Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.1

MENTOR CORPORATION

1991 STOCK
OPTION PLAN

(as amended through September 17, 2007)

I. Purposes of the Plan

This Mentor
Corporation 1991 Stock Option Plan (the “Plan”) is intended
to enable Mentor Corporation (the “Corporation”) and its
subsidiaries to attract and retain key employees and non-employee directors
and, by giving such employees and non-employee directors an opportunity to
acquire a proprietary interest in the corporation, to provide such employees
and non-employee directors with a stronger incentive to exert their maximum
effort for the continued success and growth of the Corporation and its
subsidiaries.

II. Administration of the
Plan

The Plan shall be
administered by a committee or committees appointed by, and consisting of one
or more members of, the Board of Directors of the Corporation (the
“Board”). The Board may delegate the responsibility for
administration of the Plan with respect to designated classes of optionees to
different committees, subject to such limitations as the Board deems
appropriate. The composition of any committee responsible for administration of
the Plan with respect to optionees who are subject to trading restrictions of
Section 16(b) of the Securities Exchange Act of 1934 (the “1934
Act”) with respect to securities of the Corporation shall comply with
the applicable requirements of Rule 16b-3 of the Securities and Exchange
Commission. Members of a committee shall serve for such term as the Board may
determine and shall be subject to removal by the Board at any time. Any
committee appointed by the Board shall have full authority to administer the
Plan within the scope of its delegated responsibilities, including authority to
interpret and construe any relevant provision of the Plan and to adopt such
rules and regulations as it may deem necessary. Decisions of a committee made
within the discretion delegated to it by the Board shall be final and binding
on all persons who have an interest in the Plan. With respect to any matter,
the term “Committee” shall hereinafter refer to such committee as
shall have been delegated authority with respect to such matter.

III. Eligibility for Awards

Options may be granted
under the Plan to such key employees of the Corporation and its subsidiaries
(including officers, whether or not they are also members of the Board) as the
Committee shall from time to time select. In addition, members of the Board who
are not employees of the Corporation or one of its subsidiaries shall be
eligible to receive options in accordance with, and only in accordance with,
the automatic grant provisions of Section VI below.

IV. Stock Subject to the
Plan

a. Class.
The stock which is the subject of options granted under the Plan shall be the
Corporation’s authorized but unissued common stock (“Common
Stock”). In connection with the issuance of shares of Common Stock
under the Plan, the Corporation may repurchase shares in the open market or
otherwise.

 

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b. Aggregate
Amount

1. The total
number of shares of Common Stock issuable under the Plan shall not exceed
5,000,000* shares plus the number of shares that would have become available
for grant, under the Corporation’s Restated 1987 Stock Option Plan and
Incentive Stock Option Plan (the “Prior Plans”) by reason of
the lapse, expiration or cancellation of options thereunder prior to exercise
in full (provided such shares are not subject to a subsequent grant under one
of the Prior Plans), subject to adjustment under Section IV(c).

2. If any
outstanding option under the Plan expires or is terminated or cancelled for any
reason (including pursuant to Section IX of the Plan) before being
exercised for the full number of shares of Common Stock to which it applies,
then the Common Stock allocable to the unexercised portion of such option shall
not be charged against the limitation of Section IV(b)(1) and may again
become the subject of subsequent options granted under the Plan.

3. Adjustments.
In the event any change is made to the Common Stock subject to the Plan or
subject to any outstanding option granted under the Plan (whether by reason of
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, combination of shares, exchange of shares, or other change in corporate
or capital structure of the Corporation), then, unless such change results in
the termination of all outstanding options, the Committee shall make
appropriate adjustments to the kind and maximum number of shares subject to the
Plan, the kind and maximum number of shares for which options are to be granted
to each individual under the Plan, the kind and maximum number of shares for
which options are to be granted to non-employee directors, and the kind and
number of shares and price per share of stock subject to outstanding options.

4. Individual
Limit. No individual will receive grants under this Plan for more than 600,000*
shares (subject to adjustment as provided in Section IV(c)). Grants that
are repriced and/or canceled and regranted will count against the limit
contained in this Section IV(d).

V. Terms and Conditions of
Options

Stock options granted
under the Plan may be either incentive stock options (“Incentive
Options”) qualifying under Section 422 of the Internal Revenue
Code of 1986, as amended (“Internal Revenue Code”), or
nonstatutory options, and shall be appropriately designated. The options shall
be evidenced by instruments in such form as the Committee may from time to time
approve. Such instruments shall conform to the following terms and conditions:

a. Option
Price. The option price per share shall be the fair market value of a share
of Common Stock on the day the option is granted.

b. Number of
Shares, Term and Exercise

1. Each option
granted under the Plan shall be exercisable on such date or dates, during such
period and for such number of shares as shall be determined by the Committee
and set forth in the instrument evidencing such option. No option granted under
the Plan, however, shall have an expiration date which is more than
10 years after the date of the option grant. Each option shall contain
such other terms, conditions and restrictions, which may vary from grant to
grant and may be modified by the Committee after the date of grant, as the
Committee shall determine.

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2. After any
option granted under the Plan becomes exercisable, it may be exercised by
notice to the Corporation at any time prior to the termination of such option.
Except as authorized by the Committee in accordance with Section VII, the
option price for the number of shares of Common Stock for which the option is
exercised shall become immediately due and payable upon exercise.

3. The option
price shall be payable in full in cash; provided, however, that the Committee
may, either at the time the option is granted or at the time it is exercised
and subject to such limitations as it may determine, authorize payment of all
or a portion of the option price in cash and/or one or a combination of the
following alternative forms:

i. a promissory
note authorized pursuant to Section VII; or

ii. full payment
in shares of Common Stock valued as of the exercise date; or

iii. by
delivering a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Corporation the amount of
sale or loan proceeds to pay the option price; or

4. Effective
September 17, 2007, in the event an optionee ceases to be an employee
of the Corporation of any of its subsidiaries due to death, his or her options
shall become fully vested and exercisable upon the optionee’s death.

c. Termination
of Employment

The Committee shall
determine and shall set forth in each option whether the option shall continue
to be exercisable, and the terms and conditions of such exercise, on and after
an optionee ceases to be employed by the Corporation or any of its subsidiaries.

d. Incentive
Options. Options granted under the Plan which are intended to be Incentive
Options shall be subject to the following additional terms and conditions:

1. Dollar
Limitation. To the extent that the aggregate fair market value (determined
as of the respective date or dates of grant) of shares with respect to which
options that would otherwise be Incentive Options are exercisable for the first
time by any individual during any calendar year under the Plan (or any other
plan of the Corporation, a parent or subsidiary corporation or predecessor
thereof) exceeds the sum of $100,000 (or such greater amount as may be
permitted under the Internal Revenue Code), whether by reason of acceleration
or otherwise, such options shall not be treated as Incentive Options. In making
such determination, such options shall be taken into account in the order in
which they were granted.

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2. 10%
Shareholder. If any employee to whom an Incentive Option is to be granted
pursuant to the provisions of the Plan is on the date of grant the owner of
stock (determined with application of the ownership attribution rules of
Section 425(d) of the Internal Revenue Code) possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of his or her
employer corporation or of its parent or subsidiary corporation (10%
Shareholder), then the following special provisions shall be applicable to the
option granted to such individual:

i. The option
price per share of the Common Stock subject to such Incentive Option shall not
be less than one hundred ten percent (110%) of the fair market value of one
share of Common Stock on the date of grant; and

ii. The option
shall not have a term in excess of five (5) years from the date of grant.

3. Parent;
Subsidiary. For purposes of this Section VI(d) “parent and
subsidiary corporation” and “parent or subsidiary
corporation” shall have the meaning attributed to those terms under
Section 422A(b) of the Internal Revenue Code.

e. Withholding

1. The
Corporation’s obligation to deliver stock certificates upon the exercise
of any option shall be subject to the optionee’s satisfaction of all
applicable federal, state and local income and employment tax withholding
requirements.

2. In the event
that an optionee is required to pay to the Corporation an amount with respect
to income and employment tax withholding obligations in connection with
exercise of an option, the Committee may, in its discretion and subject to such
limitations and rules as it may adopt, permit the optionee to satisfy the
obligation, in whole or in part, by delivering shares of Common Stock already
held by the optionee or by making an irrevocable election that a portion of the
total value of the shares of Common Stock subject to the option be paid in the
form of cash in lieu of the issuance of Common Stock and that such cash payment
be applied to the satisfaction of the withholding obligations.

f. Repurchase
Rights. The Committee may in its discretion determine that it shall be a
term and condition of one or more options exercised under the Plan that the
Corporation (or its assigns) shall have the right, exercisable upon the
optionee’s termination of employment with the Corporation and its
subsidiaries, to repurchase any or all of the shares of Common Stock previously
acquired by the optionee upon the exercise of such option. Any such repurchase
right shall be exercisable by the Corporation (or its assigns) upon such terms
and conditions (including the establishment of the appropriate vesting schedule
and other provisions for the expiration of such right in one or more
installments) as the Committee may specify in the instrument evidencing such
right. The Committee shall also have full power and authority to provide for
the automatic termination of the Corporation’s repurchase rights, in
whole or in part, and thereby accelerate the vesting of any or all of the
purchased shares, upon the occurrence of any Change in Control specified in
Article X.

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g. Modification of Options. The Committee shall have
full power and authority to modify or waive any or all of the terms, conditions
or restrictions applicable to any outstanding option, to the extent not
inconsistent with the Plan; provided, however, that no such modification or
waiver shall (1) without the consent of the option holder, adversely
affect the holder’s rights thereunder or (2) affect any outstanding
option granted pursuant to Section VI, except to the extent necessary to
conform to any amendment to Section VI.

VI. Automatic Option Grants to
Directors

a. Automatic
Option Grants. Non-employee members of the Board shall automatically be
granted nonstatutory stock options (“Automatic Option
Grants”) to purchase the number of shares of Common Stock set forth
below (subject to adjustment under Section IV(c) hereof) on the dates and
terms set forth below:

1. Each person
who is newly elected or appointed as a non-employee member of the Board of
Directors after the date of adoption of this Plan shall receive on the date of
such election or appointment an Automatic Option Grant to purchase 20,000
shares* .

2. On the date of
each of the Corporation’s Annual Meetings occurring after the date of
adoption of this Plan each person who is then an incumbent, continuing
non-employee director, or who is then newly elected or appointed as a
nonemployee director, shall receive an Automatic Option Grant for 6,000*
shares, provided that the maximum number of shares for which such a director
may receive such options pursuant to Section VI(a)(1) and VI(a)(2) shall
be 60,000* less the number of shares for which such director received options
under any prior option plan of the Corporation.

3. In addition to
any grants under Section VI(a)(1) and Section VI(a)(2) immediately
above, each individual who is a non-employee member of the Board on
May 17, 1994 shall receive an Automatic Option Grant to purchase 30,000*
shares. The automatic grant date of these options will be May 17, 1994.

4. In addition to
any grants under Section VI(a)(1), Section VI(a)(2) and
Section VI(a)(3) immediately above, each individual who is a non-employee
member of the Board of Directors of Mentor Corporation on May 15, 1997
shall receive a one-time grant of options to purchase 30,000 shares of Common
Stock.

b. Terms and
Conditions. The terms and conditions applicable to each Automatic Option
Grant shall be as follows:

1. The option
price per share will be equal to one hundred percent (100%) of the fair market
value of one share of the Common Stock on the automatic grant date.

2. The options
will have terms of ten years measured from the automatic grant date.

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3. The options
will be exercisable in the following increments: twenty-five percent (25%)
after one year and the remainder in equal annual installments over the next
three years, provided that options with an automatic grant date of May 17,
1994 will be exercisable in the following increments: thirty-three and
one-third percent (33-1/3%) after one year and the remainder in equal annual
installments over the next two years. Notwithstanding the foregoing,
(i) the exercisability of all such options shall accelerate upon the
occurrence of a Change in Control in accordance with Section X(a) and
shall terminate, to the extent unexercised, if the Corporation’s Common
Stock ceases to exist or be publicly traded as a result of the Change in
Control, unless the options are expressly assumed or replaced by substitute
options by the entity that survives the Change in Control, and (ii) no
option granted under this Section VI may be exercised prior to approval of
the Plan by the Corporation’s shareholders, which approval was obtained
in September of 1991 for all such grants except the May 17, 1994 grants.

4. Upon exercise
of the option, the option price for the purchased shares will become payable
immediately in cash or in shares of Common Stock that the optionee has held for
at least six months.

5. In the event
the optionee ceases to serve as a director, the option may be exercised, to the
extent then exercisable and within the term thereof, for a period of ninety
(90) days after the date of cessation (twelve (12) months in the case of
cessation by reason of disability or death). In the case of death, the option
may be exercised within such period by the estate or heirs of the optionee.

6. Effective
September 17, 2007, in the event the optionee ceases to serve as a
director due to the optionee’s death, the option shall become fully
vested and exercisable upon the optionee’s death.

VII. Loans, Loan Guarantees and
Installment Payments

In order to assist an
employee (including an employee who is an officer or member of the Board) in
the acquisition of shares of Common Stock pursuant to an option granted under
the Plan (other than pursuant to Section VI), the Committee may authorize,
at either the time of the grant of an option or the time of the acquisition of
Common Stock thereunder, (i) the extension of a loan to the employee by
the Corporation, (ii) the payment by the employee of the purchase price,
if any, of the Common Stock in installments, or (iii) the guarantee by the
Corporation of a loan obtained by the employee from a third party. The terms of
any loans, guarantees or installment payments, including the interest: rate and
terms of repayment, will be subject to the discretion of the Committee. Loans,
installment payments and guarantees may be granted without security, the
maximum credit available being the purchase price, if any, of the Common Stock
acquired plus the maximum federal and state income and employment tax liability
which may be incurred in connection with the acquisition.

VIII. Assignability

No option granted
under the Plan shall be assignable or transferable by the optionee other than
by will or by the laws of descent and distribution, and during the lifetime of
the optionee options granted under the Plan may be exercised only by the
optionee.

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IX. Cancellation and New Grant
of Options

The Committee shall
have the authority to effect, at any time and from time to time, with the
consent of the affected option holders, the cancellation of any or all
outstanding options under the Plan or the Prior Plans (other than options
granted under Section VI) and to grant in substitution therefor new
options under the Plan covering the same or different numbers of shares of
Common Stock but having an option price per share not less than the fair market
value on the new grant date (or, in the case of an Incentive Option to be
granted to a 10% Shareholder, one hundred ten percent (110%) of such fair
market value). If one or more of the cancelled options is an Incentive Option
granted before 1987 under one of the Prior Plans, then such option shall,
solely for purposes of the “sequential exercise” rule applicable to
other outstanding Incentive options granted before 1987 under the Prior Plans
or any other plan of the Corporation or parent or subsidiary, be considered to
be outstanding until the expiration date initially specified for the option
term of such option.

X. Recapitalization, Merger,
Consolidation, Sale of Assets or Liquidation

a. Acceleration of Exercisability. Anything else to
the contrary in this Plan notwithstanding, in the event of a “Change in
Control” of the Corporation, as defined herein, all options held by a
person under this Plan that shall not have expired, shall become immediately
exercisable in full. The acceleration of the exercisability of options shall be
effective immediately prior to (but subject to the actual occurrence of) the
applicable Change in Control, and each optionee shall be entitled to exercise
his or her accelerated options in advance prior to the Change in Control,
provided that such Change in Control actually occurs and that such optionee has
not voluntarily terminated his or her position with the Corporation prior to
the occurrence of such Change in Control.

b. Optional
Actions. In the event the Committee determines in good faith that a Change
in Control may be imminent, the Committee may, but shall not be obligated to:

1. If the Change
in Control is a merger or consolidation or a statutory share exchange, make
provision for the protection of the outstanding options granted under this Plan
by the substitution, in lieu of such options, of options to purchase such
numbers of shares of appropriate voting common stock of the corporation
surviving any merger or consolidation or, if appropriate, of the parent
corporation of the Corporation or such surviving corporation (the
“Survivor’s Stock”) as the Committee deems equitable,
or, alternatively, by the delivery of such numbers of shares of the
Survivor’s Stock as have a fair market value as of the date of the Change
in Control equal to the product of (i) the amount by which the Change in
Control Proceeds per Share (as defined in Section X(c)(3)) exceeds the
option exercise price per share times (ii) the numbers of Common shares
covered by the respective options; or

2. At least ten
(10) days prior to any Change in Control described in
Section X(c)(1)(iii), declare, and provide written notice to each optionee
of the declaration, that each outstanding option, whether or not then
exercisable, shall be cancelled at the time of the Change in Control (unless it
shall have been exercised prior to the occurrence of the Change in Control) in
exchange for payment to each optionee, within ten days after the Change in
Control, of cash equal to the amount (if any), for each Share covered by the
cancelled option, by which the Change in Control Proceeds per Share (as defined
in Section X(c)(3)) exceeds the exercise price per Share covered by such
option.

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No such action by the
Committee shall in any way affect the acceleration of the exercisability of
options pursuant to Section X(a), and each optionee shall have the right,
during the period preceding the Change in Control, to exercise his or her
option as; to all or any part of the shares covered thereby in accordance with
said Section X(a). In the event of a declaration pursuant to this
Section X(b), each outstanding option granted pursuant to this Plan that
shall not have been exercised prior to the Change in Control shall be cancelled
at the time of the Change in Control, and this Plan shall terminate at the time
of such cancellation, subject to the obligations of the Corporation provided in
this Section X(b).

Any action taken by
the Committee under this Section X(b) in contemplation of an expected
Change in Control shall be null and void in the event such Change in Control
does not actually occur.

c. Definitions

1. Change in
Control. A “Change in Control,” for purposes of this Plan,
shall have occurred if:

i. a majority of
the directors of the Corporation shall be persons other than persons:
(A) for whose election proxies shall have been solicited by the Board of
Directors of the Corporation, or (B) who are then serving as directors
appointed by the Board of Directors to fill vacancies on the Board of Directors
caused by death or resignation (but not by removal) or to fill newly-created
directorships;

ii. twenty
percent (20%) or more of the outstanding voting power of the Corporation shall
have been acquired or beneficially owned (as defined in Rule 13d-3 under
the 1934 Act or any successor rule thereto) by any person (other than the
Corporation, a subsidiary of the Corporation or, as to any optionee, that
optionee) or Group (as defined in Section X(c)(2), which Group does not,
as to any optionee, include such optionee; or

iii. there shall
have occurred:

(A) a merger or
consolidation of the Corporation with or into another corporation (other than
(1) a merger or consolidation with a subsidiary of the Corporation or
(2) a merger or consolidation in which (aa) the holders of voting
stock of the Corporation immediately prior to the merger as a class continue to
hold immediately after the merger at least sixty percent (60%) of all
outstanding voting power of the surviving or resulting corporation or its
parent and (bb) all holders of each outstanding class or series of voting
stock of the Corporation immediately prior to the merger or consolidation have
the right to receive substantially the same cash, securities or other property
in exchange for their voting stock of the Corporation as all other holders of
such class or series);

(B) a statutory
exchange of shares of one or more classes or series of outstanding voting stock
of the Corporation for cash, securities or other property;

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(C) the sale or
other disposition of all or substantially all of the assets of the Corporation
(in one transaction or a series of transactions); or

(D) the
liquidation or dissolution of the Corporation;

unless, as to any optionee, more than
twenty-five percent (25%) of the voting stock (or the voting equity interest)
of the surviving corporation or the corporation or other entity acquiring all
or substantially all of the assets of the Corporation (in the case of a merger,
consolidation or disposition of assets) or of the Corporation or its resulting
parent corporation (in the case of a statutory share exchange) is beneficially
owned by such optionee or a Group that includes such optionee.

2. Group.
A “Group,” for purposes of this Plan, shall mean any two or more
persons acting as a partnership, limited partnership, syndicate, or other group
acting in concert for the purpose of acquiring, holding or disposing of voting
stock of the Corporation.

3. Change in
Control Proceeds. “Change in Control Proceeds” per Share shall
mean the cash plus the fair market value ‘ as determined in good faith by
the Committee, of the noncash consideration to be received per Share by the
shareholders of the Corporation upon the occurrence of a Change in Control.

XI. Valuation of Common
Stock

For all valuation
purposes under the Plan, the fair market value of a share of Common Stock on
any relevant date shall be determined in accordance with the following
provisions:

a. Over-the-Counter. If the Common Stock is not at the
time listed or admitted to trading on any stock exchange but is traded in the
over-the-counter market, the fair market value shall be the mean between the
highest bid price and lowest asked price (or, if such information is available,
the closing selling price) of one share of Common Stock on the date in question
in the over-the-counter market, as such prices are reported by the National
Association of securities Dealers through its NASDAQ system or any successor
system. If there are no reported bid and asked prices (or closing selling
price) on the date in question, then the mean between the highest bid price and
lowest asked price (or, if available, the closing selling price) on the last
preceding date for which such quotations exist shall be determinative of fair
market value.

b. Stock
Exchange. If the Common Stock is at the time listed or admitted to trading
on any stock exchange, then the fair market value shall be the closing selling
price of one share of Common Stock on the date in question on the stock
exchange determined by the Committee to be the primary market for the Common
Stock, as such price is officially quoted on such exchange. If there is no
reported sale of Common Stock on such exchange on the date in question, then
the fair market value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.

c. Neither
Over-the-Counter nor Stock Exchange. If the Common Stock is at the time
neither listed nor admitted to trading on any stock exchange nor traded in the
over-the-counter market, then the fair market value shall be determined by the
Committee after taking into account such factors as the Committee shall deem
appropriate.

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If, however, the
Committee determines that, as a result of circumstances existing on any date,
the use of the above rules is not a reasonable method of determining fair
market value on that date, the Committee may use such other method as, in its
judgment, is reasonable.

XII. Effective Date and Term of
Plan

a. Effective
Date. The Plan shall become effective on the date it is adopted by the
Board, but no shares of Common Stock shall be issued under the Plan and no
options granted under the Plan shall be exercisable before the Plan is approved
by the holders of at least a majority of the Corporation’s voting stock
represented and voting at a duly-held meeting at which a quorum is present. If
such shareholder approval is not obtained, then any options previously granted
under the Plan shall terminate and no further options shall be granted. Subject
to such limitation, the Committee may grant options under the Plan at any time
after the adoption of the Plan by the Board and before the date fixed herein
for termination of the Plan.

b. Term.
No option may be granted under the Plan after the earlier of (i) the tenth
anniversary of the date of its adoption by the Board or (ii) the date on
which all shares available for issuance under the Plan have been issued or
cancelled pursuant to the exercise or surrender of options granted hereunder.

XIII. Amendment or Discontinuance by
Board Action

The Board may amend,
suspend or discontinue the Plan in whole or in part at any time; provided,
however, that (1) except to the extent necessary to qualify as Incentive
options any or all options granted under the Plan which are intended to so
qualify, such action shall not adversely affect rights and obligations with
respect to options at the time outstanding under the Plan; (2) the
provisions of the Plan concerning the eligibility of outside directors for
awards and the amount, price and timing of their awards may not be amended more
than once every six months, other than to comport with changes in the Internal
Revenue Code or rules thereunder; and (3) the Board shall not, without the
approval of the Corporation’s shareholders (i) increase the number
of shares of Common Stock which may be issued under the Plan (unless necessary
to effect the adjustments required under Section IV(c)), (ii) modify
the eligibility requirements for awards under the Plan or (iii) make any
other change with respect to which the Board determines that shareholder
approval is required by applicable law or regulatory standards.

XIV. No Employment Obligation

Nothing contained in
the Plan (or in any option granted under the Plan) shall confer upon any
employee any right to continue in the employ of the Corporation or any
affiliate or constitute any contract or agreement of employment or interfere in
any way with the right of the Corporation or an affiliate to reduce such
employee’s compensation from the rate in existence at. the time of the
granting of an option or to terminate such employee’s employment at any
time, with or without cause; but nothing contained herein or in any option
shall affect any contractual rights of an employee pursuant to a written
employment agreement.

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XV. Use of Proceeds

The cash proceeds
received by the Corporation from the issuance of shares pursuant to options
under the Plan shall be used for general corporate purposes.

XVI. Regulatory Approvals

The implementation of
the Plan, the granting of any option under the Plan, and the issuance of Common
Stock upon the exercise of any such option or lapse of restrictions on any
Common Stock issued under the Plan shall be subject to the Corporation’s
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options granted under the Plan or the
Common Stock issued pursuant to such an option.

XVII. Governing Law

To the extent not
otherwise governed by federal law, the Plan and its implementation shall be
governed by and construed in accordance with the laws of the State of
California.

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11Filed by Bowne Pure Compliance

 

Exhibit 10.2

MENTOR CORPORATION

2005
LONG-TERM INCENTIVE PLAN
 
(as amended through September 17, 2007)

1. PURPOSE OF PLAN

The purpose of this
Mentor Corporation 2005 Long-Term Incentive Plan (this
“Plan”) of Mentor Corporation, a Minnesota corporation (the
“Corporation”), is to promote the success of the Corporation
and to increase shareholder value by providing an additional means through the
grant of awards to attract, motivate, retain and reward selected employees and
other eligible persons. This Plan amends and restates the Corporation’s
Amended 2000 Long-Term Incentive Plan. The Share Limit set forth in
Section 4.2 applies to awards granted under this Plan before and after
this amendment and restatement of this Plan. For purposes of clarity, no
additional shares are added to the Share Limit as a result of this amendment
and restatement.

2. ELIGIBILITY

The Administrator (as
such term is defined in Section 3.1) may grant awards under this Plan only
to those persons that the Administrator determines to be Eligible Persons. An
“Eligible Person” is any person who is either: (a) an officer
(whether or not a director) or employee of the Corporation or one of its
Subsidiaries; (b) a director of the Corporation or one of its
Subsidiaries; or (c) an individual consultant or advisor who renders or
has rendered bona fide services (other than services in connection with the
offering or sale of securities of the Corporation or one of its Subsidiaries in
a capital-raising transaction or as a market maker or promoter of securities of
the Corporation or one of its Subsidiaries) to the Corporation or one of its
Subsidiaries and who is selected to participate in this Plan by the
Administrator; provided, however, that a person who is otherwise an Eligible
Person under clause (c) above may participate in this Plan only if such
participation would not adversely affect either the Corporation’s
eligibility to use Form S-8 to register under the Securities Act of 1933, as
amended (the “Securities Act”), the offering and sale of
shares issuable under this Plan by the Corporation or the Corporation’s
compliance with any other applicable laws. An Eligible Person who has been
granted an award (a “participant”) may, if otherwise
eligible, be granted additional awards if the Administrator shall so determine.
As used herein, “Subsidiary” means any corporation or other entity
a majority of whose outstanding voting stock or voting power is beneficially
owned directly or indirectly by the Corporation; and “Board” means
the Board of Directors of the Corporation.

3. PLAN ADMINISTRATION

3.1 The
Administrator. This Plan shall be administered by and all awards under this
Plan shall be authorized by the Administrator. The “Administrator”
means the Board or one or more committees appointed by the Board or another
committee (within its delegated authority) to administer all or certain aspects
of this Plan. Any such committee shall be comprised solely of one or more
directors or such number of directors as may be required under applicable law.
A committee may delegate some or all of its authority to another committee so constituted. The Board or a committee
comprised solely of directors may also delegate, to the

 

1

 

extent permitted by
applicable law, to one or more officers of the Corporation, its powers under
this Plan (a) to designate the officers and employees of the Corporation
and its Subsidiaries who will receive grants of awards under this Plan, and
(b) to determine the number of shares subject to, and the other terms and
conditions of, such awards. The Board may delegate different levels of
authority to different committees with administrative and grant authority under
this Plan. Unless otherwise provided in the Bylaws of the Corporation or the
applicable charter of any Administrator: (a) a majority of the members of
the acting Administrator shall constitute a quorum, and (b) the vote of a
majority of the members present assuming the presence of a quorum or the
unanimous written consent of the members of the Administrator shall constitute
action by the acting Administrator.

With respect to awards
intended to satisfy the requirements for performance-based compensation under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
“Code”), this Plan shall be administered by a committee
consisting solely of two or more outside directors (as this requirement is
applied under Section 162(m) of the Code); provided, however, that the failure
to satisfy such requirement shall not affect the validity of the action of any
committee otherwise duly authorized and acting in the matter. Award grants, and
transactions in or involving awards, intended to be exempt under
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), must be duly and timely authorized by the
Board or a committee consisting solely of two or more non-employee directors
(as this requirement is applied under Rule 16b-3 promulgated under the
Exchange Act). To the extent required by any applicable listing agency, this
Plan shall be administered by a committee composed entirely of independent
directors (within the meaning of the applicable listing agency).

3.2 Powers of the
Administrator. Subject to the express provisions of this Plan, the
Administrator is authorized and empowered to do all things necessary or
desirable in connection with the authorization of awards and the administration
of this Plan (in the case of a committee or delegation to one or more officers,
within the authority delegated to that committee or person(s)), including,
without limitation, the authority to:

(a) determine
eligibility and, from among those persons determined to be eligible, the
particular Eligible Persons who will receive an award under this Plan;

(b) grant awards
to Eligible Persons, determine the price at which securities will be offered or
awarded and the number of securities to be offered or awarded to any of such
persons, determine the other specific terms and conditions of such awards
consistent with the express limits of this Plan, establish the installments (if
any) in which such awards shall become exercisable or shall vest (which may
include, without limitation, performance and/or time-based schedules), or
determine that no delayed exercisability or vesting is required, establish any
applicable performance targets, and establish the events of termination or
reversion of such awards;

(c) approve the
forms of award agreements (which need not be identical either as to type of
award or among participants);

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(d) construe and
interpret this Plan and any agreements defining the rights and obligations of
the Corporation, its Subsidiaries, and participants under this Plan, further
define the terms used in this Plan, and prescribe, amend and rescind rules and
regulations relating to the administration of this Plan or the awards granted
under this Plan;

(e) cancel,
modify, or waive the Corporation’s rights with respect to, or modify,
discontinue, suspend, or terminate any or all outstanding awards, subject to
any required consent under Section 8.6.5;

(f) accelerate or
extend the vesting or exercisability or extend the term of any or all such
outstanding awards (in the case of options, within the maximum ten-year term of
such awards) in such circumstances as the Administrator may deem appropriate
(including, without limitation, in connection with a termination of employment
or services or other events of a personal nature) subject to any required
consent under Section 8.6.5;

(g) adjust the
number of shares of Common Stock subject to any award, adjust the price of any
or all outstanding awards or otherwise change previously imposed terms and
conditions, in such circumstances as the Administrator may deem appropriate, in
each case subject to Sections 4 and 8.6, and provided that in no case
(except due to an adjustment contemplated by Section 7 or any repricing
that may be approved by shareholders) shall such an adjustment constitute a
repricing (by amendment, cancellation and regrant, exchange or other means) of
the per share exercise price of any option;

(h) determine the
date of grant of an award, which may be a designated date after but not before
the date of the Administrator’s action (unless otherwise designated by
the Administrator, the date of grant of an award shall be the date upon which
the Administrator took the action granting an award);

(i) determine
whether, and the extent to which, adjustments are required pursuant to
Section 7 hereof and authorize the termination, conversion, substitution
or succession of awards upon the occurrence of an event of the type described
in Section 7;

(j) acquire or
settle (subject to Sections 7 and 8.6) rights under awards in cash, stock
of equivalent value, or other consideration; and

(k) determine the
fair market value of the Common Stock or awards under this Plan from time to
time and/or the manner in which such value will be determined.

3.3 Binding
Determinations. Any action taken by, or inaction of, the Corporation, any
Subsidiary, or the Administrator relating or pursuant to this Plan and within
its authority hereunder or under applicable law shall be within the absolute
discretion of that entity or body and shall be conclusive and binding upon all
persons. Neither the Board nor any Board committee, nor any member thereof or
person acting at the direction thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with this Plan (or any award made under this Plan), and all such persons shall
be entitled to indemnification and reimbursement by the Corporation in respect
of any claim, loss, damage or expense (including, without limitation,
attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or
under any directors and officers liability insurance coverage that may be in
effect from time to time.

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3.4 Reliance on
Experts. In making any determination or in taking or not taking any action
under this Plan, the Board or a committee, as the case may be, may obtain and
may rely upon the advice of experts, including employees and professional
advisors to the Corporation. No director, officer or agent of the Corporation
or any of its Subsidiaries shall be liable for any such action or determination
taken or made or omitted in good faith.

3.5 Delegation.
The Administrator may delegate ministerial, non-discretionary functions to
individuals who are officers or employees of the Corporation or any of its
Subsidiaries or to third parties.

4. SHARES OF COMMON STOCK SUBJECT
TO THE PLAN; SHARE LIMITS

4.1 Shares
Available. Subject to the provisions of Section 7.1, the capital stock
that may be delivered under this Plan shall be shares of the
Corporation’s authorized but unissued Common Stock and any shares of its
Common Stock held as treasury shares. For purposes of this Plan, “Common
Stock” shall mean the common stock of the Corporation and such other
securities or property as may become the subject of awards under this Plan, or
may become subject to such awards, pursuant to an adjustment made under
Section 7.1.

4.2 Share
Limits. The maximum number of shares of Common Stock that may be delivered
pursuant to awards granted to Eligible Persons under this Plan is
7,600,0001 shares (the “Share Limit”). The
following limits also apply with respect to awards granted under this Plan:

(a) The maximum
number of shares of Common Stock that may be delivered pursuant to options
qualified as incentive stock options granted under this Plan is 6,000,000
shares.

(b) The maximum
number of shares of Common Stock subject to options that are granted during any
fiscal year to any individual under this Plan is 500,000 shares.

(c) The maximum
number of shares of Common Stock subject to all awards that are granted during
any fiscal year to any individual under this Plan is 500,000 shares. This limit
does not apply, however, to shares delivered in respect of compensation earned
but deferred.

(d) In no event
will greater than ten percent (10%) of the total shares of Common Stock
available for award grant purposes under this Plan be used for purposes of
granting certain “Special Full-Value Awards” referred to in Section
5.1.4.

(e) Additional
limits with respect to Performance-Based Awards are set forth in
Section 5.2.3.

 

	1	 	The current aggregate Share Limit for this Plan is 6,000,000 shares.
Shareholders are being asked to approve an amendment to this Plan that would
increase the aggregate share limit by an additional 1,600,000 shares so that
the new aggregate Share Limit for this Plan would be 7,600,000 shares.

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Each of the foregoing
numerical limits is subject to adjustment as contemplated by Section 4.3,
Section 7.1, and Section 8.10.

4.3 Awards Settled
in Cash, Reissue of Awards and Shares. To the extent that an award is
settled in cash or a form other than shares of Common Stock, the shares that
would have been delivered had there been no such cash or other settlement shall
not be counted against the shares available for issuance under this Plan. In
the event that shares of Common Stock are delivered in respect of a dividend
equivalent right, only the actual number of shares delivered with respect to
the award shall be counted against the share limits of this Plan. To the extent
that shares of Common Stock are delivered pursuant to the exercise of a stock
option, the number of underlying shares as to which the exercise related shall
be counted against the applicable share limits under Section 4.2, as
opposed to only counting the shares actually issued. Shares that are subject to
or underlie awards which expire or for any reason are cancelled or terminated,
are forfeited, fail to vest, or for any other reason are not paid or delivered
under this Plan shall again be available for subsequent awards under this Plan.
Refer to Section 8.10 for application of the foregoing share limits with
respect to assumed awards. The foregoing adjustments to the share limits of
this Plan are subject to any applicable limitations under Section 162(m) of the
Code with respect to awards intended as performance-based compensation
thereunder.

4.4 Reservation of
Shares; No Fractional Shares; Minimum Issue. The Corporation shall at all
times reserve a number of shares of Common Stock sufficient to cover the
Corporation’s obligations and contingent obligations to deliver shares
with respect to awards then outstanding under this Plan (exclusive of any
dividend equivalent obligations to the extent the Corporation has the right to
settle such rights in cash). No fractional shares shall be delivered under this
Plan. The Administrator may pay cash in lieu of any fractional shares in
settlements of awards under this Plan. No fewer than 100 shares may be
purchased on exercise of any award (or, in the case of stock purchase rights,
no fewer than 100 rights may be exercised at any one time) unless the total
number purchased or exercised is the total number at the time available for
purchase or exercise under the award.

5. AWARDS

5.1 Type and Form
of Awards. The Administrator shall determine the type or types of award(s)
to be made to each selected Eligible Person. Awards may be granted singly, in
combination or in tandem. Awards also may be made in combination or in tandem
with, in replacement of, as alternatives to, or as the payment form for grants
or rights under any other employee or compensation plan of the Corporation or
one of its Subsidiaries. The types of awards that may be granted under this
Plan are:

5.1.1 Stock
Options. A stock option is the grant of a right to purchase a specified
number of shares of Common Stock during a specified period as determined by the
Administrator. An option may be intended as an incentive stock option within
the meaning of Section 422 of the Code (an “ISO”) or a
nonqualified stock option (an option not intended to be an ISO). The award
agreement for an option will indicate if the option is intended as an ISO; otherwise it will be deemed to be a
nonqualified stock option. The maximum term of each option (ISO or
nonqualified) shall be ten (10) years. The per share exercise price for
each option shall be not less than 100% of the fair market value of a share of
Common Stock on the date of

5

 

5

 

grant of the option, except in the case of a stock
option granted retroactively in tandem with or as a substitution for another
award, the per share exercise price may be no lower than the fair market value
of a share of Common Stock on the date such other award was granted (to the
extent consistent with Sections 422 and 424 of the Code in the case of
options intended as incentive stock options). When an option is exercised, the
exercise price for the shares to be purchased shall be paid in full in cash or
such other method permitted by the Administrator consistent with
Section 5.5.

5.1.2 Additional
Rules Applicable to ISOs. To the extent that the aggregate fair market
value (determined at the time of grant of the applicable option) of stock with
respect to which ISOs first become exercisable by a participant in any calendar
year exceeds $100,000, taking into account both Common Stock subject to ISOs
under this Plan and stock subject to ISOs under all other plans of the
Corporation or one of its Subsidiaries (or any parent or predecessor
corporation to the extent required by and within the meaning of
Section 422 of the Code and the regulations promulgated thereunder), such
options shall be treated as nonqualified stock options. In reducing the number
of options treated as ISOs to meet the $100,000 limit, the most recently
granted options shall be reduced first. To the extent a reduction of
simultaneously granted options is necessary to meet the $100,000 limit, the
Administrator may, in the manner and to the extent permitted by law, designate
which shares of Common Stock are to be treated as shares acquired pursuant to
the exercise of an ISO. ISOs may only be granted to employees of the
Corporation or one of its subsidiaries (for this purpose, the term
“subsidiary” is used as defined in Section 424(f) of the Code,
which generally requires an unbroken chain of ownership of at least 50% of the
total combined voting power of all classes of stock of each subsidiary in the
chain beginning with the Corporation and ending with the subsidiary in
question). There shall be imposed in any award agreement relating to ISOs such
other terms and conditions as from time to time are required in order that the
option be an “incentive stock option” as that term is defined in
Section 422 of the Code. No ISO may be granted to any person who, at the
time the option is granted, owns (or is deemed to own under Section 424(d) of
the Code) shares of outstanding Common Stock possessing more than 10% of the
total combined voting power of all classes of stock of the Corporation, unless
the exercise price of such option is at least 110% of the fair market value of
the stock subject to the option and such option by its terms is not exercisable
after the expiration of five years from the date such option is granted.

5.1.3 Other
Awards. The other types of awards that may be granted under this Plan
include: (a) stock bonuses, restricted stock, performance stock, stock
units, phantom stock, dividend equivalents, or similar rights to purchase or
acquire shares, whether at a fixed or variable price or ratio related to the
Common Stock, upon the passage of time, the occurrence of one or more events,
or the satisfaction of performance criteria or other conditions, or any
combination thereof; (b) any similar securities with a value derived from
the value of or related to the Common Stock and/or returns thereon; or
(c) cash awards granted consistent with Section 5.2 below.

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5.1.4 Minimum
Vesting Requirements. Except for any accelerated vesting required or
permitted pursuant to Section 7 and except as otherwise provided in the
following provisions of this Section 5.1.4, and subject to such additional
vesting requirements or conditions as the Administrator may establish with
respect to the award, each award granted under this Plan that is a Full-Value
Award (as defined below) and payable in shares of Common Stock shall be subject
to the following minimum vesting requirements: (a) if the award includes a
performance-based vesting condition, the award shall not vest earlier than the
first anniversary of the date of grant of the award and vesting shall occur
only if the award holder is employed by, a director of, or otherwise providing
services to the Corporation or one of its Subsidiaries on such vesting date;
and (b) if the award does not include a performance-based vesting
condition, the award shall not vest more rapidly than in monthly installments
over the three-year period immediately following the date of grant of the award
and vesting of any vesting installment of the award shall occur only if the
award holder is employed by, a director of, or otherwise providing services to
the Corporation or one of its Subsidiaries on the date such installment is
scheduled to vest; provided that the Administrator may accelerate or provide in
the applicable award agreement for the accelerated vesting of any Full-Value
Award in connection with a change in control of the award holder’s
employer (or a parent thereof) or of the reportable segment of the Corporation
that employs the award holder, the termination of the award holder’s
employment (including a termination of employment due to the award
holder’s death, disability or retirement, but not including a termination
of employment by the award holder’s employer for cause), or as
consideration or partial consideration for a release by the award holder of
pending or threatened claims against the Corporation, the award holder’s
employer, or any of their respective officers, directors or other affiliates
(regardless of whether the release is given in connection with a termination of
employment by the award holder’s employer for cause or other
circumstances). The Administrator may, however, accelerate or provide in the
applicable award agreement for the accelerated vesting of any Full-Value Award
in circumstances not contemplated by the preceding sentence, and/or provide for
a vesting schedule that is shorter than the minimum schedule contemplated by
the preceding sentence, in such circumstances as the Administrator may deem
appropriate; provided, however, that the portion of any such Full-Value Award
that vests earlier than the minimum vesting dates that would be applicable
pursuant to the minimum vesting requirements of the preceding sentence (or, as
to any accelerated vesting, provides for accelerated vesting other than in the
circumstances contemplated by the preceding sentence) shall count against the
applicable share limits of Section 4.2 as a Special Full-Value Award. For
purposes of this Plan that is neither (1) a delivery of shares in respect
of compensation earned but deferred nor (2) a stock option.

5.2
Section 162(m) Performance-Based Awards. Without limiting the
generality of the foregoing, any of the types of awards listed in
Section 5.1.3 above may be, and options granted with an exercise price not
less than the fair market value of a share of Common Stock at the date of grant
(“Qualifying Options”) typically will be, granted as awards
intended to satisfy the requirements for “performance-based
compensation” within the meaning of Section 162(m) of the Code
(“Performance-Based Awards”). The grant, vesting,
exercisability or payment of Performance-Based Awards may depend (or, in the
case of Qualifying Options, may also depend) on the degree of achievement of
one or more performance goals relative to a pre-established targeted level or
level using one or more of the Business Criteria set forth below (on an
absolute or relative basis) for the Corporation on a consolidated basis or for
one or more of the Corporation’s subsidiaries, segments, divisions or
business units, or any combination of the foregoing. Any Qualifying Option shall
be subject only to the requirements of Sections 5.2.1 and 5.2.3 in order
for such award to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code. Any other
Performance-Based Award shall be subject to all of the following provisions of
this Section 5.2.

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7

 

5.2.1 Class;
Administrator. The eligible class of persons for Performance-Based Awards
under this Section 5.2 shall be officers and employees of the Corporation or
one of its Subsidiaries. The Administrator approving Performance-Based Awards
or making any certification required pursuant to Section 5.2.4 must be
constituted as provided in Section 3.1 for awards that are intended as
performance-based compensation under Section 162(m) of the Code.

5.2.2 Performance
Goals. The specific performance goals for Performance-Based Awards (other
than Qualifying Options) shall be, on an absolute or relative basis,
established based on one or more of the following business criteria
(“Business Criteria”) as selected by the Administrator in
its sole discretion: earnings per share, cash flow (which means cash and cash
equivalents derived from either net cash flow from operations or net cash flow
from operations, financing and investing activities), total shareholder return,
gross revenue, revenue growth, operating income (before or after taxes), net
earnings (before or after interest, taxes, depreciation and/or amortization),
return on equity or on assets or on net investment, cost containment or
reduction, or any combination thereof. These terms are used as applied under
generally accepted accounting principles or in the financial reporting of the
Corporation or of its Subsidiaries. To qualify awards as performance-based
under Section 162(m), the applicable Business Criterion (or Business
Criteria, as the case may be) and specific performance goal or goals
(“targets”) must be established and approved by the
Administrator during the first 90 days of the performance period (and, in
the case of performance periods of less than one year, in no event after 25% or
more of the performance period has elapsed) and while performance relating to
such target(s) remains substantially uncertain within the meaning of Section
162(m) of the Code. Performance targets shall be adjusted to mitigate the
unbudgeted impact of material, unusual or nonrecurring gains and losses,
accounting changes or other extraordinary events not foreseen at the time the
targets were set unless the Administrator provides otherwise at the time of
establishing the targets. The applicable performance measurement period may not
be less than three months nor more than 10 years.

5.2.3 Form of
Payment; Maximum Performance-Based Award. Grants or awards under this
Section 5.2 may be paid in cash or shares of Common Stock or any
combination thereof. Grants of Qualifying Options to any one participant in any
one fiscal year shall be subject to the limit set forth in Section 4.2(b).
The maximum number of shares of Common Stock which may be delivered pursuant to
Performance-Based Awards (other than Qualifying Options and other than cash
awards covered by the following sentence) that are granted to any one
participant in any one fiscal year shall not exceed 100,000 shares, either
individually or in the aggregate, subject to adjustment as provided in
Section 7.1. In addition, the aggregate amount of compensation to be paid
to any one participant in respect of all Performance-Based Awards payable only
in cash and not related to shares of Common Stock and granted to that
participant in any one fiscal year shall not exceed $1,000,000. Awards that are
cancelled during the year shall be counted against these limits to the extent
permitted by Section 162(m) of the Code.

8

 

8

 

5.2.4 Certification
of Payment. Before any Performance-Based Award under this Section 5.2
(other than Qualifying Options) is paid and to the extent required to qualify
the award as performance-based compensation within the meaning of Section
162(m) of the Code, the Administrator must certify in writing that the
performance target(s) and any other material terms of the Performance-Based
Award were in fact timely satisfied.

5.2.5 Reservation
of Discretion. The Administrator will have the discretion to determine the
restrictions or other limitations of the individual awards granted under this
Section 5.2 including the authority to reduce awards, payouts or vesting
or to pay no awards, in its sole discretion, if the Administrator preserves
such authority at the time of grant by language to this effect in its
authorizing resolutions or otherwise.

5.2.6 Expiration of
Grant Authority. As required pursuant to Section 162(m) of the Code and the
regulations promulgated thereunder, the Administrator’s authority to
grant new awards that are intended to qualify as performance-based compensation
within the meaning of Section 162(m) of the Code (other than Qualifying
Options) shall terminate upon the first meeting of the Corporation’s
shareholders that occurs in the fifth year following the year in which the
Corporation’s shareholders first approve this restated Plan.

5.3 Award
Agreements. Each award shall be evidenced by a written award agreement in
the form approved by the Administrator and executed on behalf of the
Corporation and, if required by the Administrator, executed by the recipient of
the award. The Administrator may authorize any officer of the Corporation
(other than the particular award recipient) to execute any or all award
agreements on behalf of the Corporation. The award agreement shall set forth
the material terms and conditions of the award as established by the
Administrator consistent with the express limitations of this Plan.

5.4 Deferrals and
Settlements. Payment of awards may be in the form of cash, Common Stock,
other awards or combinations thereof as the Administrator shall determine, and
with such restrictions as it may impose. The Administrator may also require or
permit participants to elect to defer the issuance of shares or the settlement
of awards in cash under such rules and procedures as it may establish under
this Plan. The Administrator may also provide that deferred settlements include
the payment or crediting of interest or other earnings on the deferral amounts,
or the payment or crediting of dividend equivalents where the deferred amounts
are denominated in shares.

5.5 Consideration
for Common Stock or Awards. The purchase price for any award granted under
this Plan or the Common Stock to be delivered pursuant to an award, as
applicable, may be paid by means of any lawful consideration as determined by
the Administrator, including, without limitation, one or a combination of the
following methods:

	 	•	 	services rendered by the recipient of such award;

	 	•	 	cash, check payable to the order of the Corporation, or electronic funds
transfer;

	 	•	 	notice and third party payment in such manner as may be authorized by the
Administrator;

	 	•	 	the delivery of previously owned shares of Common Stock;

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	 	•	 	by a reduction in the number of shares otherwise deliverable pursuant to
the award; or

	 	•	 	subject to such procedures as the Administrator may adopt, pursuant to a
“cashless exercise” with a third party who provides financing for
the purposes of (or who otherwise facilitates) the purchase or exercise of
awards.

In no event shall any
shares newly-issued by the Corporation be issued for less than the minimum
lawful consideration for such shares or for consideration other than
consideration permitted by applicable state law. In the event that the
Administrator allows a participant to exercise an award by delivering shares of
Common Stock previously owned by such participant and unless otherwise
expressly provided by the Administrator, any shares delivered which were
initially acquired by the participant from the Corporation (upon exercise of a
stock option or otherwise) must have been owned by the participant at least six
months as of the date of delivery. Shares of Common Stock used to satisfy the
exercise price of an option shall be valued at their fair market value on the
date of exercise. The Corporation will not be obligated to deliver any shares
unless and until it receives full payment of the exercise or purchase price
therefor and any related withholding obligations under Section 8.5 and any
other conditions to exercise or purchase have been satisfied. Unless otherwise
expressly provided in the applicable award agreement, the Administrator may at
any time eliminate or limit a participant’s ability to pay the purchase
or exercise price of any award or shares by any method other than cash payment
to the Corporation.

5.6 Definition of
Fair Market Value. For purposes of this Plan, “fair market
value” shall mean, unless otherwise determined or provided by the
Administrator in the circumstances, the closing price for a share of Common
Stock as reported on the composite tape for securities listed in the New York
Stock Exchange (the “Exchange”) for the date in question or,
if no sales of Common Stock were made on the Exchange on that date, the closing
price for a share of Common Stock as reported on said composite tape for the
next preceding day on which sales of Common Stock were made on the Exchange.
The Administrator may, however, provide with respect to one or more awards that
the fair market value shall equal the last closing price for a share of Common
Stock as reported on the composite tape for securities listed on the Exchange
available on the date in question or the average of the high and low trading
prices of a share of Common Stock as reported on the composite tape for
securities listed on the Exchange for the date in question or the most recent
trading day. If the Common Stock is no longer listed or is no longer actively
traded on the Exchange as of the applicable date, the fair market value of the
Common Stock shall be the value as reasonably determined by the Administrator
for purposes of the award in the circumstances. The Administrator also may
adopt a different methodology for determining fair market value with respect to
one or more awards if a different methodology is necessary or advisable to
secure any intended favorable tax, legal or other treatment for the particular
award(s) (for example, and without limitation, the Administrator may provide
that fair market value for purposes of one or more awards will be based on an
average of closing prices (or the average of high and low daily trading prices)
for a specified period preceding the relevant date).

5.7 Transfer
Restrictions.

5.7.1 Limitations
on Exercise and Transfer. Unless otherwise expressly provided in (or
pursuant to) this Section 5.7, by applicable law and by the award
agreement, as the same may be amended, (a) all awards are non-transferable
and shall not be subject in any manner to sale, transfer, anticipation,
alienation, assignment, pledge, encumbrance or charge; (b) awards shall be
exercised only by the participant; and (c) amounts payable or shares
issuable pursuant to any award shall be delivered only to (or for the account
of) the participant.

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5.7.2
Exceptions. The Administrator may permit awards to be exercised by and
paid to, or otherwise transferred to, other persons or entities pursuant to
such conditions and procedures, including limitations on subsequent transfers,
as the Administrator may, in its sole discretion, establish in writing. Any
permitted transfer shall be subject to compliance with applicable federal and
state securities laws and shall not be a transfer for value (other than nominal
consideration, settlement of marital property rights, or for interests in an
entity in which more than fifty percent of the voting interests are held by the
Eligible Person or by the Eligible Person’s family members).

5.7.3 Further
Exceptions to Limits on Transfer. The exercise and transfer restrictions in
Section 5.7.1 shall not apply to:

(a) transfers to
the Corporation,

(b) the
designation of a beneficiary to receive benefits in the event of the
participant’s death or, if the participant has died, transfers to or
exercise by the participant’s beneficiary, or, in the absence of a
validly designated beneficiary, transfers by will or the laws of descent and
distribution,

(c) subject to
any applicable limitations on ISOs, transfers to a family member (or former
family member) pursuant to a domestic relations order if approved or ratified
by the Administrator,

(d) if the
participant has suffered a disability, permitted transfers or exercises on
behalf of the participant by his or her legal representative, or

(e) the
authorization by the Administrator of “cashless exercise”
procedures with third parties who provide financing for the purpose of (or who
otherwise facilitate) the exercise of awards consistent with applicable laws
and the express authorization of the Administrator.

5.8 International
Awards. One or more awards may be granted to Eligible Persons who provide
services to the Corporation or one of its Subsidiaries outside of the United
States. Any awards granted to such persons may be granted pursuant to the terms
and conditions of any applicable sub-plans, if any, appended to this Plan and
approved by the Administrator.

6. EFFECT OF TERMINATION OF
SERVICE ON AWARDS

6.1 General.
The Administrator shall establish the effect of a termination of employment or
service on the rights and benefits under each award under this Plan and in so
doing may make distinctions based upon, inter alia, the cause of termination
and type of award. If the participant is not an employee
of the Corporation or one of its Subsidiaries and provides other services to
the Corporation or one of its Subsidiaries, the Administrator shall be the sole
judge for purposes of this Plan (unless a contract or the award otherwise
provides) of whether the participant continues to render services to the
Corporation or one of its Subsidiaries and the date, if any, upon which such
services shall be deemed to have terminated.

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6.2 Events Not
Deemed Terminations of Service. Unless the express policy of the
Corporation or one of its Subsidiaries, or the Administrator, otherwise
provides, the employment relationship shall not be considered terminated in the
case of (a) sick leave, (b) military leave, or (c) any other
leave of absence authorized by the Corporation or one of its Subsidiaries, or
the Administrator; provided that unless reemployment upon the expiration of
such leave is guaranteed by contract or law, such leave is for a period of not
more than 90 days. In the case of any employee of the Corporation or one
of its Subsidiaries on an approved leave of absence, continued vesting of the
award while on leave from the employ of the Corporation or one of its
Subsidiaries may be suspended until the employee returns to service, unless the
Administrator otherwise provides or applicable law otherwise requires. In no
event shall an award be exercised after the expiration of the term set forth in
the award agreement.

6.3 Effect of
Change of Subsidiary Status. For purposes of this Plan and any award, if an
entity ceases to be a Subsidiary of the Corporation a termination of employment
or service shall be deemed to have occurred with respect to each Eligible
Person in respect of such Subsidiary who does not continue as an Eligible
Person in respect of another entity within the Corporation or another
Subsidiary that continues as such after giving effect to the transaction or
other event giving rise to the change in status.

7. ADJUSTMENTS; ACCELERATION

7.1
Adjustments. Upon or in contemplation of: any reclassification,
recapitalization, stock split (including a stock split in the form of a stock
dividend) or reverse stock split (“stock split”); any merger,
combination, consolidation, or other reorganization; any spin-off, split-up, or
similar extraordinary dividend distribution in respect of the Common Stock
(whether in the form of securities or property); any exchange of Common Stock
or other securities of the Corporation, or any similar, unusual or
extraordinary corporate transaction in respect of the Common Stock; or a sale
of all or substantially all the business or assets of the Corporation as an
entirety; then the Administrator shall, in such manner, to such extent (if any)
and at such time as it deems appropriate and equitable in the circumstances:

(a) proportionately adjust any or all of (1) the number
and type of shares of Common Stock (or other securities) that thereafter may be
made the subject of awards (including the specific share limits, maximums and
numbers of shares set forth elsewhere in this Plan), (2) the number,
amount and type of shares of Common Stock (or other securities or property)
subject to any or all outstanding awards, (3) the grant, purchase, or
exercise price of any or all outstanding awards, (4) the securities, cash
or other property deliverable upon exercise or payment of any outstanding
awards, or (5) (subject to Section 8.8.3(a)) the performance standards
applicable to any outstanding awards, or

(b) make
provision for a cash payment or for the assumption, substitution or exchange of
any or all outstanding share-based awards or the cash, securities or property
deliverable to the holder of any or all outstanding share-based awards, based
upon the distribution or consideration payable to holders of the Common Stock
upon or in respect of such event.

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The Administrator may
adopt such valuation methodologies for outstanding awards as it deems
reasonable in the event of a cash or property settlement and, in the case of
options, but without limitation on other methodologies, may base such
settlement solely upon the excess if any of the per share amount payable upon
or in respect of such event over the exercise price of the award. With respect
to any award of an ISO, the Administrator may make such an adjustment that
causes the option to cease to qualify as an ISO without the consent of the
affected participant.

In any of such events,
the Administrator may take such action prior to such event to the extent that
the Administrator deems the action necessary to permit the participant to
realize the benefits intended to be conveyed with respect to the underlying
shares in the same manner as is or will be available to shareholders generally.
In the case of any stock split or reverse stock split, if no action is taken by
the Administrator, the proportionate adjustments contemplated by clause
(a) above shall nevertheless be made.

7.2 Automatic
Acceleration of Awards.

(a) Transactions. Upon a dissolution of the
Corporation or other event described in Section 7.1 that the Corporation
does not survive (or does not survive as a public company in respect of its
Common Stock), then each then-outstanding option shall become fully vested, all
shares of restricted stock then outstanding shall fully vest free of
restrictions, and each other award granted under this Plan that is then
outstanding shall become payable to the holder of such award; provided that
such acceleration provision shall not apply, unless otherwise expressly
provided by the Administrator, with respect to any award to the extent that the
Administrator has made a provision for the substitution, assumption, exchange
or other continuation or settlement of the award, or the award would otherwise
continue in accordance with its terms, in the circumstances.

(b) Death.
Effective September 17, 2007 with respect to then outstanding awards
and with respect to future awards (except to the extent the Administrator
provides otherwise in the applicable award agreement), upon the termination of
a participant’s employment or other service to the Corporation or one of
its Subsidiaries due to the participant’s death, the participant’s
then outstanding awards shall become fully vested and exercisable upon the
participant’s death.

7.3 Possible
Acceleration of Awards. Without limiting Section 7.2, in the event of
a Change in Control Event (as defined below), the Administrator may, in its
discretion, provide that any outstanding option shall become fully vested, that
any share of restricted stock then outstanding shall fully vest free of
restrictions, and that any other award granted under this Plan that is then
outstanding shall be payable to the holder of such award. The Administrator may
take such action with respect to all awards then outstanding or only with
respect to certain specific awards identified by the
Administrator in the circumstances. For purposes of this Plan, “Change in
Control Event” means any of the following:

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(a) The
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”))
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than 20% of either (1) the
then-outstanding shares of common stock of the Corporation (the
“Outstanding Company Common Stock”) or (2) the combined voting
power of the then-outstanding voting securities of the Corporation entitled to
vote generally in the election of directors (the “Outstanding Company
Voting Securities”); provided, however, that, for purposes of this clause
(a), the following acquisitions shall not constitute a Change in Control Event;
(A) any acquisition directly from the Corporation, (B) any
acquisition by the Corporation, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Corporation or
any affiliate of the Corporation or a successor, or (D) any acquisition by
any entity pursuant to a transaction that complies with Sections (c)(1),
(2) and (3) below;

(b) Individuals
who, as of the Effective Date, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by the
Corporation’s shareholders, was approved by a vote of at least two-thirds
of the directors then comprising the Incumbent Board (including for these
purposes, the new members whose election or nomination was so approved, without
counting the member and his predecessor twice) shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board;

(c) Consummation
of a reorganization, merger, statutory share exchange or consolidation or
similar corporate transaction involving the Corporation or any of its
Subsidiaries, a sale or other disposition of all or substantially all of the
assets of the Corporation, or the acquisition of assets or stock of another
entity by the Corporation or any of its Subsidiaries (each, a “Business
Combination”), in each case unless, following such Business Combination,
(1) all or substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the entity resulting from such Business Combination
(including, without limitation, an entity that, as a result of such
transaction, owns the Corporation or all or substantially all of the
Corporation’s assets directly or through one or more subsidiaries (a
“Parent”)) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case may be,
(2) no Person (excluding any entity resulting from such Business
Combination or a Parent or any employee benefit plan (or related trust) of the
Corporation or such entity resulting from such Business Combination or Parent)
beneficially owns, directly or indirectly, more than 20% of, respectively, the
then-outstanding shares of common stock of the entity resulting
from such Business Combination or the combined voting power of the
then-outstanding voting securities of such entity, except to the extent that
the ownership in excess of 20% existed prior to the Business Combination, and
(3) at least a majority of the members of the board of directors or
trustees of the entity resulting from such Business Combination or a Parent
were members of the Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board providing for such Business
Combination; or

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(d) Approval by
the shareholders of the Corporation of a complete liquidation or dissolution of
the Corporation other than in the context of a transaction that does not
constitute a Change in Control Event under clause (c) above.

7.4 Early
Termination of Awards. Any award that has been accelerated as required or
contemplated by Section 7.2(a) or 7.3 (or would have been so accelerated
but for Section 7.5, 7.6 or 7.7) shall terminate upon the related event
referred to in Section 7.2(a) or 7.3, as applicable, subject to any
provision that has been expressly made by the Administrator, through a plan of
reorganization or otherwise, for the survival, substitution, assumption,
exchange or other continuation or settlement of such award and provided that,
in the case of options that will not survive, be substituted for, assumed,
exchanged, or otherwise continued or settled in the transaction, the holder of
such award shall be given reasonable advance notice of the impending
termination and a reasonable opportunity to exercise his or her outstanding
options in accordance with their terms before the termination of such awards
(except that in no case shall more than ten days’ notice of accelerated
vesting and the impending termination be required and any acceleration may be
made contingent upon the actual occurrence of the event).

7.5 Other
Acceleration Rules. Any acceleration of awards pursuant to this
Section 7 shall comply with applicable legal requirements and, if
necessary to accomplish the purposes of the acceleration or if the
circumstances require, may be deemed by the Administrator to occur a limited
period of time not greater than 30 days before the event. Without limiting
the generality of the foregoing, the Administrator may deem an acceleration to
occur immediately prior to the applicable event and/or reinstate the original
terms of an award if an event giving rise to an acceleration does not occur.
The Administrator may override the provisions of Section 7.2, 7.3, 7.4
and/or 7.6 by express provision in the award agreement and may accord any
Eligible Person a right to refuse any acceleration, whether pursuant to the
award agreement or otherwise, in such circumstances as the Administrator may
approve. The portion of any ISO accelerated in connection with a Change in
Control Event or any other action permitted hereunder shall remain exercisable
as an ISO only to the extent the applicable $100,000 limitation on ISOs is not
exceeded. To the extent exceeded, the accelerated portion of the option shall
be exercisable as a nonqualified stock option under the Code.

7.6 Possible
Rescission of Acceleration. If the vesting of an award has been accelerated
expressly in anticipation of an event or upon shareholder approval of an event
and the Administrator later determines that the event will not occur, the
Administrator may rescind the effect of the acceleration as to any then
outstanding and unexercised or otherwise unvested awards.

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7.7 Golden
Parachute Limitation. Notwithstanding anything else contained in this
Section 7 to the contrary, in no event shall an award be accelerated under
this Plan to an extent or in a manner which would not be fully deductible by
the Corporation or one of its Subsidiaries for federal income tax purposes
because of Section 280G of the Code, nor shall any payment hereunder be
accelerated to the extent any portion of such accelerated payment would not be
deductible by the Corporation or one of its Subsidiaries because of
Section 280G of the Code. If a participant would be entitled to benefits
or payments hereunder and under any other plan or program that would constitute
“parachute payments” as defined in Section 280G of the Code,
then the participant may by written notice to the Corporation designate the
order in which such parachute payments will be reduced or modified so that the
Corporation or one of its Subsidiaries is not denied federal income tax
deductions for any “parachute payments” because of Section 280G of
the Code. Notwithstanding the foregoing, if a participant is a party to an
employment or other agreement with the Corporation or one of its Subsidiaries,
or is a participant in a severance program sponsored by the Corporation or one
of its Subsidiaries, that contains express provisions regarding
Section 280G and/or Section 4999 of the Code (or any similar
successor provision), the Section 280G and/or Section 4999 provisions
of such employment or other agreement or plan, as applicable, shall control as
to any awards held by that participant (for example, and without limitation, a
participant may be a party to an employment agreement with the Corporation or
one of its Subsidiaries that provides for a “gross-up” as opposed
to a “cut-back” in the event that the Section 280G thresholds
are reached or exceeded in connection with a change in control and, in such
event, the Section 280G and/or Section 4999 provisions of such
employment agreement shall control as to any awards held by that participant).

8. OTHER PROVISIONS

8.1 Compliance with
Laws. This Plan, the granting and vesting of awards under this Plan, the
offer, issuance and delivery of shares of Common Stock, the acceptance of
promissory notes and/or the payment of money under this Plan or under awards
are subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law,
federal margin requirements) and to such approvals by any listing, regulatory
or governmental authority as may, in the opinion of counsel for the
Corporation, be necessary or advisable in connection therewith. The person
acquiring any securities under this Plan will, if requested by the Corporation
or one of its Subsidiaries, provide such assurances and representations to the
Corporation or one of its Subsidiaries as the Administrator may deem necessary
or desirable to assure compliance with all applicable legal and accounting
requirements.

8.2 No Rights to
Award. No person shall have any claim or rights to be granted an award (or
additional awards, as the case may be) under this Plan, subject to any express
contractual rights (set forth in a document other than this Plan) to the
contrary.

8.3 No
Employment/Service Contract. Nothing contained in this Plan (or in any
other documents under this Plan or in any award) shall confer upon any Eligible
Person or other participant any right to continue in the employ or other
service of the Corporation or one of its Subsidiaries, constitute any contract
or agreement of employment or other service or affect an employee’s
status as an employee at will, nor shall interfere in any way with the right of
the Corporation or one of its Subsidiaries
to change a person’s compensation or other benefits, or to terminate his
or her employment or other service, with or without cause. Nothing in this
Section 8.3, however, is intended to adversely affect any express
independent right of such person under a separate employment or service
contract other than an award agreement.

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8.4 Plan Not
Funded. Awards payable under this Plan shall be payable in shares or from
the general assets of the Corporation, and no special or separate reserve, fund
or deposit shall be made to assure payment of such awards. No participant,
beneficiary or other person shall have any right, title or interest in any fund
or in any specific asset (including shares of Common Stock, except as expressly
otherwise provided) of the Corporation or one of its Subsidiaries by reason of
any award hereunder. Neither the provisions of this Plan (or of any related
documents), nor the creation or adoption of this Plan, nor any action taken
pursuant to the provisions of this Plan shall create, or be construed to
create, a trust of any kind or a fiduciary relationship between the Corporation
or one of its Subsidiaries and any participant, beneficiary or other person. To
the extent that a participant, beneficiary or other person acquires a right to
receive payment pursuant to any award hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Corporation.

8.5 Tax
Withholding. Upon any exercise, vesting, or payment of any award or upon
the disposition of shares of Common Stock acquired pursuant to the exercise of
an ISO prior to satisfaction of the holding period requirements of
Section 422 of the Code, the Corporation or one of its Subsidiaries shall
have the right at its option to:

(a) require the
participant (or the participant’s personal representative or beneficiary,
as the case may be) to pay or provide for payment of at least the minimum
amount of any taxes which the Corporation or one of its Subsidiaries may be
required to withhold with respect to such award event or payment; or

(b) deduct from
any amount otherwise payable in cash to the participant (or the
participant’s personal representative or beneficiary, as the case may be)
the minimum amount of any taxes which the Corporation or one of its
Subsidiaries may be required to withhold with respect to such cash payment.

In any case where a
tax is required to be withheld in connection with the delivery of shares of
Common Stock under this Plan, the Administrator may in its sole discretion
(subject to Section 8.1) grant (either at the time of the award or
thereafter) to the participant the right to elect, pursuant to such rules and
subject to such conditions as the Administrator may establish, to have the
Corporation reduce the number of shares to be delivered by (or otherwise
reacquire) the appropriate number of shares, valued in a consistent manner at
their fair market value or at the sales price in accordance with authorized
procedures for cashless exercises, necessary to satisfy the minimum applicable
withholding obligation on exercise, vesting or payment. In no event shall the
shares withheld exceed the minimum whole number of shares required for tax
withholding under applicable law. The Corporation may, with the
Administrator’s approval, accept one or more promissory notes from any
Eligible Person in connection with taxes required to be withheld upon the
exercise, vesting or payment of any award under this Plan; provided that any
such note shall be subject to terms and conditions established by the
Administrator and the requirements of applicable law.

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8.6 Effective Date,
Termination and Suspension, Amendments.

8.6.1 Effective
Date. This Plan is effective as of July 25, 2005, the date of its
approval by the Board (the “Effective Date”). This Plan shall be
submitted for and subject to shareholder approval no later than twelve months
after the Effective Date. Unless earlier terminated by the Board, this Plan
shall terminate at the close of business on the day before the tenth
anniversary of the Effective Date. After the termination of this Plan either
upon such stated expiration date or its earlier termination by the Board, no
additional awards may be granted under this Plan, but previously granted awards
(and the authority of the Administrator with respect thereto, including the
authority to amend such awards) shall remain outstanding in accordance with
their applicable terms and conditions and the terms and conditions of this Plan.

8.6.2 Board
Authorization. The Board may, at any time, terminate or, from time to time,
amend, modify or suspend this Plan, in whole or in part. No awards may be
granted during any period that the Board suspends this Plan.

8.6.3 Shareholder
Approval. An amendment to this Plan shall be subject to shareholder
approval: (a) to the extent then required by applicable law or any
applicable listing agency or required under Section 162, 422 or 424 of the
Code to preserve the intended tax consequences of this Plan, (b) if
shareholder approval for the amendment is otherwise deemed necessary or
advisable by the Board or (c) if the amendment increases the Share Limit
set forth in Section 4.2.

8.6.4 Amendments to
Awards. Without limiting any other express authority of the Administrator
under (but subject to) the express limits of this Plan, the Administrator by
agreement or resolution may waive conditions of or limitations on awards to
participants that the Administrator in the prior exercise of its discretion has
imposed, without the consent of a participant, and (subject to the requirements
of Sections 3.2 and 8.6.5) may make other changes to the terms and
conditions of awards. Any amendment or other action that would constitute a
repricing of an award is subject to the limitations set forth in
Section 3.2(g).

8.6.5 Limitations
on Amendments to Plan and Awards. No amendment, suspension or termination
of this Plan or amendment of any outstanding award agreement shall, without
written consent of the participant, affect in any manner materially adverse to
the participant any rights or benefits of the participant or obligations of the
Corporation under any award granted under this Plan prior to the effective date
of such change. Changes, settlements and other actions contemplated by
Section 7 shall not be deemed to constitute changes or amendments for
purposes of this Section 8.6.

8.7 Privileges of
Stock Ownership. Except as otherwise expressly authorized by the
Administrator or this Plan, a participant shall not be entitled to any
privilege of stock ownership as to any shares of Common Stock not actually
delivered to and held of record by the participant. No adjustment will be made
for dividends or other rights as a shareholder for which a record date is prior
to such date of delivery.

8.8 Governing Law;
Construction; Severability.

8.8.1 Choice of
Law. This Plan, the awards, all documents evidencing awards and all other
related documents shall be governed by, and construed in accordance with the
laws of the State of Minnesota.

8.8.2
Severability. If a court of competent jurisdiction holds any provision
invalid and unenforceable, the remaining provisions of this Plan shall continue
in effect.

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8.8.3 Plan
Construction.

(a) Rule 16b-3. It is the intent of the Corporation that
the awards and transactions permitted by awards be interpreted in a manner
that, in the case of participants who are or may be subject to Section 16
of the Exchange Act, qualify, to the maximum extent compatible with the express
terms of the award, for exemption from matching liability under Rule 16b-3
promulgated under the Exchange Act. Notwithstanding the foregoing, the
Corporation shall have no liability to any participant for Section 16
consequences of awards or events under awards if an award or event does not so
qualify.

(b) Section 162(m). Awards under Section 5.1.3 to
persons described in Section 5.2 that are either granted or become vested,
exercisable or payable based on attainment of one or more performance goals
related to the Business Criteria, as well as Qualifying Options granted to
persons described in Section 5.2, that are approved by a committee
composed solely of two or more outside directors (as this requirement is
applied under Section 162(m) of the Code) shall be deemed to be intended as
performance-based compensation within the meaning of Section 162(m) of the Code
unless such committee provides otherwise at the time of grant of the award. It
is the further intent of the Corporation that (to the extent the Corporation or
one of its Subsidiaries or awards under this Plan may be or become subject to
limitations on deductibility under Section 162(m) of the Code) any such awards
and any other Performance-Based Awards under Section 5.2 that are granted
to or held by a person subject to Section 162(m) will qualify as
performance-based compensation or otherwise be exempt from deductibility
limitations under Section 162(m).

8.9 Captions.
Captions and headings are given to the sections and subsections of this Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
this Plan or any provision thereof.

8.10 Stock-Based
Awards in Substitution for Stock Options or Awards Granted by Other
Corporation. Awards may be granted to Eligible Persons in substitution for
or in connection with an assumption of employee stock options, restricted stock
or other stock-based awards granted by other entities to persons who are or who
will become Eligible Persons in respect of the Corporation or one of its
Subsidiaries, in connection with a distribution, merger or other reorganization
by or with the granting entity or an affiliated entity, or the acquisition by
the Corporation or one of its Subsidiaries, directly or indirectly, of all or a
substantial part of the stock or assets of the employing entity. The awards so
granted need not comply with other specific terms of this Plan, provided the
awards reflect only adjustments giving effect to the assumption or substitution
consistent with the conversion applicable to the Common Stock in the transaction and any change in the
issuer of the security. Any shares that are delivered and any awards that are
granted by, or become obligations of, the Corporation, as a result of the
assumption by the Corporation of, or in substitution for, outstanding awards
previously granted by an acquired company (or previously granted by a
predecessor employer (or direct or indirect parent thereof) in the case of
persons that become employed by the Corporation or one of its Subsidiaries in
connection with a business or asset acquisition or similar transaction) shall
not be counted against the Share Limit or other limits on the number of shares
available for issuance under this Plan.

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8.11
Non-Exclusivity of Plan. Nothing in this Plan shall limit or be deemed
to limit the authority of the Board or the Administrator to grant awards or
authorize any other compensation, with or without reference to the Common
Stock, under any other plan or authority.

8.12 No Corporate
Action Restriction. The existence of this Plan, the award agreements and
the awards granted hereunder shall not limit, affect or restrict in any way the
right or power of the Board or the shareholders of the Corporation to make or
authorize: (a) any adjustment, recapitalization, reorganization or other
change in the capital structure or business of the Corporation or any
Subsidiary, (b) any merger, amalgamation, consolidation or change in the
ownership of the Corporation or any Subsidiary, (c) any issue of bonds,
debentures, capital, preferred or prior preference stock ahead of or affecting
the capital stock (or the rights thereof) of the Corporation or any Subsidiary,
(d) any dissolution or liquidation of the Corporation or any Subsidiary,
(e) any sale or transfer of all or any part of the assets or business of
the Corporation or any Subsidiary, or (f) any other corporate act or
proceeding by the Corporation or any Subsidiary. No participant, beneficiary or
any other person shall have any claim under any award or award agreement
against any member of the Board or the Administrator, or the Corporation or any
employees, officers or agents of the Corporation or any Subsidiary, as a result
of any such action.

8.13 Other Company
Benefit and Compensation Programs. Payments and other benefits received by
a participant under an award made pursuant to this Plan shall not be deemed a
part of a participant’s compensation for purposes of the determination of
benefits under any other employee welfare or benefit plans or arrangements, if
any, provided by the Corporation or any Subsidiary, except where the
Administrator expressly otherwise provides or authorizes in writing. Awards
under this Plan may be made in addition to, in combination with, as
alternatives to or in payment of grants, awards or commitments under any other
plans or arrangements of the Corporation or its Subsidiaries.

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