Document:

exv10w11

 

Exhibit 10.11

CONSULTING SERVICES AGREEMENT

     This Consulting Services Agreement (this “Agreement”) is made and entered into and
effective as of the 30th day of May, 2006, by and between Lorenzo Lamadrid
(“Consultant”) and Synthesis Energy Systems, Inc. (“SES”), a Delaware corporation.

W I T N E S S E T H:

     WHEREAS, SES desires to secure the services of Consultant as non-executive Chairman of SES
(the “Services”).

     NOW, THEREFORE, in consideration of the mutual covenants contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

	 	(1)	 	Term: This Agreement will commence on August 1, 2006, and shall
extend through July 31, 2010 (the “Term”). At the expiration of the Term, SES shall
have no further obligation to Consultant other than payment of any earned and unpaid
compensation under Section 3, and Consultant shall have no further obligation to SES
except as set forth in Sections 4, 5 and 8. Notwithstanding anything to the
contrary contained in this Section 1, the Agreement shall terminate immediately
under the provisions of Section 14 at such time as those provisions become
applicable.
	 
	 	(2)	 	Services: During the Term, Consultant shall devote at least twenty
(20) hours per week of his time, energies and talents to serving as Chairman of SES
in the best interests of SES, and to perform the duties assigned to him by the Board
of Directors of SES (the “Board”) faithfully, efficiently and in a professional
manner. Consultant warrants that the Services to be provided hereunder will not
cause a conflict with any other duties or obligations of Consultant to third
parties, including, without limitation, Great Point Energy.
	 
	 	(3)	 	Compensation:

	 	A.	 	Payment Terms. SES shall pay Consultant for
performance of the services requested by SES under this Agreement (“Fees”) as
follows:
	 
	 	(i)	 	The base sum of $5,000 per month, payable at the end of each
month during the Term (except that during the first and last month of the
Term, the base sum shall be paid on a pro rata basis, determined by a
fraction the numerator of which is the number of business days Consultant
worked during such month and the denominator of which is the number of
business days in such month).
	 
	 	(ii)	 	Consultant shall be reimbursed by SES for all reasonable
business, promotional, travel and entertainment expenses incurred or paid by
Consultant during the Term in the performance of his services under this
Agreement: (i) provided that such expenses constitute business deductions
from taxable income for SES and are excludable from taxable income to
Consultant under the governing laws and regulations of the Internal Revenue
Code; (ii) to the extent that such expenses do not exceed the amounts
allocable for such expenses in budgets that are approved from time to time by
SES and are not in violation of SES’s expense reimbursement policies; and
(iii) provided that Consultant provides SES with the corresponding expense
reports in a timely manner consistent with SES’s policies.
Notwithstanding the foregoing, in the event of extraordinary or unusual
expenses, Consultant shall first obtain the Chief Executive Officer’s prior
written approval prior to incurring such

 

 

	 	 	 	expenses. In order that SES
reimburse Consultant for such allowable expenses, Consultant shall furnish
to SES, in a timely fashion, the appropriate documentation required by the
Internal Revenue Code in connection with such expenses and shall furnish
such other documentation and accounting as SES may from time to time
reasonably request.
	 
	 	B.	 	Compensation Committee. During the Term, Consultant’s
Fees shall be reviewed by the Compensation Committee of the Board, which
shall be established by the Board and consist of at least two (2)
non-employee directors (the “Compensation Committee”), on or before each
anniversary of the Commencement Date to determine whether an increase in
Consultant’s rate of compensation is appropriate.

	 	(4)	 	Confidentiality Of SES’s Business: : Consultant acknowledges that
SES’s business is highly competitive and that SES’s books, records and documents,
SES’s strategy, technical and commercial information concerning its projects,
products, equipment, services and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial data)
concerning SES’s customers and business affiliates, and any information about or
obtained in connection with the Gas Technologies Institute, all comprise
confidential business information and trade secrets of SES (“Confidential
Information”) which are valuable, special, and unique proprietary assets of SES.
Consultant further acknowledges that protection of SES’s Confidential Information
against unauthorized disclosure and use is of critical importance to SES in
maintaining its competitive position. Accordingly, Consultant hereby agrees that he
will not, at any time during or after the term of this Agreement, make any
disclosure of any Confidential Information, or make any use thereof, except for the
benefit of, and on behalf of, SES and with SES’s prior consent. However, the
Consultant’s obligation under this Section 4 shall not extend to information, which
is or becomes part of the public domain or is available to the public by publication
or otherwise than through the Consultant or its agents. The provisions of this
Section 4 shall survive the termination of this Agreement for a period of two (2)
years from such date. Money damages would not be sufficient remedy for any breach
of this Section 4 by the Consultant, and SES shall be entitled to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Section 4 by the Consultant, but shall be in addition to all remedies available
at law or in equity to SES including the recovery of damages from the Consultant.
	 
	 	(5)	 	Conflict of Interest: Consultant agrees to use his best efforts,
skill and abilities so long as his services are retained hereunder to promote the
best interest of SES and its business, and shall not engage in any other consulting
work or services that may conflict with SES’s interest.
	 
	 	(6)	 	Independent Contractor:

	 	A.	 	The parties hereto agree that the services rendered by
Consultant in the fulfillment of the terms and obligations of this Agreement
shall be as an independent contractor and not as an employee, and with
respect thereto, Consultant is not entitled to the
benefits provided by SES to its employees including, but not limited to, group
insurance and participation in SES’s employee benefit and pension plans (this
provision is not applicable to and does not limit, the benefits earned by
Consultant, or to which Consultant is entitled, by reason of Consultant’s prior
employment by SES or an affiliate). Further, Consultant is not an agent,
partner, or joint venturer of SES.

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	 	 	 	Consultant shall not represent himself to
third persons to be other than an independent contractor of SES, nor shall he
permit himself to offer or agree to incur or assume any obligations or
commitments in the name of SES or for SES without the prior written consent and
authorization of the Board of Directors or authorized officer of SES.
Consultant warrants that the services to be provided hereunder will not cause a
conflict with any other duties or obligations of Consultant to third parties.
Consultant shall not subcontract or assign any of the work to be performed
hereunder without obtaining the prior written consent of SES, provided,
however, nothing contained herein shall prohibit Consultant from incorporating
and rendering services hereunder as a corporation.
	 
	 	B.	 	Consultant shall be responsible for payment of all taxes
including central and local taxes arising out of the Consultant’s activities
in accordance with this contract, including by way of illustration but not
limitation, Personal Income tax, Social Security tax, Unemployment Insurance
taxes, and any other taxes or business license fees as required.

	 	(7)	 	Notices: All notices required or permitted by the terms hereof shall
be sent by Certified Mail to the following addresses if sent to Consultant or SES:

	 	 	 
	If to Consultant:

	 	 Lorenzo C. Lamadrid
	 

	 	1424 West 28th Street
	 

	 	Miami Beach, Florida 33140
	 

	 	Tel: (305) 674-0093
	 

	 	Fax: (305) 674-0096
	 
	 	 
	If to SES:

	 	Synthesis Energy Systems, Inc
	 

	 	6330 West Loop South, Suite 300
	 

	 	Houston, Texas 77401
	 

	 	Attn: Timothy E. Vail, Chief Executive Officer
	 

	 	Tel: (713) 898 — 0444
	 

	 	Fax: (713) 979 — 9341

	 	(8)	 	Work Product: The Consultant agrees that all Work Product (as defined
below) is work made for hire and/or if not work made for hire, is automatically,
immediately and irrevocably assigned to and will become the sole property of SES,
including all right, title and interest and goodwill relating thereto of whatever kind
or nature, without any further remuneration or compensation to the Consultant. The
Consultant agrees and does hereby irrevocably and automatically assign to SES as SES’s
exclusive property, the Consultant’s entire right, title and interest in and to all Work
Product and all goodwill associated therewith or related thereto. All right, title and
interest in and to the foregoing shall be vested in SES immediately upon development,
conception or reduction to practice. The Consultant further agrees that, when
requested, the Consultant will, without charge to SES, but at SES’s expense, sign all
papers and do all other acts which may be necessary, desirable or convenient in
connection with the foregoing and for the securing and maintaining of patents,
copyrights and legal
protection for the foregoing and for the vesting of title in and to the foregoing to
SES. SES is irrevocably designated by the Consultant as the Consultant’s
attorney-in-fact to do all such things and execute all such documents as may be
reasonably necessary to effectuate the foregoing. The Consultant represents and
warrants that all Work Product disclosed to SES by the Consultant in connection with
the services furnished to SES are not confidential or proprietary and shall be
acquired by SES without any restrictions as part of the consideration for this
Agreement. The Consultant represents and warrants that the Work Product disclosed to
SES will not be

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	 	 	 	confidential or proprietary to any other person, firm or corporation.
“Work Product” means any and all methods, procedures, processes, formula, techniques,
works of authorship, innovations, works, discoveries, concepts, products, properties,
compositions, improvements, systems, software, inventions, designs, formulations,
drawings, notes, analyses, records, plans, specifications, data, patents, copyrights,
trademarks, intellectual property, proprietary information, writings, sketches,
specifications, technology, knowledge, ideas, ideas developed, ideas conceived and
ideas reduced to practice and other data, things and information of any nature
whatsoever in whole or in part prepared and/or written and/or contributed and/or
conceived and/or developed and/or reduced to practice and/or produced and/or
discovered by the Consultant or resulting from or suggested by (directly or indirectly
and/or in whole or in part) any of the foregoing (alone or with others) that relate to
the Services being performed by Consultant during the Term or any Renewal Term.
	 
	 	(9)	 	Waiver: Failure of SES at any time to require performance by Consultant
of any provision hereof shall in no way affect the right of SES hereafter to enforce the
same. Nor shall any waiver by SES of any breach of any provision hereof be taken or
held to be a waiver of any succeeding breach of such provision or as a waiver of this
provision itself. Consultant shall not plead or set up as a defense to enforcement of
this contract, laches or any statute of limitations.
	 
	 	(10)	 	Applicable Law: This Agreement is governed by the internal laws of the
State of Delaware, USA without regard to the choice of law provisions therein.
	 
	 	(11)	 	Severability: It is the desire and intent of the parties that the
terms, provisions and covenants contained in this Agreement shall be enforceable to the
fullest extent permitted by law. If any such term, provision or covenant or the
application thereof to any person or circumstances shall, to any extent, be construed
to be invalid or unenforceable in whole or in part, then such term, provision or
covenant shall be construed in a manner as to permit its enforceability under the
applicable law to the fullest extent permitted by law. In any case, the remaining
provisions of this Agreement or the application thereof to any person or circumstances,
other than those to which they have been held invalid or unenforceable, shall remain in
full force and effect.
	 
	 	(12)	 	Successors And Assignment: This Agreement shall be binding upon and
shall inure to the benefit of any person, corporation or entity which may hereafter
acquire or succeed to all or substantially all of the business or assets of SES by
purchase, merger, consolidation or by any other means whatsoever, whether direct or
indirect. SES shall be entitled to freely assign this Agreement without the prior
consent of Consultant, provided that SES notifies Consultant in writing of such
assignment. This Agreement and the Consultant’s rights and obligations hereunder shall
not be assignable by Consultant without the prior written consent of SES.
	 
	 	(13)	 	Subsidiary and Affiliate: “SES” as used in this Agreement, shall
include any entity which owns or controls, is owned or controlled by, or is under
common control or ownership with, SES.
	 
	 	(14)	 	Termination of Consulting Arrangement: This Agreement shall terminate,
and all compensation under paragraph (3) shall cease, in the event any of the following
occurs:

	 	A.	 	If Consultant fails to perform any one or more of Consultant’s
duties and responsibilities under this Agreement or commits any other breach
thereof; provided that, regarding such breach SES shall consult in good faith
with and provide an opportunity for Consultant to be

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	 	 	 	heard prior to effecting
any termination under this subparagraph and that failure to do so shall prevent
any termination of this Agreement by SES under this subparagraph.
	 
	 	B.	 	Consultant or SES may terminate this Agreement at any time for any
other reason by furnishing the other party with ninety (90) days’ advance notice
of such termination.

	 	(15)	 	Other Agreements/Modifications:

	 	A.	 	This Agreement modifies and supersedes all other preceding
agreements between the parties and constitutes the entire agreement of the
parties regarding the performance of services on behalf of SES by the Consultant.
	 
	 	B.	 	This Agreement may be amended, modified, superseded, canceled,
renewed or extended and the terms and conditions hereof may be waived only by a
written instrument executed by both parties hereto or, in the case of a waiver,
by the party waiving compliance.
	 
	 	C.	 	CONSULTANT AND SES EXPRESSLY WAIVE ANY RIGHT EITHER MAY HAVE TO A
JURY TRIAL CONCERNING ANY CIVIL ACTION THAT MAY ARISE FROM THIS AGREEMENT, OR
THE RELATIONSHIP OF THE PARTIES HERETO AND THE PREVAILING PARTY IN SUCH ACTION
SHALL BE ENTITLED TO RECOVER ITS ATTORNEYS’ FEES AND COSTS INCURRED TO ENFORCE
ANY OF ITS RIGHTS HEREUNDER.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day
and year first above written.

SYNTHESIS ENERGY SYSTEMS, INC.

	 	 	 	 	 
	By:

	 	/s/ Timothy E. Vail
 

Timothy E. Vail, Chief Executive Officer
	 	 
	 
	 	 	 	 
	 

	 	/s/ Lorenzo C. Lamadrid
 

	 	 
	LORENZO C. LAMADRID	 	 

- 5 -exv10w12

 

Exhibit
10.12

SYNTHESIS ENERGY SYSTEMS, INC.

2005 INCENTIVE PLAN

(as amended and restated effective August 5, 2006)

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	SECTION 1. GENERAL PROVISIONS RELATING TO PLAN GOVERNANCE, COVERAGE AND BENEFITS
	 	 	1	 
	 
	 	 	 	 
	1.1 Purpose
	 	 	1	 
	1.2 Definitions
	 	 	2	 
	1.3 Plan Administration
	 	 	6	 
	1.4 Shares of Common Stock Available for Incentive Awards
	 	 	8	 
	1.5 Share Pool Adjustments for Awards and Payouts
	 	 	9	 
	1.6 Common Stock Available
	 	 	10	 
	1.7 Participation
	 	 	10	 
	1.8 Types of Incentive Awards
	 	 	11	 
	1.9 Other Compensation Programs
	 	 	11	 
	1.10 Repricing
	 	 	11	 
	 
	 	 	 	 
	SECTION 2. STOCK OPTIONS
	 	 	11	 
	 
	 	 	 	 
	2.1 Grant of Stock Options
	 	 	11	 
	2.2 Stock Option Terms
	 	 	12	 
	2.3 Stock Option Exercises
	 	 	13	 
	2.4 Reload Options
	 	 	15	 
	2.5 Supplemental Payment on Exercise of Nonqualified Stock Options or Stock
Appreciation Rights
	 	 	15	 
	 
	 	 	 	 
	SECTION 3. RESTRICTED STOCK
	 	 	16	 
	 
	 	 	 	 
	3.1 Award of Restricted Stock
	 	 	16	 
	3.2 Restrictions
	 	 	17	 
	3.3 Delivery of Shares of Common Stock
	 	 	17	 
	3.4 Supplemental Payment on Vesting of Restricted Stock
	 	 	18	 
	 
	 	 	 	 
	SECTION 4. OTHER STOCK-BASED AWARDS AND PERFORMANCE AWARDS
	 	 	18	 
	 
	 	 	 	 
	4.1 Grant of Other Stock-Based Awards
	 	 	18	 
	4.2 Other Stock-Based Award Terms
	 	 	18	 
	4.3 Performance Awards
	 	 	19	 
	 
	 	 	 	 
	SECTION 5. PROVISIONS RELATING TO PLAN PARTICIPATION
	 	 	21	 
	 
	 	 	 	 
	5.1 Plan Conditions
	 	 	21	 
	5.2 Transferability and Exercisability
	 	 	22	 
	5.3 Rights as a Stockholder
	 	 	23	 
	5.4 Listing and Registration of Shares of Common Stock
	 	 	23	 
	5.5 Change in Stock and Adjustments
	 	 	24	 
	5.6 Termination of Employment, Death, Disability and Retirement
	 	 	27	 
	5.7 Change in Control
	 	 	27	 
	5.8 Exchange of Incentive Awards
	 	 	29	 
	5.9 Financing
	 	 	29	 

i

 

	 	 	 	 	 
	 	 	Page	 
	SECTION 6. GENERAL
	 	 	29	 
	 
	 	 	 	 
	6.1 Effective Date and Grant Period
	 	 	29	 
	6.2 Funding and Liability of Company
	 	 	29	 
	6.3 Withholding Taxes
	 	 	30	 
	6.4 No Guarantee of Tax Consequences
	 	 	31	 
	6.5 Designation of Beneficiary by Grantee
	 	 	31	 
	6.6 Deferrals
	 	 	31	 
	6.7 Amendment and Termination
	 	 	31	 
	6.8 Requirements of Law
	 	 	32	 
	6.9 Rule 16b-3 Securities Law Compliance and Compliance with Company
Policies
	 	 	32	 
	6.10 Compliance with Code Section 162(m)
	 	 	32	 
	6.11 Successors
	 	 	32	 
	6.12 Miscellaneous Provisions
	 	 	33	 
	6.13 Severability
	 	 	33	 
	6.14 Gender, Tense and Headings
	 	 	33	 
	6.15 Governing Law
	 	 	33	 
	6.16 Code Section 409A
	 	 	33	 

ii

 

SYNTHESIS ENERGY SYSTEMS, INC.

2005 INCENTIVE PLAN

SECTION 1.

GENERAL PROVISIONS RELATING TO

PLAN GOVERNANCE, COVERAGE AND BENEFITS

     WHEREAS, the Board of Directors of Synthesis Energy Systems, Inc. authorized the establishment
of Synthesis Energy Systems, Inc. 2005 Incentive Plan (the “Plan”) originally effective November 7,
2005 and effective August 5, 2006, the Board of Directors authorized the amendment and restatement
of the Plan to increase the number of shares authorized under the Plan, subject to shareholder
approval as provided herein;

     NOW, THEREFORE, the Plan is hereby amended and restated as follows:

	1.1	 	Purpose

     The purpose of the Plan is to foster and promote the long-term financial success of Synthesis
Energy Systems, Inc. (the “Company”) and its Subsidiaries and to increase stockholder value by: (a)
encouraging the commitment of selected key Employees, Consultants and Outside Directors, (b)
motivating superior performance of key Employees, Consultants and Outside Directors by means of
long-term performance related incentives, (c) encouraging and providing key Employees, Consultants
and Outside Directors with a program for obtaining ownership interests in the Company which link
and align their personal interests to those of the Company’s stockholders, (d) attracting and
retaining key Employees, Consultants and Outside Directors by providing competitive incentive
compensation opportunities, and (e) enabling key Employees, Consultants and Outside Directors to
share in the long-term growth and success of the Company.

     The Plan provides for payment of various forms of incentive compensation and it is not
intended to be a plan that is subject to the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”). The Plan shall be interpreted, construed and administered consistent with its
status as a plan that is not subject to ERISA.

     The Plan shall commence on the Effective Date and shall remain in effect, subject to the right
of the Board to amend or terminate the Plan at any time pursuant to Section 6.7, until all
Shares subject to the Plan have been purchased or acquired according to its provisions. However,
in no event may an Incentive Award be granted under the Plan after the expiration of ten (10) years
from November 7, 2005. Subject to the approval of stockholders, the Plan is amended and restated
effective as of August 5, 2006 (the “Effective Date”).

1

 

	1.2	 	Definitions

     The following terms shall have the meanings set forth below:

     (a) Authorized Officer. The Chief Executive Officer or any other senior
officer of the Company to whom either of them delegate the authority to execute any
Incentive Agreement for and on behalf of the Company. No officer or director shall be an
Authorized Officer with respect to any Incentive Agreement for himself.

     (b) Board. The Board of Directors of the Company.

     (c) Change in Control. Unless otherwise expressly provided in the Grantee’s
Incentive Agreement, any of the events described in and subject to Section 5.7.

     (d) Code. The Internal Revenue Code of 1986, as amended, and the regulations
and other authority promulgated thereunder by the appropriate governmental authority.
References herein to any provision of the Code shall refer to any successor provision
thereto.

     (e) Committee. A committee appointed by the Board consisting of not less than
two directors as appointed by the Board to administer the Plan. During such period that the
Company is a Publicly Held Corporation, the Plan shall be administered by a committee
appointed by the Board consisting of not less than two directors who fulfill the
“non-employee director” requirements of Rule 16b-3 under the Exchange Act, the “outside
director” requirements of Section 162(m) of the Code and the “independent” requirements of
the rules of any national securities exchange or the NASDAQ, as the case may be, on which
any of the securities of the Company are traded, listed or quoted. The Committee may be the
Compensation Committee of the Board, or any subcommittee of the Compensation Committee,
provided that the members of the Committee satisfy the requirements of the previous
provisions of this paragraph. Notwithstanding the foregoing, if the composition of the
Board does not provide the Company the ability to establish a committee meeting the
foregoing requirements, the Plan shall be administered by the full Board.

     The Board shall have the power to fill vacancies on the Committee arising by
resignation, death, removal or otherwise. The Board, in its sole discretion, may bifurcate
the powers and duties of the Committee among one or more separate committees, or retain all
powers and duties of the Committee in a single Committee. The members of the Committee
shall serve at the discretion of the Board.

     Notwithstanding the preceding paragraphs, the term “Committee” as used in the Plan with
respect to any Incentive Award for an Outside Director shall refer to the entire Board. In
the case of an Incentive Award for an Outside Director, the Board shall have all the powers
and responsibilities of the Committee hereunder as to such Incentive Award, and any actions
as to such Incentive Award may be acted upon only by the Board (unless it otherwise
designates in its discretion). When the Board exercises its authority to act in the
capacity as the Committee hereunder with respect to an Incentive Award for

2

 

an Outside Director, it shall so designate with respect to any action that it
undertakes in its capacity as the Committee.

     (f) Common Stock. The common stock of the Company, $0.01 par value per share,
and any class of common stock into which such common shares may hereafter be converted,
reclassified or recapitalized.

     (g) Company. Synthesis Energy Systems, Inc., a corporation organized under the
laws of the State of Delaware, and any successor in interest thereto.

     (h) Consultant. An independent agent, consultant, attorney, an individual who
has agreed to become an Employee within the next six (6) months, or any other individual who
is not an Outside Director or employee of the Company (or any Parent or Subsidiary) and who
(i), in the opinion of the Committee, is in a position to contribute to the growth or
financial success of the Company (or any Parent or Subsidiary), (ii) is a natural person and
(iii) provides bona fide services to the Company (or any Parent or Subsidiary), which
services are not in connection with the offer or sale of securities in a capital raising
transaction, and do not directly or indirectly promote or maintain a market for the
Company’s securities.

     (i) Covered Employee. A named executive officer who is one of the group of
covered employees, as defined in Section 162(m) of the Code and Treasury Regulation §
1.162-27(c) (or its successor), during such period that the Company is a Publicly Held
Corporation.

     (j) Employee. Any employee of the Company (or any Parent or Subsidiary) within
the meaning of Section 3401(c) of the Code who, in the opinion of the Committee, is in a
position to contribute to the growth, development and financial success of the Company (or
any Parent or Subsidiary), including, without limitation, officers who are members of the
Board.

     (k) Employment. Employment by the Company (or any Parent or Subsidiary), or by
any corporation issuing or assuming an Incentive Award in any transaction described in
Section 424(a) of the Code, or by a parent corporation or a subsidiary corporation of such
corporation issuing or assuming such Incentive Award, as the parent-subsidiary relationship
shall be determined at the time of the corporate action described in Section 424(a) of the
Code. In this regard, neither the transfer of a Grantee from Employment by the Company to
Employment by any Parent or Subsidiary, nor the transfer of a Grantee from Employment by any
Parent or Subsidiary to Employment by the Company, shall be deemed to be a termination of
Employment of the Grantee. Moreover, the Employment of a Grantee shall not be deemed to
have been terminated because of an approved leave of absence from active Employment on
account of temporary illness, authorized vacation or granted for reasons of professional
advancement, education, health, or government service, or military leave, or during any
period required to be treated as a leave of absence by virtue of any applicable statute,
Company personnel policy or agreement. Whether an authorized leave of absence shall

3

 

constitute termination of Employment hereunder shall be determined by the Committee in
its discretion.

     Unless otherwise provided in the Incentive Agreement, the term “Employment” for
purposes of the Plan is also defined to include (i) compensatory or advisory services
performed by a Consultant for the Company (or any Parent or Subsidiary) and (ii) membership
on the Board by an Outside Director.

     (l) Exchange Act. The Securities Exchange Act of 1934, as amended.

     (m) Fair Market Value. Except as set forth below, the Fair Market Value of one
share of Common Stock on the date in question is deemed to be (i) the closing price of a
share of Common Stock as reported on the consolidated reporting system for the securities
exchange(s) on which Shares are then listed or admitted to trading (as reported in the Wall
Street Journal or other reputable source), or (ii) if not so reported, the closing price for
a Share as quoted on the Nasdaq Stock Market, Inc. (“NASDAQ”), or (iii) if not quoted on
NASDAQ, the closing price for a Share as quoted by the National Quotation Bureau’s “Pink
Sheets” or the National Association of Securities Dealers’ OTC Bulletin Board System or any
other method permitted by Code Section 409A and the regulations thereunder or as required by
other applicable law or regulation as determined by the Committee. If there was no public
trade of Common Stock on the date in question, Fair Market Value shall be determined by
reference to the last preceding date on which such a trade was so reported or any other
method permitted by Code Section 409A and the regulations thereunder.

     If the Company is not a Publicly Held Corporation at the time a determination of the
Fair Market Value of the Common Stock is required to be made hereunder, the determination of
Fair Market Value for purposes of the Plan shall be made by the Committee in its discretion
exercised in good faith and consistent with Code Section 409A as it shall determine. In
this respect, the Committee may rely on such financial data, valuations, experts, and other
sources, in its discretion, as it deems advisable under the circumstances.

     (n) Grantee. Any Employee, Consultant or Outside Director who is granted an
Incentive Award under the Plan.

     (o) Immediate Family. With respect to a Grantee, the Grantee’s spouse,
children or grandchildren (including legally adopted and step children and grandchildren)

     (p) Incentive Agreement. The written agreement entered into between the
Company and the Grantee setting forth the terms and conditions pursuant to which an
Incentive Award is granted under the Plan, as such agreement is further defined in
Section 5.1(a).

     (q) Incentive Award. A grant of an award under the Plan to a Grantee,
including any Nonqualified Stock Option, Incentive Stock Option, Reload Option, Restricted
Stock Award, Other Stock-Based Award or Performance Award.

4

 

     (r) Incentive Stock Option or ISO. A Stock Option granted by the Committee to
an Employee under Section 2 which is designated by the Committee as an Incentive
Stock Option and intended to qualify as an Incentive Stock Option under Section 422 of the
Code.

     (s) Insider. An individual who is, on the relevant date, an officer, director
or ten percent (10%) beneficial owner of any class of the Company’s equity securities that
is registered pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of
the Exchange Act.

     (t) Nonqualified Stock Option. A Stock Option granted by the Committee to a
Grantee under Section 2 that is not designated by the Committee as an Incentive
Stock Option.

     (u) Option Price. The exercise price at which a Share may be purchased by the
Grantee of a Stock Option.

     (v) Other Stock-Based Award. An award granted by the Committee to a Grantee
under Section 4.1 that is valued in whole or in part by reference to, or is
otherwise based upon Common Stock, and is payable in Common Stock, cash or other
consideration.

     (w) Outside Director. A member of the Board who is not, at the time of grant
of an Incentive Award, an employee of the Company or any Parent or Subsidiary within the
meaning of 16b-3 under the Exchange Act and who is certified by the Board as an independent
director; provided, however, that a person who is a control person or director of an entity
that is the beneficial owner of 25% or more of outstanding shares of the Company shall not
be deemed to be a “non-employee” director.

     (x) Parent. Any corporation (whether now or hereafter existing) which
constitutes a “parent” of the Company, as defined in Section 424(e) of the Code.

     (y) Performance Award. An award granted by the Committee to the Grantee under
Section 4.3.

     (z) Performance-Based Exception. The performance-based exception from the tax
deductibility limitations of Section 162(m) of the Code, as prescribed in Code § 162(m) and
Treasury Regulation § 1.162-27(e) (or its successor), which is applicable during such period
that the Company is a Publicly Held Corporation.

     (aa) Performance Period. A period of time, as may be determined in the
discretion of the Committee and set out in the Incentive Agreement, over which performance
is measured for the purpose of determining a Grantee’s right to and the payment value of an
Incentive Award.

     (bb) Performance Share or Performance Unit. An Incentive Award that is a
Performance Award under Section 4.3 representing a contingent right to receive cash or
Shares of Common Stock (which may be Restricted Stock) at the end of a Performance

5

 

Period and which, in the case of Performance Shares, is denominated in Common Stock,
and in the case of Performance Units is denominated in cash values.

     (cc) Plan. The Synthesis Energy Systems, Inc. 2005 Incentive Plan as set forth
herein and as it may be amended from time to time.

     (dd) Publicly Held Corporation. A corporation issuing any class of common
equity securities required to be registered under Section 12 of the Exchange Act.

     (ee) Restricted Stock. Shares of Common Stock issued or transferred to a
Grantee pursuant to Section 3.

     (ff) Restricted Stock Award. An authorization by the Committee to issue or
transfer Restricted Stock to a Grantee.

     (gg) Restriction Period. The period of time determined by the Committee and
set forth in the Incentive Agreement during which the transfer of Restricted Stock by the
Grantee is restricted.

     (hh) Share. A share of the Common Stock.

     (ii) Share Pool. The number of shares authorized for issuance under
Section 1.4, as adjusted for awards and payouts under Section 1.5 and as
adjusted for changes in corporate capitalization under Section 5.5.

     (jj) Stock Option or Option. Pursuant to Section 2, (i) an Incentive
Stock Option granted to an Employee or (ii) a Nonqualified Stock Option granted to an
Employee, Consultant or Outside Director, where under such stock option the Grantee has the
right to purchase Shares of Common Stock. In accordance with Section 422 of the Code, only
an Employee may be granted an Incentive Stock Option.

     (kk) Subsidiary. Any corporation (whether now or hereafter existing) which
constitutes a “subsidiary” of the Company, as defined in Section 424(f) of the Code.

     (ll) Supplemental Payment. Any amount, as described in Sections 2.4, 3.4 or
4.3, that is dedicated to payment of income taxes which are payable by the Grantee resulting
from an Incentive Award.

	1.3	 	Plan Administration

     (a) Authority of the Committee. Except as may be limited by law and subject to
the provisions herein, the Committee shall have full power to (i) select Grantees who shall
participate in the Plan; (ii) determine the sizes, duration and types of Incentive Awards;
(iii) determine the terms and conditions of Incentive Awards and Incentive Agreements; (iv)
determine whether any Shares subject to Incentive Awards will be subject to any restrictions
on transfer; (v) construe and interpret the Plan and any Incentive Agreement or other
agreement entered into under the Plan; and (vi) establish, amend, or waive rules for the
Plan’s administration. Further, the Committee shall make

6

 

all other determinations which may be necessary or advisable for the administration of
the Plan including, without limitation, correcting any defect, supplying any omission or
reconciling any inconsistency in the Plan or any Incentive Agreement. The determinations of
the Committee shall be final and binding.

     (b) Meetings. The Committee shall designate a chairman from among its members
who shall preside at all of its meetings, and shall designate a secretary, without regard to
whether that person is a member of the Committee, who shall keep the minutes of the
proceedings and all records, documents, and data pertaining to its administration of the
Plan. Meetings shall be held at such times and places as shall be determined by the
Committee and the Committee may hold telephonic meetings. The Committee may take any action
otherwise proper under the Plan by the affirmative vote, taken with or without a meeting, of
a majority of its members. The Committee may authorize any one or more of their members or
any officer of the Company to execute and deliver documents on behalf of the Committee.

     (c) Decisions Binding. All determinations and decisions made by the Committee
shall be made in its discretion pursuant to the provisions of the Plan, and shall be final,
conclusive and binding on all persons including the Company, its stockholders, Employees,
Grantees, and their estates and beneficiaries. The Committee’s decisions and determinations
with respect to any Incentive Award need not be uniform and may be made selectively among
Incentive Awards and Grantees, whether or not such Incentive Awards are similar or such
Grantees are similarly situated.

     (d) Modification of Outstanding Incentive Awards. Subject to the stockholder
approval requirements of Section 6.7 if applicable, the Committee may, in its
discretion, provide for the extension of the exercisability of an Incentive Award,
accelerate the vesting or exercisability of an Incentive Award, eliminate or make less
restrictive any restrictions contained in an Incentive Award, waive any restriction or other
provisions of an Incentive Award, or otherwise amend or modify an Incentive Award in any
manner (including the repricing of an Incentive Award) that is either (i) not adverse to the
Grantee to whom such Incentive Award was granted or (ii) consented to by such Grantee. With
respect to an Incentive Award that is an incentive stock option (as described in Section 422
of the Code), no adjustment to such option shall be made to the extent constituting a
“modification” within the meaning of Section 424(h)(3) unless otherwise agreed to by the
Grantee in writing, and with respect to any Stock Option no adjustment will be made if it
constitutes a modification or results in deferred compensation under Code Section 409A
unless otherwise agreed to by the Grantee in writing.

     (e) Delegation of Authority. The Committee may delegate to designated
officers or other employees of the Company any of its duties under this Plan pursuant to
such conditions or limitations as the Committee may establish from time to time; provided,
however, while the Company is a Publicly Held Corporation, the Committee may not delegate to
any person the authority to (i) grant Incentive Awards, or (ii) take any action which would
contravene the requirements of Rule 16b-3 under the Exchange Act or the Performance-Based
Exception under Section 162(m) of the Code.

7

 

     (f) Expenses of Committee. The Committee may employ legal counsel, including,
without limitation, independent legal counsel and counsel regularly employed by the Company,
and other agents as the Committee may deem appropriate for the administration of the Plan.
The Committee may rely upon any opinion or computation received from any such counsel or
agent. All expenses incurred by the Committee in interpreting and administering the Plan,
including, without limitation, meeting expenses and professional fees, shall be paid by the
Company.

     (g) Surrender of Previous Incentive Awards. The Committee may, in its absolute
discretion, grant Incentive Awards to Grantees on the condition that such Grantees surrender
to the Committee for cancellation such other Incentive Awards (including, without
limitation, Incentive Awards with higher exercise prices) as the Committee directs.
Incentive Awards granted on the condition precedent of surrender of outstanding Incentive
Awards shall not count against the limits set forth in Section 1.4 until such time
as such previous Incentive Awards are surrendered and canceled.

     (h) INDEMNIFICATION. EACH PERSON WHO IS OR WAS A MEMBER OF THE COMMITTEE, OR
OF THE BOARD, SHALL BE INDEMNIFIED BY THE COMPANY AGAINST AND FROM ANY DAMAGE, LOSS,
LIABILITY, COST AND EXPENSE THAT MAY BE IMPOSED UPON OR REASONABLY INCURRED BY HIM IN
CONNECTION WITH OR RESULTING FROM ANY CLAIM, ACTION, SUIT, OR PROCEEDING TO WHICH HE MAY BE
A PARTY OR IN WHICH HE MAY BE INVOLVED BY REASON OF ANY ACTION TAKEN OR FAILURE TO ACT UNDER
THE PLAN (INCLUDING SUCH INDEMNIFICATION FOR A PERSON’S OWN, SOLE, CONCURRENT OR JOINT
NEGLIGENCE OR STRICT LIABILITY), EXCEPT FOR ANY SUCH ACT OR OMISSION CONSTITUTING WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE. SUCH PERSON SHALL BE INDEMNIFIED BY THE COMPANY FOR ALL
AMOUNTS PAID BY HIM IN SETTLEMENT THEREOF, WITH THE COMPANY’S APPROVAL, OR PAID BY HIM IN
SATISFACTION OF ANY JUDGMENT IN ANY SUCH ACTION, SUIT, OR PROCEEDING AGAINST HIM, PROVIDED
HE SHALL GIVE THE COMPANY AN OPPORTUNITY, AT ITS OWN EXPENSE, TO HANDLE AND DEFEND THE SAME
BEFORE HE UNDERTAKES TO HANDLE AND DEFEND IT ON HIS OWN BEHALF. THE FOREGOING RIGHT OF
INDEMNIFICATION SHALL NOT BE EXCLUSIVE OF ANY OTHER RIGHTS OF INDEMNIFICATION TO WHICH SUCH
PERSONS MAY BE ENTITLED UNDER THE COMPANY’S ARTICLES OF INCORPORATION OR BYLAWS, AS A MATTER
OF LAW, OR OTHERWISE, OR ANY POWER THAT THE COMPANY MAY HAVE TO INDEMNIFY THEM OR HOLD THEM
HARMLESS.

	1.4	 	Shares of Common Stock Available for Incentive Awards

     Subject to adjustment under Section 5.5, there shall be available for Incentive Awards
that are granted wholly or partly in Common Stock (including rights or Options that may be
exercised for or settled in Common Stock) the greater of fifteen percent (15%) of Shares of Common
Stock that are outstanding on the last day of each calendar quarter preceding a grant or six (6)
million Shares. The total number of Shares reserved for issuance under the Plan

8

 

(pursuant to the previous sentence) that shall be available for Incentive Stock Options shall
be five (5) million. The number of Shares of Common Stock that are the subject of Incentive Awards
under this Plan, that are forfeited or terminated, expire unexercised, withheld for tax withholding
requirements, are settled in cash in lieu of Common Stock or in a manner such that all or some of
the Shares covered by an Incentive Award are not issued to a Grantee or are exchanged for Incentive
Awards that do not involve Common Stock, shall again immediately become available for Incentive
Awards hereunder. The Committee may from time to time adopt and observe such procedures concerning
the counting of Shares against the Plan maximum as it may deem appropriate. The Board and the
appropriate officers of the Company shall from time to time take whatever actions are necessary to
file any required documents with governmental authorities, stock exchanges and transaction
reporting systems to ensure that Shares are available for issuance pursuant to Incentive Awards.

     During any period that the Company is a Publicly Held Corporation, the following rules shall
apply to grants of Incentive Awards to Employees:

     (a) Subject to adjustment as provided in Section 5.5, the maximum aggregate
number of Shares of Common Stock (including Stock Options, SARs, Restricted Stock,
Performance Units and Performance Shares paid out in Shares, or Other Stock-Based Awards
paid out in Shares) that may be granted or that may vest, as applicable, in any calendar
year pursuant to any Incentive Award held by any individual Employee shall be [five million
(5,000,000).]

     (b) The maximum aggregate cash payout (including SARs, Performance Units and
Performance Shares paid out in cash, or Other Stock-Based Awards paid out in cash) with
respect to Incentive Awards granted in any calendar year which may be made to any individual
Employee shall be [five million dollars ($5,000,000).]

     (c) With respect to any Stock Option or Stock Appreciation Right granted to an Employee
that is canceled or repriced, the number of Shares subject to such Stock Option or stock
appreciation right shall continue to count against the maximum number of Shares that may be
the subject of Stock Options or stock appreciation rights granted to such Employee hereunder
to the extent such is required in accordance with Section 162(m) of the Code.

     (d) The limitations of subsections (a), (b) and (c) above shall
be construed and administered so as to comply with the Performance-Based Exception.

	1.5	 	Share Pool Adjustments for Awards and Payouts.

     The following Incentive Awards and payouts shall reduce, on a one Share for one Share basis,
the number of Shares authorized for issuance under the Share Pool:

     (a) Stock Options;

     (b) Restricted Stock Awards; and

9

 

     (c) A payout of an Other Stock-Based Award or Performance Awards in Shares.

     The following transactions shall restore, on a one Share for one Share basis, the number of
Shares authorized for issuance under the Share Pool:

     (a) A payout of an Other Stock-Based Award or Performance Awards in the form of cash;

     (b) A cancellation, termination, expiration, forfeiture, or lapse for any reason of any
Shares subject to an Incentive Award; and

     (c) Payment of an Option Price or Restricted Stock purchase price as provided in the
Incentive Agreement or as determined by the Compensation Committee in its sole discretion
with previously acquired Shares or by withholding Shares that otherwise would be acquired on
exercise or grant (i.e., the Share Pool shall be increased by the number of Shares turned in
or withheld as payment of the Option Price or Restricted Stock purchase price).

	1.6	 	Common Stock Available.

     The Common Stock available for issuance or transfer under the Plan shall be made available
from Shares now or hereafter (a) held in the treasury of the Company, (b) authorized but unissued
shares, or (c) shares to be purchased or acquired by the Company. No fractional shares shall be
issued under the Plan; payment for fractional shares shall be made in cash.

	1.7	 	Participation

     (a) Eligibility. Under the Plan, Incentive Awards may be granted as determined
by the Committee to a Grantee. The Committee shall from time to time designate those
Employees, Consultants and/or Outside Directors, if any, to be granted Incentive Awards
under the Plan, the type of Incentive Awards granted, the number of Shares or Stock Options,
as the case may be, which shall be granted to each such person, and any other terms or
conditions relating to the Incentive Awards as it may deem appropriate to the extent not
inconsistent with the provisions of the Plan. A Grantee who has been granted an Incentive
Award may, if otherwise eligible, be granted additional Incentive Awards at any time.

     (b) Incentive Stock Option Eligibility. No Consultant or Outside Director
shall be eligible for the grant of any Incentive Stock Option. In addition, no Employee
shall be eligible for the grant of any Incentive Stock Option who owns or would own
immediately before the grant of such Incentive Stock Option, directly or indirectly, stock
possessing more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, or any Parent or Subsidiary. This restriction does not apply if, at
the time such Incentive Stock Option is granted, the Option Price with respect to the
Incentive Stock Option is at least one hundred and ten percent (110%) of the Fair Market
Value on the date of grant and the Incentive Stock Option by its terms is not exercisable
after the expiration of five (5) years from the date of grant. For the purpose of the

10

 

immediately preceding sentence, the attribution rules of Section 424(d) of the Code
shall apply for the purpose of determining an Employee’s percentage ownership in the
Company or any Parent or Subsidiary. This paragraph shall be construed consistent with the
requirements of Section 422 of the Code.

	1.8	 	Types of Incentive Awards

     The types of Incentive Awards that may be granted under the Plan are Stock Options as
described in Section 2, Restricted Stock as described in Section 3, Other
Stock-Based Awards and Performance Awards as described in Section 4, or any combination of
the foregoing.

	1.9	 	Other Compensation Programs

     The existence and terms of the Plan shall not limit the authority of the Board or Company or
any Company affiliate in compensating directors, Outside Directors, Employees or Consultants of the
Company, in such other forms and amounts, including compensation pursuant to any other plans or
programs (including but not limited to bonus programs) as may be currently in effect or adopted in
the future, as it may determine from time to time.

	1.10	 	Repricing

     In connection with any Incentive Award, the Committee shall have the authority to reprice such
award. “Repricing” may include, as determined by the Committee, but not be limited to, any of the
following or any other action that has the same effect:

     (a) lowering the strike price of a Stock Option after it is granted.

     (b) any other action that is treated as a repricing under generally accepted accounting
principles, or

     (c) canceling a Stock Option at a time when its exercise price exceeds the Fair Market
Value of the underlying stock, in exchange for another stock option, Restricted Stock, or
other equity, unless the cancellation and exchange occurs in connection with a merger,
acquisition, spin-off or other similar corporate transaction.

SECTION 2.

STOCK OPTIONS

	2.1	 	Grant of Stock Options

     The Committee is authorized to grant (a) Nonqualified Stock Options to Employees, Consultants
and/or Outside Directors and (b) Incentive Stock Options to Employees only, in accordance with the
terms and conditions of the Plan, and with such additional terms and conditions, not inconsistent
with the Plan, as the Committee shall determine in its discretion. Successive grants may be made
to the same Grantee whether or not any Stock Option previously granted to such person remains
unexercised.

11

 

	2.2	 	Stock Option Terms

     (a) Written Agreement. Each grant of a Stock Option shall be evidenced by a
written Incentive Agreement. Among its other provisions, each Incentive Agreement shall set
forth the extent to which the Grantee shall have the right to exercise the Stock Option
following termination of the Grantee’s Employment. Such provisions shall be determined in
the discretion of the Committee, shall be included in the Grantee’s Incentive Agreement and
need not be uniform among all Stock Options issued pursuant to the Plan.

     (b) Number of Shares. Each Stock Option shall specify the number of Shares of
Common Stock to which it pertains.

     (c) Exercise Price. The Option Price with respect to each Stock Option shall
be determined by the Committee; provided, however, that in the case of an Incentive Stock
Option, the Option Price shall not be less than one hundred percent (100%) of the Fair
Market Value per Share on the date the Incentive Stock Option is granted (110% for 10% or
greater stockholders pursuant to Section 1.7(b)). To the extent that the Company is
a Publicly Held Corporation and the Stock Option is intended to qualify for the
Performance-Based Exception, or to the extent the Stock Option is intended to be exempt from
Code Section 409A, the Option Price shall not be less than one hundred percent (100%) of the
Fair Market Value per Share on the date the Stock Option is granted. Each Stock Option
shall specify the method of exercise which shall be consistent with the requirements of
Section 2.3(a).

     (d) Term. In the Incentive Agreement, the Committee shall fix the term of each
Stock Option (which shall be not more than ten (10) years from the date of grant for ISO
grants; five (5) years for ISO grants to ten percent (10%) or greater stockholders pursuant
to Section 1.7(b)). In the event no term is fixed, such term shall be ten (10)
years from the date of grant.

     (e) Exercise. The Committee shall determine the time or times at which a Stock
Option may be exercised in whole or in part. Each Stock Option may specify the required
period of continuous Employment and/or the performance objectives to be achieved before the
Stock Option or portion thereof will become exercisable. Each Stock Option, the exercise of
which, or the timing of the exercise of which, is dependent, in whole or in part, on the
achievement of designated performance objectives, may specify a minimum level of achievement
in respect of the specified performance objectives below which no Stock Options will be
exercisable and a method for determining the number of Stock Options that will be
exercisable if performance is at or above such minimum but short of full achievement of the
performance objectives. All such terms and conditions shall be set forth in the Incentive
Agreement.

     (f) $100,000 Annual Limit on Incentive Stock Options. Notwithstanding any
contrary provision in the Plan, to the extent that the aggregate Fair Market Value
(determined as of the time the Incentive Stock Option is granted) of the Shares of Common
Stock with respect to which Incentive Stock Options are exercisable for the first

12

 

time by any Grantee during any single calendar year (under the Plan and any other stock
option plans of the Company and its Subsidiaries or Parent) exceeds the sum of $100,000,
such Incentive Stock Option shall be treated as a Nonqualified Stock Option to the extent in
excess of the $100,000 limit, and not an Incentive Stock Option, but all other terms and
provisions of such Stock Option shall remain unchanged. This paragraph shall be applied by
taking Incentive Stock Options into account in the order in which they were granted and
shall be construed in accordance with Section 422(d) of the Code. In the absence of such
regulations or other authority, or if such regulations or other authority require or permit
a designation of the Options which shall cease to constitute Incentive Stock Options, then
such Incentive Stock Options, only to the extent of such excess, shall automatically be
deemed to be Nonqualified Stock Options but all other terms and conditions of such Incentive
Stock Options, and the corresponding Incentive Agreement, shall remain unchanged.

	2.3	 	Stock Option Exercises

     (a) Method of Exercise and Payment. Stock Options shall be exercised by the
delivery of a signed written notice of exercise to the Company as of a date set by the
Company in advance of the effective date of the proposed exercise. The notice shall set
forth the number of Shares with respect to which the Option is to be exercised, accompanied
by full payment for the Shares.

     The Option Price upon exercise of any Stock Option shall be payable to the Company in
full either: (i) in cash or its equivalent, or (ii) subject to prior approval by the
Committee in its discretion, by tendering previously acquired Shares having an aggregate
Fair Market Value at the time of exercise equal to the total Option Price (provided that the
Shares which are tendered must have been held by the Grantee for at least six (6) months
prior to their tender to satisfy the Option Price), or (iii) subject to prior approval by
the Committee in its discretion, by withholding Shares which otherwise would be acquired on
exercise having an aggregate Fair Market Value at the time of exercise equal to the total
Option Price, or (iv) subject to prior approval by the Committee in its discretion, by a
combination of (i), (ii), and (iii) above. Any payment in Shares shall be effected by the
surrender of such Shares to the Company in good form for transfer and shall be valued at
their Fair Market Value on the date when the Stock Option is exercised. Unless otherwise
permitted by the Committee in its discretion, the Grantee shall not surrender, or attest to
the ownership of, Shares in payment of the Option Price if such action would cause the
Company to recognize compensation expense (or additional compensation expense) with respect
to the Stock Option for financial reporting purposes.

     The Committee, in its discretion, also may allow the Option Price to be paid with such
other consideration as shall constitute lawful consideration for the issuance of Shares
(including, without limitation, effecting a “cashless exercise” with a broker of the
Option), subject to applicable securities law restrictions and tax withholdings, or by any
other means which the Committee determines to be consistent with the Plan’s purpose and
applicable law. A “cashless exercise” of an Option is a procedure by which a broker
provides the funds to the Grantee to effect an Option exercise, to the extent consented to
by the Committee in its discretion. At the direction of the Grantee, the broker will either

13

 

(i) sell all of the Shares received when the Option is exercised and pay the Grantee
the proceeds of the sale (minus the Option Price, withholding taxes and any fees due to the
broker) or (ii) sell enough of the Shares received upon exercise of the Option to cover the
Option Price, withholding taxes and any fees due the broker and deliver to the Grantee
(either directly or through the Company) a stock certificate for the remaining Shares.
Dispositions to a broker effecting a cashless exercise are not exempt under Section 16 of
the Exchange Act (if the Company is a Publicly Held Corporation). In no event will the
Committee allow the Option Price to be paid with a form of consideration, including, but not
limited to, a loan to employee if such form of consideration would violate the
Sarbanes-Oxley Act of 2002 as determined by the Committee in its discretion.

     The Committee, in its discretion, may also allow an Option to be exercised by a
broker-dealer acting on behalf of the Grantee if (i) the broker-dealer has received from the
Grantee a duly endorsed Incentive Agreement evidencing such Option and instructions signed
by the Grantee requesting the Company to deliver the shares of Common Stock subject to such
Option to the broker-dealer on behalf of the Grantee and specifying the account into which
such shares should be deposited, (ii) adequate provision has been made with respect to the
payment of any withholding taxes due upon such exercise, and (iii) the broker-dealer and the
Grantee have otherwise complied with Section 220.3(e)(4) of Regulation T, 12 CFR Part 220
(or its successor).

     As soon as practicable after receipt of a written notification of exercise and full
payment, the Company shall deliver, or cause to be delivered, to or on behalf of the
Grantee, in the name of the Grantee or other appropriate recipient, Share certificates for
the number of Shares purchased under the Stock Option. Such delivery shall be effected for
all purposes when the Company or a stock transfer agent of the Company shall have deposited
such certificates in the United States mail, addressed to Grantee or other appropriate
recipient.

     Subject to Section 5.2, during the lifetime of a Grantee, each Option granted
to him shall be exercisable only by the Grantee (or his legal guardian in the event of his
disability as determined by the Committee or as defined in the Incentive Agreement) or by a
broker-dealer acting on his behalf pursuant to a cashless exercise under the foregoing
provisions of this Section 2.3(a).

     (b) Restrictions on Share Transferability. The Committee may impose such
restrictions on any grant of Stock Options or on any Shares acquired pursuant to the
exercise of a Stock Option as it may deem advisable, including, without limitation,
restrictions under (i) any buy/sell agreement or right of first refusal, non-competition,
and any other agreement between the Company and any of its securities holders or employees,
(ii) any applicable federal securities laws, (iii) the requirements of any stock exchange or
market upon which such Shares are then listed and/or traded, or (iv) any blue sky or state
securities law applicable to such Shares. Any certificate issued to evidence Shares issued
upon the exercise of an Incentive Award may bear such legends and statements as the
Committee shall deem advisable to assure compliance with federal and state laws and
regulations.

14

 

     Any Grantee or other person exercising an Incentive Award may be required by the
Committee to give a written representation that the Incentive Award and the Shares subject
to the Incentive Award will be acquired for investment and not with a view to public
distribution; provided, however, that the Committee, in its sole discretion, may release any
person receiving an Incentive Award from any such representations either prior to or
subsequent to the exercise of the Incentive Award.

     (c) Notification of Disqualifying Disposition of Shares from Incentive Stock
Options. Notwithstanding any other provision of the Plan, a Grantee who disposes of
Shares of Common Stock acquired upon the exercise of an Incentive Stock Option by a sale or
exchange either (i) within two (2) years after the date of the grant of the Incentive Stock
Option under which the Shares were acquired or (ii) within one (1) year after the transfer
of such Shares to him pursuant to exercise, shall promptly notify the Company of such
disposition, the amount realized and his adjusted basis in such Shares.

	2.4	 	Reload Options
	 
	 	 	At the discretion of the Committee, the Grantee may be granted under an Incentive Agreement,
replacement Stock Options under the Plan that permit the Grantee to purchase an additional
number of Shares equal to the number of previously owned Shares surrendered by the Grantee
to pay for all or a portion of the Option Price upon exercise of his Stock Options. The
terms and conditions of such replacement Stock Options shall be set forth in the Incentive
Agreement.
	 
	2.5	 	Supplemental Payment on Exercise of Nonqualified Stock Options or Stock Appreciation Rights.

     The Committee, either at the time of grant or as of the time of exercise of any Nonqualified
Stock Option or stock appreciation right, may provide in the Incentive Agreement for a Supplemental
Payment by the Company to the Grantee with respect to the exercise of any Nonqualified Stock Option
or stock appreciation right. The Supplemental Payment shall be in the amount specified by the
Committee, which amount shall not exceed the amount necessary to pay the federal and state income
tax payable with respect to both the exercise of the Nonqualified Stock Option and/or stock
appreciation right and the receipt of the Supplemental Payment, assuming the holder is taxed at
either the maximum effective income tax rate applicable thereto or at a lower tax rate as deemed
appropriate by the Committee in its discretion. The Committee shall have the discretion to grant
Supplemental Payments that are payable solely in cash or Supplemental Payments that are payable in
cash, Common Stock, or a combination of both, as determined by the Committee at the time of
payment.

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SECTION 3.

RESTRICTED STOCK

	3.1	 	Award of Restricted Stock

     (a) Grant. In consideration of the performance of Employment by any Grantee
who is an Employee, Consultant or Outside Director, Shares of Restricted Stock may be
awarded under the Plan by the Committee with such restrictions during the Restriction Period
as the Committee may designate in its discretion, any of which restrictions may differ with
respect to each particular Grantee. Restricted Stock shall be awarded for no additional
consideration or such additional consideration as the Committee may determine, which
consideration may be less than, equal to or more than the Fair Market Value of the shares of
Restricted Stock on the grant date. The terms and conditions of each grant of Restricted
Stock shall be evidenced by an Incentive Agreement.

     (b) Immediate Transfer Without Immediate Delivery of Restricted Stock. Unless
otherwise specified in the Grantee’s Incentive Agreement, each Restricted Stock Award shall
constitute an immediate transfer of the record and beneficial ownership of the Shares of
Restricted Stock to the Grantee in consideration of the performance of services as an
Employee, Consultant or Outside Director, as applicable, entitling such Grantee to all
voting and other ownership rights in such Shares.

     As specified in the Incentive Agreement, a Restricted Stock Award may limit the
Grantee’s dividend rights during the Restriction Period in which the shares of Restricted
Stock are subject to a “substantial risk of forfeiture” (within the meaning given to such
term under Code Section 83) and restrictions on transfer. In the Incentive Agreement, the
Committee may apply any restrictions to the dividends that the Committee deems appropriate.
Without limiting the generality of the preceding sentence, if the grant or vesting of Shares
of Restricted Stock granted to a Covered Employee, if applicable, is designed to comply with
the requirements of the Performance-Based Exception, the Committee may apply any
restrictions it deems appropriate to the payment of dividends declared with respect to such
Shares of Restricted Stock, such that the dividends and/or the Shares of Restricted Stock
maintain eligibility for the Performance-Based Exception. In the event that any dividend
constitutes a derivative security or an equity security pursuant to the rules under Section
16 of the Exchange Act, if applicable, such dividend shall be subject to a vesting period
equal to the remaining vesting period of the Shares of Restricted Stock with respect to
which the dividend is paid.

     Shares awarded pursuant to a grant of Restricted Stock may be (i) issued in the name of
the Grantee and held, together with a stock power endorsed in blank, by the Committee or
Company (or their delegates) or in trust or in escrow pursuant to an agreement satisfactory
to the Committee or (ii) issued in “book entry” form or other means of evidencing
uncertificated Shares, as determined by the Committee, until such time as the restrictions
on transfer have expired. All such terms and conditions shall be set forth in the
particular Grantee’s Incentive Agreement. The Company or Committee

16

 

(or their delegates) shall issue to the Grantee a receipt evidencing the certificates
held by it which are registered in the name of the Grantee.

	3.2	 	Restrictions

     (a) Forfeiture of Restricted Stock. Restricted Stock awarded to a Grantee may
be subject to the following restrictions until the expiration of the Restriction Period: (i)
a restriction that constitutes a “substantial risk of forfeiture” (as defined in Code
Section 83), or a restriction on transferability; (ii) unless otherwise specified by the
Committee in the Incentive Agreement, the Restricted Stock that is subject to restrictions
which are not satisfied shall be forfeited and all rights of the Grantee to such Shares
shall terminate; and (iii) any other restrictions that the Committee determines in advance
are appropriate, including, without limitation, rights of repurchase or first refusal in the
Company or provisions subjecting the Restricted Stock to a continuing substantial risk of
forfeiture in the hands of any transferee. Any such restrictions shall be set forth in the
particular Grantee’s Incentive Agreement.

     (b) Issuance of Certificates. Reasonably promptly after the date of grant with
respect to Shares of Restricted Stock, the Company shall cause to be issued a stock
certificate, registered in the name of the Grantee to whom such Shares of Restricted Stock
were granted, evidencing such Shares; provided, however, that the Company shall not cause to
be issued such a stock certificate unless it has received a stock power duly endorsed in
blank with respect to such Shares; provided, further, in lieu of issuing such a stock
certificate, the Committee may arrange to make “book entries” or other means of evidencing
uncertificated Shares of Restricted Stock. Each such stock certificate shall bear the
following legend or any other legend approved by the Company:

The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture and restrictions against transfer)
contained in the Synthesis Energy Systems, Inc. 2006 Incentive Plan
and an Incentive Agreement entered into between the registered owner
of such shares and Synthesis Energy Systems, Inc. A copy of the
Plan and Incentive Agreement are on file in the corporate offices of
Synthesis Energy Systems, Inc.

Such legend shall not be removed from the certificate evidencing such Shares of Restricted
Stock until such Shares vest pursuant to the terms of the Incentive Agreement.

     (c) Removal of Restrictions. The Committee, in its discretion, shall have the
authority to remove any or all of the restrictions on the Restricted Stock if it determines
that, by reason of a change in applicable law or another change in circumstance arising
after the grant date of the Restricted Stock, such action is appropriate.

	3.3	 	Delivery of Shares of Common Stock

     Subject to withholding taxes under Section 6.3 and to the terms of the Incentive
Agreement, a stock certificate evidencing the Shares of Restricted Stock with respect to which

17

 

the restrictions in the Incentive Agreement have been satisfied shall be delivered to the
Grantee or other appropriate recipient free of restrictions. Such delivery shall be effected for
all purposes when the Company shall have deposited such certificate in the United States mail,
addressed to the Grantee or other appropriate recipient.

	3.4	 	Supplemental Payment on Vesting of Restricted Stock

     The Committee, either at the time of grant or vesting of Restricted Stock, may provide for a
Supplemental Payment by the Company to the holder in an amount specified by the Committee, which
amount shall not exceed the amount necessary to pay the federal and state income tax payable with
respect to both the vesting of the Restricted Stock and receipt of the Supplemental Payment,
assuming the Grantee is taxed at either the maximum effective income tax rate applicable thereto or
at a lower tax rate as deemed appropriate by the Committee in its discretion. The Committee shall
have the discretion to grant Supplemental Payments that are payable solely in cash or Supplemental
Payments that are payable in cash, Common Stock, or a combination of both, as determined by the
Committee at the time of payment.

SECTION 4.

OTHER STOCK-BASED AWARDS AND PERFORMANCE AWARDS

	4.1	 	Grant of Other Stock-Based Awards

     Other Stock-Based Awards may be awarded by the Committee to selected Grantees that are
denominated or payable in, valued in whole or in part by reference to, or otherwise related to,
Shares of Common Stock, as deemed by the Committee to be consistent with the purposes of the Plan
and the goals of the Company. Types of Other Stock-Based Awards include, without limitation,
purchase rights, Shares of Common Stock awarded which are not subject to any restrictions or
conditions, convertible or exchangeable debentures, other rights convertible into Shares, Incentive
Awards valued by reference to the value of securities of, or the performance of, the Company or a
specified Subsidiary, division or department, and settlement in cancellation of rights of any
person with a vested interest in any other plan, fund, program or arrangement that is or was
sponsored, maintained or participated in by the Company or any Parent or Subsidiary. As is the
case with other Incentive Awards, Other Stock-Based Awards may be awarded either alone or in
addition to or in tandem with any other Incentive Awards.

	4.2	 	Other Stock-Based Award Terms

     (a) Written Agreement. The terms and conditions of each grant of an Other
Stock-Based Award shall be evidenced by an Incentive Agreement.

     (b) Purchase Price. Except to the extent that an Other Stock-Based Award is
granted in substitution for an outstanding Incentive Award or is delivered upon exercise of
a Stock Option, the amount of consideration required to be received by the Company shall be
either (i) no consideration other than services actually rendered (in the case of authorized
and unissued shares) or to be rendered, or (ii) in the case of an Other Stock-Based Award in
the nature of a purchase right, consideration (other than services rendered or to be
rendered) at least equal to fifty percent (50%) of the Fair Market Value

18

 

of the Shares covered by such grant on the date of grant (or such percentage higher
than 50% that is required by any applicable tax or securities law). To the extent that the
Company is a Publicly Held Corporation and that a stock appreciation right is intended to
qualify for the Performance-Based Exception or to the extent it is intended to be exempt
from Code Section 409A, the exercise price per share of Common Stock shall not be less than
one hundred percent (100%) of Fair Market Value of a share of Common Stock on the date of
the grant of the stock appreciation right.

     (c) Performance Criteria and Other Terms. In its discretion, the Committee may
specify such criteria, periods or goals for vesting in Other Stock-Based Awards and payment
thereof to the Grantee as it shall determine; and the extent to which such criteria, periods
or goals have been met shall be determined by the Committee. All terms and conditions of
Other Stock-Based Awards shall be determined by the Committee and set forth in the Incentive
Agreement.

     (d) Payment. Other Stock-Based Awards may be paid in Shares of Common Stock,
cash or other consideration or a combination thereof related to such Shares, in a single
payment or in installments on such dates as determined by the Committee, all as specified in
the Incentive Agreement.

     (e) Dividends. The Grantee of an Other Stock-Based Award shall not be entitled
to receive, currently or on a deferred basis, dividends or dividend equivalents with respect
to the number of Shares covered by the Other Stock-Based Award, unless (and to the extent)
otherwise as determined by the Committee and set forth in a separate Incentive Agreement.
The Committee may also provide in such Incentive Agreement that the amounts of any dividends
or dividend equivalent shall be deemed to have been reinvested in additional Shares of
Common Stock.

	4.3	 	Performance Awards

     (a) Grant. The Committee is authorized to grant Performance Awards to selected
Grantees who are Employees or Consultants. Performance Awards may be by reference to
Performance Shares or Performance Units. Each grant of Performance Awards shall he
evidenced by an Incentive Agreement in such amounts and upon such terms as shall be
determined by the Committee. The Committee may make grants of Performance Awards in such a
manner that more than one Performance Period is in progress concurrently. For each
Performance Period, the Committee shall establish the number of Performance Awards and their
contingent values which may vary depending on the degree to which performance criteria
established by the Committee are met.

     (b) Performance Criteria. The Committee may establish performance goals
applicable to Performance Awards based upon criteria in one or more of the following
categories: (i) performance of the Company as a whole, (ii) performance of a segment of the
Company’s business, and (iii) individual performance. Performance criteria for the Company
shall relate to the achievement of predetermined financial objectives for the Company and
its Subsidiaries on a consolidated basis. Performance criteria for a segment of the
Company’s business shall relate to the achievement of financial and

19

 

operating objectives of the segment for which the Grantee is accountable. Examples of
performance criteria shall include one or more of the following pre-tax or after-tax profit
levels, including: earnings per share, earnings before interest and taxes, earnings before
interest, taxes, depreciation and amortization, net operating profits after tax, and net
income; total stockholder return; return on assets, equity, capital or investment; cash flow
and cash flow return on investment; economic value added and economic profit; growth in
earnings per share; levels of operating expense, maintenance expenses or measures of
customer satisfaction and customer service as determined from time to time including the
relative improvement therein; stock price performance, sales, costs, production volumes, or
reserves added. Individual performance criteria shall relate to a Grantee’s overall
performance, taking into account, among other measures of performance, the attainment of
individual goals and objectives. The performance goals may differ among Grantees. The
Performance Criteria need not be based on an increase or positive result and may include for
example, maintaining the status quo or limiting economic loss.

     (c) Modification. If an Incentive Award is intended to meet the
Performance-Based Exception, the Committee shall not permit any modification that would
cause the Incentive Award to fail to qualify for the Performance-Based Exception, if
applicable.

     (d) Payment. The basis for payment of Performance Awards for a given
Performance Period shall be the achievement of those performance objectives determined by
the Committee at the beginning of the Performance Period as specified in the Grantee’s
Incentive Agreement. If minimum performance is not achieved for a Performance Period, no
payment shall be made and all contingent rights shall cease. If minimum performance is
achieved or exceeded, the number of Performance Awards may be based on the degree to which
actual performance exceeded the pre-established minimum performance standards. The amount of
payment shall be determined by multiplying the number of Performance Awards granted at the
beginning of the Performance Period times the final Performance Award value. Payments shall
be made, in the discretion of the Committee as specified in the Incentive Agreement.

     (e) Special Rule for Covered Employees. No later than the ninetieth (90th) day
following the beginning of a Performance Period (or twenty-five percent (25%) of the
Performance Period) the Committee shall establish performance goals as described in
Section 4.3 applicable to Performance Awards awarded to Covered Employees in such a
manner as shall permit payments with respect thereto to qualify for the Performance-Based
Exception, if applicable. If a Performance Award granted to a Covered Employee is intended
to comply with the Performance-Based Exception, the Committee in establishing performance
goals shall comply with Treasury Regulation § l.162-27(e)(2) (or its successor). As soon as
practicable following the Company’s determination of the Company’s financial results for any
Performance Period, the Committee shall certify in writing: (i) whether the Company achieved
its minimum performance for the objectives for the Performance Period, (ii) the extent to
which the Company achieved its performance objectives for the Performance Period, (iii) any
other terms that are material to the grant of Performance Awards, and (iv) the calculation
of the payments, if any, to be paid to each Grantee for the Performance Period.

20

 

     (f) Supplemental Payment on Vesting of Performance Units or Performance Shares.
The Committee, either at the time of grant or at the time of vesting of Performance Units
or Performance Shares, may provide for a Supplemental Payment by the Company to the Grantee
in an amount specified by the Committee, which amount shall not exceed the amount necessary
to pay the federal and state income tax payable with respect to both the vesting of such
Performance Units or Performance Shares and receipt of the Supplemental Payment, assuming
the Grantee is taxed at either the maximum effective income tax rate applicable thereto or
at a lower tax rate as seemed appropriate by the Committee in its discretion. The Committee
shall have the discretion to grant Supplemental Payments that are payable in cash, Common
Stock, or a combination of both, as determined by the Committee at the time of payment.

SECTION 5.

PROVISIONS RELATING TO PLAN PARTICIPATION

	5.1	 	Plan Conditions

     (a) Incentive Agreement. Each Grantee to whom an Incentive Award is granted
shall be required to enter into an Incentive Agreement with the Company, in such a form as
is provided by the Committee. The Incentive Agreement shall contain specific terms as
determined by the Committee, in its discretion, with respect to the Grantee’s particular
Incentive Award. Such terms need not be uniform among all Grantees or any similarly
situated Grantees. The Incentive Agreement may include, without limitation, vesting,
forfeiture and other provisions particular to the particular Grantee’s Incentive Award, as
well as, for example, provisions to the effect that the Grantee (i) shall not disclose any
confidential information acquired during Employment with the Company, (ii) shall abide by
all the terms and conditions of the Plan and such other terms and conditions as may be
imposed by the Committee, (iii) shall not interfere with the employment or other service of
any employee, (iv) shall not compete with the Company or become involved in a conflict of
interest with the interests of the Company, (v) shall forfeit an Incentive Award if
terminated for cause as determined by the Committee or as defined in the Incentive
Agreement, (vi) shall not be permitted to make an election under Section 83(b) of the Code
when applicable, and (vii) shall be subject to any other agreement between the Grantee and
the Company regarding Shares that may be acquired under an Incentive Award including,
without limitation, an agreement restricting the transferability of Shares by Grantee. An
Incentive Agreement shall include such terms and conditions as are determined by the
Committee, in its discretion, to be appropriate with respect to any individual Grantee. The
Incentive Agreement shall be signed by the Grantee to whom the Incentive Award is made and
by an Authorized Officer.

     (b) No Right to Employment. Nothing in the Plan or any instrument executed
pursuant to the Plan shall create any Employment rights (including without limitation,
rights to continued Employment) in any Grantee or affect the right of the Company to
terminate the Employment of any Grantee at any time without regard to the existence of the
Plan.

21

 

     (c) Securities Requirements. The Company shall be under no obligation to
effect the registration pursuant to the Securities Act of 1933 of any Shares of Common Stock
to be issued hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause
to be issued or delivered any certificates evidencing Shares pursuant to the Plan unless and
until the Company is advised by its counsel that the issuance and delivery of such
certificates is in compliance with all applicable laws, regulations of governmental
authorities, and the requirements of any securities exchange on which Shares are traded.
The Committee may require, as a condition of the issuance and delivery of certificates
evidencing Shares of Common Stock pursuant to the terms hereof, that the recipient of such
Shares make such covenants, agreements and representations, and that such certificates bear
such legends, as the Committee, in its discretion, deems necessary or desirable.

     If the Shares issuable on exercise of an Incentive Award are not registered under the
Securities Act of 1933, the Company may imprint on the certificate for such Shares the
following legend or any other legend which counsel for the Company considers necessary or
advisable to comply with the Securities Act of 1933:

THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON
RECEIPT BY THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION, IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION, THAT
REGISTRATION IS NOT REQUIRED FOR SUCH SALE OR TRANSFER.

	5.2	 	Transferability and Exercisability

     Incentive Awards granted under the Plan shall not be transferable or assignable other
than: (a) by will or the laws of descent and distribution or (b) pursuant to a qualified
domestic relations order (as defined by Section 414(p) of the Code (“QDRO”); provided,
however, that an ISO may only be transferred pursuant to a QDRO if the Incentive Agreement
expressly permits such transfer and provided further that only with respect to Incentive
Awards of Nonqualified Stock Options, the Committee may, in its discretion, authorize all or
a portion of the Nonqualified Stock Options to be granted on terms which permit transfer by
the Grantee to (i) the members of the Grantee’s Immediate Family, (ii) a trust or trusts for
the exclusive benefit of such Immediate Family, or (iii) a partnership in which such members
of such Immediate Family are the only partners, provided that (A) there may be no
consideration for any such transfer, (B) the Incentive Agreement pursuant to which such
Nonqualified Stock Options are granted must be approved by the Committee, and must expressly
provide for transferability in a manner consistent with this Section 5.2, and (C)
subsequent transfers of transferred Options shall be prohibited except in accordance with
clauses (a) and (b) (above) of this sentence. Following any permitted transfer, any
Incentive Award shall continue to be subject to the

22

 

same terms and conditions as were applicable immediately prior to transfer, provided
that the term “Grantee” shall be deemed to refer to the transferee. The termination of
employment events of Section 5.6 and in the Incentive Agreement shall continue to be
applied with respect to the original Grantee, and the Incentive Award shall be exercisable
by the transferee only to the extent, and for the periods, specified in the Incentive
Agreement.

     Except as may otherwise be permitted under the Code, in the event of a permitted
transfer of a Nonqualified Stock Option hereunder, the original Grantee shall remain subject
to withholding taxes upon exercise. In addition, the Company shall have no obligation to
provide any notices to a transferee including, for example, of the termination of an
Incentive Award following the original Grantee’s termination of employment.

     In the event that a Grantee terminates employment with the Company to assume a position
with a governmental, charitable, educational or other nonprofit institution, the Committee
may, in its discretion, subsequently authorize a third party, including but not limited to a
“blind” trust, to act on behalf of and for the benefit of such Grantee regarding any
outstanding Incentive Awards held by the Grantee subsequent to such termination of
employment. If so permitted by the Committee, a Grantee may designate a beneficiary or
beneficiaries to exercise the rights of the Grantee and receive any distribution under the
Plan upon the death of the Grantee.

     No transfer by will or by the laws of descent and distribution shall be effective to
bind the Company unless the Committee has been furnished with a copy of the deceased
Grantee’s enforceable will or such other evidence as the Committee deems necessary to
establish the validity of the transfer. Any attempted transfer in violation of this
Section 5.2 shall be void and ineffective. All determinations under this
Section 5.2 shall be made by the Committee in its discretion.

	5.3	 	Rights as a Stockholder

     (a) No Stockholder Rights. Except as otherwise provided in Section
3.1(b) for grants of Restricted Stock, a Grantee of an Incentive Award (or a permitted
transferee of such Grantee) shall have no rights as a stockholder with respect to any Shares
of Common Stock until the issuance of a stock certificate for such Shares.

     (b) Representation of Ownership. In the case of the exercise of an Incentive
Award by a person or estate acquiring the right to exercise such Incentive Award by reason
of the death or disability of a Grantee, the Committee may require reasonable evidence as to
the ownership of such Incentive Award or the authority of such person and may require such
consents and releases of taxing authorities as the Committee may deem advisable.

	5.4	 	Listing and Registration of Shares of Common Stock

     The exercise of any Incentive Award granted hereunder shall only be effective at such time as
counsel to the Company shall have determined that the issuance and delivery of Shares of

23

 

Common Stock pursuant to such exercise is in compliance with all applicable laws, regulations
of governmental authorities and the requirements of any securities exchange on which Shares of
Common Stock are traded. The Committee may, in its discretion, defer the effectiveness of any
exercise of an Incentive Award in order to allow the issuance of Shares of Common Stock to be made
pursuant to a registration statement, or an exemption from registration, or other methods for
compliance available under federal or state securities laws. The Committee shall inform the
Grantee in writing of its decision to defer the effectiveness of the exercise of an Incentive
Award. During the period that the effectiveness of the exercise of an Incentive Award has been
deferred, the Grantee may, by written notice to the Committee, withdraw such exercise and obtain
the refund of any amount paid with respect thereto.

	5.5	 	Change in Stock and Adjustments

     (a) Changes in Law or Circumstances. Subject to Section 5.7 (which
only applies in the event of a Change in Control), in the event of any change in applicable
law or any change in circumstances which results in or would result in any dilution of the
rights granted under the Plan, or which otherwise warrants an equitable adjustment because
it interferes with the intended operation of the Plan, then, if the Committee should so
determine, in its absolute discretion, that such change equitably requires an adjustment in
the number or kind of shares of stock or other securities or property theretofore subject,
or which may become subject, to issuance or transfer under the Plan or in the terms and
conditions of outstanding Incentive Awards, such adjustment shall be made in accordance with
such determination. Such adjustments may include changes with respect to (i) the aggregate
number of Shares that may be issued under the Plan, (ii) the number of Shares subject to
Incentive Awards, and (iii) the Option Price or other price per Share for outstanding
Incentive Awards. Any adjustment under this paragraph of an outstanding Incentive Stock
Option shall be made only to the extent not constituting a “modification” within the meaning
of Section 424(h)(3) of the Code or with respect to a Stock Option to the extent not
constituting a modification or deferred compensation under Code Section 409A and the
regulations thereunder unless otherwise agreed to by the Grantee in writing. The Committee
shall give notice to each applicable Grantee of such adjustment which shall be effective and
binding.

     (b) Exercise of Corporate Powers. The existence of the Plan or outstanding
Incentive Awards hereunder shall not affect in any way the right or power of the Company or
its stockholders to make or authorize any or all adjustments, recapitalization,
reorganization or other changes in the Company’s capital structure or its business or any
merger or consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stocks ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding whether of a similar character
or otherwise.

     (c) Recapitalization of the Company. Subject to Section 5.7 (which
only applies in the event of a Change in Control), if while there are Incentive Awards
outstanding, the Company shall effect any subdivision or consolidation of Shares of Common
Stock or other capital readjustment, the payment of a stock dividend, stock

24

 

split, combination of Shares, recapitalization or other increase or reduction in the
number of Shares outstanding, without receiving compensation therefor in money, services or
property, then the number of Shares available under the Plan and the number of Incentive
Awards which may thereafter be exercised shall (i) in the event of an increase in the number
of Shares outstanding, be proportionately increased and the Option Price or Fair Market
Value of the Incentive Awards awarded shall be proportionately reduced; and (ii) in the
event of a reduction in the number of Shares outstanding, be proportionately reduced, and
the Option Price or Fair Market Value of the Incentive Awards awarded shall be
proportionately increased. The Committee shall take such action and whatever other action
it deems appropriate, in its discretion, so that the value of each outstanding Incentive
Award to the Grantee shall not be adversely affected by a corporate event described in this
subsection (c).

     (d) Issue of Common Stock by the Company. Except as hereinabove expressly
provided in this Section 5.5 and subject to Section 5.7 in the event of a
Change in Control, the issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon any conversion of shares or obligations of the Company convertible into
such shares or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of, or Option Price or Fair Market Value of, any
Incentive Awards then outstanding under previously granted Incentive Awards; provided,
however, in such event, outstanding Shares of Restricted Stock shall be treated the same as
outstanding unrestricted Shares of Common Stock.

     (e) Assumption under the Plan of Outstanding Stock Options. Notwithstanding
any other provision of the Plan, the Committee, in its absolute discretion, may authorize
the assumption and continuation under the Plan of outstanding and unexercised stock options
or other types of stock-based incentive awards that were granted under a stock option plan
(or other type of stock incentive plan or agreement) that is or was maintained by a
corporation or other entity that was merged into, consolidated with, or whose stock or
assets were acquired by, the Company as the surviving corporation. Any such action shall be
upon such terms and conditions as the Committee, in its discretion, may deem appropriate,
including provisions to preserve the holder’s rights under the previously granted and
unexercised stock option or other stock-based incentive award, such as, for example,
retaining the treatment as a Stock Option. Any such assumption and continuation of any such
previously granted and unexercised incentive award shall be treated as an outstanding
Incentive Award under the Plan and shall thus count against the number of Shares reserved
for issuance pursuant to Section 1.4. In addition, any Shares issued by the Company
through the assumption or substitution of outstanding grants from an acquired company shall
reduce the Shares available for grants under Section 1.4.

     (f) Assumption of Incentive Awards by a Successor. Subject to the accelerated
vesting and other provisions of Section 5.7 that apply in the event of a Change in
Control, in the event of a Corporate Event (defined below), each Grantee shall be entitled
to receive, in lieu of the number of Shares subject to Incentive Awards, such

25

 

shares of capital stock or other securities or property as may be issuable or payable
with respect to or in exchange for the number of Shares which Grantee would have received
had he exercised the Incentive Award immediately prior to such Corporate Event, together
with any adjustments (including, without limitation, adjustments to the Option Price and the
number of Shares issuable on exercise of outstanding Stock Options). For this purpose,
Shares of Restricted Stock shall be treated the same as unrestricted outstanding Shares of
Common Stock. A “Corporate Event” means any of the following: (i) a dissolution or
liquidation of the Company, (ii) a sale of all or substantially all of the Company’s assets,
(iii) a merger, consolidation or combination involving the Company (other than a merger,
consolidation or combination (A) in which the Company is the continuing or surviving
corporation and (B) which does not result in the outstanding Shares being converted into or
exchanged for different securities, cash or other property, or any combination thereof), or
(iv) if so determined by the Committee, any other “corporate transaction” as defined in Code
Sections 424 and 409A and the regulations thereunder. The Committee shall take whatever
other action it deems appropriate to preserve the rights of Grantees holding outstanding
Incentive Awards.

     Notwithstanding the previous paragraph of this Section 5.5(f), but subject to
the accelerated vesting and other provisions of Section 5.7 that apply in the event
of a Change in Control, in the event of a Corporate Event (described in the previous
paragraph), the Committee, in its discretion, shall have the right and power to:

     (i) cancel, effective immediately prior to the occurrence of the Corporate
Event, each outstanding Incentive Award (whether or not then exercisable) and, in
full consideration of such cancellation, pay to the Grantee an amount in cash equal
to the excess of (A) the value, as determined by the Committee, of the property
(including cash) received by the holders of Common Stock as a result of such
Corporate Event over (B) the exercise price of such Incentive Award, if any;
provided, however, this subsection (i) shall be inapplicable to an Incentive Award
granted within six (6) months before the occurrence of the Corporate Event but only
if the Grantee is an Insider and such disposition is not exempt under Rule 16b-3 (or
other rules preventing liability of the Insider under Section 16(b) of the Exchange
Act) and, in that event, the provisions hereof shall be applicable to such Incentive
Award after the expiration of six (6) months from the date of grant; or

     (ii) provide for the exchange or substitution of each Incentive Award
outstanding immediately prior to such Corporate Event (whether or not then
exercisable) for another award with respect to the Common Stock or other property
for which such Incentive Award is exchangeable and, incident thereto, make an
equitable adjustment as determined by the Committee, in its discretion, in the
Option Price or exercise price of the Incentive Award, if any, or in the number of
Shares or amount of property (including cash) subject to the Incentive Award; or

     (iii) provide for assumption of the Plan and such outstanding Incentive Awards
by the surviving entity or its parent.

26

 

The Committee, in its discretion, shall have the authority to take whatever action it deems
to be necessary or appropriate to effectuate the provisions of this subsection (f).

	5.6	 	Termination of Employment, Death, Disability and Retirement

     The Committee shall provide in the Grantee’s Incentive Agreement for exercisability periods
and vesting and any other terms in connection with the Grantee’s Termination of Employment, death,
disability or retirement. Subject to the conditions and limitations of the Plan and applicable law
and regulation in the event that a Grantee ceases to be an Employee, Outside Director or
Consultant, as applicable, for whatever reason, the Committee and Grantee may mutually agree with
respect to any outstanding Option or other Incentive Award then held by the Grantee (i) for an
acceleration or other adjustment in any vesting schedule applicable to the Incentive Award, (ii)
for a continuation of the exercise period following termination for a longer period than is
otherwise provided under such Incentive Award, or (iii) to any other change in the terms and
conditions of the Incentive Award. In the event of any such change to an outstanding Inventive
Award, a written amendment to the Grantee’s Incentive Agreement shall be required.

	5.7	 	Change in Control

     Notwithstanding any contrary provision in the Plan, in the event of a Change in Control (as
defined below) the following actions shall automatically occur as of the day immediately preceding
the Change in Control date unless expressly provided otherwise in the Grantee’s Incentive
Agreement:

     (a) all of the Stock Options then outstanding shall become one hundred percent (100%)
vested and immediately and fully exercisable;

     (b) all of the restrictions and conditions of any Restricted Stock and any Other
Stock-Based Awards then outstanding shall be deemed satisfied, and the Restriction Period
with respect thereto shall be deemed to have expired; and

     (c) all of the Other Stock-Based Awards shall become fully vested, deemed earned in
full, and promptly paid within thirty (30) days to the affected Grantees without regard to
payment schedules and notwithstanding that the applicable performance cycle, retention cycle
or other restrictions and conditions have not been completed or satisfied.

     (d) If a Grantee is a “disqualified individual” (as defined in Section 280G of the
Code) and the accelerated vesting of an Incentive Award and/or the termination of the
restricted period occurs with respect to a Change in Control, together with any other
payments which the Grantee has the right to receive from the Company and its Affiliates,
whether or not under this Plan, would constitute a “parachute payment” (as defined in
Section 280G of the Code), then, except to the extent such Grantee has entered into an
Incentive Award Agreement or a written severance or employment agreement with the Company
that expressly provides for a “parachute tax gross-up”, such accelerated vesting and/or
termination of the restricted period provided under the paragraph above shall be reduced to
the extent necessary (beginning with Stock Options) so that the present value thereof (as
determined for parachute purposes) to the Grantee will be $l.00 less than three times the
Grantee’s “base amount” (as defined in Section 280G of the Code), but only if

27

 

such reduction produces a better net after-tax position to the Grantee. Such
determinations shall be made by the Company in good faith.

     Notwithstanding any other provision of the Plan, unless otherwise expressly provided in the
Grantee’s Incentive Agreement, the provisions of this Section 5.7 may not be terminated,
amended, or modified to adversely affect any Incentive Award theretofore granted under the Plan
without the prior written consent of the Grantee with respect to his outstanding Incentive Awards
subject, however, to the last paragraph of this Section 5.7.

     For all purposes of this Plan, a “Change in Control” of the Company shall be deemed to occur
if:

     (a) any “person” (as defined in section 3(a)(9) of the Exchange Act, and as such term
is modified in sections 13(d) and 14(d) of the Exchange Act, is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of
securities of the Company representing 50% or more of the combined voting power of the
Company’s then outstanding securities, provided however, that excluded are the following:
(i) the Company or any of its subsidiaries, (ii) a trustee or any fiduciary holding
securities under any Compensation Plan, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, (iv) a corporation owned, directly or
indirectly, by stockholders of the Company in substantially the same proportions as their
ownership of the Company (for the purposes of this paragraph, “Compensation Plan” shall mean
any compensation arrangement, plan, policy, practice or program established, maintained or
sponsored by the Company or any subsidiary of the Company, for its employees generally or
any specific group of employees, or to which the Company or any subsidiary of the Company
contributes, and which includes, by way of example and not limitation, any incentive plan,
bonus plan, 401(k) plan, pension plan, savings plan, equity or cash incentive plan, phantom
stock plan, stock appreciation right plan, stock option plan, restricted stock award plan,
retirement plan, deferred compensation plan, or supplemental benefit arrangement);

     (b) during any period of not more than two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to effect a
transaction described in clause (a), (c) or (d) of this definition whose election by the
Board or nomination for election by the Company’s stockholders 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 whose election or nomination for election was previously so
approved (hereinafter referred to as “Continuing Directors”), cease for any reason to
constitute at least a majority thereof;

     (c) the stockholders of the Company approve a merger or consolidation of the Company
with any other corporation or entity, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of any trustee or
other fiduciary holder of securities under a Compensation

28

 

Plan, 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, or
(ii) a merger or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than 50% of the combined voting power
of the Company’s then outstanding securities;

     (d) the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or substantially
all of the Company’s assets; or

     (e) any other event determined by the Board of Directors in its sole discretion to be a
Change in Control; provided, further, that an Initial Public Offering shall not be a Change
in Control unless it is determined to be by the Board in its sole discretion.

	5.8	 	Exchange of Incentive Awards

     The Committee may, in its discretion, permit any Grantee to surrender outstanding Incentive
Awards in order to exercise or realize his rights under other Incentive Awards or in exchange for
the grant of new Incentive Awards, or require holders of Incentive Awards to surrender outstanding
Incentive Awards (or comparable rights under other plans or arrangements) as a condition precedent
to the grant of new Incentive Awards.

	5.9	 	Financing

     To the extent permitted by the Sarbanes-Oxley Act of 2002 or other applicable law, the Company
may extend and maintain, or arrange for and guarantee, the extension and maintenance of financing
to any Grantee to purchase Shares pursuant to exercise of an Incentive Award upon such terms as are
approved by the Committee and the Board in their discretion.

SECTION 6.

GENERAL

	6.1	 	Effective Date and Grant Period

     This Plan, as amended and restated, is adopted by the Board effective as of the Effective Date
subject to the approval of the stockholders of the Company within twelve (12) months from the
Effective Date. Incentive Awards may be granted under the Plan at any time prior to receipt of
such stockholder approval; provided, however, if the requisite stockholder approval is not obtained
within the permissible time frame, then the Plan and any Incentive Awards granted hereunder shall
automatically become null and void and of no force or effect. Unless sooner terminated by the
Board pursuant to Section 6.7, no Incentive Award shall be granted under the Plan after ten
(10) years from November 7, 2005.

	6.2	 	Funding and Liability of Company

     No provision of the Plan shall require the Company, for the purpose of satisfying any
obligations under the Plan, to purchase assets or place any assets in a trust or other entity to

29

 

which contributions are made, or otherwise to segregate any assets. In addition, the Company
shall not be required to maintain separate bank accounts, books, records or other evidence of the
existence of a segregated or separately maintained or administered fund for purposes of the Plan.
Although bookkeeping accounts may be established with respect to Grantees who are entitled to cash,
Common Stock or rights thereto under the Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Company shall not be required to segregate any assets that may at any
time be represented by cash, Common Stock or rights thereto. The Plan shall not be construed as
providing for such segregation, nor shall the Company, the Board or the Committee be deemed to be a
trustee of any cash, Common Stock or rights thereto. Any liability or obligation of the Company to
any Grantee with respect to an Incentive Award shall be based solely upon any contractual
obligations that may be created by this Plan and any Incentive Agreement, and no such liability or
obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any
property of the Company. Neither the Company, the Board nor the Committee shall be required to
give any security or bond for the performance of any obligation that may be created by the Plan.

	6.3	 	Withholding Taxes

     (a) Tax Withholding. The Company shall have the power and the right to deduct
or withhold, or require a Grantee to remit to the Company, an amount sufficient to satisfy
federal, state, and local taxes, domestic or foreign, required by law or regulation to be
withheld with respect to any taxable event arising as a result of the Plan or an Incentive
Award hereunder.

     (b) Share Withholding. With respect to tax withholding required upon the
exercise of Stock Options, upon the lapse of restrictions on Restricted Stock, or upon any
other taxable event arising as a result of any Incentive Awards, Grantees may elect, subject
to the approval of the Committee in its discretion, to satisfy the withholding requirement,
in whole or in part, by having the Company withhold Shares having a Fair Market Value on the
date the tax is to be determined equal to the statutory total tax which could be imposed on
the transaction. All such elections shall be made in writing, signed by the Grantee, and
shall be subject to any restrictions or limitations that the Committee, in its discretion,
deems appropriate. Any fraction of a Share required to satisfy such obligation shall be
disregarded and the amount due shall instead be paid in cash by the Grantee.

     (c) Incentive Stock Options. With respect to Shares received by a Grantee
pursuant to the exercise of an Incentive Stock Option, if such Grantee disposes of any such
Shares within (i) two (2) years from the date of grant of such Option or (ii) one (1) year
after the transfer of such shares to the Grantee, the Company shall have the right to
withhold from any salary, wages or other compensation payable by the Company to the Grantee
an amount sufficient to satisfy federal, state and local tax withholding requirements
attributable to such disqualifying disposition.

30

 

	6.4	 	No Guarantee of Tax Consequences

     Neither the Company nor the Committee makes any commitment or guarantee that any federal,
state or local tax treatment will apply or be available to any person participating or eligible to
participate hereunder.

	6.5	 	Designation of Beneficiary by Grantee

     Each Grantee may, from time to time, name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid in case of his death
before he receives any or all of such benefit. Each such designation shall revoke all prior
designations by the same Grantee, shall be in a form prescribed by the Committee, and will be
effective only when filed by the Grantee in writing with the Committee during the Grantee’s
lifetime. In the absence of any such designation, benefits remaining unpaid at the Grantee’s death
shall be paid to the Grantee’s estate.

	6.6	 	Deferrals

     The Committee may permit a Grantee to defer such Grantee’s receipt of the payment of cash or
the delivery of Shares that would, otherwise be due to such Grantee by virtue of the lapse or
waiver of restrictions with respect to Restricted Stock, or the satisfaction of any requirements or
goals with respect to Other Stock-Based Awards. If any such deferral election is permitted, the
Committee shall, in its discretion, establish rules and procedures for such payment deferrals to
the extent consistent with the Code.

	6.7	 	Amendment and Termination

     The Board shall have complete power and authority to terminate or amend the Plan at any time;
provided, however, if the Company is a Publicly Held Corporation, the Board shall not, without the
approval of the stockholders of the Company within the time period required by applicable law, (a)
except as provided in Section 5.5, increase the maximum number of Shares which may be
issued under the Plan pursuant to Section 1.4, (b) amend the requirements as to the class
of Employees eligible to purchase Common Stock under the Plan, (c) to the extent applicable,
increase the maximum limits on Incentive Awards to Covered Employees as set for compliance with the
Performance-Based Exception, (d) extend the term of the Plan, or (e) to the extent applicable,
decrease the authority granted to the Committee under the Plan in contravention of Rule 16b-3 under
the Exchange Act.

     No termination, amendment, or modification of the Plan shall adversely affect in any material
way any outstanding Incentive Award previously granted to a Grantee under the Plan, without the
written consent of such Grantee or other designated holder of such Incentive Award.

     In addition, to the extent that the Committee determines that (a) the listing for
qualification requirements of any national securities exchange or quotation system on which the
Common Stock is then listed or quoted, if applicable, or (b) the Code (or regulations promulgated
thereunder), require stockholder approval in order to maintain compliance with such listing
requirements or to maintain any favorable tax advantages or qualifications, then the Plan shall not
be amended in such respect without approval of the Company’s stockholders.

31

 

	6.8	 	Requirements of Law

     The granting of Incentive Awards and the issuance of Shares under the Plan shall be subject to
all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required. The Committee may refuse to issue or transfer
any Shares or other consideration under an Incentive Award if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or other consideration might violate
applicable laws. Certificates evidencing shares of Common Stock delivered under this Plan (to the
extent that such shares are so evidenced) may be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules and regulations of the Securities
and Exchange Commission, any securities exchange or transaction reporting system upon which the
Common Stock is then listed or to which it is admitted for quotation, and any applicable federal or
state securities law, if applicable. The Committee may cause a legend or legends to be placed upon
such certificates (if any) to make appropriate reference to such restrictions.

	6.9	 	Rule 16b-3 Securities Law Compliance and Compliance with Company Policies

     With respect to Insiders to the extent applicable, transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 under the Exchange Act. With respect to all
Grantees, transactions under the Plan are intended to comply with Securities Regulation BTR and the
Company’s insider trading policies as revised from time to time or such other similar Company
policies, including but not limited to, policies relating to black out periods. Any ambiguities or
inconsistencies in the construction of an Incentive Award or the Plan shall be interpreted to give
effect to such intention. However, to the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void to the extent deemed advisable by
the Committee in its discretion.

	6.10	 	Compliance with Code Section 162(m)

     While the Company is a Publicly Held Corporation, unless otherwise determined by the Committee
with respect to any particular Incentive Award, it is intended that the Plan shall comply fully
with the applicable requirements so that any Incentive Awards subject to Section 162(m) that are
granted to Covered Employees shall qualify for the Performance-Based Exception. If any provision
of the Plan or an Incentive Agreement would disqualify the Plan or would not otherwise permit the
Plan or Incentive Award to comply with the Performance-Based Exception as so intended, such
provision shall be construed or deemed to be amended to conform to the requirements of the
Performance-Based Exception to the extent permitted by applicable law and deemed advisable by the
Committee; provided, however, no such construction or amendment shall have any adverse effect on
the prior grant of an Incentive Award, or the economic value to a Grantee of any outstanding
Incentive Award, unless consented to in writing by the Grantee.

	6.11	 	Successors

     All obligations of the Company under the Plan with respect to Incentive Awards granted
hereunder shall be binding on any successor to the Company, whether the existence of such

32

 

successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise,
of all or substantially all of the business and/or assets of the Company.

	6.12	 	Miscellaneous Provisions

     (a) No Employee, Consultant, Outside Director, or other person shall have any claim or
right to be granted an Incentive Award under the Plan. Neither the Plan, nor any action
taken hereunder, shall be construed as giving any Employee, Consultant, or Outside Director
any right to be retained in the Employment or other service of the Company or any Parent or
Subsidiary.

     (b) No Shares of Common Stock shall be issued hereunder unless counsel for the Company
is then reasonably satisfied that such issuance will be in compliance with federal and state
securities laws, if applicable.

     (c) The expenses of the Plan shall be borne by the Company.

     (d) By accepting any Incentive Award, each Grantee and each person claiming by or
through him shall be deemed to have indicated his acceptance of the Plan.

	6.13	 	Severability

     In the event that any provision of this Plan shall be held illegal, invalid or unenforceable
for any reason, such provision shall be fully severable, but shall not affect the remaining
provisions of the Plan, and the Plan shall be construed and enforced as if the illegal, invalid, or
unenforceable provision was not included herein.

	6.14	 	Gender, Tense and Headings

     Whenever the context so requires, words of the masculine gender used herein shall include the
feminine and neuter, and words used in the singular shall include the plural. Section headings as
used herein are inserted solely for convenience and reference and constitute no part of the
interpretation or construction of the Plan.

	6.15	 	Governing Law

     The Plan shall be interpreted, construed and constructed in accordance with the laws of the
State of Delaware without regard to its conflicts of law provisions, except as may be superseded by
applicable laws of the United States.

	6.16	 	Code Section 409A

     To the extent that any Incentive Award is subject to Code Section 409A as determined by the
Committee, the Incentive Agreement shall comply with the requirements of Code Section 409A and the
notices and regulations thereunder in a manner as determined by the Committee in its sole
discretion including, but not limited to, using the more restrictive definition of Change in
Control from applicable Code Section 409A regulations and notices to the extent that it is more
restrictive than as defined in the Plan and using the more restrictive definition of

33

 

Disability as provided in Section 409A. The Committee may amend any Incentive Award to comply
with Code Section 409A and the notices and regulations thereunder without a Grantee’s consent even
if such amendment would have an adverse affect on a Grantee’s Incentive Award. The Board may amend
the Plan as it deems necessary to comply with Section 409A and no Grantee consent shall be required
even if such an amendment would have an adverse effect on a Grantee’s Incentive Award.

34

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