Document:

ex10_1.htm

    
      
        

      

    

    Exhibit
      10.1

    

    SECOND
      AMENDED AND RESTATED EMPLOYMENT AGREEMENT

    

    THIS
      EMPLOYMENT AGREEMENT (hereinafter this “Agreement”) is made effective as of
      August 2, 2007 (the “Effective Date”), between Mediware Information Systems,
      Inc., (hereinafter the “Company”) and John Damgaard (hereinafter the
“Executive”).

    

    WHEREAS,
      the Executive is a current employee of the Company, and now the Company desires
      to employ the Executive as the Senior Vice President and Chief Operating Officer
      of the Company, or in such other capacity as the parties may agree, and the
      Executive desires to be so employed by the Company, on the terms and conditions
      hereinafter set forth;

    

    NOW,
      THEREFORE, in consideration of the foregoing and of the respective covenants
      and
      agreements herein set forth, the Company and the Executive hereby agree as
      follows:

    

    1.
      Employment. The Company hereby agrees to employ the Executive, and the
      Executive hereby agrees to serve as the Senior Vice President and Chief
      Operating Officer, or in such other capacity as the parties may mutually agree.
      The Executive agrees to perform such services customary to such office as shall
      from time to time be assigned to him by the Chief Executive Officer or his
      designee. The Executive further agrees to use his best efforts to promote the
      interests of the Company and to devote his full energies to the business and
      affairs of the Company.

    

    2.
      Term of Employment. The employment hereunder shall be for a term of
      thirty-six months commencing on the Effective Date hereof and ending thirty-six
      months after the Effective Date hereof (the “Expiration Date”), unless
      terminated earlier pursuant to Paragraph 4 of this Agreement (the “Term of
      Employment”). This Agreement shall automatically renew for successive terms of
      one (1) year (each a “Renewal Term”) commencing on the first day immediately
      following the Expiration Date, unless such renewal is objected to by either
      the
      Company or the Executive by giving at least 90 days prior written notice prior
      to the scheduled Expiration Date. In the event of such renewal, the last day
      of
      each successive Renewal Term shall be deemed the Expiration Date.

    

    3.
      Compensation and Other Related Matters.

    

    (a)
      Salary. As compensation for services rendered hereunder, the Executive
      shall receive an annual base salary of two hundred twenty-five thousand dollars
      ($225,000), which salary shall be paid in accordance with the Company’s then
      prevailing payroll practices for its executives and shall be subject to review
      annually by the Chief Executive Officer and the Compensation Committee of the
      Board of Directors, which may include annual increases (the “Annual Base
      Salary”).

    

    (b)
      Bonus. During the term of this Agreement the Executive shall be eligible
      to receive an annual bonus of up to fifty percent (50%) of Executive’s Annual
      Base Salary for achieving objectives established by the Company, subject to
      the
      discretion of the Chief Executive Officer and the Compensation Committee of
      the
      Board of Directors (the “Annual Bonus”).  The bonus, if any, would be
      payable after the conclusion of the annual audit.

    

    (c)  Equity
      Compensation.

    

    Performance
      Shares. The Executive is hereby granted forty-five thousand
      (45,000) restricted shares of the Company’s common stock (the
“Performance Shares”) subject to the terms of the 2003 Equity Incentive Plan,
      any applicable restricted stock agreement and the vesting requirements set
      forth
      on Attachment A.

    

    Options.  The
      Executive is hereby granted thirty thousand (30,000) non-qualified stock options
      to purchase the Company’s common stock (the “Stock Options”).  Ten
      thousand (10,000) Stock Options, subject to the terms of the 2003 Equity
      Incentive Plan and any applicable stock option agreement, shall vest on each
      of
      the first, second, and third anniversary of the date of grant as provided on
      Attachment A.

    

    (d)
      Other Benefits. The fringe benefits, perquisites and other benefits of
      employment, including four (4) weeks vacation each year, to be provided to
      the
      Executive shall be equivalent to such benefits and perquisites as are provided
      to other senior executives of the Company as amended from time to
      time.

    

    (e)
      Reimbursement. Subject to policies established from time to time by the
      Company, the Company shall reimburse Executive
      for the reasonable expenses incurred by him in connection with the performance
      of his duties hereunder, including but not limited to, travel expenses and
      entertainment expenses, for which the Executive shall account to the Company
      in
      a manner sufficient to conform to Company policy and Internal Revenue Service
      requirements.  If the Company requires Executive to relocate, the
      Company will pay Executive’s reasonable moving expenses.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    4.
      Termination.

    

    (a)
      Disability. If, as a result of the incapacity of the Executive due to
      physical or mental illness, the Executive is unable to perform substantially
      and
      continuously the duties assigned to him hereunder for a period of three (3)
      consecutive months or for a non-consecutive period of nine (9) months during
      the
      Term of Employment, the Company may terminate his employment for “Disability”
upon thirty (30) days prior written notice to the Executive.

    

    (b)
      Death. The Executive’s employment shall terminate immediately upon the
      death of the Executive.

    

    (c)
      Cause. The Company shall be entitled to terminate the Executive’s
      employment for “Cause.” Termination by the Company of the employment of the
      Executive for “Cause” shall mean termination based upon (i) the willful failure
      by the Executive to follow directions communicated to him by the Chief Executive
      Officer or his designee; (ii) the willful engaging by the Executive in conduct
      which is materially injurious to the Company, monetarily or otherwise; (iii)
      a
      conviction of, a plea of nolo contendere, a guilty plea or confession
      by the Executive to an act of fraud, misappropriation or embezzlement or to
      a
      felony; (iv) the Executive’s habitual drunkenness or use of illegal substances;
      (v) a material breach by the Executive of this Agreement; or (vi) an act of
      gross neglect or gross misconduct which the Company deems in good faith to
      be
      good and sufficient cause.  Executive hereby represents and warrants
      that he has never been convicted of an act of fraud, misappropriation,
      embezzlement or a felony, and Executive further warrants that during the term
      of
      this Agreement, he will give the Company immediate notice of any charge against
      the Executive relating to any of the foregoing.

    

    (d)
      Termination Without Cause. The Executive shall have the right to
      terminate the Executive’s employment without cause at any time upon three months
      written notice.  The Company shall have the right to terminate the
      Executive’s employment without cause at any time upon written
      notice.  The giving of notice by either party pursuant to Section 2 to
      prevent the renewal of this Agreement shall not be deemed a termination of
      Executive’s employment without cause.

    

    5.
      Compensation Upon Termination or During Disability.

    

    (a)
      Disability. During any period that the Executive fails to perform his
      full-time duties with the Company for a three-month period as a result of
      incapacity due to physical or mental illness (the “Disability Period”), the
      Executive shall continue to receive his Annual Base Salary at the rate set
      forth
      in Paragraph 3(a) of this Agreement, less any compensation payable to the
      Executive under the applicable disability insurance plan of the Company during
      the Disability Period, until this Agreement is terminated pursuant to Paragraph
      4(a) hereof. Thereafter, or in the event the Executive’s employment shall be
      terminated by reason of his death, the Executive’s benefits shall be determined
      under the Company’s insurance and other compensation programs then in effect in
      accordance with the terms of such programs and the Company shall have no further
      obligation to the Executive under this Agreement.

    

    (b)
      Death. In the event of the Executive’s death, the Executive’s beneficiary
      shall be entitled to receive the Executive’s Annual Base Salary at the rate set
      forth in Paragraph 3(a) of this Agreement until the date of his death.
      Thereafter, the Company shall have no further obligation to the Executive or
      the
      Executive’s beneficiary under this Agreement.

    

    (c)
      Cause. If the Executive’s employment shall be terminated by the Company
      for “Cause” as defined in Paragraph 4(c) of this Agreement, the Company shall
      continue to pay the Executive his Annual Base Salary at the rate set forth
      in
      Paragraph 3(a) of this Agreement through the date of termination of the
      Executive’s employment. Thereafter, the Company shall have no further obligation
      to the Executive under this Agreement.

     

    (d)
      Termination Without Cause. If the Executive terminates his employment
      pursuant to Paragraph 4(d), the Executive shall be entitled to receive
      Executive’s Annual Base Salary at the rate set forth in Paragraph 3(a) of this
      Agreement until the date Executive’s employment ends.  Thereafter the
      Company shall have no obligation to Executive.  If the Company
      voluntarily terminates the Executive’s employment with the Company pursuant to
      Paragraph 4(d) of this Agreement, the Company shall until the earlier of the
      six
      month anniversary of the termination of employment or the commencement of
      Executive’s employment at a successor employer, pay the Executive an amount
      equal to six months of the Executive’s Annual Salary at the highest rate in
      effect during the period of the Executive’s employment, payable in six equal
      monthly installments. Additionally, until the earlier of the six month
      anniversary of the termination of employment, or the commencement of the
      provision of health benefits to the Executive by a successor employer, the
      Employer will pay for all COBRA health premiums to ensure that Executive
      continues to receive the same coverage of health insurance as immediately before
      the date of the termination. Thereafter, the Executive acknowledges that the
      Company shall have no further obligation to the Executive under this
      Agreement.  Notwithstanding the foregoing, the Company shall only be
      obligated to make the payments set forth in this section after the Executive
      delivers to the Company an executed Release and Severance Agreement, which
      shall
      be substantially in the form of Employer’s standard Release and Severance
      Agreement for all employees, with such changes therein or additions thereto
      as
      needed under then applicable law to give effect to its intent and
      purpose.  After the Executive is no longer receiving benefits from the
      Company, the Executive shall be eligible for COBRA at Executive’s own expense in
      accordance with applicable law.

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    (e)
      Acquisition or Sale ofCompany. If a third party described in
      Paragraph 5(f) of this Agreement terminates the Executive due to “an acquisition
      or sale of the Company,” as described in Paragraph 5(f) below, the Company shall
      pay the Executive an amount equal to three months of Executive’s Annual Base
      Salary at the rate in effect at the date of termination of the Executive’s
      employment during the period of the Executive’s employment, payable in three
      equal monthly installments. Until the earlier of the three months after the
      termination of employment, or the commencement of the provision of health
      benefits to the Executive by a successor employer, the Executive will continue
      to receive the same coverage of health insurance as immediately before the
      date
      of the termination, at the expense of the Company. Thereafter, the Executive
      acknowledges that the Company shall have no further obligation to the Executive
      under this Agreement.  Notwithstanding the foregoing, the Company
      shall only be obligated to make the payments set forth in this section after
      the
      Executive delivers to the Company an executed Release and Severance Agreement,
      which shall be substantially in the form of Employer’s standard Release and
      Severance Agreement for all employees, with such changes therein or additions
      thereto as needed under then applicable law to give effect to its intent and
      purpose; and after delivery to the Company of a resignation from all offices,
      directorships and fiduciary positions with the Company, its affiliates and
      employee benefit plans.

    

    (f)
      Definition. For purposes hereof, “an acquisition or sale of the Company”
to or by “a third party” shall mean the occurrence of any transaction or series
      of transactions which within a six (6) month period result in (i) greater than
      fifty percent (50%) of the then outstanding shares of Common Stock
      of the Company (for cash, property including, without limitation, stock in
      any
      corporation or other third party legal entity, indebtedness or any combination
      thereof) have been redeemed by the Company or purchased by a third party not
      previously affiliated with the Company, or exchanged for shares in any other
      corporation or other third party legal entity not previously affiliated with
      the
      Company, or any combination of such redemption, purchase or exchange, (ii)
      greater than fifty percent (50%) in book value of the Company’s gross assets are
      acquired by a third party not previously affiliated with the Company (for cash,
      property including, without limitation, stock in any corporation whether or
      not
      unaffiliated with the Company, indebtedness of any person or any combination
      thereof), or (iii) the Company is merged or consolidated with another private
      or
      public corporation or other third party legal entity and the former holders
      of
      shares of Common Stock of the Company own less than twenty-five percent (25%)
      of
      the voting power of the acquiring, resulting or surviving corporation or other
      third party legal entity. For the purposes hereof a director or officer of
      the
      Company shall be considered “affiliated with the Company.”

    

    6.
      Confidentiality and Restrictive Covenants.

    

    (a)
      The
      Executive acknowledges that:

    

    (i)
      the
      business in which the Company is engaged is intensely competitive and his
      employment by the Company will require that he have continual access to and
      knowledge of confidential information of the Company, including, but not limited
      to, the nature and scope of its products, the object and source code offered,
      marketed or under development by the Company or under consideration by the
      Company for development, acquisition, or marketing by the Company and the
      documentation prepared or to be prepared for use by the Company (and the phrase
      “by the Company” shall include other vendors, licensees or and resellers and
      value-added resellers of the Company’s products or proposed product) and
      the  Company’s plans for creation, acquisition, improvement or
      disposition of products or software, expansion plans, financial status and
      plans, products, improvements, formulas, designs or styles, method of
      distribution, lists of remarketing and value-added and other resellers customer
      lists and contact lists, product development plans, rules and regulations,
      personnel information and trade secrets of the Company, all of which are of
      vital importance to the success of the Company’s business, provided that
      Confidential Information will not include information which has become publicly
      known otherwise than through a breach by Executive of the provisions of this
      Agreement (collectively, “Confidential Information”);

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    (ii)  the
      direct or indirect disclosure of any Confidential Information would place the
      Company at a serious competitive disadvantage and would do serious damage,
      financial and otherwise, to the Company’s business;

    

    (iii)  by
      his training, experience and expertise, the Executive’s services to the Company
      will be special and unique; and

    

    (iv)  if
      the Executive leaves the Company’s employ to work for a competitive business, in
      any capacity, it would cause the Company irreparable harm.

    

    (b)  Covenant
      Against Disclosure. The Executive therefore covenants and agrees that all
      Confidential Information relating to the business products and services of
      the
      Company, any subsidiary, affiliate, seller or reseller, value-added vendor
      or
      customer shall be and remain the sole property and confidential business
      information of the Company, free of any rights of the Executive. The Executive
      further agrees not to make any use of the confidential information except in
      the
      performance of his duties hereunder and not to disclose the information to
      third
      parties, without the prior written consent of the Company. The obligations
      of
      the Executive under this Paragraph 6 shall survive any termination of this
      Agreement. The Executive agrees that, upon any termination of his employment
      with the Company, all Confidential Information in his possession, directly
      or
      indirectly, that is in written or other tangible or readable form (together
      with
      all duplicates thereof) will forthwith be returned to the Company and will
      not
      be retained by the Executive or furnished to any third party, either by sample,
      facsimile, film, audio or video cassette, electronic data, verbal communication
      or any other means of communication.

    

    (c)  Non-competition.
      The Executive agrees that, during the Term of Employment and for a period of
      one
      (1) year following the date of termination of the Executive’s employment with
      the Company (or six months following the date of termination of the Executive’s
      employment with the Company if the Company terminates the Executive’s employment
      without cause pursuant to Section 4(d)), the Executive will not own, manage,
      or
      be connected as an officer, employee or director with, or aid or
      assist anyone else in the conduct of, any entity or business which competes
      with
      any business conducted by the Company (which currently includes the licensing
      and sale of  medical software and services in the Medication
      Management, Blood Banking and Operating Room fields) or any of its subsidiaries
      or affiliates, in the United States, Canada and the UK and any other area where
      such business is being conducted on the date the Executive’s employment is
      terminated hereunder. Notwithstanding the foregoing the Executive’s ownership of
      securities of a public company engaged in competition with the Company not
      in
      excess of five (5%) percent of any class of such securities shall not be
      considered a breach of the covenants set forth in this Paragraph 6.

    

    (d)  Further
      Covenant. Until the date which is one (1) year after the date of the
      termination of the Executive’s employment hereunder for any reason, the
      Executive will not, directly or indirectly, take any of the following actions,
      and, to the extent the Executive owns, manages, operates, controls, is employed
      by or participates in the ownership, management, operation or control of, or
      is
      connected in any manner with, any business of the type and character engaged
      in
      and competitive with that conducted by the Company or any of its subsidiaries
      or
      affiliates during the period of the Executive’s employment, the Executive
      will  not encourage or participate in any of the following actions on
      behalf of such business:

    

    (i)
      persuade or attempt to persuade any customer of the Company or any
      seller,reseller or value-added vendor of the Company or of its products to
      cease
      doing business with the Company or any of its subsidiaries or affiliates, or
      to
      reduce the amount of business it does with the Company or any of its
      subsidiaries or affiliates;

    

    (ii)
      solicit for himself or any entity the business of (A) any customer of the
      Company or any of its subsidiaries or affiliates, or (B) any seller, reseller
      or-value-added vendor of the Company, or of its products, or (C) solicit any
      business from a customer which was a customer of the Company or any of its
      subsidiaries or affiliates within six months prior to the termination of the
      Executive’s employment; and

    

    (iii)
      persuade or attempt to persuade any employee of the Company or any of
      itssubsidiaries or affiliates or any individual who was an employee of the
      Company or any of its subsidiaries or affiliates, at any time during the
      six-month period prior to the Executive’s termination of employment, to leave
      the employ of the Company or any of its subsidiaries or affiliates.

    

    7.
      Intellectual Property. The Executive hereby agrees that any and all (i)
      software, object code, source code, and documentation, (ii) any improvements,
      inventions, discoveries, formulae, processes, methods, know-how, confidential
      data, patents, trade secrets, (iii) Food and Drug Administrative (“FDA”)
      applications seeking approval by the FDA, information contained in the Forms
      510-k of the FDA and approvals from the FDA, and (iv) other proprietary
      information made, developed or created by the Executive (whether at the request
      or suggestion of the Company or otherwise, whether alone or in conjunction
      with
      others, and whether during regular working hours of work or otherwise) during
      the period of his employment with the Company, which may be directly or
      indirectly useful in, or relate to, the business being carried out by the
      Company or any of its subsidiaries or affiliates, shall be promptly and fully
      disclosed by the Executive to the Board of Directors and shall be the Company’s
      exclusive property as against the Executive, and the Executive shall promptly
      deliver to the Board of Directors of the Company all papers, drawings, models,
      data and other material relating to any invention made, developed or created
      by
      him as aforesaid.

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    The
      Executive shall, upon the Company’s request and without any payment therefor,
      execute any documents necessary or advisable in the opinion of the Company’s
      counsel to direct issuance of patents, copyrights and FDA applications or
      approvals of the Company with respect to such inventions or work product or
      improvements or enhancements as are to be the Company’s exclusive property as
      against the Executive under this Paragraph 7 or to vest in the Company title
      to
      such inventions as against the Executive, the expense of securing any such
      patent or copyright, to be borne by the Company.

    

    8.
      Breach by Employee. Both parties recognize that the services to be
      rendered under this Agreement by the Executive are special, unique and
      extraordinary in character, and that in the event of a breach by Employee of
      the
      terms and conditions of the Agreement to be performed by him, then the Company
      shall be entitled, if it so elects, to institute and prosecute proceedings
      in
      any court of competent jurisdiction, either in law or in equity, to enforce
      the
      specific performance thereof by the Executive. Without limiting the generality
      of the foregoing, the parties acknowledge that a breach by the Executive of
      his
      obligations under Paragraph 6 or 7 would cause the Company irreparable harm,
      that no adequate remedy at law would be available in respect thereof and that
      therefore the Company would be entitled to seek injunctive relief with respect
      thereto.

    

    9.
      Arbitration. Without precluding acting to obtain specific performance
      and/or injunctive relief pursuant to Paragraph 8 above, in the event of any
      dispute between the parties hereto arising out of or relating to this Agreement
      or the employment relationship, including, without limitation, any statutory
      claims of discrimination, between the Company and the Executive (except any
      dispute with respect to Paragraphs 6 and 7 hereof), such dispute shall be
      settled by arbitration in Nassau County or New York County, State of New York,
      or in Wyandotte County or the City of Kansas City, State of Kansas, in
      accordance with the National Rules for the Resolution of Employment Disputes
      then in effect of the American Arbitration Association. The parties hereto
      agree
      that the arbitral panel shall also be empowered to grant injunctive relief
      to a
      party, which may be included in any award. Judgment upon the award rendered,
      including injunctive relief, may be entered in any court having jurisdiction
      thereof. Notwithstanding anything herein to the contrary, if any dispute arises
      between the parties under Paragraphs 6 or 7, neither the Executive nor the
      Company shall be required to arbitrate such dispute or claim, but each party
      shall have the right to institute judicial proceedings in any court of competent
      jurisdiction with respect to such dispute or claim. If such judicial proceedings
      are instituted, the parties agree that such proceedings shall not be stayed
      or
      delayed pending the outcome of any arbitration proceeding
      hereunder.

    

    10.
      Miscellaneous.

    

    (a)
      Successors; Binding Agreement. This Agreement and the obligations of the
      Company hereunder and all rights of the Executive hereunder shall inure to
      the
      benefit of the parties hereto and their respective heirs, personal
      representatives, successors and assigns, provided, however, that the duties
      of
      the Executive hereunder are personal to the Executive and may not be delegated
      or assigned by him.  By entering into this Agreement, the Executive’s
      prior employment agreement with the company is hereby terminated.

    

    (b)
      Notice. All notices of termination and other communications provided for
      in this Agreement shall be in writing and shall be deemed to have been duly
      given when delivered by hand, delivered by an express delivery (one day
      service), delivered by telefax and confirmed by express mail or one day express
      delivery service, or mailed by United States registered mail, return receipt
      requested, addressed as follows:

    

    
      	
              If
                to the Company:

            
	
              Mediware
                Information Systems, Inc.

            
	
              11711
                West 79th
                Street

            
	
              Lenexa,
                KS  66214

            
	 
	
              If
                to the Executive:

            
	
              John
                Damgaard

            

    

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    or
      to
      such other address as either party may designate by notice to the other, which
      notice shall be deemed to have been given upon receipt.

    

    (c)
      Governing Law. This Agreement shall be governed by and construed in
      accordance with the laws of the State of Kansas without regard to the conflict
      of law rules thereof.

    

    (d)
      Waivers. The waiver of either party hereto of any right hereunder or of
      any failure to perform or breach by the other party hereto shall not be deemed
      a
      waiver of any other right hereunder or of any other failure or breach by the
      other party hereto, whether of the same or a similar nature or otherwise. No
      waiver shall be deemed to have occurred unless set forth in writing executed
      by
      or on behalf of the waiving party. No such written waiver shall be deemed a
      continuing waiver unless specifically stated therein, and each such waiver
      shall
      operate only as to the specific term or condition waived and shall not
      constitute a waiver of such term or condition for the future or as to any act
      other than that specifically waived.

    

    (e)
      Validity. The invalidity or unenforceability of any provision of this
      Agreement shall not affect the validity or enforceability of any other provision
      of this Agreement, which shall otherwise remain in full force and effect.
      Moreover, if any one or more of the provisions contained in this Agreement
      is
      held to be excessively broad as to duration, scope or activity, such provisions
      shall be construed by limiting and reducing them so as to be enforceable to
      the
      maximum extent compatible with applicable law.

    

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

    

    (g)
      Entire Agreement. This Agreement (including the applicable restricted
      stock agreements) sets forth the entire agreement and understanding of the
      parties in respect of the subject matter contained herein, and supersedes all
      prior agreements (including the prior employment agreement), promises,
      covenants, arrangements, communications, representations or warranties, whether
      oral or written, by any officer, employee or representative of either party
      in
      respect of said subject matter.

    

    (i)
      Headings Descriptive. The headings of the several paragraphs of this
      Agreement are inserted for convenience only and shall not in any way affect
      the
      meaning or construction of any of this Agreement.

    

    (j)
      Capacity. The Executive represents and warrants that he is not a party to
      any agreement that would prohibit him from entering into this Agreement or
      performing fully his obligations hereunder.

    

    

    IN
      WITNESS WHEREOF, the Company and the Executive have executed this Agreement
      as
      of the date first written above.

    

    

    
      	
              EXECUTIVE:

            	 	
              MEDIWARE
                INFORMATION SYSTEMS, INC:

            
	 	 	 	 
	 	 	 	 
	
               

            	 	
              By:

            	
              /s/
                James Burgess

            
	
              John
                Damgaard

            	 	 	
              Name
                James Burgess

            
	 	 	 	
              Title:President
                & Chief Executive OfficerExhibit 10.1

    

      Exhibit
        10.1

       

      

      

      

      AMENDED
        AND RESTATED

      

      LUFKIN
        INDUSTRIES, INC.

      INCENTIVE
        STOCK COMPENSATION PLAN 2000

      

      

      SECTION
        1. Purpose
        of the Plan.

      

      The
        Lufkin Industries, Inc. Incentive Stock Compensation Plan 2000 (the “Plan”) is
        intended to promote the interests of Lufkin Industries, Inc., a Delaware
        corporation (the “Company”), by encouraging officers, employees, directors and
        consultants of the Company and its Affiliates to acquire or increase their
        equity interest in the Company and to provide a means whereby they may develop
        a
        sense of proprietorship and personal involvement in the development and
        financial success of the Company, and to encourage them to remain with and
        devote their best efforts to the business of the Company thereby advancing
        the
        interests of the Company and its stockholders. The Plan is also contemplated
        to
        enhance the ability of the Company and its Affiliates to attract and retain
        the
        services of individuals who are essential for the growth and profitability
        of
        the Company.

      

      SECTION
        2. Definitions.

      

      As
        used
        in the Plan, the following terms shall have the meanings set forth
        below:

      

      “Affiliate”
        shall mean (i) any “parent corporation” of the Company (as defined in Section
        424(e) of the Code) and any “subsidiary corporation” of any such corporation (as
        defined in Section 424(f) of the Code), (ii) any entity that, directly or
        through one or more intermediaries, is controlled by the Company, and (iii)
        any
        entity in which the Company has a significant equity interest, as determined
        by
        the Committee.

      

      “Award”
        shall mean any Option, Restricted Stock, Performance Award, Phantom Shares,
        Bonus Shares, Other Stock-Based Award or Cash Award.

      

      “Award
        Agreement” shall mean any agreement, contract, or other instrument or document
        (written or electronic) evidencing any Award, which may, but need not, be
        executed or acknowledged by a Participant.

      

      “Board”
        shall mean the Board of Directors of the Company.

      

      “Bonus
        Shares” shall mean an award of Shares granted pursuant to Section 6(d) of
        the Plan. 

      

      “Cash
        Award” shall mean an award payable in cash granted pursuant to Section 6(f) of
        the Plan.

      

      “Change
        in Control” shall mean the occurrence of any one of the following
        events:

      

      (a) any
        “person,” as such term is used in Section 13(d) and 14(d) of the Exchange Act
        (other than the Company, any trustee or other fiduciary holding securities
        under
        an executive benefit plan of the Company, or any company owned, directly
        or
        indirectly, by the shareholders of the Company in substantially the same
        proportions as their ownership of stock of the Company) together with its
        “Affiliates” and “Associates”, as such term is defined in Rule 12b-2 of the
        Exchange Act, is or becomes the “beneficial owner” (as defined in Rule 13d-3
        under the Exchange Act), directly or indirectly, of securities of the Company
        representing 25% or more of the Company’s common stock or of the combined voting
        power of the Company’s then outstanding securities entitled to vote generally in
        the election of directors;

      

      (b) during
        any period of two consecutive years, individuals who at the beginning of
        such
        period constitute the Board, and any new director (other than a director
        designated by a person who has entered into an agreement with the Company
        to
        effect a transaction described in clause (a), (c) or (d) of this definition)
        whose election by the Board or nomination for election by the Company’s
        shareholders was approved by a vote of at least two-thirds of the directors
        then
        still in office who either were directors at the beginning of the period
        or
        whose election or nomination for election was previously so approved, cease
        for
        any reason to constitute at least a majority thereof;

      

      (c) the
        shareholders of the Company approve a merger or consolidation of the Company
        with any other company other than (A) a merger or consolidation which would
        result in the voting securities of the Company outstanding immediately prior
        thereto continuing to represent (either by remaining outstanding or by being
        converted into voting securities of the surviving entity) more than 65% of
        the
        combined voting power of the voting securities of the Company (or such surviving
        entity) outstanding immediately after such merger or consolidation, or (B)
        a
        merger or consolidation effected to implement a recapitalization of the Company
        (or similar transaction) in which no “person” (as hereinabove defined) acquires
        more than 25% of the combined voting power of the Company’s then outstanding
        securities; or

      

      (d) the
        shareholders of the Company adopt a plan of complete liquidation of the Company
        or approve an agreement for the sale, exchange or disposition by the Company
        of
“all or a significant portion of the Company’s assets,” which for this purpose
        shall mean a sale or other disposition transaction or series of related
        transactions involving assets of the Company or any subsidiary (including
        the
        stock of any subsidiary) in which the value of the assets or stock being
        sold or
        otherwise disposed of (as measured by the purchase price being paid therefore
        or
        by such other method as the Board determines is appropriate in a case where
        there is no readily ascertainable purchase price) constitutes more than 35%
        of
        the fair market value of the Company (as hereinafter defined). For purposes
        of
        the preceding sentence, the “fair market value of the Company” shall be the
        aggregate market value of the outstanding shares of common stock of the Company
        (on a fully diluted basis) plus the aggregate market value of the Company’s
        other outstanding equity securities. The aggregate market value of the shares
        of
        common stock of the Company shall be determined by multiplying the number
        of
        shares of the Company’s common stock (on a fully diluted basis) outstanding on
        the date of the execution and delivery of a definitive agreement with respect
        to
        the transaction or series of related transactions (the “Transaction Date”) by
        the market value per share immediately preceding the Transaction Date or
        by such
        other method as the Board shall reasonably determine is appropriate. The
        aggregate market value of any other equity securities of the Company shall
        be
        determined in a manner similar to that prescribed in the immediately preceding
        sentence for determining the aggregate market value of the shares of common
        stock of the Company or by such other method as the Board shall reasonably
        determine is appropriate.

      

      “Code”
        shall mean the Internal Revenue Code of 1986, as amended from time to time,
        and
        the rules and regulations thereunder.

      

      “Committee”
        shall mean the committee appointed by the Board to administer the Plan or,
        if
        none, the Board.

      

      “Consultant”
        shall mean any individual, other than a Director or an Employee, who renders
        consulting services to the Company or an Affiliate for a fee.

      

      “Director”
        shall mean a “non-employee director” of the Company, as defined in Rule
        16b-3.

      

      “Employee”
        shall mean any employee of the Company or an Affiliate.

      

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

      

      “Fair
        Market Value” shall mean, with respect to Shares, the closing sales price of a
        Share on the applicable date (or if there is no trading in the Shares on
        such
        date, on the next preceding date on which there was trading) as reported
        in
The
        Wall Street Journal
        (or
        other reporting service approved by the Committee). In the event the Shares
        are
        not publicly traded at the time a determination of its fair market value
        is
        required to be made hereunder, the determination of fair market value shall
        be
        made in good faith by the Committee. 

      

      “Option”
        shall mean an option granted under Section 6(a) of the Plan. Options granted
        under the Plan may constitute “incentive stock options” for purposes of Section
        422 of the Code or nonqualified stock options.

      

      “Other
        Stock-Based Award” shall mean an award granted pursuant to Section 6(g) of the
        Plan that is not otherwise specifically provided for, the value of which
        is
        based in whole or in part upon the value of a Share.

      

      “Participant”
        shall mean any Director, Employee or Consultant granted an Award under the
        Plan.

      

      “Performance
        Award” shall mean any right granted under Section 6(c) of the Plan.

      

      “Performance
        Objectives” means the objectives, if any, established by the Committee that are
        to be achieved with respect to an Award granted under this Plan, which may
        be
        described in terms of Company-wide objectives, in terms of objectives that
        are
        related to performance of a division, subsidiary, department or function
        within
        the Company or an Affiliate in which the Participant receiving the Award
        is
        employed or in individual or other terms, and which will relate to the period
        of
        time determined by the Committee. The Performance Objectives intended to
        qualify
        under Section 162(m) of the Code shall be with respect to one or more of
        the
        following: earnings per share; earnings before interest, taxes, depreciation
        and
        amortization expenses (“EBITDA”); earnings before interest and taxes (“EBIT”);
        EBITDA, EBIT or earnings before taxes and unusual or nonrecurring items as
        measured either against the annual budget or as a ratio to revenue; market
        share; sales; costs; return on equity; operating cash flow; discretionary
        cash
        flow; return on net capital employed; and stock price performance. Which
        objectives to use with respect to an Award, the weighting of the objectives
        if
        more than one is used, and whether the objective is to be measured against
        a
        Company-established budget or target, an index or a peer group of companies,
        shall be determined by the Committee in its discretion at the time of grant
        of
        the Award. A Performance Objective need not be based on an increase or a
        positive result and may include, for example, maintaining the status quo
        or
        limiting economic losses. 

      

      “Person”
        shall mean individual, corporation, partnership, association, joint-stock
        company, trust, unincorporated organization, government or political subdivision
        thereof or other entity.

      

      “Phantom
        Shares” shall mean an Award of the right to receive Shares issued at the end of
        a Restricted Period which is granted pursuant to Section 6(e) of the Plan.

      

      “Restricted
        Period” shall mean the period established by the Committee with respect to an
        Award during which the Award either remains subject to forfeiture or is not
        exercisable by the Participant.

      

      “Restricted
        Stock” shall mean any Share, prior to the lapse of restrictions thereon, granted
        under Sections 6(b) of the Plan.

      

      “Rule
        16b-3" shall mean Rule 16b-3 promulgated by the SEC under the Exchange Act,
        or
        any successor rule or regulation thereto as in effect from time to
        time.

      

      “SEC”
        shall mean the Securities and Exchange Commission, or any successor
        thereto.

      

      “Shares”
        or “Common Shares” or “Common Stock” shall mean the common stock of the Company,
        $1.00 par value, and such other securities or property as may become the
        subject
        of Awards under the Plan.

      

      SECTION
        3. Administration.

      

      The
        Plan
        shall be administered by the Committee. A majority of the Committee shall
        constitute a quorum, and the acts of the members of the Committee who are
        present at any meeting thereof at which a quorum is present, or acts unanimously
        approved by the members of the Committee in writing, shall be the acts of
        the
        Committee. Subject to the following, the Committee, in its sole discretion,
        may
        delegate any or all of its powers and duties under the Plan, including the
        power
        to grant Awards under the Plan, to the Chief Executive Officer of the Company,
        subject to such limitations on such delegated powers and duties as the Committee
        may impose. Upon any such delegation all references in the Plan to the
“Committee”, other than in Section 7, shall be deemed to include the Chief
        Executive Officer; provided, however, that such delegation shall not limit
        the
        Chief Executive Officer’s right to receive Awards under the Plan.
        Notwithstanding the foregoing, the Chief Executive Officer may not grant
        Awards
        to, or take any action with respect to any Award previously granted to, a
        person
        who is an officer or a member of the Board. Subject to the terms of the Plan
        and
        applicable law, and in addition to other express powers and authorizations
        conferred on the Committee by the Plan, the Committee shall have full power
        and
        authority to: (i) designate Participants; (ii) determine the type or types
        of
        Awards to be granted to a Participant; (iii) determine the number of Shares
        to be covered by, or with respect to which payments, rights, or other matters
        are to be calculated in connection with, Awards; (iv) determine the terms
        and
        conditions of any Award; (v) determine whether, to what extent, and under
        what
        circumstances Awards may be settled or exercised in cash, Shares, other
        securities, other Awards or other property, or canceled, forfeited, or suspended
        and the method or methods by which Awards may be settled, exercised, canceled,
        forfeited, or suspended; (vi) determine whether, to what extent, and under
        what
        circumstances cash, Shares, other securities, other Awards, other property,
        and
        other amounts payable with respect to an Award shall be deferred either
        automatically or at the election of the holder thereof or of the Committee;
        (vii) interpret and administer the Plan and any instrument or agreement
        relating to an Award made under the Plan; (viii) establish, amend, suspend,
        or
        waive such rules and regulations and appoint such agents as it shall deem
        appropriate for the proper administration of the Plan; and (ix) make any
        other
        determination and take any other action that the Committee deems necessary
        or
        desirable for the administration of the Plan. Unless otherwise expressly
        provided in the Plan, all designations, determinations, interpretations,
        and
        other decisions under or with respect to the Plan or any Award shall be within
        the sole discretion of the Committee, may be made at any time and shall be
        final, conclusive, and binding upon all Persons, including the Company, any
        Affiliate, any Participant, any holder or beneficiary of any Award, any
        stockholder and any Employee.

      

      SECTION
        4. Shares
        Available for Awards.

      

      (a) Shares
        Available.
        Subject
        to adjustment as provided in Section 4(c), the number of Shares with respect
        to
        which Awards may be granted under the Plan shall be 1,800,000, plus an
        additional number of 1,000,000 “new” Shares available with respect to which
        Options may be granted under the Plan. If any Award is exercised, paid,
        forfeited, terminated or canceled without the delivery of Shares, then the
        Shares covered by such Award, to the extent of such payment, exercise,
        forfeiture, termination or cancellation, shall again be Shares with respect
        to
        which Awards may be granted. 

      

      (b) Sources
        of Shares Deliverable Under Awards.
        Any
        Shares delivered pursuant to an Award may consist, in whole or in part, of
        authorized and unissued Shares or of treasury Shares.

      

      (c) Adjustments.
        In the
        event that the Committee determines that any dividend or other distribution
        (whether in the form of cash, Shares, other securities, or other property),
        recapitalization, stock split, reverse stock split, reorganization, merger,
        consolidation, split-up, spin-off, combination, repurchase, or exchange of
        Shares or other securities of the Company, issuance of warrants or other
        rights
        to purchase Shares or other securities of the Company, or other similar
        corporate transaction or event affects the Shares such that an adjustment
        is
        determined by the Committee to be appropriate in order to prevent dilution
        or
        enlargement of the benefits or potential benefits intended to be made available
        under the Plan, then the Committee shall, in such manner as it may deem
        equitable, adjust any or all of (i) the number and type of Shares (or other
        securities or property) with respect to which Awards may be granted,
        (ii) the number and type of Shares (or other securities or property)
        subject to outstanding Awards, and (iii) the grant or exercise price with
        respect to any Award or, if deemed appropriate, make provision for a cash
        payment to the holder of an outstanding Award; provided, that the Committee
        shall not take any action otherwise authorized under this subparagraph (c
        ) to
        the extent that such action would cause (A) the application of Section 409A
        or
        162(m) of the Code to the Award or (B) create adverse tax consequences under
        Section 409A or 162(m) of the Code should either or both of those Code sections
        apply to the Award.

      

      SECTION
        5. Eligibility.

      

      Any
        Employee, Director or Consultant shall be eligible to be designated a
        Participant and receive an Award under the Plan. 

      

      SECTION
        6. Awards.

      

      (a) Options.
        Subject
        to the provisions of the Plan, the Committee shall have the authority to
        determine the Participants to whom Options shall be granted, the number of
        Shares to be covered by each Option, the purchase price therefor and the
        conditions and limitations applicable to the exercise of the Option, including
        the following terms and conditions and such additional terms and conditions,
        as
        the Committee shall determine, that are not inconsistent with the provisions
        of
        the Plan.

      

      (i) Exercise
        Price.
        The
        purchase price per Share purchasable under an Option shall be determined
        by the
        Committee at the time the Option is granted, but shall not be less than the
        Fair
        Market Value per Share on such grant date.

      

      (ii) Time
        and Method of Exercise.
        The
        Committee shall determine the time or times at which an Option may be exercised
        in whole or in part (which may include the achievement of one or more
        Performance Objectives), and the method or methods by which, and the form
        or
        forms (which may include, without limitation, cash, check acceptable to the
        Company, Shares already-owned for more than six months, outstanding Awards,
        Shares that would otherwise be acquired upon exercise of the Option, a
“cashless-broker” exercise through procedures approved by the Company, other
        securities or other property, loans, notes approved by the Committee, or
        any
        combination thereof, having a Fair Market Value on the exercise date equal
        to
        the relevant exercise price) in which payment of the exercise price with
        respect
        thereto may be made or deemed to have been made.

      

      (iii) Incentive
        Stock Options.
        The
        terms of any Option granted under the Plan intended to be an incentive stock
        option shall comply in all respects with the provisions of Section 422 of
        the
        Code, or any successor provision, and any regulations promulgated thereunder.
        Incentive stock options may be granted only to employees of the Company and
        its
        parent corporation and subsidiary corporations, within the meaning of Section
        424 of the Code. To the extent the aggregate Fair Market Value of the Shares
        (determined as of the date of grant) of an Option to the extent exercisable
        for
        the first time during any calendar year (under all plans of the Company and
        its
        parent and subsidiary corporations) exceeds $100,000, such Option Shares
        in
        excess of $100,000 shall be nonqualified stock options. The maximum number
        of
        Shares with respect to which incentive stock options may be granted under
        the
        Plan shall not exceed 300,000 Shares. No Option may be granted as an incentive
        stock option after the 10th
        anniversary of the date the Plan was adopted by the Board. The Plan was adopted
        by the Board on May 4, 2000.

      

      (iv) Limits.
        The
        maximum number of Options that may be granted to any Participant during any
        calendar year shall not exceed 300,000 Shares.

      

      (b) Restricted
        Stock.
        Subject
        to the provisions of the Plan, the Committee shall have the authority to
        determine the Participants to whom Restricted Stock shall be granted, the
        number
        of Shares of Restricted Stock to be granted to each such Participant, the
        duration of the Restricted Period during which, and the conditions, including
        Performance Objectives, if any, under which if not achieved, the Restricted
        Stock may be forfeited to the Company, and the other terms and conditions
        of
        such Awards. Unless subject to the achievement of Performance Objectives
        or a
        special determination is made by the Committee as to a shorter Restricted
        Period, the Restricted Period shall not be less than three years.

      

      (i) Dividends.
        Dividends paid on Restricted Stock may be paid directly to the Participant,
        may
        be subject to risk of forfeiture and/or transfer restrictions during any
        period
        established by the Committee or sequestered and held in a bookkeeping cash
        account (with or without interest) or reinvested on an immediate or deferred
        basis in additional shares of Common Stock, which credit or shares may be
        subject to the same restrictions as the underlying Award or such other
        restrictions, all as determined by the Committee in its discretion.

      

      (ii) Registration.
        Any
        Restricted Stock may be evidenced in such manner as the Committee shall deem
        appropriate, including, without limitation, book-entry registration or issuance
        of a stock certificate or certificates. In the event any stock certificate
        is
        issued in respect of Restricted Stock granted under the Plan, such certificate
        shall be registered in the name of the Participant and shall bear an appropriate
        legend referring to the terms, conditions, and restrictions applicable to
        such
        Restricted Stock.

      

      (iii) Forfeiture
        and Restrictions Lapse.
        Except
        as otherwise determined by the Committee or the terms of the Award that granted
        the Restricted Stock, upon termination of a Participant’s employment (as
        determined under criteria established by the Committee) for any reason during
        the applicable Restricted Period, all Restricted Stock shall be forfeited
        by the
        Participant and reacquired by the Company. Unrestricted Shares, evidenced
        in
        such manner as the Committee shall deem appropriate, shall be issued to the
        holder of Restricted Stock promptly after the applicable restrictions have
        lapsed or otherwise been satisfied.

      

      (iv) Transfer
        Restrictions.
        During
        the Restricted Period, Restricted Stock will be subject to the limitations
        on
        transfer as provided in Section 6(h)(iii).

      

      (v) Limits.
        The
        maximum number of Shares of Restricted Stock that may be granted to any
        Participant during any calendar year shall not exceed 150,000
        Shares.

      

      (c) Performance
        Awards.
        The
        Committee shall have the authority to determine the Participants who shall
        receive a Performance Award, which shall be denominated as a cash amount
        (e.g.,
        $100 per award unit) at the time of grant and confer on the Participant the
        right to receive payment of such Award, in whole or in part, upon the
        achievement of such Performance Objectives during such performance periods
        as
        the Committee shall establish with respect to the Award. 

      

      (i) Terms
        and Conditions.
        Subject
        to the terms of the Plan and any applicable Award Agreement, the Committee
        shall
        determine the Performance Objectives to be achieved during any performance
        period, the length of any performance period, the amount of any Performance
        Award and the amount of any payment or transfer to be made pursuant to any
        Performance Award. 

      

      (ii) Payment
        of Performance Awards.
        Performance Awards, to the extent earned, shall be paid (in cash and/or in
        Shares, in the sole discretion of the Committee) in a lump sum following
        the
        close of the performance period.

      

      (iii) Limits.
        The
        maximum value of Performance Awards that may be granted to any Participant
        during any calendar year shall not exceed $1,000,000.

      

      (d) Bonus
        Shares.
        The
        Committee shall have the authority, in its discretion, to grant Bonus Shares
        to
        Participants. Each Bonus Share shall constitute a transfer of an unrestricted
        Share to the Participant, without other payment therefor, as additional
        compensation for the Participant’s services to the Company. Bonus Shares shall
        be in lieu of a cash bonus that otherwise would be granted to the
        Participant.

      

      (e) Phantom
        Shares.
        The
        Committee shall have the authority to grant Awards of Phantom Shares to
        Participants upon such terms and conditions as the Committee may determine.
        

      

      (i) Terms
        and Conditions.
        Each
        Phantom Share Award shall constitute an agreement by the Company to issue
        or
        transfer a specified number of Shares or pay an amount of cash equal to a
        specified number of Shares, or a combination thereof to the Participant in
        the
        future, subject to the fulfillment during the Restricted Period of such
        conditions, including Performance Objectives, if any, as the Committee may
        specify at the date of grant. During the Restricted Period, the Participant
        shall not have any right to transfer any rights under the subject Award,
        shall
        not have any rights of ownership in the Phantom Shares and shall not have
        any
        right to vote such shares. 

      

      (ii) Dividends.
        Any
        Phantom Share award may provide that amount equal to any or all dividends
        or
        other distributions paid on Shares during the Restricted Period be credited
        in a
        cash bookkeeping account (without interest) or that equivalent additional
        Phantom Shares be awarded, which account or shares may be subject to the
        same
        restrictions as the underlying Award or such other restrictions as the Committee
        may determine. 

      

      (iii) Limits.
        The
        maximum number of Phantom Shares that may be granted to any Participant during
        any calendar year shall not exceed 150,000.

      

      (f) Cash
        Awards.
        The
        Committee shall have the authority to determine the Participants to whom
        Cash
        Awards shall be granted, the amount, and the terms or conditions, if any,
        as
        additional compensation for the Participant’s services to the Company or its
        Affiliates. A Cash Award may be granted (simultaneously or subsequently)
        separately or in tandem with another Award and may entitle a Participant
        to
        receive a specified amount of cash from the Company upon such other Award
        becoming taxable to the Participant, which cash amount may be based on a
        formula
        relating to the anticipated taxable income associated with such other Award
        and
        the payment of the Cash Award. 

      

      (g) Other
        Stock-Based Awards.
        The
        Committee may grant to Participants an Other Stock-Based Award, which shall
        consist of a right which is an Award denominated or payable in, valued in
        whole
        or in part by reference to, or otherwise based on or related to, Shares as
        is
        deemed by the Committee to be consistent with the purposes of the Plan. Subject
        to the terms of the Plan, including the Performance Objectives, if any,
        applicable to such Award, the Committee shall determine the terms and conditions
        of any such Other Stock-Based Award. The maximum number of Shares or the
        value
        for which Other Stock-Based Awards may be granted to any Participant during
        any
        calendar year shall not exceed 300,000 Shares, if the Award is in Shares,
        or
        $1,000,000, if the Award is denominated in dollars.

      

      (h) General.

      

      (i) Awards
        May Be Granted Separately or Together.
        Awards
        may, in the discretion of the Committee, be granted either alone or in addition
        to, in tandem with, or in substitution for any other Award granted under
        the
        Plan or any award granted under any other plan of the Company or any Affiliate.
        Awards granted in addition to or in tandem with other Awards or awards granted
        under any other plan of the Company or any Affiliate may be granted either
        at
        the same time as or at a different time from the grant of such other Awards
        or
        awards. 

      

      (ii) Forms
        of Payment by Company Under Awards.
        Subject
        to the terms of the Plan and of any applicable Award Agreement, payments
        or
        transfers to be made by the Company or an Affiliate upon the grant, exercise
        or
        payment of an Award may be made in such form or forms as the Committee shall
        determine, including, without limitation, cash, Shares, other securities,
        other
        Awards or other property, or any combination thereof, and may be made in
        a
        single payment or transfer, in installments, or on a deferred basis, in each
        case in accordance with rules and procedures established by the Committee.
        Such
        rules and procedures may include, without limitation, provisions for the
        payment
        or crediting of reasonable interest on installment or deferred
        payments.

      

      (iii) Limits
        on Transfer of Awards.
        

      

      (A) Except
        as
        provided in (C) below, each Award, and each right under any Award, shall
        be
        exercisable only by the Participant during the Participant’s lifetime, or by the
        person to whom the Participant’s rights shall pass by will or the laws of
        descent and distribution. 

      

      (B) Except
        as
        provided in (C) below, no Award and no right under any such Award may be
        assigned, alienated, pledged, attached, sold or otherwise transferred or
        encumbered by a Participant otherwise than by will or by the laws of descent
        and
        distribution (or, in the case of Restricted Stock, to the Company) and any
        such
        purported assignment, alienation, pledge, attachment, sale, transfer or
        encumbrance shall be void and unenforceable against the Company or any
        Affiliate. 

      

      (C) Notwithstanding
        anything in the Plan to the contrary, to the extent specifically provided
        by the
        Committee with respect to a grant, a nonqualified stock option may be
        transferred to immediate family members or related family trusts, or similar
        entities on such terms and conditions as the Committee may
        establish.

      

      (iv) Term
        of Awards.
        The
        term of each Award shall be for such period as may be determined by the
        Committee; provided, that in no event shall the term of any Award exceed
        a
        period of 10 years from the date of its grant. 

      

      (v) Share
        Certificates.
        All
        certificates for Shares or other securities of the Company or any Affiliate
        delivered under the Plan pursuant to any Award or the exercise thereof shall
        be
        subject to such stop transfer orders and other restrictions as the Committee
        may
        deem advisable under the Plan or the rules, regulations, and other requirements
        of the SEC, any stock exchange upon which such Shares or other securities
        are
        then listed, and any applicable federal or state laws, and the Committee
        may
        cause a legend or legends to be put on any such certificates to make appropriate
        reference to such restrictions. 

      

      (vi) Consideration
        for Grants.
        Awards
        may be granted for no cash consideration or for such consideration as the
        Committee determines including, without limitation, such minimal cash
        consideration as may be required by applicable law. 

      

      (vii) Delivery
        of Shares or other Securities and Payment by Participant of
        Consideration.
        No
        Shares or other securities shall be delivered pursuant to any Award until
        payment in full of any amount required to be paid pursuant to the Plan or
        the
        applicable Award Agreement (including, without limitation, any exercise price,
        tax payment or tax withholding) is received by the Company. Such payment
        may be
        made by such method or methods and in such form or forms as the Committee
        shall
        determine, including, without limitation, cash, Shares, other securities,
        other
        Awards or other property, withholding of Shares, cashless exercise with
        simultaneous sale, or any combination thereof; provided that the combined
        value,
        as determined by the Committee, of all cash and cash equivalents and the
        Fair
        Market Value of any such Shares or other property so tendered to the Company,
        as
        of the date of such tender, is at least equal to the full amount required
        to be
        paid pursuant to the Plan or the applicable Award Agreement to the
        Company.

      

      SECTION
        7. Amendment
        and Termination.

      

      Except
        to
        the extent prohibited by applicable law and unless otherwise expressly provided
        in an Award Agreement or in the Plan:

      

      (a) Amendments
        to the Plan.
        Except
        as required by applicable law or the rules of the principal securities market
        on
        which the shares are traded and subject to paragraph (b) below, the Board
        or the
        Committee may amend, alter, suspend, discontinue, or terminate the Plan without
        the consent of any stockholder, Participant, other holder or beneficiary
        of an
        Award, or other Person; provided, however, no such amendment may be made
        without
        stockholder approval, if such amendment would (i) materially increase the
        number
        of Shares authorized under the Plan or (ii) materially increase the Persons
        eligible to receive Awards under the Plan.

      

      (b) Amendments
        to Awards.
        Subject
        to paragraph (d) below, the Committee may waive any conditions or rights
        under,
        amend any terms of, or alter any Award theretofore granted, provided no change,
        other than pursuant to paragraph (c), in any Award shall reduce the benefit
        to
        Participant without the consent of such Participant. 

      

      (c) Adjustment
        of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
        Events.
        Subject
        to paragraph (d) below, the Committee is hereby authorized to make adjustments
        in the terms and conditions of, and the criteria included in, Awards in
        recognition of unusual or nonrecurring events (including, without limitation,
        the events described in Section 4(c) of the Plan) affecting the Company,
        any Affiliate, or the financial statements of the Company or any Affiliate,
        or
        of changes in applicable laws, regulations, or accounting principles, whenever
        the Committee determines that such adjustments are appropriate in order to
        prevent dilution or enlargement of the benefits or potential benefits intended
        to be made available under the Plan. 

      

      (d) Section
        162(m).
        The
        Committee, in its sole discretion and without the consent of the Participant,
        may amend (i) any stock-based Award to reflect (1) a change in corporate
        capitalization, such as a stock split or dividend, (2) a corporate transaction,
        such as a corporate merger, a corporate consolidation, any corporate separation
        (including a spinoff or other distribution of stock or property by a
        corporation), any corporate reorganization (whether or not such reorganization
        comes within the definition of such term in Section 368 of the Code), (3)
        any
        partial or complete corporate liquidation, or (4) a change in accounting
        rules
        required by the Financial Accounting Standards Board and (ii) any Award that
        is
        not intended to meet the requirements of Section 162(m) of the Code, to reflect
        significant event that the Committee, in its sole discretion, believes to
        be
        appropriate to reflect the original intent in the grant of the Award. With
        respect to an Award that is subject to Section 162(m) of the Code, the Committee
        (i) shall not take any action that would disqualify such Award and (ii) must
        first certify that the Performance Objectives, if applicable, have been achieved
        before the Award may be paid.

      

      SECTION
        8. Change
        in Control.

      

      (a) Subject
        to paragraph (b) below, in the event of a Change in Control of the Company
        all
        outstanding Awards automatically shall become fully vested immediately prior
        to
        such Change in Control (or such earlier time as set by the Committee), all
        restrictions, if any, with respect to such Awards shall lapse, all performance
        criteria, if any, with respect to such Awards shall be deemed to have been
        met
        in full (at the highest level), and unless the Company survives as an
        independent publicly traded company, all Options outstanding at the time
        of the
        event or transaction shall terminate, except to the extent provision is made
        in
        writing in connection with such event or transaction for the continuation
        of the
        Plan and/or the assumption of the Options theretofore granted, or for the
        substitution for such Options of new options covering the stock of a successor
        entity, or the parent or subsidiary thereof, with appropriate adjustments
        as to
        the number and kinds of shares and exercise prices, in which event the Plan
        and
        Options theretofore granted shall continue in the manner and under the terms
        so
        provided. 

      

      (b) Notwithstanding
        anything to the contrary in this Plan, if a Participant is a “disqualified
        individual” (as defined in Section 280G(c) of the Code) and the accelerated
        vesting of an Award and/or the termination of the Restricted Period occurs
        with
        respect to a Change in Control, together with any other payments which the
        Participant has the right to receive from any Person, whether or not under
        this
        Plan, would constitute a “parachute payment” (as defined in Section 280G(b)(2)
        of the Code), such accelerated vesting and/or termination of the Restricted
        Period provided under the paragraph above shall be reduced to the extent
        necessary (beginning with Options) so that the present value thereof (as
        determined for parachute purposes) to the Participant will be $1.00 less
        than
        three times the Participant’s “base amount” (as defined in Section 280G of the
        Code) but only if such reduction produces a better net after-tax position
        to the
        Participant. Such determination shall be made by the Company in good
        faith.

      

      SECTION
        9. General
        Provisions.

      

      (a) No
        Rights to Awards.
        No
        Director, Employee, Consultant or other Person shall have any claim to be
        granted any Award, and there is no obligation for uniformity of treatment
        of
        Employees, Consultants, or holders or beneficiaries of Awards. The terms
        and
        conditions of Awards need not be the same with respect to each
        recipient.

      

      (b) Withholding.
        The
        Company or any Affiliate is authorized to withhold from any Award, from any
        payment due or transfer made under any Award or under the Plan or from any
        compensation or other amount owing to a Participant the amount (in cash,
        Shares,
        other securities, Shares that would otherwise be issued pursuant to such
        Award,
        other Awards or other property) of any applicable taxes payable in respect
        of an
        Award, its exercise, the lapse of restrictions thereon, or any payment or
        transfer under an Award or under the Plan and to take such other action as
        may
        be necessary in the opinion of the Company to satisfy all obligations for
        the
        payment of such taxes. Notwithstanding the above, a Participant who is subject
        to Rule 16b-3 may direct the Company to satisfy such Participant’s tax
        withholding obligation through the “constructive” tender of already-owned Shares
        or the withholding of Shares otherwise to be acquired upon the exercise or
        payment of such Award.

      

      (c) No
        Right to Employment.
        The
        grant of an Award shall not be construed as giving a Participant the right
        to be
        retained in the employ of the Company or any Affiliate. Further, the Company
        or
        an Affiliate may at any time dismiss a Participant from employment, free
        from
        any liability or any claim under the Plan, unless otherwise expressly provided
        in the Plan or in any Award Agreement.

      

      (d) Governing
        Law.
        The
        validity, construction, and effect of the Plan and any rules and regulations
        relating to the Plan shall be determined in accordance with the laws of the
        State of Delaware, without regard to conflicts of laws principles, and
        applicable federal law.

      

      (e) Severability.
        If any
        provision of the Plan or any Award is or becomes or is deemed to be invalid,
        illegal, or unenforceable in any jurisdiction or as to any Person or Award,
        or
        would disqualify the Plan or any Award under any law deemed applicable by
        the
        Committee, such provision shall be construed or deemed amended to conform
        to the
        applicable laws, or if it cannot be construed or deemed amended without,
        in the
        determination of the Committee, materially altering the intent of the Plan
        or
        the Award, such provision shall be stricken as to such jurisdiction, Person
        or
        Award and the remainder of the Plan and any such Award shall remain in full
        force and effect.

      

      (f) Other
        Laws.
        The
        Committee may refuse to issue or transfer any Shares or other consideration
        under an Award if, acting in its sole discretion, it determines that the
        issuance of transfer or such Shares or such other consideration might violate
        any applicable law or regulation or entitle the Company to recover the same
        under Section 16(b) of the Exchange Act, and any payment tendered to the
        Company
        by a Participant, other holder or beneficiary in connection with the exercise
        of
        such Award shall be promptly refunded to the relevant Participant, holder
        or
        beneficiary.

      

      (g) No
        Trust or Fund Created.
        Neither
        the Plan nor the Award shall create or be construed to create a trust or
        separate fund of any kind or a fiduciary relationship between the Company
        or any
        Affiliate and a Participant or any other Person. To the extent that any Person
        acquires a right to receive payments from the Company or any Affiliate pursuant
        to an Award, such right shall be no greater than the right of any general
        unsecured creditor of the Company or any Affiliate.

      

      (h) No
        Fractional Shares.
        No
        fractional Shares shall be issued or delivered pursuant to the Plan or any
        Award, and the Committee shall determine whether cash, other securities,
        or
        other property shall be paid or transferred in lieu of any fractional Shares
        or
        whether such fractional Shares or any rights thereto shall be canceled,
        terminated, or otherwise eliminated.

      

      (i) Headings.
        Headings are given to the Sections and subsections of the 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 the Plan
        or
        any provision thereof.

      

      SECTION
        10. Designation
        of Beneficiary.

      

      Each
        Participant to whom an Award has been made under this Plan may designate
        a
        beneficiary or beneficiaries (which beneficiary may be an entity other than
        a
        natural person) to exercise any rights or receive any payment that under
        the
        terms of such Award may become exercisable or payable on or after the
        Participant’s death. At any time, and from time to time, any such designation
        may be changed or cancelled by the Participant without the consent of any
        such
        beneficiary. Any such designation, change or cancellation must be on a form
        provided for that purpose by the Committee and shall not be effective until
        received by the Committee. If no beneficiary has been named by a deceased
        Participant, or the designated beneficiaries have predeceased the Participant,
        the beneficiary shall be the Participant’s estate. If a Participant designates
        more than one beneficiary, any such exercise or payment under this Plan shall
        be
        made in equal shares unless the Participant has designated otherwise, in
        which
        case the exercise or payment shall be made in the shares designated by the
        Participant.

      

      SECTION
        11. Effective
        Date of the Plan.

      

      The
        Plan
        shall become effective upon its adoption by the Board; however, no Award
        may
        become exercisable or payable unless, and until the Plan is approved by the
        stockholders of the Company within 12 months of the date it is adopted by
        the
        Board. In the event such stockholder approval is not obtained, all Awards
        then
        outstanding on the first anniversary of the date adopted by the Board shall
        be
        automatically cancelled without payment.

      

      SECTION
        12. Term
        of the Plan.

      

      The
        Plan
        shall be effective from the time of its adoption by the Board and shall continue
        until May 31, 2017. However, unless otherwise expressly provided in the Plan
        or
        in an applicable Award Agreement, any Award granted prior to such termination,
        and the authority of the Board or the Committee to amend, alter, adjust,
        suspend, discontinue, or terminate any such Award or to waive any conditions
        or
        rights under such Award, shall extend beyond such termination date.

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