Document:

exv10w16

Exhibit 10.16

JACK IN THE BOX INC.

2004 STOCK INCENTIVE PLAN

INDEX TO 2004 STOCK INCENTIVE PLAN

	 	 	 	 	 

	1. Establishment, Purpose and Term of Plan
	 	 	3	 
	1.1 Establishment
	 	 	3	 
	1.2 Purpose
	 	 	3	 
	1.3 Term of Plan
	 	 	3	 
	 
	 	 	 	 
	2. Definitions and Construction
	 	 	3	 
	2.1 Definitions
	 	 	3	 
	2.2 Construction
	 	 	6	 
	 
	 	 	 	 
	3. Administration
	 	 	6	 
	3.1 Administration by the Committee
	 	 	6	 
	3.2 Authority of Officers
	 	 	6	 
	3.3 Powers of the Committee
	 	 	6	 
	3.4 Administration with Respect to Insiders
	 	 	7	 
	3.5 Committee Complying with Section 162(m)
	 	 	7	 
	3.6 No Repricing
	 	 	7	 
	3.7 Indemnification
	 	 	7	 
	 
	 	 	 	 
	4. Shares Subject to Plan
	 	 	8	 
	4.1 Maximum Number of Shares Issuable
	 	 	8	 
	4.2 Adjustments for Changes in Capital Structure
	 	 	8	 
	 
	 	 	 	 
	5. Eligibility and Award Limitations
	 	 	8	 
	5.1 Persons Eligible for Incentive Stock Options
	 	 	8	 
	5.2 Persons Eligible for Other Awards
	 	 	8	 
	5.3 Fair Market Value Limitation on Incentive Stock Options
	 	 	9	 
	5.4 Award Limits
	 	 	9	 
	5.5 Performance Awards
	 	 	9	 
	 
	 	 	 	 
	6. Terms and Conditions of Options
	 	 	10	 
	6.1 Exercise Price
	 	 	10	 
	6.2 Exercisability and Term of Options
	 	 	10	 
	6.3 Payment of Exercise Price
	 	 	10	 
	6.4 Effect of Termination of Service
	 	 	11	 
	6.5 Transferability of Options
	 	 	11	 
	 
	 	 	 	 
	7. Terms and Conditions of Stock Appreciation Rights
	 	 	11	 
	7.1 Types of SARs Authorized
	 	 	11	 
	7.2 Exercise Price
	 	 	11	 
	7.3 Exercisability and Term of SARs
	 	 	11	 
	7.4 Exercise of SARs
	 	 	12	 
	7.5 Deemed Exercise of SARs
	 	 	12	 
	7.6 Effect of Termination of Service
	 	 	12	 
	7.7 Nontransferability of SARs
	 	 	12	 
	 
	 	 	 	 
	8. Terms and Conditions of Restricted Stock Awards
	 	 	12	 
	8.1 Purchase Price
	 	 	13	 
	8.2 Purchase Period
	 	 	13	 
	8.3 Payment of Purchase Price
	 	 	13	 
	8.4 Vesting and Restrictions on Transfer
	 	 	13	 
	8.5 Voting Rights; Dividends
	 	 	13	 
	8.6 Effect of Termination of Service
	 	 	13	 
	8.7 Nontransferability of Restricted Stock Award Rights
	 	 	13	 

1

 

	 	 	 	 	 

	9. Terms and Conditions of Performance Awards
	 	 	13	 
	9.1 Initial Value of Performance Shares and Performance Units
	 	 	14	 
	9.2 Establishment of Performance Goals and Performance Period
	 	 	14	 
	9.3 Measurement of Performance Goals
	 	 	14	 
	9.4 Determination of Final Value of Performance Awards
	 	 	15	 
	9.5 Dividend Equivalents
	 	 	15	 
	9.6 Payment in Settlement of Performance Awards
	 	 	15	 
	9.7 Restrictions Applicable to Payment in Shares
	 	 	15	 
	9.8 Effect of Termination of Service
	 	 	16	 
	9.9 Nontransferability of Performance Awards
	 	 	16	 
	 
	 	 	 	 
	10. Standard Forms of Award Agreement
	 	 	16	 
	10.1 Award Agreements
	 	 	16	 
	10.2 Authority to Vary Terms
	 	 	16	 
	 
	 	 	 	 
	11. Change in Control
	 	 	16	 
	11.1 Definitions
	 	 	16	 
	11.2 Effect of Change in Control on Options
	 	 	17	 
	11.3 Effect of Change in Control on SARs
	 	 	17	 
	11.4 Effect of Change in Control on Restricted Stock Awards
	 	 	17	 
	11.5 Effect of Change in Control on Performance Awards
	 	 	17	 
	 
	 	 	 	 
	12. Compliance with Securities Law
	 	 	18	 
	 
	 	 	 	 
	13. Tax Withholding
	 	 	18	 
	13.1 Tax Withholding in General
	 	 	18	 
	13.2 Withholding in Shares
	 	 	18	 
	 
	 	 	 	 
	14. Termination or Amendment of Plan
	 	 	18	 
	 
	 	 	 	 
	15. Miscellaneous Provisions
	 	 	18	 
	15.1 Provision of Information
	 	 	18	 
	15.2 Rights as Employee, Consultant or Director
	 	 	19	 
	15.3 Rights as a Stockholder
	 	 	19	 
	15.4 409A Compliance
	 	 	19	 
	15.5 Beneficiary Designation
	 	 	19	 
	15.6 Unfunded Obligation
	 	 	19	 

2

 

JACK IN THE BOX INC.

2004 STOCK INCENTIVE PLAN

Amended and Restated Effective May 4, 2010

1. Establishment, Purpose and Term of Plan.

     1.1 Establishment. Jack in the Box Inc., a Delaware corporation (the “Company”), hereby
establishes the Jack in the Box 2004 Stock Incentive Plan (the “Plan”) effective as of February 13,
2004, the date of its approval by the stockholders of the Company (the “Effective Date”), as
amended and restated effective May 4, 2010.

     1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company
Group and its stockholders by providing an incentive to attract, retain and reward persons
performing services for the Participating Company Group and by motivating such persons to
contribute to the growth and profitability of the Participating Company Group. The Plan seeks to
achieve this purpose by providing for Awards in the form of Options, Indexed Options, Stock
Appreciation Rights, Restricted Stock Purchase Rights, Restricted Stock Bonuses, Restricted Stock
Units, Performance Shares and Performance Units.

     1.3 Term of Plan. The Plan shall continue in effect until the earlier of its termination by
the Board or the date on which all of the shares of Stock available for issuance under the Plan
have been issued and all restrictions on such shares under the terms of the Plan and the agreements
evidencing Awards granted under the Plan have lapsed. However, all Awards shall be granted, if at
all, within ten (10) years from the Effective Date.

2. Definitions and Construction.

     2.1 Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:

          (a) “Award” means any Option, Indexed Option, Stock Appreciation Right, Restricted Stock
Purchase Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share or Performance
Unit granted under the Plan.

          (b) “Award Agreement” means a written agreement between the Company and a Participant setting
forth the terms, conditions and restrictions of the Award granted to the Participant. An Award
Agreement may be an “Option Agreement,” an “Indexed Option Agreement,” a “SAR Agreement,” a
“Restricted Stock Purchase Agreement,” a “Restricted Stock Bonus Agreement,” a “Restricted Stock
Unit Agreement,” a “Performance Share Agreement,” or a “Performance Unit Agreement.”

          (c) “Board” means the Board of Directors of the Company.

          (d) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.

          (e) “Committee” means the Compensation Committee or other committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by the Board. If no
committee of the Board has been appointed to administer the Plan, the Board shall exercise all of
the powers of the Committee granted herein, and, in any event, the Board may in its discretion
exercise any or all of such powers.

          (f) “Company” means Jack in the Box Inc., a Delaware corporation, or any successor corporation
thereto.

          (g) “Consultant” means a person engaged to provide consulting or advisory services (other than
as an Employee or a Director) to a Participating Company, provided that the identity of such
person, the nature of such services or the entity to which such services are provided would not
preclude the Company

3

 

from offering or selling securities to such person pursuant to the Plan in reliance on
registration on a Form S-8 Registration Statement under the Securities Act.

          (h) “Director” means a member of the Board or of the board of directors of any other
Participating Company.

          (i) “Disability” means the inability of the Participant, in the opinion of a qualified
physician acceptable to the Company, to perform the major duties of the Participant’s position with
the Participating Company Group because of the sickness or injury of the Participant.

          (j) “Dividend Equivalent” means a credit, made at the discretion of the Committee or as
otherwise provided by the Plan, to the account of a Participant in an amount equal to the cash
dividends paid on one share of Stock for each share of Stock represented by an Award of Restricted
Stock Units or Performance Shares held by such Participant.

          (k) “Employee” means any person treated as an employee (including an officer or a Director who
is also treated as an employee) in the records of a Participating Company and, with respect to any
Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a director’s fee
shall be sufficient to constitute employment for purposes of the Plan.

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

          (m) “Fair Market Value” means, as of any date, the value of a share of Stock or other property
as determined by the Committee, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the following:

               (i) If, on such date, the Stock is listed on a national or regional securities exchange or
market system, the Fair Market Value of a share of Stock shall be the closing price of a share of
Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so
quoted instead) as quoted on the NASDAQ Stock Market or such other national or regional securities
exchange or market system constituting the primary market for the Stock, as reported in The
Wall Street Journal or such other source as the Company deems reliable. If the relevant date
does not fall on a day on which the Stock has traded on such securities exchange or market system,
the date on which the Fair Market Value shall be established shall be the last day on which the
Stock was so traded prior to the relevant date, or such other appropriate day as shall be
determined by the Committee, in its discretion.

               (ii) If, on such date, the Stock is not listed on a national or regional securities exchange
or market system, the Fair Market Value of a share of Stock shall be as determined by the Committee
in good faith without regard to any restriction other than a restriction which, by its terms, will
never lapse.

          (n) “Full-Value Share” means a share of Stock issued under the Plan pursuant to the exercise
or settlement of Restricted Stock Awards and Performance Awards, including a Restricted Stock
Bonus, a Restricted Stock Purchase Right, a Restricted Stock Unit, a Performance Share or a
Performance Unit.

          (o) “Incentive Stock Option” means an Option intended to be (as set forth in the Option
Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of
the Code.

          (p) “Indexed Option” means an Option with an exercise price which either increases by a fixed
percentage over time or changes by reference to a published index, as determined by the Committee
and set forth in the Option Agreement.

          (q) “Insider” means any person whose transactions in Stock are subject to Section 16 of the
Exchange Act.

          (r) “Nonstatutory Stock Option” means an Option not intended to be (as set forth in the Option
Agreement) or which does not qualify as an Incentive Stock Option.

          (s) “Option” means a right to purchase Stock (subject to adjustment as provided in
Section 4.2) pursuant to the terms and conditions of the Plan. An Option may be either an
Incentive Stock Option, a Nonstatutory Stock Option or an Indexed Option.

4

 

          (t) “Parent Corporation” means any present or future “parent corporation” of the Company, as
defined in Section 424(e) of the Code.

          (u) “Participant” means any eligible person who has been granted one or more Awards.

          (v) “Participating Company” means the Company or any Parent Corporation or Subsidiary
Corporation.

          (w) “Participating Company Group” means, at any point in time, all corporations collectively
which are then Participating Companies.

          (x) “Performance Award” means an Award of Performance Shares or Performance Units.

          (y) “Performance Goal” means a performance goal established by the Committee pursuant to
Section 9.2.

          (z) “Performance Period” means a period established by the Committee pursuant to Section 9.2
at the end of which one or more Performance Goals are to be measured.

          (aa) “Performance Share” means a bookkeeping entry representing a right granted to a
Participant pursuant to the terms and conditions of Section 9 to receive a payment equal to the
value of a Performance Share, as determined by the Committee, based on performance.

          (bb) “Performance Unit” means a bookkeeping entry representing a right granted to a
Participant pursuant to the terms and conditions of Section 9 to receive a payment equal to the
value of a Performance Unit, as determined by the Committee, based upon performance.

          (cc) “Restricted Stock Award” means an Award of a Restricted Stock Bonus, a Restricted Stock
Purchase Right or a Restricted Stock Unit.

          (dd) “Restricted Stock Bonus” means Stock granted to a Participant pursuant to the terms and
conditions of Section 8.

          (ee) “Restricted Stock Purchase Right” means a right to purchase Stock granted to a
Participant pursuant to the terms and conditions of Section 8.

          (ff) “Restricted Stock Unit” means a bookkeeping entry representing a right granted to a
Participant to receive in cash or Stock the Fair Market Value of a share of Stock granted pursuant
to the terms and conditions of Section 8.

          (gg) “Restriction Period” means the period established in accordance with Section 8.4 during
which shares subject to a Restricted Stock Award are subject to Vesting Conditions.

          (hh) “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time, or
any successor rule or regulation.

          (ii) “Section 162(m)” means Section 162(m) of the Code.

          (jj) “Securities Act” means the Securities Act of 1933, as amended.

          (kk) “Service” means a Participant’s employment or service with the Participating Company
Group, whether in the capacity of an Employee, a Director or a Consultant. A Participant’s Service
shall not be deemed to have terminated merely because of a change in the capacity in which the
Participant renders Service to the Participating Company Group or a change in the Participating
Company for which the Participant renders such Service, provided that there is no interruption or
termination of the Participant’s Service. Furthermore, a Participant’s Service with the
Participating Company Group may be deemed, as provided in the applicable Award Agreement, to have
terminated if the Participant takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if any such leave exceeds ninety (90)
days, on the one hundred eighty-first (181st) day of such leave any Incentive Stock Option held by
such Participant shall cease to be treated as an Incentive Stock Option and instead shall be
treated thereafter as a Nonstatutory Stock Option unless the Participant’s right to return to
Service with the Participating Company Group is guaranteed by statute or contract. Notwithstanding
the foregoing, unless otherwise designated by the Company or required by law, a leave of absence
shall not be treated as Service for purposes of determining vesting under the Participant’s Award
Agreement. A Participant’s Service shall be deemed to have terminated either upon an actual
termination of Service or upon the

5

 

corporation for which the Participant performs Service ceasing to be a Participating Company.
Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s
Service has terminated and the effective date of such termination.

          (ll) “Stock” means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.2.

          (mm) “SAR” or “Stock Appreciation Right” means a bookkeeping entry representing, for each
share of Stock subject to such SAR, a right granted to a Participant pursuant to Section 7 of the
Plan to receive payment of an amount equal to the excess, if any, of the Fair Market Value of a
share of Stock on the date of exercise of the SAR over the exercise price.

          (nn) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the
Company, as defined in Section 424(f) of the Code.

          (oo) “Ten Percent Owner” means a Participant who, at the time an Option is granted to the
Participant, owns stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of a Participating Company within the meaning of Section 422(b)(6) of the
Code.

          (pp) “Vesting Conditions” mean those conditions established in accordance with Section 8.4
prior to the satisfaction of which shares subject to a Restricted Stock Award remain subject to
forfeiture or a repurchase option in favor of the Company.

     2.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated
by the context, the singular shall include the plural and the plural shall include the singular.
Use of the term “or” is not intended to be exclusive, unless the context clearly requires
otherwise.

3. Administration.

     3.1 Administration by the Committee. The Plan shall be administered by the Committee. All
questions of interpretation of the Plan or of any Award shall be determined by the Committee, and
such determinations shall be final and binding upon all persons having an interest in the Plan or
such Award.

     3.2 Authority of Officers. Any officer of a Participating Company shall have the authority to
act on behalf of the Company with respect to any matter, right, obligation, determination or
election which is the responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation, determination or
election; provided however, that no officer shall have discretion with respect to grants of Awards
to non-employee Directors.

     3.3 Powers of the Committee. In addition to any other powers set forth in the Plan and
subject to the provisions of the Plan, the Committee shall have the full and final power and
authority, in its discretion:

	 	(a)	 	to determine the persons to whom, and the time or times at which, Awards shall be
granted and the number of shares of shares of Stock, units or rights to be subject to each
Award;
	 
	 	(b)	 	to determine the type of Award granted and to designate Options as Incentive Stock
Options, Nonstatutory Stock Options or Indexed Options;
	 
	 	(c)	 	to determine the Fair Market Value of shares of Stock or other property;
	 
	 	(d)	 	to determine the terms, conditions and restrictions applicable to each Award (which
need not be identical) and any shares acquired pursuant thereto, including, without
limitation, (i) the purchase price of any Stock, (ii) the method of payment for shares
purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with Award, including by the withholding or delivery of
shares of Stock, (iv) subject to Section 5.4(c), the timing, terms and conditions of the
exercisability or vesting of any Award or any shares acquired pursuant thereto, (v) the
Performance Goals applicable to any Award and the extent to which such Performance Goals
have been attained, (vi) the time of the expiration of any Award, (vii) the effect of the
Participant’s termination of Service on any of the foregoing, and (viii) all other terms,
conditions and restrictions

6

 

	 	 	 	applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms
of the Plan;
	 
	 	(e)	 	to determine whether an Award of Restricted Stock Units, Performance Shares,
Performance Units or Stock Appreciation Rights will be settled in shares of Stock, cash, or
in any combination thereof;
	 
	 	(f)	 	to approve one or more forms of Award Agreement;
	 
	 	(g)	 	subject to Section 5.4(c), to amend, modify, extend, cancel or renew any Award, or to
waive any restrictions or conditions applicable to any Award or any shares acquired
pursuant thereto;
	 
	 	(h)	 	subject to Section 5.4(c), to accelerate, continue, extend or defer the exercisability
or vesting of any Award or any shares acquired pursuant thereto, including with respect to
the period following a Participant’s termination of Service;
	 
	 	(i)	 	to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or
to adopt supplements to, or alternative versions of, the Plan, including, without
limitation, as the Committee deems necessary or desirable to comply with the laws of, or to
accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be
granted Awards;
	 
	 	(j)	 	to authorize, in conjunction with any applicable Company deferred compensation plan,
that the receipt of cash or Stock subject to any Award under this Plan, may be deferred
under the terms and conditions of such Company deferred compensation plan; and
	 
	 	(k)	 	to correct any defect, supply any omission or reconcile any inconsistency in the Plan
or any Award Agreement and to make all other determinations and take such other actions
with respect to the Plan or any Award as the Committee may deem advisable to the extent not
inconsistent with the provisions of the Plan or applicable law.

     3.4 Administration with Respect to Insiders. With respect to participation by Insiders in the
Plan, at any time that any class of equity security of the Company is registered pursuant to
Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements,
if any, of Rule 16b-3.

     3.5 Committee Complying with Section 162(m). If the Company is a “publicly held corporation”
within the meaning of Section 162(m), the Board may establish a Committee of “outside directors”
within the meaning of Section 162(m) to approve the grant of any Award which might reasonably be
anticipated to result in the payment of employee remuneration that would otherwise exceed the limit
on employee remuneration deductible for income tax purposes pursuant to Section 162(m).

     3.6 No Repricing. Without the affirmative vote of holders of a majority of the shares of
Stock cast in person or by proxy at a meeting of the stockholders of the Company at which a quorum
representing a majority of all outstanding shares of Stock is present or represented by proxy, the
Board shall not approve a program providing for either (a) the reduction of the exercise price of
outstanding options and/or SARs; or (b) the cancellation of outstanding Options and/or SARs in
exchange for cash, other Awards or Options and/or SARs with an exercise price that is less than the
exercise price of the original Options and/or SARs. This paragraph shall not be construed to apply
to “issuing or assuming a stock option in a transaction to which section 424(a) applies,” within
the meaning of Section 424 of the Code.

     3.7 Indemnification. In addition to such other rights of indemnification as they may have as
members of the Board or the Committee or as officers or employees of the Participating Company
Group, members of the Board or the Committee and any officers or employees of the Participating
Company Group to whom authority to act for the Board, the Committee or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees,
actually and necessarily incurred in connection with the defense of any action, suit or proceeding,
or in connection with any appeal therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with the Plan, or any right granted
hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or

7

 

paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or proceeding that such
person is liable for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit or proceeding, such
person shall offer to the Company, in writing, the opportunity at its own expense to handle and
defend the same.

4. Shares Subject to Plan.

     4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the
maximum aggregate number of shares of Stock that may be issued under the Plan shall be Seven
Million Nine Hundred Thousand (7,900,000), all of which shall be eligible to be issued pursuant to
incentive stock options intended to qualify under Code section 422. If an outstanding Award for
any reason expires or is terminated without having been exercised or settled in full, or if shares
of Stock acquired pursuant to an Award subject to forfeiture are forfeited by the Participant, the
shares of Stock allocable to the terminated portion of such Award or such forfeited shares of Stock
shall again be available for issuance under the Plan. Shares of Stock shall not be deemed to have
been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash.
Shares of stock covered by an SAR, to the extent that it is exercised and settled in shares of
Stock, whether or not shares of Stock are actually issued to the Participant upon exercise of the
SAR, shall be considered issued or transferred pursuant to the Plan. The number of shares
available for issuance under the Plan shall be reduced by (i) shares of Stock withheld by the
Company to satisfy any tax withholding obligation pursuant to Section 13.2 and (ii) the gross
number of shares for which an Option is exercised, if the exercise price of the Option is paid by
tender to the Company or attestation to the ownership of shares of Stock owned by the Participant.
Shares of Stock that are repurchased by the Company with Option proceeds shall not be added to the
aggregate plan limit described above. Any shares issued pursuant to Awards granted under this Plan
as Full-Value Shares shall be counted against this limit as one-and-three-quarters (1.75) shares
for every one share subject to such Award.

     4.2 Adjustments for Changes in Capital Structure. In the event of any stock dividend, stock
split, reverse stock split, recapitalization, combination, reclassification or similar change in
the capital structure of the Company, appropriate adjustments shall be made in the number and class
of shares subject to the Plan and to any outstanding Awards, and in the exercise price per share of
any outstanding Options and Restricted Stock Purchase Rights. If a majority of the shares which
are of the same class as the shares that are subject to outstanding Awards are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership Change Event, as
defined in Section 11.1) shares of another corporation (the “New Shares”), the Committee may
unilaterally amend the outstanding Awards to provide that such Awards shall be for New Shares. In
the event of any such amendment, the number of shares subject to outstanding Awards and the
exercise price per share of outstanding Options and Restricted Stock Purchase Rights shall be
adjusted in a fair and equitable manner as determined by the Committee, in its discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this
Section 4.2 shall be rounded down to the nearest whole number, and in no event may the exercise
price of any Option or Restricted Stock Purchase Right be decreased to an amount less than the par
value, if any, of the stock subject to such Award. The adjustments determined by the Committee
pursuant to this Section 4.2 shall be final, binding and conclusive.

5.0 Eligibility and Award Limitations

     5.1 Persons Eligible for Incentive Stock Options. Incentive Stock Options may be granted only
to Employees. For purposes of the foregoing sentence, the term “Employees” shall include
prospective Employees to whom Incentive Stock Options are granted in connection with written offers
of employment with the Participating Company Group, provided that any such Incentive Stock Option
shall be deemed granted effective on the date such person commences Service as an Employee, with an
exercise price determined as of such date in accordance with Section 6.1. Eligible persons may be
granted more than one (1) Incentive Stock Option.

     5.2 Persons Eligible for Other Awards. Awards other than Incentive Stock Options may be
granted only to Employees, Consultants and Directors. For purposes of the foregoing sentence,
“Employees,” “Consultants” and “Directors” shall include prospective Employees, prospective
Consultants and prospective

8

 

Directors to whom Awards are granted in connection with written offers of an employment or
other service relationship with the Participating Company Group; provided, however, that no Stock
subject to any such Award shall vest, become exercisable or be issued prior to the date on which
such person commences Service. Eligible persons may be granted more than one (1) Award.

     5.3 Fair Market Value Limitation on Incentive Stock Options. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans of the Participating
Company Group, including the Plan) become exercisable by a Participant for the first time during
any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portions of such options which exceed such amount shall be treated as Nonstatutory
Stock Options. For purposes of this Section 5.3, options designated as Incentive Stock Options
shall be taken into account in the order in which they were granted, and the Fair Market Value of
stock shall be determined as of the time the option with respect to such stock is granted. If the
Code is amended to provide for a different limitation from that set forth in this Section 5.3, such
different limitation shall be deemed incorporated herein effective as of the date and with respect
to such Options as required or permitted by such amendment to the Code. If an Option is treated as
an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.3, the Participant may designate which portion of such
Option the Participant is exercising. In the absence of such designation, the Participant shall be
deemed to have exercised the Incentive Stock Option portion of the Option first. Separate
certificates representing each such portion shall be issued upon the exercise of the Option.

     5.4 Award Limits. The following limits shall apply to the grant of any Award if, at the time
of grant, the Company is a “publicly held corporation” within the meaning of Section 162(m).

          (a) Options and SARs. Subject to adjustment as provided in Section 4.2, no Employee shall be
granted within any fiscal year of the Company one or more Options or Freestanding SARs (as defined
in Section 7) which in the aggregate are for more than Five Hundred Thousand (500,000) shares of
Stock. An Option which is canceled (or a Freestanding SAR as to which the exercise price is
reduced to reflect a reduction in the Fair Market Value of the Stock) in the same fiscal year of
the Company in which it was granted shall continue to be counted against such limit for such fiscal
year.

          (b) Restricted Stock Awards. Subject to adjustment as provided in Section 4.2, no Employee
shall be granted within any fiscal year of the Company one or more Restricted Stock Awards, subject
to Vesting Conditions based on the attainment of Performance Goals, for more than Two Hundred
Thousand (200,000) shares of Stock.

          (c) Limits on Vesting.

     (i) Accelerated Vesting of Awards. The Committee shall not have the authority to
accelerate vesting of Awards, except in connection with death, retirement, Disability or a
Change in Control, and as described in Section 5.4(c)(ii).

     (ii) Full Value Shares. Any Full Value Shares which vest on the basis of continued
service shall not provide for vesting any more rapid than annual pro rata vesting over a
three (3) year period and any Full Value Shares which vest upon the attainment of
Performance Goals shall provide for a Performance Period of at least twelve (12) months.
There shall be no acceleration of vesting of such Full Value Shares, except in connection
with death, retirement, Disability or a Change in Control. Notwithstanding any contrary
provision of the Plan, however, a maximum of 295,000 shares or 10% of the shares authorized
for issuance, whichever is greater, may be issued without regard to the limitations of this
Section 5.4(c)(ii).

     5.5 Performance Awards. Subject to adjustment as provided in Section 4.2, no Employee shall
be granted (A) Performance Shares which could result in such Employee receiving more than Two
Hundred Thousand (200,000) shares of Stock for each full fiscal year of the Company contained in
the Performance Period for such Award, or (B) Performance Units which could result in such Employee
receiving more than One Million dollars ($1,000,000) for each full fiscal year of the Company
contained in the Performance Period for such Award. No Participant may be granted more than one
Performance Award for the same Performance Period.

9

 

	6.	 	Terms and Conditions of Options.

     Options shall be evidenced by Option Agreements specifying the number of shares of Stock
covered thereby, in such form as the Committee shall from time to time establish. No Option or
purported Option shall be a valid and binding obligation of the Company unless evidenced by a fully
executed Option Agreement. Option Agreements may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and conditions:

     6.1 Exercise Price. The exercise price for each Option shall be established in the discretion
of the Committee; provided, however, that (a) the exercise price per share shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the Option, (b) no
Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less
than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective
date of grant of the Option, and (c) in the case of an Indexed Option, the Committee shall
determine the exercise price of such Indexed Option and the terms and conditions that affect, if
any, any adjustments to the exercise price of such Indexed Option. Notwithstanding the foregoing,
an Option may be granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for another option in a
manner qualifying under the provisions of Section 424(a) of the Code.

     6.2 Exercisability and Term of Options. Options shall be exercisable at such time or times,
or upon such event or events, and subject to such terms, conditions, performance criteria and
restrictions as shall be determined by the Committee and set forth in the Option Agreement
evidencing such Option; provided, however, that (a) no Option awarded prior to November 12, 2009
shall be exercisable after the expiration of ten (10) years after the effective date of grant of
such Option, (b) no Option awarded on or after November 12, 2009 shall be exercisable after the
expiration of seven (7) years after the effective date of grant of such Option, (c) no Incentive
Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5)
years after the effective date of grant of such Option, (d) no Option granted to a prospective
Employee, prospective Consultant or prospective Director may become exercisable prior to the date
on which such person commences Service. Subject to the foregoing, unless otherwise specified by the
Committee in the grant of an Option, any Option granted hereunder shall terminate seven (7) years
after the effective date of grant of the Option, unless earlier terminated in accordance with its
provisions.

     6.3 Payment of Exercise Price.

          (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
exercise price for the number of shares of Stock being purchased pursuant to any Option shall be
made (i) in cash, by check or cash equivalent, (ii) by tender to the Company, or attestation to the
ownership, of shares of Stock owned by the Participant having a Fair Market Value not less than the
exercise price, (iii) by delivery of a properly executed notice together with irrevocable
instructions to a broker providing for the assignment to the Company of the proceeds of a sale with
respect to some or all of the shares being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve System) (a “Cashless
Exercise”), (iv) by such other consideration as may be approved by the Committee from time to time
to the extent permitted by applicable law, or (v) by any combination thereof. The Committee may at
any time or from time to time grant Options which do not permit all of the foregoing forms of
consideration to be used in payment of the exercise price or which otherwise restrict one or more
forms of consideration.

          (b) Limitations on Forms of Consideration.

               (i) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock. Unless otherwise provided by the Committee, an
Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of
Stock unless such shares either have been owned by the Participant for more than six (6) months
(and not used for another Option exercise by attestation during such period) or were not acquired,
directly or indirectly, from the Company.

               (ii) Cashless Exercise. The Company reserves, at any and all times, the right, in the
Company’s sole and absolute discretion, to establish, decline to approve or terminate any program
or

10

 

procedures for the exercise of Options by means of a Cashless Exercise.

     6.4 Effect of Termination of Service.

          (a) Option Exercisability. An Option granted to a Participant shall be exercisable after the
Participant’s termination of Service only during the applicable time period determined in
accordance with the Option’s term as set forth in the Option Agreement evidencing such Option (the
“Option Expiration Date”).

          (b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing other than
termination of a Participant’s Service for Cause, if the exercise of an Option within the
applicable time periods set forth in an Option Agreement is prevented by the provisions of
Section 12 herein, the Option shall remain exercisable until one (1) month (or such longer period
of time as determined by the Committee, in its discretion) after the date the Participant is
notified by the Company that the Option is exercisable, but in any event no later than the Option
Expiration Date.

          (c) Extension if Participant Subject to Section 16(b). Notwithstanding the foregoing other
than termination of a Participant’s Service for Cause, if a sale within the applicable time periods
set forth in an Option Agreement of shares acquired upon the exercise of the Option would subject
the Participant to suit under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a
sale of such shares by the Participant would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Participant’s termination of Service, or (iii) the
Option Expiration Date.

     6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be
exercisable only by the Participant or the Participant’s guardian or legal representative. No
Option shall be assignable or transferable by the Participant, except by will or by the laws of
descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee,
in its discretion, and set forth in the Option Agreement evidencing such Option, a Nonstatutory
Stock Option shall be assignable or transferable subject to the applicable limitations, if any,
described in the General Instructions to Form S-8 Registration Statement under the Securities Act.

7. Terms and Conditions of Stock Appreciation Rights.

     SARs shall be evidenced by Award Agreements specifying the number of shares of Stock subject
to the Award, in such form as the Committee shall from time to time establish. No SAR or purported
SAR shall be a valid and binding obligation of the Company unless evidenced by a fully executed
Award Agreement. Award Agreements evidencing SARs may incorporate all or any of the terms of the
Plan by reference and shall comply with and be subject to the following terms and conditions:

     7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a
related Option (a “Tandem SAR”) or may be granted independently of any Option (a “Freestanding
SAR”). A Tandem SAR may be granted either concurrently with the grant of the related Option or at
any time thereafter prior to the complete exercise, termination, expiration or cancellation of such
related Option.

     7.2 Exercise Price. The exercise price for each SAR shall be established in the discretion of
the Committee; provided, however, that (a) the exercise price per share subject to a Tandem SAR
shall be the exercise price per share under the related Option and (b) the exercise price per share
subject to a Freestanding SAR shall be not less than the Fair Market Value of a share of Stock on
the effective date of grant of the SAR.

     7.3 Exercisability and Term of SARs.

          (a) Tandem SARs. Tandem SARs shall be exercisable only at the time and to the extent that the
related Option is exercisable, subject to such provisions as the Committee may specify where the
Tandem SAR is granted with respect to less than the full number of shares of Stock subject to the
related Option. The Committee may, in its discretion, provide in any Award Agreement evidencing a
Tandem SAR that such SAR may not be exercised without the advance approval of the Company and, if
such approval is not given, then the Option shall nevertheless remain exercisable in accordance
with its terms. A Tandem SAR shall terminate and cease to be exercisable no later than the date on
which the related Option expires or is terminated or canceled. Upon the exercise of a Tandem SAR
with respect to some or all of the shares

11

 

subject to such SAR, the related Option shall be canceled automatically as to the number of
shares with respect to which the Tandem SAR was exercised. Upon the exercise of an Option related
to a Tandem SAR as to some or all of the shares subject to such Option, the related Tandem SAR
shall be canceled automatically as to the number of shares with respect to which the related Option
was exercised.

          (b) Freestanding SARs. Freestanding SARs shall be exercisable at such time or times, or upon
such event or events, and subject to such terms, conditions, performance criteria and restrictions
as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR;
provided, however, that (a) no Freestanding SAR awarded prior to November 12, 2009 shall be
exercisable after the expiration of ten (10) years after the effective date of grant of such SAR,
and (b) no Freestanding SAR awarded on or after November 12, 2009 shall be exercisable after the
expiration of seven (7) years after the effective date of grant of such SAR.

     7.4 Exercise of SARs. Upon the exercise (or deemed exercise pursuant to Section 7.5) of a
SAR, the Participant (or the Participant’s legal representative or other person who acquired the
right to exercise the SAR by reason of the Participant’s death) shall be entitled to receive
payment of an amount for each share with respect to which the SAR is exercised equal to the excess,
if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the
exercise price. Payment of such amount shall be made in cash, shares of Stock, or any combination
thereof as determined by the Committee. Unless otherwise provided in the Award Agreement
evidencing such SAR, payment shall be made in a lump sum as soon as practicable following the date
of exercise of the SAR. The Award Agreement evidencing any SAR may provide for deferred payment in
a lump sum or in installments. When payment is to be made in shares of Stock, the number of shares
to be issued shall be determined on the basis of the Fair Market Value of a share of Stock on the
date of exercise of the SAR. For purposes of Section 7, an SAR shall be deemed exercised on the
date on which the Company receives notice of exercise from the Participant.

     7.5 Deemed Exercise of SARs. If, on the date on which an SAR would otherwise terminate or
expire, the SAR by its terms remains exercisable immediately prior to such termination or
expiration and, if so exercised, would result in a payment to the holder of such SAR, then any
portion of such SAR which has not previously been exercised shall automatically be deemed to be
exercised as of such date with respect to such portion.

     7.6 Effect of Termination of Service. An SAR shall be exercisable after a Participant’s
termination of Service to such extent and during such period as determined by the Committee, in its
discretion, and set forth in the Award Agreement evidencing such SAR.

     7.7 Nontransferability of SARs. SARs may not be assigned or transferred in any manner except
by will or the laws of descent and distribution, and, during the lifetime of the Participant, shall
be exercisable only by the Participant or the Participant’s guardian or legal representative.

8. Terms and Conditions of Restricted Stock Awards.

     The Committee may from time to time grant Restricted Stock Awards upon such conditions as the
Committee shall determine, including, without limitation, upon the attainment of one or more
Performance Goals described in Section 9.3. If either the grant of a Restricted Stock Award or the
lapsing of the Restriction Period is to be contingent upon the attainment of one or more
Performance Goals, the Committee shall follow procedures substantially equivalent to those set
forth in Sections 8.2 through 8.4. Restricted Stock Awards may be in the form of a Restricted
Stock Bonus, which shall be evidenced by Restricted Stock Bonus Agreement, a Restricted Stock
Purchase Right, which shall be evidenced by Restricted Stock Purchase Agreement or a Restricted
Stock Unit, which shall be evidenced by a Restricted Stock Unit Agreement. Each such Award
Agreement shall specify the number of shares of Stock subject to and the other terms, conditions
and restrictions of the Award, and shall be in such form as the Committee shall establish from time
to time. No Restricted Stock Award or purported Restricted Stock Award shall be a valid and
binding obligation of the Company unless evidenced by a fully executed Award Agreement. Restricted
Stock Award Agreements may incorporate all or any of the terms of the Plan by reference and shall
comply, as applicable, with and be subject to the following terms and conditions:

12

 

     8.1 Purchase Price. The purchase price under each Restricted Stock Purchase Right shall be
established by the Committee. No monetary payment (other than applicable tax withholding) shall be
required as a condition of receiving a Restricted Stock Bonus or Restricted Stock Unit, the
consideration for which shall be services actually rendered to a Participating Company or for its
benefit.

     8.2 Purchase Period. A Restricted Stock Purchase Right shall be exercisable within a period
established by the Committee, which shall in no event exceed thirty (30) days from the effective
date of the grant of the Restricted Stock Purchase Right; provided, however, that no Restricted
Stock Purchase Right granted to a prospective Employee, prospective Director or prospective
Consultant may become exercisable prior to the date on which such person commences Service.

     8.3 Payment of Purchase Price. Except as otherwise provided below, payment of the purchase
price for the number of shares of Stock being purchased pursuant to any Restricted Stock Purchase
Right shall be made (i) in cash, by check, or cash equivalent, (ii) by such other consideration as
may be approved by the Committee from time to time to the extent permitted by applicable law, or
(iii) by any combination thereof. The Committee may at any time or from time to time grant
Restricted Stock Purchase Rights which do not permit all of the foregoing forms of consideration to
be used in payment of the purchase price or which otherwise restrict one or more forms of
consideration. Restricted Stock Bonuses and Restricted Stock Units shall be issued in
consideration for services actually rendered to a Participating Company or for its benefit.

     8.4 Vesting and Restrictions on Transfer. Subject to Section 5.4(c), shares issued pursuant
to any Restricted Stock Award may be made subject to vesting conditioned upon the satisfaction of
such Service requirements, conditions, restrictions or performance criteria, including, without
limitation, Performance Goals as described in Section 9.3 (the “Vesting Conditions”), as shall be
established by the Committee and set forth in the Award Agreement evidencing such Award. During
any period (the “Restriction Period”) in which shares acquired pursuant to a Restricted Stock Award
remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged,
assigned or otherwise disposed of other than pursuant to an Ownership Change Event, as defined in
Section 11.1, or as provided in Section 8.7. Upon request by the Company, each Participant shall
execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock
hereunder and shall promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing
any such transfer restrictions.

     8.5 Voting Rights; Dividends. Except as provided in this Section and Section 8.4, during the
Restriction Period applicable to shares subject to a Restricted Stock Purchase Right and a
Restricted Stock Bonus held by a Participant, the Participant shall have all of the rights of a
stockholder of the Company holding shares of Stock, including the right to vote such shares and to
receive all dividends and other distributions paid with respect to such shares; provided, however,
that if any such dividends or distributions are paid in shares of Stock, such shares shall be
subject to the same Vesting Conditions as the shares subject to the Restricted Stock Purchase Right
and Restricted Stock Bonus with respect to which the dividends or distributions were paid. A
Participant who is awarded a Restricted Stock Unit shall possess no incidents of ownership with
respect to such a Restricted Stock Award; provided that the award agreement may provide for
payments in lieu of dividends to such Participant.

     8.6 Effect of Termination of Service. The effect of the Participant’s termination of Service
on any Restricted Stock Award shall be determined by the Committee, in its discretion, and set
forth in the Award Agreement evidencing such Restricted Stock Award.

     8.7 Nontransferability of Restricted Stock Award Rights. Rights to acquire shares of Stock
pursuant to a Restricted Stock Award may not be assigned or transferred in any manner except by
will or the laws of descent and distribution, and, during the lifetime of the Participant, shall be
exercisable only by the Participant.

9. Terms and Conditions of Performance Awards

     Subject to Section 5.4(c), the Committee may from time to time grant Performance Awards upon
such conditions as the Committee shall determine. Performance Awards may be in the form of either
Performance Shares, which shall be evidenced by a Performance Share Agreement, or Performance
Units,

13

 

which shall be evidenced by a Performance Unit Agreement. Each such Award Agreement shall specify
the number of Performance Shares or Performance Units subject thereto, the method of computing the
value of each Performance Share or Performance Unit, the Performance Goals and Performance Period
applicable to the Award, and the other terms, conditions and restrictions of the Award, and shall
be in such form as the Committee shall establish from time to time. No Performance Award or
purported Performance Award shall be a valid and binding obligation of the Company unless evidenced
by a fully executed Award Agreement. Performance Share and Performance Unit Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:

     9.1 Initial Value of Performance Shares and Performance Units. Unless otherwise provided by
the Committee in granting a Performance Award, each Performance Share shall have an initial value
equal to the Fair Market Value of a share of Stock on the effective date of grant of the
Performance Share, and each Performance Unit shall have an initial value of one hundred
dollars ($100). The final value payable to the Participant in settlement of a Performance Award
will depend on the extent to which Performance Goals established by the Committee are attained
within the applicable Performance Period established by the Committee.

	 	9.2	 	Establishment of Performance Goals and Performance Period. The Committee shall
establish in writing the Performance Period applicable to each Performance Award and one or
more Performance Goals which, when measured at the end of the Performance Period, shall
determine the final value of the Performance Award to be paid to the Participant. Unless
otherwise permitted in compliance with the requirements under Section 162(m) with respect
to “performance-based compensation,” the Committee shall establish the Performance Goals
applicable to each Performance Award no later than the earlier of (a) the date ninety (90)
days after the commencement of the applicable Performance Period or (b) the date on which
25% of the Performance Period has elapsed, and, in any event, at a time when the outcome of
the Performance Goals remains substantially uncertain. Once established, the Performance
Goals shall not be changed during the Performance Period.
	 
	 	9.3	 	Measurement of Performance Goals. Performance Goals shall be established by the
Committee on the basis of targets to be attained (“Performance Targets”) with respect one
or more measures of business or financial performance (each, a “Performance Measure”).
Performance Measures shall have the same meanings as used in the Company’s financial
statements, or if such terms are not used in the Company’s financial statements, they shall
have the meaning applied pursuant to generally accepted accounting principles, or as used
generally in the Company’s industry. Performance Targets may include a minimum, maximum,
target level and intermediate levels of performance, with the final value of a Performance
Award determined by the level attained during the applicable Performance Period. A
Performance Target may be stated as an absolute value or as a value determined relative to
a standard selected by the Committee. Performance Measures shall be calculated with
respect to the Company and each Subsidiary Corporation consolidated therewith for financial
reporting purposes or such division or other business unit as may be selected by the
Committee. For purposes of the Plan, the Performance Measures applicable to a Performance
Award shall be calculated before the effect of changes in accounting standards,
restructuring charges and similar extraordinary items, determined according to criteria
established by the Committee, occurring after the establishment of the Performance Goals
applicable to a Performance Award. Performance Measures may be one or more of the
following, as determined by the Committee:

	 	a.	 	sales
	 
	 	b.	 	revenue
	 
	 	c.	 	gross margin
	 
	 	d.	 	operating margin
	 
	 	e.	 	operating income
	 
	 	f.	 	pre-tax profit
	 
	 	g.	 	earnings before interest, taxes, depreciation and/or amortization
	 
	 	h.	 	net income
	 
	 	i.	 	cash flow

14

 

	 	j.	 	expenses
	 
	 	k.	 	stock price
	 
	 	l.	 	earnings per share
	 
	 	m.	 	return on stockholders’ equity
	 
	 	n.	 	return on capital
	 
	 	o.	 	 return on assets
	 
	 	p.	 	return on invested capital
	 
	 	q.	 	economic value added
	 
	 	r.	 	number of customers
	 
	 	s.	 	market share
	 
	 	t.	 	same store sales
	 
	 	u.	 	average restaurant margin
	 
	 	v.	 	return on investment
	 
	 	w.	 	profit after tax
	 
	 	x.	 	customer satisfaction

     9.4 Determination of Final Value of Performance Awards. As soon as practicable following
the completion of the Performance Period applicable to a Performance Award, the Committee shall
certify in writing the extent to which the applicable Performance Goals have been attained and
the resulting final value of the Award earned by the Participant and to be paid upon its
settlement in accordance with the terms of the Award Agreement. The Committee shall have no
discretion to increase the value of an Award payable upon its settlement in excess of the amount
called for by the terms of the Award Agreement on the basis of the degree of attainment of the
Performance Goals as certified by the Committee. However, notwithstanding the attainment of any
Performance Goal, if permitted under a Participant’s Award Agreement, the Committee shall have
the discretion, on the basis of such criteria as may be established by the Committee, to reduce
some or all of the value of a Performance Award that would otherwise be paid upon its
settlement. No such reduction may result in an increase in the amount payable upon settlement
of another Participant’s Performance Award. As soon as practicable following the Committee’s
certification, the Company shall notify the Participant of the determination of the Committee.

     9.5 Dividend Equivalents. In its discretion, the Committee may provide in the Award
Agreement evidencing any Performance Share Award that the Participant shall be entitled to
receive Dividend Equivalents with respect to the payment of cash dividends on Stock having a
record date prior to the date on which the Performance Shares are settled or forfeited.
Dividend Equivalents may be accumulated but will be paid only to the extent that Performance
Shares are earned and become nonforfeitable, at the time determined by the Committee and
designated in the Award Agreement. Settlement of Dividend Equivalents may be made in cash,
shares of Stock, or a combination thereof as determined by the Committee, and may be paid on the
same basis as settlement of the related Performance Share as provided in Section 9.6. Dividend
Equivalents shall not be paid with respect to Performance Units.

     9.6 Payment in Settlement of Performance Awards. Payment of the final value of a
Performance Award earned by a Participant as determined following the completion of the
applicable Performance Period pursuant to Sections 9.4 and 9.5 may be made in cash, shares of
Stock, or a combination thereof as determined by the Committee. If payment is made in shares of
Stock, the number of such shares shall be determined by dividing the final value of the
Performance Award by the Fair Market Value of a share of Stock on the settlement date. Payment
may be made in a lump sum or installments as prescribed by the Committee. If any payment is to
be made on a deferred basis, the Committee may, but shall not be obligated to, provide for the
payment during the deferral period of Dividend Equivalents or a reasonable rate of interest
within the meaning of Section 162(m).

     9.7 Restrictions Applicable to Payment in Shares. Shares of Stock issued in payment of any
Performance Award may be fully vested and freely transferable shares or may be shares of Stock
subject to Vesting Conditions as provided in Section 8.4. Any shares subject to Vesting
Conditions shall be evidenced by an appropriate Restricted Stock Bonus Agreement and shall be
subject to the provisions of Sections 8.4 through 8.7 above.

15

 

     9.8 Effect of Termination of Service. The effect of the Participant’s termination of Service
on any Performance Award shall be determined by the Committee, in its discretion, and set forth in
the Award Agreement evidencing such Performance Award. Unless otherwise provided by the Committee,
and subject to Section 5.4(c):

     (a) the final award value of a Participant who terminates Service due to death, retirement or
Disability prior to the end of the applicable performance period will be determined on a prorated
basis, at the end of such performance period, based on the number of months of the Participant’s
Service during the performance period, and the extent to which performance goals are achieved, and

     (b) the Performance Award of a Participant who terminates Service for a reason other than
death, retirement or Disability prior to the end of the applicable performance period will be
forfeited.

     9.9 Nontransferability of Performance Awards. Performance Shares and Performance Units may
not be sold, exchanged, transferred, pledged, assigned, or otherwise disposed of other than by will
or by the laws of descent and distribution until the completion of the applicable Performance
Period. All rights with respect to Performance Shares and Performance Units granted to a
Participant hereunder shall be exercisable during his or her lifetime only by such Participant.

10. Standard Forms of Award Agreement.

     10.1 Award Agreements. Each Award shall comply with and be subject to the terms and
conditions set forth in the appropriate form of Award Agreement approved by the Committee
concurrently with its adoption of the Plan and as amended from time to time. Any Award Agreement
may consist of an appropriate form of Notice of Grant and a form of Agreement incorporated therein
by reference, or such other form or forms as the Committee may approve from time to time.

     10.2 Authority to Vary Terms. The Committee shall have the authority from time to time to
vary the terms of any standard form of Award Agreement either in connection with the grant or
amendment of an individual Award or in connection with the authorization of a new standard form or
forms; provided, however, that the terms and conditions of any such new, revised or amended
standard form or forms of Award Agreement are not inconsistent with the terms of the Plan.

11. Change in Control.

          11.1 Definitions.

               (a) An “Ownership Change Event” shall be deemed to have occurred if any of the following
occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.

               (b) A “Change in Control” shall mean an Ownership Change Event or a series of related
Ownership Change Events (collectively, a “Transaction”) wherein the stockholders of the Company
immediately before the Transaction do not retain immediately after the Transaction, in
substantially the same proportions as their ownership of shares of the Company’s voting stock
immediately before the Transaction, direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of the outstanding voting stock of the Company or,
in the case of a Transaction described in Section 11.1(a)(iii), the corporation or corporations to
which the assets of the Company were transferred (the “Transferee Corporation(s)”), as the case may
be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting stock of one or more corporations
which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the
case may be, either directly or through one or more subsidiary corporations. The Committee shall
have the right to determine whether multiple sales or exchanges of the voting stock of the Company
or multiple Ownership Change Events are related, and its determination shall be final, binding and
conclusive.

16

 

     11.2 Effect of Change in Control on Options. In the event of a Change in Control, the
surviving, continuing, successor, or purchasing corporation or other business entity or parent
corporation thereof, as the case may be (the “Acquiring Corporation”), may, without the consent of
the Participant, either assume the Company’s rights and obligations under outstanding Options or
substitute for outstanding Options substantially equivalent options for the Acquiring Corporation’s
stock. In the event that the Acquiring Corporation elects not to assume or substitute for
outstanding Options in connection with a Change in Control, the exercisability and vesting of each
such outstanding Option and any shares acquired upon the exercise thereof held by a Participant
whose Service has not terminated prior to such date shall be accelerated, effective as of the date
ten (10) days prior to the date of the Change in Control. The exercise or vesting of any Option
and any shares acquired upon the exercise thereof that was permissible solely by reason of this
Section 11.2 and the provisions of such Option Agreement shall be conditioned upon the consummation
of the Change in Control. Any Options which are neither assumed or substituted for by the
Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the
Change in Control shall terminate and cease to be outstanding effective as of the date of the
Change in Control. Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Change in Control and any consideration received pursuant to the Change in Control with
respect to such shares shall continue to be subject to all applicable provisions of the Option
Agreement evidencing such Option except as otherwise provided in such Option Agreement.
Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the
outstanding Options immediately prior to an Ownership Change Event described in Section 11.1(a)(i)
constituting a Change in Control is the surviving or continuing corporation and immediately after
such Ownership Change Event less than fifty percent (50%) of the total combined voting power of its
voting stock is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions
of Section 1504(b) of the Code, the outstanding Options shall not terminate unless the Committee
otherwise provides in its discretion.

     11.3 Effect of Change in Control on SARs. In the event of a Change in Control, the Acquiring
Corporation may, without the consent of any Participant, either assume the Company’s rights and
obligations under outstanding SARs or substitute for outstanding SARs substantially equivalent SARs
for the Acquiring Corporation’s stock. In the event the Acquiring Corporation elects not to assume
or substitute for outstanding SARs in connection with a Change in Control, then any unexercised
and/or unvested portions of outstanding SARs shall be immediately exercisable and vested in full as
of the date thirty (30) days prior to the date of the Change in Control. The exercise and/or
vesting of any SAR that was permissible solely by reason of this paragraph 11.3 shall be
conditioned upon the consummation of the Change in Control. Any SARs which are not assumed by the
Acquiring Corporation in connection with the Change in Control nor exercised as of the time of
consummation of the Change in Control shall terminate and cease to be outstanding effective as of
the time of consummation of the Change in Control.

     11.4 Effect of Change in Control on Restricted Stock Awards. In the event of a Change in
Control, the lapsing of the Vesting Conditions applicable to the shares subject to the Restricted
Stock Award held by a Participant whose Service has not terminated prior to such date shall be
accelerated effective as of the date of the Change in Control. Any acceleration of the lapsing of
Vesting Conditions that was permissible solely by reason of this Section 11.4 and the provisions of
such Award Agreement shall be conditioned upon the consummation of the Change in Control.

     11.5 Effect of Change in Control on Performance Awards. In the event of a Change in Control,
the Performance Award held by a Participant whose Service has not terminated prior to such date
(unless the Participant’s Service terminated by reason of the Participant’s death or Disability)
shall become payable effective as of the date of the Change in Control. For this purpose, the
final value of the Performance Award shall be determined by the greater of (a) the extent to which
the applicable Performance Goals have been attained during the Performance Period prior to the date
of the Change in Control or (b) the pre-established 100% level with respect to each Performance
Target comprising the applicable Performance Goals. Any acceleration of a Performance Award that
was permissible solely by reason of this Section 11.5 and the provisions of such Award Agreement
shall be conditioned upon the consummation of the Change in Control.

17

 

12. Compliance with Securities Law.

     The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject
to compliance with all applicable requirements of federal, state and foreign law with respect to
such securities and the requirements of any stock exchange or market system upon which the Stock
may then be listed. In addition, no Award may be exercised or shares issued pursuant to an Award
unless (a) a registration statement under the Securities Act shall at the time of such exercise or
issuance be in effect with respect to the shares issuable pursuant to the Award or (b) in the
opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in
accordance with the terms of an applicable exemption from the registration requirements of the
Securities Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite authority shall not
have been obtained. As a condition to issuance of any Stock, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.

13. Tax Withholding.

     13.1 Tax Withholding in General. The Company shall have the right to require the Participant,
through payroll withholding, cash payment or otherwise, including by means of a Cashless Exercise
of an Option, to make adequate provision for the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect to an Award or the
shares acquired pursuant thereto. The Company shall have no obligation to deliver shares of Stock,
to release shares of Stock from an escrow established pursuant to an Award Agreement, or to make
any payment in cash under the Plan until the Participating Company Group’s tax withholding
obligations have been satisfied by the Participant.

     13.2 Withholding in Shares. The Company shall have the right, but not the obligation, to
deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an
Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a
Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group. The Fair Market Value of any shares of Stock
withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount
determined by the applicable minimum statutory withholding rates.

14. Termination or Amendment of Plan.

     The Committee may terminate or amend the Plan at any time. However, subject to changes in
applicable law, regulations or rules that would permit otherwise, without the approval of the
Company’s stockholders, there shall be (a) no increase in the maximum aggregate number of shares of
Stock that may be issued under the Plan (except by operation of the provisions of Section 4.2),
(b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other
amendment of the Plan that would require approval of the Company’s stockholders under any
applicable law, regulation or rule. No termination or amendment of the Plan shall affect any then
outstanding Award unless expressly provided by the Committee. In any event, no termination or
amendment of the Plan may adversely affect any then outstanding Award without the consent of the
Participant, unless such termination or amendment is required to enable an Option designated as an
Incentive Stock Option to qualify as an Incentive Stock Option or is necessary to comply with any
applicable law, regulation or rule.

15. Miscellaneous Provisions.

     15.1 Provision of Information. Each Participant shall be given access to information
concerning the Company equivalent to that information generally made available to the Company’s
common stockholders.

18

 

     15.2 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to
Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be
selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall
confer on any Participant a right to remain an Employee, Consultant or Director, or interfere with
or limit in any way the right of a Participating Company to terminate the Participant’s Service at
any time.

     15.3 Rights as a Stockholder. A Participant shall have no rights as a stockholder with
respect to any shares covered by an Award until the date of the issuance of a certificate for such
shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such certificate is issued, except as
provided in Section 4.2 or another provision of the Plan.

     15.4 409A Compliance. The Plan and all Awards granted hereunder are intended to comply with,
or otherwise be exempt from, Section 409A of the Code. The Plan and all Awards shall be
administered, interpreted, and construed in a manner consistent with Section 409A of the Code.
Should any provision of the Plan, any Grant Agreement, or any other agreement or arrangement
contemplated by the Plan be found not to comply with, or otherwise be exempt from, the provisions
of Section 409A of the Code, such provision shall be modified and given effect (retroactively if
necessary), in the sole discretion of the Administrator, and without the consent of the grantee or
holder of the Award, in such manner as the Administrator determines to be necessary or appropriate
to comply with, or to effectuate an exemption from, Section 409A of the Code. Notwithstanding the
forgoing, no provision of the Plan, any Grant Agreement, or any other agreement or arrangement
contemplated by the Plan shall be construed as a guarantee by the Company of any particular tax
effect to grantees or holders of Awards. In any event, except as otherwise provided under the
applicable Grant Agreement, the Company shall have no obligation to pay any applicable tax on
income to grantees or holders of Awards.

     15.5 Beneficiary Designation. Each Participant may file with the Company a written
designation of a beneficiary who is to receive any benefit under the Plan to which the Participant
is entitled in the event of such Participant’s death before he or she receives any or all of such
benefit. Each designation will revoke all prior designations by the same Participant, shall be in
a form prescribed by the Company, and will be effective only when filed by the Participant in
writing with the Company during the Participant’s lifetime. If a married Participant designates a
beneficiary other than the Participant’s spouse, the effectiveness of such designation shall be
subject to the consent of the Participant’s spouse. If a Participant dies without an effective
designation of a beneficiary who is living at the time of the Participant’s death, the Company will
pay any remaining unpaid benefits to the Participant’s legal representative.

     15.6 Unfunded Obligation. Any amounts payable to Participants pursuant to the Plan shall be
unfunded obligations for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974. No Participating Company shall be required to segregate
any monies from its general funds, or to create any trusts, or establish any special accounts with
respect to such obligations. The Company shall retain at all times beneficial ownership of any
investments, including trust investments, which the Company may make to fulfill its payment
obligations hereunder. Any investments or the creation or maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary relationship between the
Committee or any Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participant’s creditors in any assets of any
Participating Company. The Participants shall have no claim against any Participating Company for
any changes in the value of any assets which may be invested or reinvested by the Company with
respect to the Plan.

19exv10w1

EXHIBIT 10.1

OFFICER CONTINUITY AGREEMENT

     This Officer Continuity Agreement (the “Agreement”) is made as of
                     (the “Effective Date”), by and between the individual named on the
signature page hereto (the “Employee”) and Energy Focus, Inc., a Delaware Corporation
(the “Company”).

     A. The Board believes that it is in the best interests of the Company and its
shareholders to provide the Employee with an incentive to continue his employment with
the Company, and to do so without the Employee’s concern for the undue hardship that
may arise in the event of an Involuntary Termination (as defined below) without Cause
(defined below) of such employment.

     B. Also, it is expected that another company or other entity may from time to time
consider the possibility of acquiring the Company or that a change in control may
otherwise occur, with or without the approval of the Company’s Board of Directors (the
“Board”). The Board recognizes that such consideration can be a distraction to the
Employee and can cause the Employee to consider alternative employment opportunities.
The Board has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or occurrence of
a Change of Control (as defined below) of the Company.

     C. The Board believes that it is imperative to provide the Employee with certain
benefits upon an Involuntary Termination of the Employee’s employment without Cause,
which benefits are intended to provide the Employee with financial security and
provide sufficient income and encouragement to the Employee to remain with the Company
notwithstanding the possibility of a Change of Control.

     D. To accomplish the foregoing objectives, the Board of Directors has directed
the Company, upon execution of this Agreement by the Employee, to agree to the terms
provided in this Agreement.

     In consideration of the mutual covenants herein contained, and in consideration
of the continuing employment of Employee by the Company, the parties agree as follows:

          1. At-Will Employment. The Company and the Employee acknowledge that the
Employee’s employment is and shall continue to be at-will, as defined under applicable
Ohio law.

2. Severance Benefits.

(a) Involuntary Termination. If the Employee’s employment is terminated as a
result of an Involuntary Termination by the Board of Directors that occurs within
three months before or two years following the Closing Date of a Change of Control, or
at any other time, during his employment as Chief Executive Officer, the Employee
shall be entitled to receive severance payments during the period from the date of the
Employee’s termination until the end of the Continuation Period. The Employee’s
severance payments shall be equal to the total cash compensation which the Employee
was receiving immediately prior to the Involuntary Termination and shall be paid
during the Continuation Period in accordance with the Company’s standard payroll
practices, subject to offset by the amount of any severance payments otherwise
required by Federal or state law. In addition, during the Continuation Period, the
Employee shall be entitled to reimbursement of the group health continuation coverage
premiums for the Employee and the Employee’s eligible dependents under Title X of the
Consolidated Budget Reconciliation Act of 1985, as amended (“COBRA”), provided that
the Employee will be solely responsible for electing such coverage within the required
time period. For the purposes of this Section 2(a), “total cash compensation” shall
mean, on a monthly basis, the total monthly salary then in effect for the Employee
immediately prior to the date of termination, plus the average monthly commission or
similar contingent compensation (excluding equity compensation) paid to the Employee
during the

29

 

twelve full calendar months ending prior to the date of termination. It is
the intent of the parties that the
severance payments (including COBRA reimbursement) not be subject to Section 409A of
the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, any unpaid
installments of the severance payments will be paid no later than the end of the year
in which the Employee terminates employment, or such later date as permitted under
Section 409A, if necessary in the good faith determination of the Company to prevent
the severance payments from being treated as deferred compensation subject to Section
409A. In addition, it is not the intent of the parties that payment under this
Agreement will constitute a “parachute payment” as defined in Section 280G of the
Code. Accordingly, all benefits and payments pursuant to this Agreement shall be
reduced, if necessary, to the largest aggregate amount that will result in no portion
thereof being subject to federal excise tax or being nondeductible to the Company or
its successor for federal income tax purposes under Sections 280G or 4999 of the Code.

               (b) Other Termination. If the Employee’s employment with the Company
terminates by reason of death or disability, or under any other circumstances that are
not specifically described in Sections 2(a) or 2(c), then the Employee shall not be
entitled to receive any severance payments or other benefits under this Agreement.

               (c) Voluntary Resignation during Window Period. If the Employee
voluntarily resigns within the 7 day period immediately following the twelve (12)
month anniversary date of the Closing Date of a Change of Control, and has not engaged
in conduct constituting a basis for termination for Cause, then the Employee will
receive the same severance payments and benefits described in Section 2(a) for an
Involuntary Termination.

               (d) Release. The Employee’s entitlement to the severance payments and
other benefits under this Agreement is conditioned upon the Employee’s execution and
delivery (and non-revocation) of a general release of claims in a form that is
acceptable to the Company upon the Employee’s termination. At the Company’s option,
this release of claims may include non-compete, non-solicitation and/or non-disclosure
obligations during the Continuation Period (see 3 (c) below).

          3. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:

               (a) Change of Control. “Change of Control” shall mean the occurrence of
any of the following events:

                    (i) Ownership. Any “person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly,
of securities of the Company representing a majority of the total voting power
represented by the Company’s then outstanding voting securities without the approval
of the Board of Directors of the Company; or

                    (ii) Merger/Sale of Assets. A merger or consolidation of the Company
whether or not approved by the Board of Directors of the Company, other than 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) at
least fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding immediately after such
merger or consolidation, or the shareholders of the Company approve a plan of complete
liquidation of the Company, or the closing of a sale or disposition by the Company of
all or substantially all of the Company’s assets.

               (iii) Change in Board Composition. A change in the composition of the
Board of Directors of the Company, as a result of which fewer than a majority of the
directors are Incumbent Directors. “Incumbent Directors” shall mean directors who
either (A) are directors of the Company as of the date of this Agreement, or (B) are
elected, or nominated for election, to the Board of Directors of the Company with the
affirmative votes of at least a majority of the Incumbent Directors at

30

 

 the time of
such election or nomination (but shall not include an individual whose election or
nomination is in connection with an actual or threatened proxy contest relating to the election
of directors to the Company).

          (b) Cause. “Cause” shall mean (i) material breach of any material terms
of this Agreement, (ii) conviction of a felony, (iii) fraud, (iv) repeated unexplained
or unjustified absence, (v) willful breach of fiduciary duty under Ohio laws, this
Agreement or Company policies first in effect prior to the occurrence of a Change of
Control or (vi) gross negligence or willful misconduct where such gross negligence or
willful misconduct has resulted or is likely to result in substantial and material
damage to the Company or its subsidiaries.

          (c) Continuation Period. “Continuation Period” shall mean the twelve
month period commencing on the date of the Employee’s termination.

          (d) Involuntary Termination. “Involuntary Termination” means (1)
termination of the Employee’s employment by the Company without Cause, as defined
above in paragraph (b) or (2) the Employee’s voluntary termination, upon thirty (30)
days prior written notice to the Company, within thirty (30) days following (i) a
material reduction in job responsibilities inconsistent with the Employee’s position
with the Company and the Employee’s prior responsibilities or (ii) relocation to a
facility or location more than 50 miles from the Company’s current location, in either
case without the Employee’s written consent; provided that the Employee has not
engaged in conduct constituting a basis for termination for Cause.

          (e) Closing Date of a Change of Control. “Closing Date” of a Change of
Control shall mean that date in which either of the events described in paragraph 3(a)
i, ii or iii become effective.

          4. Retirement Benefit. If the Employee is employed by the Company on or
after his or her sixty-second (62nd) birthday, is not subject to an Involuntary
Termination, and is not subject to a voluntary resignation during a window period
pursuant to Section 2(c), and voluntarily terminates his or her employment, then the
Employee shall be entitled to a payment equal to one (1) month of salary for every
year of service with the Company, not to exceed twelve (12) years of service, which
amount shall be payable in a lump sum.

     5. Successors. The Company shall require any (whether direct or indirect
purchaser, whether by lease, merger, consolidation, liquidation or otherwise) to all
or substantially all of the Company’s business and/or assets to assume the obligations
under this Agreement and agree expressly to perform the obligations under this
Agreement in the same manner and to the same extent as the Company would be required
to perform such obligations in the absence of a succession. The terms of this
Agreement and all of the Employees rights hereunder shall inure to the benefit of, and
be enforceable by, the Employee’s personal or legal representatives, executors,
administrator, successors, heirs, distributees, devisees and legatees.

     6. Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. Mailed notices to the Employee shall be
addressed to the Employee at the home address, which the Employee most recently
communicated to the Company in writing. In the case of the Company, mailed notices
shall be addressed to its corporate headquarters, and all notices shall be directed to
the attention of its Secretary.

     7. Term of Agreement. Except for Section 4 which shall survive, the
terms of this Agreement shall terminate upon the earlier of (i) the date that all
obligations of the parties hereunder have been have satisfied or (ii) 3 years from the
Effective Date of this Agreement. A termination of the terms of this Agreement
pursuant to the preceding sentence shall be effective for all purposes, except that
such termination shall not affect the payment or provision of compensation or benefits
on account of a termination of employment occurring prior to the termination of the
terms of this Agreement.

31

 

8. Miscellaneous Provisions.

          (a) No duty to Mitigate. The Employee shall not be required to mitigate
the amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor, except as otherwise provided in this
Agreement, shall any such payment be reduced by any earnings that the Employee may
receive from any other source.

          (b) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing and
signed by the Employee and by an authorized officer of the Company (other than the
Employee). No waiver by either party of any breach of, or of compliance with, any
condition or provision of this Agreement by the other party shall be considered a
waiver of any other condition or provision or of the same condition or provision at
another time.

          (c) Entire Agreement. No agreements, representations or understandings
(whether oral or written and whether express or implied) which are not expressly set
forth in this Agreement have been made or entered into by either party with respect to
the subject matter hereof. This Agreement supersedes any agreement concerning similar
subject matter dated prior to the date of this Agreement, including the existing
Management and Continuity Agreement, and by execution of this Agreement both parties
agree that any such predecessor agreement shall be deemed null and void.

          (d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of Ohio
without reference to conflict of laws rules. Each of the parties irrevocably submits
to the exclusive jurisdiction of the Cuyahoga County Court of Common Pleas, State of
Ohio, for the purposes of any suit, action, or other proceeding arising out of this
agreement.

          (e) Severability. If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction and to any extent,
be invalid or unenforceable, such term or provision shall be ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without invalidating
or rendering unenforceable the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as to which
it is held invalid or unenforceable, and a suitable and equitable term or provision
shall be substituted therefor to carry out, insofar as may be valid and enforceable,
the intent and purpose of the invalid or unenforceable term or provision.

          (f) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement may be settled at the option of either party by binding
arbitration in Cuyahoga County, in accordance with the rules of the American
Arbitration Association then in effect. Punitive damages shall not be awarded.

          (g) Legal Fees and Expenses. The parties shall each bear their own
expenses, legal fees and other fees incurred in connection with this Agreement.

          (h) No Assignment of Benefits. The rights of any person to payment or
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor’s process,
and any action in violation of this subsection (h) shall be void.

          (i) Employment Taxes. All payments made pursuant to this Agreement will
be subject to withholding of applicable income and employment taxes.

          (j) Assignment by Company. The Company may not assign its rights or
obligations under this Agreement.

32

 

(k) Section 409A. This Agreement is intended to comply with the requirements
of Section 409A of the Code (to the extent applicable). Benefits under this Agreement
otherwise payable upon termination of
employment may be subject to Section 409A which, if applicable, could require a delay
in the payment of such benefits for a period of at least six (6) months following
separation from service. Should the Company in good faith determine that any such
benefits to be provided to the Employee pursuant to this Agreement are subject to
Section 409A, the Company may delay the payment of such benefits for at least six (6)
months (or such other period as may be applicable), after first notifying the Employee
of its intention to do so.

(l) Counterparts. This Agreement may be executed in counterparts
each of which shall be deemed an original, but all of which together will constitute
one and the same instrument.

(signatures appear on following page)

33

 

     Each of the parties has executed this Agreement, in the case of the Company by
its duly authorized officer, as of the day and year first above written.

	 	 	 	 	 	 	 	 	 	 	 

	ENERGY FOCUS, INC.	 	 	 	Employee:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	
	 	 	 	 	 	Signature 	 	 
	Title:
	 

	 	 	 	 

34

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00173-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00173-of-00352.parquet"}]]