Document:

Exhibit
10.18

 

Heartland
Payment Systems, Inc.

Amended and Restated 2000 Equity Incentive Plan

 

ARTICLE I

 

PURPOSE
AND EFFECTIVENESS

 

1.1                                 Purpose.  The purpose of the Plan is to promote the
success of Heartland Payment Systems, Inc. (the “Company”) by providing a
method whereby (i) employees of the Company and its Subsidiaries and (ii)
independent contractors providing services to the Company and its Subsidiaries
may be awarded additional remuneration competitive with industry practices for
services they render, thereby encouraging them to remain in the employ of the
Company or its Subsidiaries and increasing their personal interest in the
continued success and progress of the Company and its Subsidiaries.  The Plan is also intended to aid in (i)
attracting and retaining persons of exceptional ability and leadership
qualities to become officers and employees of the Company and its Subsidiaries
and (ii) inducing independent contractors to agree to provide services to the
Company and its Subsidiaries.

 

It is intended that this
purpose will be effected by the granting of “nonqualified stock options” and/or
“incentive stock options” to acquire the Common Stock of the Company and/or by
the granting of awards of shares of Common Stock.

 

1.2                                 Effective
Date.  The Plan became effective on
October 1, 2000, and was amended and restated on July 29, 2003, but
shall be subject to approval by the affirmative vote of the holders of at least
a majority of the outstanding shares of capital stock of the Company.  Any Options granted under the Plan prior to
such stockholder approval shall be conditioned upon such approval and shall be
null and void if such approval is not obtained.

 

1.3                                 Term
of Plan.  Unless sooner terminated
by action of the Board, the Plan will terminate on July 30, 2013.

 

ARTICLE II

 

DEFINITIONS

 

2.1                                 Certain
Defined Terms.  Capitalized terms
not defined elsewhere in the Plan shall have the following meanings (whether
used in the singular or plural):

 

“Agreement” means a written agreement
between a Participant and the Company which sets out the terms of the grant of
an Option or Stock Award, as any such Agreement may be supplemented or amended
from time to time.

 

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

 

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“Code” means the Internal Revenue Code of
1986, as amended from time to time, or any successor statute or statutes
thereto.  Reference to any specific Code
section shall include any successor section.

 

“Common Stock” means the common stock which
the Company is currently authorized to issue or may in the future be authorized
to issue.

 

“Committee” means the committee of the
Board appointed or designated pursuant to Section 3.1 to administer the
Plan in accordance with its terms.

 

“Company” means Heartland Payment Systems,
Inc. and any successor entity.

 

“Consultant” means any person who is
engaged by the Company or any Subsidiary to render consulting or advisory
services and is compensated for such services, and any director of the Company
whether compensated for such services or not.

 

“Disability” means a Participant is
qualified for long-term disability benefits under the applicable health and
welfare plan of the Company or, if no such benefits are then in existence, that
the Participant is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for
a continuous period of not less than 12 months.

 

“Date of Grant” means the date on which the Committee makes the
determination granting an Option or Stock Award, or such other date as is
determined by the Board.

 

“Effective Date” means October 1,
2000, the date on which the Plan originally became effective.

 

“Eligible Employee” means an Employee who
is selected by the Committee, in accordance with Section 5.1 of the Plan
to participate in the Plan.

 

“Employee” means common law employee (as
defined in accordance with the Regulations and Revenue Rulings then applicable
under Section 3401(c) of the Code) of the Company or any Subsidiary of the
Company.

 

“ERISA” means the Employee Retirement
Income Security Act of 1974, as amended from time to time, or any successor
statute or statutes thereto.

 

“Fair Market Value” means the value of  Shares as determined by the Committee in
accordance with the provisions of Article X of the Plan.

 

“Exchange Act” means the Securities
Exchange Act of 1934, as amended from time to time, or any successor statute or
statutes thereto.  Reference to any
specific Exchange Act section shall include any successor section.

 

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“Incentive Option” means an option granted
under this Plan that is both intended to and qualifies as an incentive stock
option under Section 422 of the Code.

 

“Initial Public Offering” or “IPO” means
the first underwritten public offering of equity securities of the Company
pursuant to an effective registration statement under the Securities Act of
1933, as amended, for which the Company receives not less than $25 million in
gross proceeds and following which there is a public market for the securities
so offered.

 

“Nonqualified Option” means an option
granted under this Plan that either is not intended to be or is not denominated
as an Incentive Option, or that does not qualify as an incentive stock option
under Section 422 of the Code.

 

“Officer” means an Employee who is subject
to the provisions of Section 16b of the Exchange Act.

 

“Option” means a Nonqualified Option or an
Incentive Option.

 

“Optionee” means an Employee of the Company
or a Subsidiary or a Consultant who has received an Option under this Plan.

 

“Option Price” means the price which must be paid by an Optionee
upon exercise of an Option to purchase a share of Common Stock.

 

“Option Shares” means, with respect to any
Option granted under this Plan, the Common Stock that may be acquired upon the
exercise of such Option.

 

“Participant” means an Employee or a
Consultant who has received an Option or a Stock Award under this Plan.

 

“Plan” means this Heartland Payment
Systems, Inc. Amended and Restated 2000 Equity Incentive Plan, as amended from
time to time.

 

“Plan Award” means an Option, a Stock Award
or a Stock Appreciation Right.

 

“Secretary” means the secretary of the
Company or his designee.

 

“Shares” means shares of Common Stock.

 

“Stock Appreciation Right” shall mean any
right granted under Section 6.12 of the Plan.

 

“Stock Award” means the transfer of Common
Stock to an eligible individual pursuant to Article VIII of the Plan.

 

“Subsidiary” of the Company means any
present or future subsidiary (as defined in Section 424(f) of the Code) of
the Company or any business entity in which the Company owns directly or
indirectly, 50% or more of the voting, capital or profits

 

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interests.  An entity shall be deemed a subsidiary of
the Company for purposes of this definition only for such periods as the
requisite ownership or control relationship is maintained.

 

“Termination of Service” occurs when a
Participant ceases to serve as an Employee of the Company and its Subsidiaries
or as a Consultant, as the case may be, for any reason.

 

“Vesting Date” with respect to any Plan
Award granted hereunder means the date on which such Plan Award ceases to be
subject to a risk of forfeiture, as designated in or determined in accordance
with the Agreement with respect to such Plan Award.  If more than one Vesting Date is designated for a Plan Award,
reference in the Plan to a Vesting Date in respect of such Plan Award shall be
deemed to refer to each part of such Plan Award and the Vesting Date for such
part.

 

ARTICLE III

 

ADMINISTRATION

 

3.1                                 Committee.   The Plan shall be administered by the
Compensation Committee of the Board unless a different committee is appointed
by the Board.  The Board may from time
to time appoint members of the Committee in substitution for or in addition to
members previously appointed, may fill vacancies in the Committee and may
remove members of the Committee.  The
Committee shall select one of its members as its chairman.  The Committee shall hold meetings at such
times and places as may be necessary for the proper administration of the Plan
and shall keep minutes of its meetings. 
A majority of its members shall constitute a quorum and all
determinations shall be made by a majority of such quorum.  Any determination reduced to writing and
signed by all of the members shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held.

 

3.2                                 Powers.  Subject to the provisions of the Plan, the
Committee shall have sole authority, in its absolute discretion:

 

(i)                                     to
determine which eligible individuals shall be granted Plan Awards;

(ii)                                  to
grant Plan Awards;

(iii)                               to determine the times
when Options may be granted and the number of Shares that may be purchased
pursuant to such Options;

(iv)                              to
determine the Fair Market Value of the Common Stock in accordance with
Article X of the Plan and the exercise price of the Shares subject to each
Option, which price shall be not less than the minimum specified in
Section 6.3;

(v)                                 to
determine the time or times when each Option becomes exercisable, the duration
of the exercise period, and any other restrictions on the exercise of Options
issued hereunder;

(vi)                              to
prescribe the form or forms of the Agreements under the Plan;

 

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(vii)                           to determine the
circumstances under which the time for exercising Options should be accelerated
and to accelerate the time for exercising outstanding Options;

(viii)                        to determine the duration and
purposes for leaves of absence which may be granted to a Participant without
constituting a Termination of Service for purposes of the Plan;

(ix)                                to
designate whether any Option to be granted hereunder is to be an Incentive
Option or a Nonqualified Option;

(x)                                   to
determine the amount (not less than the par value per share) and the form of
the consideration that may be used to purchase shares of Common Stock upon
exercise of any Option (including, without limitation, the circumstances under
which issued and outstanding shares of Common Stock owned by a Participant may
be used by the Participant to exercise an Option);

(xi)                                to
impose restrictions and/or conditions with respect to shares of Common Stock
acquired upon exercise of an Option;

(xii)                             to determine the
circumstances under which shares of Common Stock acquired upon exercise of any
Option may be subject to repurchase by the Company;

(xiii)                          to determine the circumstances
and conditions subject to which shares acquired upon exercise of an Option may
be sold or otherwise transferred, including, without limitation, the
circumstances and conditions subject to which a proposed sale of shares of
Common Stock acquired upon exercise of an Option may be subject to the
Company’s right of first refusal or right of first offer (as well as the terms
and conditions of any such right of first refusal or right of first offer);

(xiv)                         to establish a vesting
provision for any Plan Award relating to the time when (or the circumstances
under which) the Plan Award may vest, including, without limitation, vesting
provisions that may be contingent upon (A) the Company’s meeting specified
financial goals, (B) a change of control of the Company or (C) the occurrence
of other specified events and

(xv)                            to
make all other determinations deemed necessary or advisable for the
administration of the Plan;

 

provided, however, that
with respect to those Participants who are not “Officers” or “directors” of the
Company within the meaning of Section 16b of the Exchange Act, the
Committee may delegate to any person or persons (“Subcommittee”) all or any
part of its authority as set forth in clause (i) through (xv) above.

 

3.3                                 Rules
and Interpretations.  The Committee
is authorized, subject to the provisions of the Plan, to establish, amend and
rescind such rules and regulations as it deems necessary or advisable for the
proper administration of the Plan and to take such other action in connection
with or in relation to the Plan as it deems necessary or advisable.  Each action and determination made or taken
pursuant to the Plan by the Committee, including any interpretation or
construction of the Plan, shall be final and conclusive for all purposes and
upon all persons.

 

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3.4                                 Liability
and Indemnification.  No member of
the Committee shall be personally liable for any action, determination or
interpretation made by that member or the Committee in good faith with respect
to the Plan or any Option granted pursuant thereto.    Each member of the Committee shall be indemnified and held
harmless by the Company against any cost or expense (including counsel fees)
reasonably incurred by that member or liability (including any sum paid in
settlement of a claim with the approval of the Company) arising out of any act
or omission to act in connection with this Plan unless arising out of such
member’s own fraud or bad faith.  Such
indemnification shall be in addition to any rights of indemnification the
members of the Committee may have as directors or otherwise under the by-laws
of the Company.

 

3.5                                 Survival
of Provisions.  The provisions of
this Article III shall survive any termination of the Plan.

 

3.6                                 Costs
of Plan.  All expenses and
liabilities incurred by the Committee in the administration of the Plan shall
be borne by the Company.  The Committee
may employ attorneys, consultants, accountants or other persons in connection
with the administration of the Plan. 
The Company, and its officers and directors, shall be entitled to rely
upon the advice, opinions or valuations of any such persons.

 

3.7                                 Additional
Restrictions Following an IPO.   
Upon the Company registering any class of common equity securities under
Section 12 of the Exchange Act coincident with an Initial Public Offering,
the Committee shall be comprised of not less than two persons each of whom
qualifies as both:  (i) a “Non-Employee
Director” within the meaning of the rules promulgated under Section 16b of
the Exchange Act, and (ii) an “outside director” within the meaning of
Section 162(m) of the Code.  All
members of the Committee shall be “outside directors” within the meaning of the
Section 162(m) no later than the earliest applicable date described in Treasury
Regulation Section 1.162-27(f)(2) (the “Transition Date”).

 

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ARTICLE IV

 

SHARES SUBJECT TO
THE PLAN

 

4.1                                 Number
of Shares.  The maximum number of
Shares with respect to which Plan Awards may be granted during the term of the
Plan is [5,000,000]
(or the number and kind of Shares or other securities which are substituted for
those Shares or to which those Shares are adjusted pursuant to the provisions
of Article IX of the Plan).  The
terms of this Plan shall not apply to Plan Awards granted prior to the
Effective Date.  No fractional Shares
shall be issued with respect to Plan Awards granted under the Plan.

 

4.2                                 Source
of Shares.  During the term of this
Plan, the Company will at all times reserve and keep available the number of
shares of Common Stock that shall be sufficient to satisfy the requirements of
this Plan.  Shares of Common Stock will
be made available from the authorized but unissued shares of the Company or
from shares reacquired by the Company, including shares purchased in the open
market.  The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company’s counsel to be necessary to the lawful issuance and
sale of any Share hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

 

4.3                                 Counting
of Shares.  In the event that any
outstanding Plan Award under the Plan for any reason expires, is terminated,
forfeited or is canceled without having been exercised prior to the expiration
date of the Plan, the Shares subject to the outstanding portion of such Plan
Award may, to the extent permitted by rules promulgated under the Exchange Act
and the Code, again be subject to a Plan Award granted under the Plan.  If any shares of Common Stock issued or sold
pursuant to a Stock Award or the exercise of an Option shall have been
repurchased by the Company, then such shares may again be subject to an Option
and/or Award granted under the Plan (other than Incentive Options).

 

ARTICLE V

 

ELIGIBLITY AND
PARTICIPATION

 

5.1                                 General.  The persons who shall be eligible to
participate in the Plan and to receive Plan Awards shall be such employees
(including officers and directors) of the Company and its Subsidiaries or
Consultants as the Committee shall select. 
Plan Awards may be made to employees or Consultants who hold or have
held Plan Awards under this Plan or any similar plan or other awards under any
other plan of the Company or any of its Subsidiaries.  Any member of the Committee shall be eligible to receive Plan
Awards while serving on the Committee, subject to applicable provisions of the
Exchange Act and the rules promulgated thereunder.

 

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5.2                                 Committee
Discretion.  Plan Awards may be
granted by the Committee at any time and from time to time to new Participants,
or to then Participants, or to a greater or lesser number of Participants, and
may include or exclude previous Participants, as the Committee shall
determine.  Except as required by this
Plan, Plan Awards granted at different times need not contain similar
provisions.  The Committee’s
determinations under the Plan (including without limitation, determinations of
which individuals, if any, are to receive Plan Awards, the form, amount and
timing of such Plan Awards, the terms and provisions of such Plan Awards and
the agreements evidencing same) need not be uniform and may be made by it
selectively among individuals who receive, or are eligible to receive, Plan
Awards under the Plan.

 

ARTICLE VI

 

GRANTS OF STOCK
OPTIONS; STOCK APPRECIATION RIGHTS

 

6.1                                 Grant
of Options.  Subject to the
limitations of the Plan, the Committee shall designate from time to time those
eligible persons to be granted Options, the time when each Option shall be
granted to such eligible persons, the number of shares of Common Stock subject
to such Option, whether such Option is an Incentive Option or a Nonqualified
Option and, subject to Section 6.3, the purchase price of the shares of
Common Stock subject to such Option. 
Options shall be evidenced by Agreements in such form and containing
such terms and provisions not inconsistent with the provisions of the Plan as
the Committee may from time to time approve. 
Each Optionee shall be notified promptly of such grant and a written
Agreement shall be promptly executed and delivered by the Company to the Optionee.  Subject to the other provisions of the Plan,
the same person may receive Incentive Options and Nonqualified Options at the
same time and pursuant to the same Agreement, provided that Incentive Options
and Nonqualified Options are clearly designated as such.

 

6.2                                 Provisions
of Options.  Option Agreements shall
conform to the terms and conditions of the Plan.  Such Agreements may provide that the grant of any Option under
the Plan, or that Stock acquired pursuant to the exercise of any Option, shall
be subject to such other conditions (whether or not applicable to the Option or
Stock received by any other optionee) as the Committee determines appropriate,
including, without limitation, provisions conditioning vesting upon the
occurrence of certain events or performance or the passage of time, provisions
to assist the Optionee in financing the purchase of Stock through the exercise
of Options, provisions for forfeiture, restrictions on resale or other
disposition of shares acquired under the Plan, provisions conditioning the
grant of the option or future options upon the Optionee retaining ownership of
Shares acquired upon exercise for a stated period of time, provisions giving
the Company the right to repurchase shares acquired under the Plan in the event
the Optionee elects to dispose of such shares, and provisions to comply with
federal and state securities laws and federal and state income tax and other
payroll tax withholding requirements. 
All Options shall specify the term during which the Option

 

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may be exercised, which
shall be ten years or less, subject to the provisions of the Plan with respect
to termination of employment.

 

6.3                                 Option
Price.  The price at which Shares
may be purchased upon exercise of an Option shall be fixed by the Committee and
may not be less than the Fair Market Value of the Shares subject to the Option
as of the date the Option is granted.

 

6.4                                 Limitations
on Exercisability.  No Option or
part thereof may be exercised before the Vesting Date(s) set forth in its terms,
other than in the event of an acceleration as provided in Article IX, or
after the Option expires by its terms as set forth in the applicable
Agreement.  In the case of an Option
which is exercisable in installments, installments which are exercisable and
not exercised shall remain exercisable during the term of the Option.  The grant of an Option shall impose no
obligation on the Optionee to exercise such Option.

 

6.5                                 Vesting.  The Committee may, in its sole discretion,
specify in any Agreement a vesting schedule that must be satisfied before
Options may be exercised, such that all or any portion of an Option may not be
exercised until a Vesting Date or Vesting Dates, or until the occurrence of one
or more specified events, subject in any case to the terms of the Plan.  Subsequent to the grant of an Option, the
Committee, at any time before complete termination of such Option, may
accelerate the time or times at which such Option may be exercised in whole or
in part (without reducing the term of such Option).

 

6.6                                 Limited
Transferability of Options.  Subject
to the exceptions noted in this Section 6.6 and Section 6.11, no
Option shall be transferable other than by will or the laws of descent and
distribution.  During the lifetime of
the Optionee, the Option shall be exercisable only by such Optionee (or his or
her court-appointed legal representative).

 

6.7                                 No
Rights as a Stockholder.  An
Optionee or a transferee of an Option shall have no rights as a stockholder
with respect to any Share covered by his Option until he shall have become the
holder of record of such Share, and he shall not be entitled to any dividends
or distributions or other rights in respect of such Share for which the record
date is prior to the date on which he shall have become the holder of record
thereof.

 

6.8                                 Special
Provisions Applicable to Incentive Options.

 

(a) Options granted under
this Plan which are intended to qualify as Incentive Options shall be
specifically designated as such in the applicable Agreement, and may be granted
only to Employees.

 

(b) To the extent the
aggregate Fair Market Value (determined as of the time the Option is granted)
of the Stock with respect to which any Incentive Options granted hereunder may
be exercisable for the first time by the Optionee in any calendar year (under
this Plan or any other stock option plan of the Company or any Subsidiary
thereof) exceeds $100,000, such Options shall not be considered Incentive
Options.

 

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(c) No Incentive Option
may be granted to an individual who, at the time the Option is granted, owns
directly, or indirectly within the meaning of Section 424(d) of the Code,
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any Subsidiary thereof, unless such
Option (i) has an exercise price of at least 110% of the Fair Market Value of
the Stock on the Date of Grant of such option; and (ii) cannot be exercised
more than five years after the Date of Grant.

 

(d) Each Optionee who
receives an Incentive Option must agree to notify the Company in writing
immediately after the Optionee makes a Disqualifying Disposition of any Stock
acquired pursuant to the exercise of an Incentive Option.  A Disqualifying Disposition is any disposition
of such Stock before the later of (i) two years after the date the optionee was
granted the Incentive Option or (ii) one year after the date the Optionee
acquired Stock by exercising the Incentive Option, other than a transfer (i)
from a decedent to an estate, (ii) by bequest or inheritance, (iii) pursuant to
a tax-free corporate reorganization, or (iv) to a spouse or incident to
divorce.  Any transfer of ownership to a
broker or nominee shall be deemed to be a disposition unless the Optionee provides
proof satisfactory to the Committee of the Optionee’s continued beneficial
ownership of the Stock.

 

(e) No Incentive Option
shall be granted after the date which is ten years from the date this Plan is
adopted by the Board, or the date the Plan is approved by the stockholders,
whichever is earlier.  The Option Price
for Incentive Options shall not be less than the Fair Market Value of the
Common Stock on the Date of Grant of such Incentive Option.

 

(f) No Incentive Option
shall be transferable other than by will or the laws of descent and
distribution.

 

(g) No grant of Incentive
Options shall be made under this Plan unless such Plan is approved by the
stockholders of the Company within 12 months of the Effective Date of the Plan.

 

6.9                                 Financing
of Option Exercises.  The Committee
may permit any Optionee to pay the Option Price under the Option by delivering
a full-recourse, interest bearing promissory note payable in one or more
installments and secured by the purchased Common Stock.  The terms of any such promissory note
(including the interest rate and the terms of repayment) shall be established
by the Committee in its sole discretion. 
In no event may the maximum credit available to the Optionee exceed the
sum of (i) the aggregate option exercise price or purchase price payable for
the purchased Shares plus (ii) any Federal, state and local income and
employment tax liability incurred by the Optionee in connection with the option
exercise.

 

6.10                           Cancellation
and Regrant of Options.  The
Committee shall not, without first having obtained the approval of the
shareholders of the Company, effect the cancellation of any or all outstanding
Options under the Plan and the substitution therefor of new Options covering
the same or  a different number of
Shares but with an exercise price per share based on the Fair Market Value per
Share on the new option grant date.

 

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6.11                           Additional
Restrictions Following an IPO.

 

(a) Subsequent to the
Company registering any class of common equity securities under Section 12
of the Exchange Act coincident with an Initial Public Offering, no individual
may be granted in any fiscal year of the Company Options covering more than
500,000 shares (as such number may be adjusted from time to time as provided in
Section 9.1).  Further, Options
granted to persons subject to Section 16b of the Exchange Act (“Officers”)
must comply with Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan transactions,
including (i) a restriction precluding the exercise of such Option within six
months of the Date of Grant (other than in the case of an event described in
sections 9.2 or 9.6 of the Plan), and (ii) any Option granted to an Officer
shall have an Option Price at least equal to the Fair Market Value of the
Company Stock on the Date of Grant of such Option.

 

(b) Subsequent to the
Company registering any class of common equity securities under Section 12
of the Exchange Act coincident with an Initial Public Offering, the Committee
may, in its sole discretion, provide in the applicable Agreement evidencing a
Nonqualified Option that the Optionee may transfer, assign or otherwise dispose
of an option (i) to his spouse, parents, siblings and lineal descendants, (ii)
to a trust for the benefit of the optionee and any of the foregoing, or (iii)
to any corporation or partnership controlled by the Optionee, subject to such
conditions or limitations as it may establish to ensure compliance with any
rule promulgated pursuant to the Exchange Act, or for other purposes.  The terms applicable to the assigned portion
shall be the same as those in effect for the Option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Committee may deem appropriate.

 

6.12                           Stock
Appreciation Rights.  The Committee
is hereby authorized to grant Stock Appreciation Rights to eligible persons
subject to the terms of the Plan.  Each
Stock Appreciation Right granted under the Plan shall confer on the holder upon
exercise the right to receive, as determined by the Committee, cash or a number
of Shares equal to the excess of (a) the Fair Market Value of one Share on
the date of exercise (or, if the Committee shall so determine, at any time
during a specified period before or after the date of exercise) over
(b) the grant price of the Stock Appreciation Right as determined by the
Committee, which grant price shall not be less than 100% of the Fair Market
Value of one Share on the date of grant of the Stock Appreciation Right.  Subject to the terms of the Plan, the grant
price, term, methods of exercise, dates of exercise, methods of settlement and any
other terms and conditions (including conditions or restrictions on the
exercise thereof) of any Stock Appreciation Right shall be as determined by the
Committee.

 

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ARTICLE VII

 

EXERCISES OF STOCK
OPTION

 

7.1                                 General.  Any Option may be exercised in whole or in
part at any time to the extent such Option has become exercisable during the
term of such Option; provided, however, that each partial exercise shall be for
whole Shares only.  Each Option, or any
exercisable portion thereof, may only be exercised by delivery to the Secretary
or his office in accordance with such procedures for the exercise of Options as
the Committee may establish from time to time of (i) notice in writing signed
by the Optionee (or other person then entitled to exercise such Option) that
such Option, or a specified portion thereof, is being exercised; (ii) payment
in full for the purchased Shares (as specified in Section 7.3 below);
(iii) such representations and documents as are necessary or advisable to
effect compliance with all applicable provisions of Federal or state securities
laws or regulations; (iv) in the event that the Option or portion thereof shall
be exercised pursuant to Section 9.2 by any individual other than the
Optionee, appropriate proof of the right of such individual to exercise the
Option or portion thereof; and (v) full payment to the Company of all amounts
which, under federal or state law, it is required to withhold upon exercise of
the Option (as specified in Section 7.4 below).

 

7.2                                 Share
Certificates.  Upon receiving notice
of exercise and payment, the Company will cause to be delivered to the
Optionee, as soon as practicable, a certificate in the Optionee’s name for the
Shares purchased, and within a reasonable time thereafter such transfer shall
be evidenced on the books and records of the Company.  The Shares issuable and deliverable upon the exercise of a Stock
Option shall be fully paid and nonassessable. 
Shares shall not be issued pursuant to the exercise of an Option unless
the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

 

7.3                                 Payment
for Shares.  Payment for Shares
purchased under an Option granted hereunder shall be made in full upon exercise
of the Option.  The method or methods of
payment of the purchase price for the Shares to be purchased upon exercise of
an Option and of any amounts required by Section 12.5 shall be determined
by the Committee and may consist of (i) cash, (ii) check, (iii) promissory
note, (iv) whole shares of Common Stock, (v) the delivery, together with a
properly executed exercise notice, of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds required to
pay the purchase price, (vi) any combination of the foregoing methods of
payment, or such other consideration and method of payment as may be permitted
for the issuance of shares under General Corporation Law for the State of New
Jersey.  The permitted method or methods
of payment of the amounts payable upon exercise of an Option, if other than in
cash, shall be set forth in the applicable Agreement and may be subject to such
conditions as the Committee deems appropriate To the extent the Option exercise
price may be paid in Shares as provided above, Shares delivered by the Optionee
may be (i) upon the exercise of an Incentive Option, shares which were received
by the Optionee upon exercise of one or more previously exercised Incentive
Options, but only if such Shares have been held by the Optionee for the periods
of time required by Section 422(a)(1) or six months, whichever is longer,
or (ii) shares which were

 

12

 

received by the Optionee
upon exercise of one or more Nonqualified Options, but only if such Shares have
been held by the Optionee for at least six months.

 

7.4                                 Share
Withholding.  Each Agreement shall
require that an Optionee pay to the Company, at the time of exercise of a
Nonqualified Option, such amount as the Company deems necessary to satisfy the
Company’s obligation to withhold federal or state income or other taxes
incurred by reason of the exercise or the transfer of Shares thereupon.  An Optionee may satisfy such withholding
requirements by having the Company withhold from the number of Shares otherwise
issuable upon exercise of the Option that number of shares having an aggregate
Fair Market Value on the date of exercise equal to the minimum amount required
by law to be withheld; provided, however, that in the case of an exercise by an
Optionee subject to Section 16b of the Exchange Act, such withholding must
be approved by the Committee before execution thereof.

 

7.5                                 Additional
Restrictions Following an IPO.

 

(a) Unless a registration
statement under the Securities Act and the applicable rules and regulations
thereunder is then in effect with respect to Shares issued under this Plan, the
Company shall require that the offer and sale of such Shares be exempt from the
registration provisions of said Act.  In
furtherance of such exemption, the Company may require, as a condition
precedent to the grant of any Plan Award, that the Participant give to the
Company written representation and undertaking, satisfactory in form and
substance to the Company, that he is acquiring the Shares for his own account
for investment and not with a view to the distribution or resale thereof and
otherwise establish to the Company’s satisfaction that the offer or sale of the
Shares issuable upon exercise of the Option will not constitute or result in
any breach or violation of the Securities Act or any similar state act or
statute or any rules or regulations thereunder.  In the event a registration statement under the Securities Act is
not then in effect with respect to the Shares, the Company shall place upon any
stock certificate an appropriate legend referring to the restrictions on
disposition under the Act.

 

(b) Until such time as
the Common Stock of the Company is first registered under Section 12 of
the Exchange Act, (i) the Participant may not sell or otherwise transfer Common
Stock acquired pursuant to this Article until such Common Stock has been
held for six months and (ii) the right of a Participant under this Plan to
exercise an Option and thereby purchase Shares shall be subject to any
requirement imposed by the Company or the Committee upon the Participant to
execute a stockholders agreement prior to the transfer of such Shares.  The stockholders agreement may contain such
restrictions and limitations as the Company or the Committee may deem necessary
and appropriate with respect to the Participant’s ownership rights in the
Shares.  Except as specifically permitted
by the provisions of the stockholders agreement, the Participant shall have no
right to sell, transfer or otherwise dispose of the shares.   Certificates representing Shares issued
upon the exercise of Options shall bear a restrictive legend to the effect that
transferability of such shares are subject to the restrictions contained in the
Plan and the applicable stockholders agreement and that the Company may cause
the transfer agent for the Common Stock to place a stop transfer order with
respect to such shares.

 

13

 

ARTICLE VIII

 

GRANTS OF COMMON
STOCK

 

8.1                           Stock
Awards.  The Committee shall have
the sole authority and discretion under the Plan

 

(i)                                     to
select the Employees who are to be granted Stock Awards hereunder;

(ii)                                  to
determine the time or times and the conditions subject to which Stock Awards
may be made;

(iii)                               to
establish transfer restrictions and the terms and conditions on which any such
transfer restrictions with respect to shares of Common Stock acquired pursuant
to a Stock Award shall lapse;

(iv)                              to
establish vesting provisions with respect to any shares of Common Stock subject
to a Stock Award, including, without limitation, vesting provisions which may
be contingent upon (A) the Company’s meeting specified financial goals, (B) a
change of control of the Company or (C) the occurrence of other specified
events;

(v)                                 to
determine the circumstances under which shares of Common Stock acquired
pursuant to a Stock Award may be subject to repurchase by the Company;

(vi)                              to
determine the circumstances and conditions subject to which any shares of
Common Stock acquired pursuant to a Stock Award may be sold or otherwise
transferred, including, without limitation, the circumstances and conditions subject
to which a proposed sale of shares of Common Stock acquired pursuant to a Stock
Award may be subject to the Company’s right of first refusal or right of first
offer (as well as the terms and conditions of any such right of first refusal
or right of first offer);

(vii)                           to
accelerate the time at which any or all restrictions imposed with respect to
any shares of Common Stock subject to an Award will lapse; and

(viii)                        to
establish any other terms, restrictions and/or conditions applicable to any
Award not inconsistent with the provisions of the Plan.

 

8.2                                 Vesting.  Stock Awards shall be subject to the right
of the Company to require forfeiture of such Shares by the Participant in the
event that conditions specified by the Committee in the applicable Agreement
are not satisfied prior to the end of the applicable vesting period established
by the Committee for such Award. 
Conditions for repurchase (or forfeiture) may be based on continuing
employment or service or achievement of pre-established performance or other
goals and objectives.  In the event of a
Participant’s termination of employment for any reason prior to the lapse of
restrictions applicable to a Stock Award made to such Participant and unless
otherwise provided for herein by this Plan or as provided for in the Stock
Agreement, all rights to Shares as to which there remain unlapsed restrictions
shall be forfeited by such

 

14

 

participant to the
Company without payment or any consideration by the Company, and neither the
participant nor any successors, heirs, assigns or personal representatives of
such participant shall thereafter have any further rights or interest in such
Shares.

 

8.3                                 Nontransferability
of Stock Awards.  Shares of Stock
Awards may not be sold, assigned, transferred, pledged or otherwise encumbered,
except as permitted by the Committee, during the applicable vesting
period.  Shares of Stock Awards shall be
evidenced in such manner as the Committee may determine.  Any certificates issued in respect of shares
of Stock Awards shall be registered in the name of the Participant and, unless
otherwise determined by the Committee, deposited by the Participant, together
with a stock power endorsed in blank, with the Company (or its designee).  At the expiration of the vesting period, the
Company (or such designee) shall deliver such certificates to the Participant
or, if the Participant has died, to the Participant’s Designated Beneficiary.  Each certificate evidencing stock subject to
Stock Awards shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Award.  Any attempt to dispose of stock in contravention of such terms,
conditions and restrictions shall be ineffective.  During the restriction period, the Participant shall have the
rights of a shareholder for all such Shares of Common Stock, including the
right to vote and the right to receive dividends thereon as paid.

 

8.4                                 Tax
Withholding.  To the extent that the
Company is required to withhold any Federal, state or local taxes in respect of
any compensation income realized by the Participant in respect of shares
acquired pursuant to an Award, or in respect of the vesting of any such shares
of Common Stock, then the Company shall deduct from any payments of any kind
otherwise due to such Participant the aggregate amount of such Federal, state
or local taxes required to be so withheld, or if such payments are insufficient
to satisfy such Federal, state or local taxes, or if no such payments are due
or to become due to such Participant, then such Participant will be required to
pay to the Company, or make other arrangements satisfactory to the Company
regarding payment to the Company of, the aggregate amount of any such taxes.  All matters with respect to the total amount
of taxes to be withheld in respect of any such compensation income shall be
determined by the Committee, in its sole discretion.

 

8.5                                 Additional
Restrictions Following an IPO.

 

(a) In the event that the
Company becomes a “publicly held corporation” within the meaning of
Section 162(m), the Committee will not on or after the Transition Date
grant any Award to any Employee who is likely to be a “covered employee” within
the meaning of Section 162(m), unless the grant of such Award complies
with the requirements set forth in Section 162(m) with respect to the
Company’s entitlement to a deduction for such Award, including without
limitation the requirements relating to objective performance goals established
by the Committee and shareholder approval.

 

(b) Until such time as
the Common Stock of the Company is first registered under Section 12 of
the Exchange Act, (i) the Participant may not sell or otherwise transfer Common
Stock acquired pursuant to this Article until such Common Stock has been
held for six months and (ii) the right of a Participant under this Plan to
receive a Stock

 

15

 

Award shall be subject to
any requirement imposed by the Company or the Committee upon the Participant to
execute a stockholders agreement prior to the transfer of such Shares.  The stockholders agreement may contain such
restrictions and limitations as the Company or the Committee may deem necessary
and appropriate with respect to the Participant’s ownership rights in the
Shares.  Except as specifically
permitted by the provisions of the stockholders agreement, the Participant
shall have no right to sell, transfer or otherwise dispose of the shares.    Certificates representing Stock Awards
shall bear a restrictive legend to the effect that transferability of such
shares are subject to the restrictions contained in the Plan and the applicable
Agreement and the Company may cause the transfer agent for the Common Stock to
place a stop transfer order with respect to such shares.

 

ARTICLE IX

 

EVENTS AFFECTING
PLAN RESERVE OR PLAN AWARDS

 

9.1                                 Capital
Adjustments.

 

(a) If the Company
subdivides its outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock dividend, stock split, reclassification or
otherwise) or combines its outstanding shares of Common Stock into a smaller
number of shares of Common Stock (by reverse stock split, reclassification or
otherwise), or the Committee determines that any stock dividend, extraordinary
cash dividend, reclassification, recapitalization, reorganization, split-up,
spin-off, combination, exchange of shares, warrants or rights offering to
purchase Common Stock, or other similar corporate event (including mergers or
consolidations) affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under this Plan, then the Committee shall, in such manner as it may
deem equitable and appropriate, make such adjustments to any or all of (i) the
number of shares of Common Stock reserved for the Plan, (ii) the number of
shares subject to outstanding Options and Stock Awards, and (iii) the exercise
price with respect to outstanding Options, provided, however, that the number of
shares subject to any Option shall always be a whole number.  The Committee may provide for a cash payment
to any Participant of a Plan Award in connection with any adjustment made
pursuant to this Section 9.1.

 

Any such adjustment to an
Option shall be made without a change to the total exercise price applicable to
the unexercised portion of the Option (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices), and shall be
final and binding upon all Participants, the Company, their representatives,
and all other interested persons.

 

(b) In the event
of a transaction involving (i) a merger or consolidation in which the Company
is not the surviving company or (ii) the sale or disposition of all or
substantially all of the Company’s assets, provision shall be made in
connection with such transaction for the assumption of Options theretofore
granted under the Plan, or

 

16

 

the substitution
for such Options of new options of the successor corporation, with appropriate
adjustment as to the number and kind of Shares and the purchase price for
Shares thereunder, or, in the discretion of the Committee, the Plan and the
Options issued hereunder shall terminate on the effective date of such
transaction if appropriate provision is made for payment to the Participant of
an amount in cash equal to the Fair Market Value of a Share multiplied by the
number of Shares subject to the Options (to the extent such Options have not
been exercised) less the exercise price for such Options (to the extent such
Options have not been exercised); provided, however, that if the Board desires
to have a transaction described in clause (i) or (ii) above treated as a
pooling of interests under generally accepted accounting principles, the
Committee shall not take any action or make any determination under this
Article IX which would prevent such treatment.

 

(c) In the event of the
proposed dissolution or liquidation of the Company, the Committee shall notify
the Optionee at least fifteen (15) days prior to such proposed action.  To the extent it has not been previously
exercised, the Option will terminate immediately prior to the consummation of
such proposed action.

 

9.2                                 Death or Disability of a Participant. 
If a Participant who is an Employee or a director of the Company ceases
to be an Employee or a director of the Company (i) by reason of his death, or
(ii) solely in the case of an Employee, because of his Disability, then
notwithstanding any contrary waiting period, installment period or vesting
schedule in any Agreement or in the Plan, unless the applicable Agreement
provides otherwise, each outstanding Plan Award granted under the Plan to such
Participant shall immediately become vested and, if an Option, exercisable in
full in respect of the aggregate number of shares covered thereby.  Each Option may be exercised by the
Participant’s estate or the Participant, as the case may be, for a period of
twelve months from the date of death or six months from Termination of Service
due to Disability.  In no event,
however, shall an Option remain exercisable beyond the latest date on which it
could have been exercised without regard to this Section 9.2.

 

9.3                                 Other
Termination of Service.  If a
Participant who is an Employee or a director ceases to be an Employee or a
director for any reason other than death or Disability, or if there is a
termination of the relationship in respect of which a Consultant was granted an
Option hereunder, except as otherwise determined by the Committee, all Plan
Awards held by the Participant that were not vested and exercisable immediately
prior to such termination shall become null and void at the time of the
termination.  Any Options that were
exercisable immediately prior to the termination will continue to be
exercisable for a period of (i) one month in the case of voluntary resignation;
and (ii) three months in the case of involuntary dismissal (or such shorter or
longer period as the Committee may determine), and shall thereupon
terminate.  Any termination by the
Company for Cause will be treated in accordance with the provisions of
Section 9.4.  In no event, however,
shall an Option remain exercisable beyond the latest date on which it could
have been exercised without regard to this Section 9.3.

 

9.4                                 Termination
by Company for Cause.  If a
Participant’s employment or service relationship with the Company or a
Subsidiary shall be terminated by the Company or

 

17

 

such Subsidiary for
Cause, then all Plan Awards held by such Participant, whether or not then
vested or exercisable, shall immediately terminate.  For these purposes, Cause shall have the meaning ascribed thereto
in any employment agreement to which such Participant is a party or, in the
absence thereof, shall include but not be limited to, insubordination,
dishonesty, other significant misconduct of any kind and the refusal to perform
his duties and responsibilities for any reason other than illness or
incapacity.

 

9.5                                 Leave
of Absence.  The Committee may
determine whether any given leave of absence constitutes a termination of
employment; provided, however, that for purposes of the Plan (i) a leave of
absence, duly authorized in writing by the Company for military service or
sickness, or for any other purpose approved by the Company if the period of
such leave does not exceed 90 days, and (ii) a leave of absence in excess of 90
days, duly authorized in writing by the Company, provided the Employee’s right
to reemployment is guaranteed either by statute or contract, shall not be
deemed a termination of employment. 
Plan Awards granted under the Plan shall not be affected by any change
of employment so long as the Participant continues to be an employee of the
Company or any Subsidiary.

 

9.6                                 Change-In-Control.  No Agreement issued pursuant to the Plan may
provide for

 

the acceleration of any
vesting schedule solely because of the occurrence of any “Approved
Transaction, Board Change or Control Purchase”, each of which is a
“Change-in-Control” of the Company. 
Awards may provide for an acceleration of a vesting schedule in the
event of the involuntary dismissal of a Participant within a specified period
of time following a Change-in-Control, notwithstanding any contrary waiting
period, installment period, or vesting schedule in any Agreement or in the
Plan. Such period of time is to be determined by the Committee at the date of
grant of the Plan Award and specified in the Agreement.

 

“Approved Transaction”
means any transaction in which the Board (or, if approval of the Board is not
required as a matter of law, the stockholders of the Company) shall approve (i)
any merger, consolidation or binding share exchange of the Company, pursuant to
which shares of common stock of the Company would be changed or converted into
or exchanged for cash, securities or other property, other than any such
transaction in which the common stockholders of the Company immediately prior
to such transaction have the same proportionate ownership of the common stock
of, and voting power with respect to, the surviving corporation immediately
after such transaction, (ii) the adoption of any plan or proposal for the
liquidation or dissolution of the Company, or (iii) any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions) of
all, or substantially all, of the assets of the Company.

 

“Board Change” means,
during any period of two consecutive years, individuals who at the beginning of
such period constituted the entire Board cease for any reason to constitute a
majority thereof, unless the election, or the nomination for election, of each
new director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period.

 

18

 

“Control Purchase” means
any transaction (or series of related transactions) in which (i) any person (as
such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation
or other entity (other than the Company, any Subsidiary or any employee benefit
plan sponsored by the Company or any Subsidiary) shall purchase any common
stock of the Company (or securities convertible into common stock of the
Company) for cash, securities or any other consideration pursuant to a tender
offer or exchange offer, without the prior consent of the Board, or (ii) any
person (as such term is so defined), corporation or other entity (other than
the Company, any Subsidiary, any employee benefit plan sponsored by the Company
or any Subsidiary, or any Controlling Person (as defined below)) shall become
the “beneficial owner” (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of the then outstanding securities of
the Company ordinarily having the right to vote in the election of directors,
other than in a transaction (or series of related transactions) approved by the
Board.  For purposes of this definition,
“Controlling Person” means each of the Chairman of the Board, the President and
each of the directors of the Company as of the Effective Date of this Plan, and
(b) the respective family members, estates and heirs of each of the persons
referred to in clause (a) above and any trust or other investment vehicle for
the primary benefit of any of such persons or their respective family members
or heirs.  As used with respect to any
person, the term “family member” means the spouse, parents, siblings and lineal
descendants of such person.

 

9.7                                 Recapture
of Option Profit.  An Option may, in
the sole discretion of the Committee and on the Date of Grant, contain a
“Harmful Conduct” provision.  Such a
provision shall provide that in the case of an Employee who has been granted an
Option and exercised such Option under this Plan, who has terminated
employment, and who has engaged in Harmful Conduct, the Committee may, in its
sole discretion, require such Employee to pay to the Company his Recent Option
Profit.  For the purposes of this
Section 9.7, “Harmful Conduct” means a breach in any material respect of
an agreement to not reveal confidential information regarding the business
operations of the Company or any Subsidiary, or to refrain from solicitation of
the customers, suppliers or employees of the Company or any Subsidiary.  “Recent Option Profit” means an amount equal
to the excess of (i) the Fair Market Value of the Stock purchased by such
individual through the exercise of Options during the fifteen month period
commencing twelve months before the individual’s last day of employment and
ending three months after the last day of employment over (ii) the amount paid
to exercise such Options.

 

19

 

ARTICLE X

 

FAIR MARKET VALUE

 

10.1                           General.  The fair market value of the Common Stock of
the Company on any relevant date shall be determined in accordance with the
following provisions:

 

(i)                                     If
the Common Stock is at the time listed on any Stock Exchange, then the Fair
Market Value shall be the closing selling price 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 in the composite tape of
transactions on such exchange.  If there
is no closing selling price for the Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the last preceding
date for which such quotation exists;

(ii)                                  If
the Common Stock is at the time traded on the Nasdaq National Market, then the
Fair Market Value shall be the closing selling price on the date in question,
as such price is reported by the National Association of Securities Dealers on
the Nasdaq National Market.  If there is
no closing selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last preceding date
for which such quotation exists;

(iii)                               If
the Common Stock is not quoted on the NASDAQ System or is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for
the Common Stock on the last market trading day prior to the day of
determination; or

(iv)                              If
for any day the Fair Market Value of a share of the Common Stock is not
determinable by any of the foregoing means, then the Fair Market Value for such
day shall be determined in good faith by the Committee on the basis of such
quotations and other considerations as the Committee deems appropriate.

 

ARTICLE XI

 

GOVERNMENT
REGULATIONS AND REGISTRATION OF SHARES

 

11.1                           General.  The Plan, and the grant and exercise of Plan
Awards hereunder, and the Company’s obligation to sell and deliver stock under
Options, shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any regulatory or governmental agency as
may be required.

 

11.2                           Additional
Restrictions Following an IPO.  The
obligation of the Company with respect to Plan Awards shall be subject to all
applicable laws, rules and regulations and such approvals by any governmental
agencies as may be required, including, without limitation, the effectiveness
of any registration statement required under the Securities Act of 1933, and
the rules and regulations of any securities exchange or association on which
the Common Stock may be listed or quoted. 
For so long as the Common Stock of the Company is registered under the
Exchange Act, the Company shall use its

 

20

 

reasonable efforts to
comply with any legal requirements (i) to maintain a registration statement in
effect under the Securities Act of 1933 with respect to all shares of the
applicable series of Common Stock that may be issued to Participants under the
Plan, and (ii) to file in a timely manner all reports required to be filed by
it under the Exchange Act.

 

ARTICLE XII

 

MISCELLANEOUS
PROVISIONS

 

12.1                           Legends.  Each certificate evidencing Common Stock
obtained through the Plan shall bear such legends as the Committee deems
necessary or appropriate to reflect or refer to any terms, conditions or
restrictions applicable to such Shares, including, without limitation, any to
the effect that the Shares represented thereby may not be disposed of unless
the Company has received an opinion of counsel, acceptable to the Company, that
such dispositions will not violate any federal or state securities laws.

 

12.2                           Rights of Company. 
Nothing contained in the Plan or in any Agreement, and no action of the
Company or the Committee with respect thereto, shall confer or be construed to
confer on any Participant any right to continue in the employ of the Company or
any of its Subsidiaries or interfere in any way with the right of the Company
or a Subsidiary to terminate the employment of the Participant at any time,
with or without cause; subject, however, to the provisions of any employment
agreement between the Participant and the Company or any Subsidiary.  The grant of Options pursuant to the Plan
shall not affect in any way the right or power of the Company to make
reclassifications, reorganizations or other changes of or to its capital or
business structure or to merge, consolidate, liquidate, sell or otherwise
dispose of all or any part of its business or assets.

 

12.3                           Designation
of Beneficiaries.  Each Participant
who shall be granted a Plan Award may designate a beneficiary or beneficiaries
and may change such designation from time to time by filing a written
designation of beneficiary or beneficiaries with the Committee on a form to be
prescribed by it, provided that no such designation shall be effective unless
so filed prior to the death of such person.

 

12.4                           Compliance
with Other Laws and Regulations. 
Notwithstanding anything contained herein to the contrary, the Company
shall not be required to sell or issue shares of Common Stock if the issuance
thereof would constitute a violation by the Company of any provisions of any
law or regulation of any governmental authority or any national securities
exchange or other forum in which shares of Common Stock are traded (including
without limitation Section 16 of the Exchange Act); and, as a condition of
any sale or issuance of shares of Common Stock, the Committee may require such
agreements or undertakings, if any, as the Committee may deem necessary or
advisable to assure compliance with any such law or regulation.  The Plan, the grant of Plan Awards and
exercise of Options hereunder, and the obligation of the Company to sell and
deliver shares of Common Stock, shall be subject to all applicable federal and
state

 

21

 

laws, rules and
regulations and to such approvals by any government or regulatory agency as may
be required.

 

12.5                           Payroll
Tax Withholding.  The Company’s
obligation to deliver shares of Common Stock under the Plan shall be subject to
applicable federal, state and local tax withholding requirements.  Federal, state and local withholding tax due
upon the exercise of any Option may, in the discretion of the Committee, be
paid in shares of Common Stock already owned by the Optionee or through the
withholding of shares otherwise issuable to such Optionee, upon such terms and
conditions (including, without limitation, the conditions referenced in
Section 7.6) as the Committee shall determine which shares shall have an
aggregate Fair Market Value equal to the required minimum withholding
payment.  If the Optionee shall fail to
pay, or make arrangements satisfactory to the Committee for the payment to the
Company of all such federal, state and local taxes required to be withheld by
the Company, then the Company shall, to the extent permitted by law, have the
right to deduct from any payment of any kind otherwise due to such Optionee an
amount equal to federal, state or local taxes of any kind required to be
withheld by the Company.

 

12.6                           Non-Exclusivity
of the Plan.  Neither the adoption
of the Plan by the Board nor the submission of the Plan to the stockholders of
the Company for approval shall be construed as creating any limitations on the
power of the Board to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and the
awarding of stock and cash otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.

 

12.7                           Exclusion
from Benefit Computation.  By
acceptance of a Plan Award, unless otherwise provided in the applicable
Agreement, each Participant shall be deemed to have agreed that such Plan Award
is special incentive compensation that will not be taken into account, in any
manner, as salary, compensation or bonus in determining the amount of any
payment under any health and welfare, pension, retirement or other employee
benefit plan, program or policy of the Company or any Subsidiary.  In addition, each beneficiary of a deceased
Participant shall be deemed to have agreed that such Plan Award will not affect
the amount of any life insurance coverage, if any, provided by the Company on
the life of the Participant which is payable to such beneficiary under any life
insurance plan covering employees of the Company or any Subsidiary.

 

12.8                           Governing
Law.  The Plan shall be governed by,
and construed in accordance with, the laws of the State of New Jersey.

 

12.9                           Use
of Proceeds.  Proceeds from the sale
of shares of Common Stock pursuant to Options granted under this Plan shall
constitute general funds of the Company.

 

22

 

ARTICLE XIII

 

TERMINATION AND
AMENDMENT

 

13.1                           General.  Unless the Plan shall theretofore have been
terminated as hereinafter provided, no Plan Awards may be granted on or after
the tenth anniversary of the Effective Date. 
The Board or the Committee may at any time prior to the tenth
anniversary of the Effective Date terminate the Plan, and may, from time to
time, suspend or discontinue the Plan or modify or amend the Plan in such
respects as it shall deem advisable; except that no such modification or
amendment shall be effective prior to approval by the Company’s stockholders to
the extent such approval is required by applicable legal requirements.

 

13.2                           Shareholder
Approval.  Continuance of the Plan
shall be subject to approval by the shareholders of the Company within twelve
(12) months before or after the date the Plan is adopted.  Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock may be listed during
such period of time.

 

13.3                           Modification.  No termination, modification or amendment of
the Plan may, without the consent of the person to whom any Plan Award shall
theretofore have been granted, adversely affect the rights of such person with
respect to such Plan Award.  No
modification, extension, renewal or other change in any Option granted under
the Plan shall be made after the grant of such Option, unless the same is
consistent with the provisions of the Plan. 
With the consent of the Participant and subject to the terms and
conditions of the Plan, the Committee may amend outstanding Agreements with any
Participant, including, without limitation, any amendment which would (i)
accelerate the time or times at which the Option may be exercised and/or (ii)
extend the scheduled expiration date of the Option.  The Committee may, subject to the approval of the Shareholders,
and solely with the Holder’s consent unless otherwise provided in the
Agreement, agree to cancel any Option under the Plan and issue a new Option in
substitution therefore, provided that the Option so substituted shall satisfy
all of the requirements of the Plan as of the date such new Option is made.

 

23Exhibit
10.19

 

Option #:
                    
10/20/00 $6 Name of Employee:
                                        

 

EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT WITH OPTION
VESTING

(GRANTED WHILE A CLOSELY-HELD COMPANY)

 

HEARTLAND PAYMENT SYSTEMS, INC.

 

2000 EQUITY
INCENTIVE PLAN

 

1.             Grant of Option.  Pursuant to the Heartland Payment Systems,
Inc. 2000 Equity Incentive Plan (the “Plan”) of Heartland Payment Systems,
Inc., a Delaware corporation (the “Company”), and its Subsidiaries, the Company
grants to                                                         
(the “Optionee”), an option to purchase from the Company a total of
                                   
full shares of common stock (“Common Stock”) of the Company, in the amounts,
during the periods, and upon the terms and conditions set forth in this
Agreement (the “Option” or “Agreement”). The Date of Grant Option is October
20, 2000. To the extent possible, the Option will be treated by the Company as
an Incentive Stock Option as defined in Section 422(b) of the Internal Revenue
Code of 1986, as amended (the “Code”).

 

2.             Incorporation by Reference of Plan.  The provisions of the Plan, a copy of which
is being furnished herewith to the Optionee, are incorporated by reference
herein and shall govern as to all matters not expressly provided for in this
Agreement. Capitalized terms not defined herein have the meaning set forth in
the Plan. In the event of any conflict between the terms of this Agreement and
the Plan, the terms of the Plan shall govern.

 

3.             Option Price.  The purchase price for the shares of Common Stock subject to the
Option (the “Option Price”) shall be $6.00 per share (subject to adjustment as
provided in Section 12).

 

4.             Exercise of Option.  The Option shall be exercisable only in
accordance with its provisions and those of the Plan. Except as provided in
Sections 9 and 11 hereof, the Option shall not be exercisable after October 20,
2010.

 

5.             Vesting of Option.  The Option is fully vested.

 

6.             Method of Exercising Option.  Subject to the terms and conditions of this
Agreement and the Plan, the Option may be exercised in whole or in part (for
whole Shares only) by written notice delivered to the Company signed by the
Optionee or by the person or persons exercising the Option, in the form of
Exhibit A attached hereto.

 

Such notice shall be accompanied by payment in full of
the Option Price. The Option Price shall be payable by certified or bank
cashier’s check payable to the order of the Company, or in the form of
unrestricted Shares already owned by the Optionee based on the fair market
value (as defined in Article X of the Plan) of such Shares on the date the
Option is exercised, or by a combination thereof, all as set forth in Section
7.3 of the Plan. To the extent the Option Price is paid in Shares, Shares
delivered by the Optionee may be shares which were received by the Optionee
upon the exercise of one or more previously exercised Incentive Options, but
only if such Shares have been held by the Optionee for at least the greater of
(a) two years from the date the Incentive Options were granted or (b) one year
after the transfer of Shares to the Optionee, or (ii) Shares which were
received by the Optionee upon exercise of one or more Nonqualified Options, but
only if such Shares have been held by the Optionee for at least six months.

 

 

The Optionee shall not be entitled to any rights as a
shareholder with respect to such shares of Common Stock being acquired pursuant
to the exercise of the Option unless and until such certificates are issued. No
adjustment shall be made for dividends or distributions or other rights for
which the record date is prior to the date such certificate is issued.

 

In the event the Option shall be exercised by any
person other than the Optionee, the notice of exercise of the Option shall be
accompanied by proof satisfactory to the Committee of the right of such person
to exercise the Option.

 

Certificates for the purchased shares will not be
issued to the Optionee unless and until the Optionee has executed a stockholders
agreement governing and limiting the stockholder’s rights to sell, transfer or
otherwise dispose of the Shares.

 

7.             Holding Period of Shares Necessary for Favorable Tax
Treatment.  To obtain the
most advantageous federal income tax treatment for stock acquired pursuant to
the Option, the Optionee may not dispose of Shares acquired pursuant to the
Option (i) within two years of the date the Option is granted or (ii) within
one year after the transfer of the Shares to the Optionee. The foregoing statement
of tax consequences is intended only as a generalized statement of federal tax
law (as in existence on the date of this Agreement) and the Optionee should
consult a tax advisor to determine the specific tax consequences of his sale of
the Shares. An Optionee who disposes of his Shares prior to the expiration of
either holding period shall notify the Company, within 10 days after the
disposition occurs, of the date of the sale and the amount of gain on the sale.

 

8.             Retained Ownership of Shares Acquired by Exercise.  A stated purpose of the Plan and of the
grant of this Option is to increase the Optionee’s proprietary interest in the
Company. This can be accomplished through the grant of this Option solely by
the Optionee retaining ownership of the stock acquired pursuant to the exercise
hereof for a significant period of time. The Company hereby states its
expectation that upon exercise of this Option, in part or in full, the Optionee
will retain ownership of the Shares purchased as follows:

 

	
  Portion of Stock Purchased

  	
   

  	
  To be Held For At
  Least

  the Following Duration

  	
   

  
	
  1/3

  	
   

  	
  2 years

  	
   

  
	
  1/3

  	
   

  	
  3 years

  	
   

  
	
  1/3

  	
   

  	
  4 years

  	
   

  

 

The Committee hereby states that in determining the
number of shares to be optioned to the Optionee in future years, the Committee
will take into consideration, among other factors, the extent to which the
Optionee has satisfied the expectations of the Company with respect to the
retained ownership of Shares acquired by the exercise of this Option.

 

9.             Death or Disability of the Optionee.  As provided in Section 9.2 of the Plan, if
the Optionee shall Terminate Service by reason of his death or Disability, the
Option shall become fully and immediately exercisable. The Option may be
exercised by the Optionee’s estate or the Optionee, as the case may be, for a
period of (i) one year from the date of death, or (ii) six months from a
Termination of Service by reason of Disability, or until the expiration of the
stated term of the Option, whichever period is shorter.

 

10.           Other Termination of Service.  If an Optionee shall Terminate Service for a
reason other than his death or Disability, that portion of the Option that has
not become exercisable on or before such date of Termination shall immediately
be forfeited and canceled and become null and void. If such

 

2

 

Termination is due to voluntary resignation or involuntary dismissal,
the Optionee may exercise that portion of the Option which became exercisable
prior to the date of such Termination within the sooner to occur of (i) one
month from the date of Termination of Service in the case of voluntary
resignation or three months in the case of involuntary dismissal, or (ii) the
end of the remaining stated term of the Option. Notwithstanding anything herein
to the contrary, no part of the Option, whether or not exercisable, shall be
exercisable after the date of termination if the Termination of Service is by
the Company or any Subsidiary for Cause.

 

11.           Change in Control.  If within eighteen months following a Change
In Control, the Optionee Terminates Employment by reason of an involuntary
resignation, the Option shall immediately become exercisable on the Optionee’s
last date of employment with the Company.

 

12.           Nontransferability of Options.  Except as provided in this Section 12, or as
permitted by the Committee, the Option shall not be assignable or transferable
by the Optionee, and any attempted disposition thereof shall be null and void
and of no effect. Nothing in this Section 12 shall prevent transfers by will,
by the applicable laws of descent and distribution, or pursuant to a Domestic
Relations Order. During the life of the Optionee, the Option shall be
exercisable only by the Optionee or the Optionee’s guardian or legal
representative.

 

13.           Adjustment for Recapitalization, Etc.  In accordance with Article IX of the Plan,
in the event of any change in the outstanding Shares by reason of a stock
dividend, split or combination, recapitalization, reclassification,
reorganization, merger or consolidation in which the Company is the surviving
corporation, or other similar change affecting the Common Stock, the Committee
shall determine any changes to the number and class of Shares described in
Section 1 of this Agreement. This adjustment shall be made without a change to
the total price applicable to the unexercised portion of the Option (except for
any change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment in the
per share Option Price described in Section 3 of this Agreement.

 

In the event of a transaction involving (i) a merger
or consolidation in which the Company is not the surviving corporation or (ii)
the sale or disposition of all or substantially all of the Company’s assets,
provision shall be made in connection with such transaction for the assumption
of the Option, or the substitution for the Option of new options of the
successor corporation, with appropriate adjustment as to the number and kind of
Shares and the purchase price for Shares thereunder, or, in the discretion of
the Committee, the Option shall terminate on the effective date of such
transaction and appropriate provision shall be made for payment to the Optionee
of an amount in cash equal to the fair market value of a Share less the Option
Price, multiplied by the number of Shares subject to the Option (to the extent
the Option has not been exercised).

 

14.           Notices.  All notices and other communications required or permitted under
the Plan and this Agreement shall be in writing and shall be given either by
(i) personal delivery or (ii) first class registered or certified mail, return
receipt requested. Any such communication shall be deemed to have been given
(i) on the date of receipt in the cases referred to in clause (i) of the
preceding sentence and (ii) on the second day after the date of mailing in the
cases referred to in clause (ii) of the preceding sentence. All such
communications to the Company shall be addressed to it, to the attention of its
Secretary or Treasurer, at its then principal office and to the Optionee at his
last address appearing on the records of the Company.

 

3

 

15.           Modification and Waiver.  Neither this Agreement nor any provision
hereof can be changed, modified, amended, discharged, terminated or waived
orally or by any course of dealing or purported course of dealing, but only by
an agreement in writing signed by the Optionee or his heirs and the Company. No
such agreement shall extend to or affect any provision of this Agreement not
expressly changed, modified, amended, discharged, terminated or waived or
impair any right consequent on such a provision. The waiver of or failure to
enforce any breach of this Agreement shall not be deemed to be a waiver or
acquiescence in any other breach thereof.

 

16.           Acceptance of Provisions.  The execution of this Agreement by the
Employee shall constitute the Employee’s acceptance of and agreement to all of
the terms and conditions of the Plan and this Agreement. The Optionee hereby
acknowledges that all decisions, determinations and interpretations of the
Committee in respect to this Agreement shall be final and conclusive. This
Agreement and the Plan contain a complete statement of all the arrangements
between the parties with respect to this subject matter, and this Agreement
cannot be changed except by a writing executed by both parties. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New Jersey applicable to agreements made and to be performed exclusively in New
Jersey. The headings in this Agreement are solely for convenience of reference
and shall not affect its meaning or interpretation.

 

	
   

  	
  HEARTLAND PAYMENT SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Robert Owen Carr, Chief Executive Officer

  	
   

  

 

OPTIONEE ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS
AGREEMENT, NOR IN THE COMPANY’S 2000 EQUITY INCENTIVE PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.

 

Optionee acknowledges receipt of a copy of the Plan
document and represents that he is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. Optionee has reviewed the Plan and this Option in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Committee upon any questions arising under the Plan
or this Option. Optionee further agrees to notify the Company upon any change
in the residence address indicated below.

 

	
  October 20, 2000

  	
   

  	
   

  
	
   

  	
  [Signature]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [Printed Name]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Residence Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

4

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