Document:

EX-10.1

Exhibit 10.1

 

    KELLOGG
    COMPANY 2009 NON-EMPLOYEE DIRECTOR STOCK PLAN

 

    1. PURPOSE. The purpose of the Kellogg
    Company 2009 Non-Employee Director Stock Plan is to promote the
    long-term growth of Kellogg Company by increasing the
    proprietary interest of non-employee directors in Kellogg
    Company and to attract and retain highly qualified and capable
    non-employee directors.

 

    2. DEFINITIONS. Unless the context clearly
    indicates otherwise, for the purposes of the Plan, the following
    terms shall have the following meanings:

 

    2.1. “Award” means an award granted
    to a Non-Employee Director under the Plan in the form of Shares
    or Restricted Shares

 

    2.2. “Award Agreement” means a
    written agreement between a Participant and the Company
    evidencing an Award.

 

    2.3. “Board” means the Board of
    Directors of Kellogg Company, as constituted from time to time.

 

    2.4. “Change in Control” has the
    meaning set forth in Section 9.4.

 

    2.5. “Code” means the Internal
    Revenue Code of 1986, as in effect and as amended from time to
    time, or any successor statute thereto, together with any rules,
    regulations and interpretations promulgated thereunder or with
    respect thereto.

 

    2.6. “Committee” means the
    committee of the Board designated to administer the Plan, as
    described in Section 3 of the Plan.

 

    2.7. “Company” means Kellogg
    Company, a Delaware corporation, or any successor corporation to
    Kellogg Company.

 

    2.8. “Effective Date” has the
    meaning set forth in Section 12.

 

    2.9. “Exchange Act” means the
    Securities Exchange Act of 1934, as in effect and as amended
    from time to time, or any successor statute thereto, together
    with any rules, regulations and interpretations promulgated
    thereunder or with respect thereto.

 

    2.10. “Fair Market Value” means,
    with respect to any date, (a) the officially quoted closing
    price in the primary trading session for a Share on the New York
    Stock Exchange — Composite Transactions Tape or on any
    other stock exchange, if any, on which the Shares are primarily
    traded (or if no Shares were traded on such date, then on the
    most recent previous date on which any Shares were so traded) or
    (b) if clause (a) is not applicable, the value of a
    Share for such date as established by the Committee, using any
    reasonable method of valuation consistent with the requirements
    of Section 409A of the Code.

 

    2.11. “Incumbent Board” has the
    meaning set forth in Section 9.4.

 

    2.12. “Merger Event” has the
    meaning set forth in Section 9.3.

 

    2.13. “Non-Employee Director” means
    a director of the Company who is not an employee of the Company
    or any subsidiary of the Company.

 

    2.14. “Outstanding Company Common Stock”
    has the meaning set forth in Section 9.4.

 

    2.15. “Outstanding Company Voting
    Securities” has the meaning set forth in
    Section 9.4.

 

    2.16. “Participant” means a
    Non-Employee Director who has been selected to receive an Award
    under the Plan.

 

    2.17. “Person” has the meaning set
    forth in Section 9.4.

 

    2.18. “Plan” means the Kellogg
    Company 2009 Non-Employee Director Stock Plan, as amended and
    restated from time to time (together with any rules and
    regulations promulgated by the Committee with respect thereto).

 

    2.19. “Restricted Shares” means
    Shares subject to such restrictions, terms and conditions as the
    Committee deems appropriate, including, without limitation
    (a) restrictions on the sale, assignment, transfer,
    hypothecation or other disposition of such Shares, (b) the
    requirement that the Participant deposit such Shares with the
    Company

    

    1

 

    which such Shares are subject to such restrictions and
    (c) the requirement that such Shares be forfeited upon
    termination of Board service for specified reasons within a
    specified period of time or for other reasons.

 

    2.20. “Shares” means Shares of the
    common stock, par value $.25 per share, of the Company or any
    security of the Company issued by the Company in substitution or
    exchange therefor.

 

    2.21. “Stock Account” has the
    meaning set forth in Section 7.7.

 

    2.22. “Subsidiary(ies)” means any
    corporation or other entity of which outstanding shares or
    ownership interests representing 50% or more of the combined
    voting power of such corporation or other entity entitled to
    elect the management thereof, or such lesser percentages as may
    be approved by the Committee, are owned directly or indirectly
    by the Company.

 

    2.23. “Trust has the meaning set forth
    in Section 7.7.

 

    3. ADMINISTRATION.

 

    3.1.  Administrator of the Plan. The
    Plan shall be administered by the Nominating and Governance
    Committee of the Board, as constituted from time to time. The
    Committee shall consist of two or more Non-Employee Directors,
    each of whom shall be (a) a “non-employee
    director” within the meaning of
    Rule 16b-3
    promulgated under the Exchange Act and (b) an
    “independent director” as defined under
    Section 303A of the Listed Company Manual of the New York
    Stock Exchange or such other applicable stock exchange rule. To
    the extent no Committee exists that has the authority to
    administer the Plan, the functions of the Committee shall be
    exercised by the Board. If for any reason the appointed
    Committee does not meet the requirements of
    Rule 16b-3
    of the Exchange Act or Section 303A of the Listed Company
    Manual, such noncompliance shall not affect the validity of
    Awards, grants, interpretations or other actions of the
    Committee.

 

    3.2.  Authority of Committee. The
    Committee shall have full power and authority to:
    (i) interpret and construe the Plan and adopt such rules
    and regulations as it shall deem necessary and advisable to
    implement and administer the Plan, and (ii) designate
    persons other than members of the Committee to carry out its
    responsibilities, subject to such limitations, restrictions and
    conditions as it may prescribe, such determinations to be made
    in accordance with the Committee’s best business judgment
    as to the best interests of the Company and its shareowners and
    in accordance with the purposes of the Plan. Subject to
    applicable law, the Committee may delegate administrative duties
    under the Plan to one or more agents as it shall deem necessary
    or advisable.

 

    3.3.  Determinations of Committee. A
    majority of the Committee’s members shall constitute a
    quorum at any meeting of the Committee, and all determinations
    of the Committee shall be made by a majority of its members. Any
    determination of the Committee under the Plan may be made
    without notice or a meeting of the Committee by a written
    consent signed by all members of the Committee.

 

    3.4.  Liability Limitation. Neither the
    Board nor the Committee, nor any member of either, or any of
    their designees, shall be liable for any act, omission,
    interpretation, construction or determination made in good faith
    in connection with the Plan (or any Award or Award Agreement) or
    any transaction hereunder, and the members of the Board and the
    Committee shall be entitled to indemnification and reimbursement
    by the Company in respect of any claim, loss, damage or expense
    (including, without limitation, attorneys’ fees) arising or
    resulting therefrom to the fullest extent permitted by law
    and/or under
    any directors and officers liability insurance coverage which
    may be in effect from time to time.

 

    4. AWARDS. Awards in the form of Shares or
    Restricted Shares shall be granted to Non-Employee Directors in
    accordance with Section 7. Each Award granted under the
    Plan shall be evidenced by an Award Agreement.

 

    5. ELIGIBILITY. Non-Employee Directors of the
    Company shall be eligible to participate in the Plan in
    accordance with Section 7 hereof.

 

    6. SHARES SUBJECT TO THE PLAN. Subject to
    adjustment as provided in Section 9.2, the aggregate number
    of Shares available for all grants of Awards under the Plan
    shall not exceed 500,000, plus the aggregate number of
    Shares described in the immediately following sentence. If any
    Awards under the Plan and the Kellogg Company 2000 Non-Employee
    Director Stock Plan (the “2000 Plan”)
    are forfeited, surrendered, cancelled, terminated or settled in
    cash in lieu of common stock, the Shares which were thereto
    subject (or potentially subject) to such Awards shall again be
    available for Awards under the Plan to the extent of such
    expiration, forfeiture, surrender, cancellation, termination or
    settlement of such Awards (as may be adjusted pursuant to
    Section 9.2). Shares withheld or deducted by the Company
    for tax withholding obligations in accordance with
    Section 11.1 hereof or the 2000 Plan shall not again be
    available for issuance under the Plan. Shares that as of the
    Effective Date have not been issued under the 2000 Plan, and are
    not covered by

    

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    outstanding Awards under the 2000 Plan granted on or before the
    Effective Date, shall not be available for Awards under the Plan.

 

    7. GRANTS OF AWARDS.

 

    7.1.  Annual Share Grants. Each year
    during the term of the Plan, beginning in 2009, an annual Award
    of Shares or Restricted Shares shall be made to each Participant
    on the second business day following the earlier of (a) the
    Company’s announcement by press release or other widely
    disseminated means of its results of operations for the first
    fiscal quarter of the Company, or (b) the Company’s
    filing with the Securities and Exchange Commission of its
    Quarterly Report on
    Form 10-Q
    for the first fiscal quarter of the Company. The number of
    Shares granted pursuant to each annual Award shall be determined
    by the Committee, and the Committee will also have the authority
    under the Plan to change the timing of the annual Awards.
    Non-Employee Directors first elected or appointed to the Board
    at any time other than the Annual Meeting of Shareowners shall
    receive an initial Award on the date on which that person first
    begins to serve as a Non-Employee Director equal to the most
    recently granted annual Award, pro-rated based upon the number
    of days remaining until the next Annual Meeting of Shareowners
    divided by 365.

 

    7.2.  Other Share Grants. The Committee
    may make other grants of Shares or Restricted Shares to
    Non-Employee Directors at such times and subject to such terms
    and conditions as it may determine in its sole discretion.

 

    7.3.  Terms and Conditions. Grants of
    Shares or Restricted Shares shall be subject to the terms and
    conditions set forth in this Section 7 and additional terms
    and conditions, not inconsistent with the express terms and
    provisions of the Plan, as the Committee shall set forth in the
    relevant Award Agreement. With respect to each Participant
    receiving an Award, there shall be issued a stock certificate
    (or stock certificates) in respect of such Shares or Restricted
    Shares. Such stock certificate(s) shall be registered in the
    name of such Participant, shall be accompanied by a stock power
    duly executed by such Participant if required by the Award
    Agreement, and shall bear legends required by the Award
    Agreement. Such stock certificate(s) evidencing such Shares
    shall, in the sole discretion of the Committee, be deposited
    with and held in custody of the Company until the restrictions
    thereon, if any, shall have lapsed and all of the terms and
    conditions applicable to such grant have been satisfied.

 

    7.4.  Restriction Period. Unless
    otherwise determined by the Committee (in its sole discretion)
    at any time and from time to time, Restricted Shares shall only
    become unrestricted and vested in accordance with the Plan and
    the vesting schedule relating to such Restricted Shares, as the
    Committee may establish in the relevant Award Agreement.

 

    7.5.  Payment of Restricted Share
    Grants. After the satisfaction
    and/or lapse
    of the restrictions, terms and conditions established by the
    Committee in respect of a grant of Restricted Shares, a new or
    additional certificate (without legends) for the number of
    Shares which are no longer subject (or deemed to be subject) to
    such restrictions, terms and conditions shall, as soon as
    practicable thereafter, be delivered to Participant.

 

    7.6.  Shareowner Rights. A Participant
    shall have, with respect to the Shares underlying a grant of
    Restricted Shares, all of the rights of a shareowner of such
    Shares (except as such rights are limited or restricted under
    the Plan or in the relevant Award Agreement). Any stock
    dividends paid in respect of unvested Restricted Shares shall be
    treated as additional Restricted Shares and shall be subject to
    the same restrictions and other terms and conditions that apply
    to the unvested Restricted Shares in respect of which such stock
    dividends are issued.

 

    7.7.  Stock Account. The Committee may
    provide that annual Awards shall be made by entry into a stock
    account. If the Committee does so, the Company shall establish a
    bookkeeping account in the name of each Participant (the
    “Stock Account”). For any Award made by
    Stock Account entry, the Participant’s Stock Account shall
    be adjusted to reflect such Shares and an aggregate number of
    Shares credited to each Participant on such date shall be
    transferred by the Company to the Kellogg Company Grantor Trust
    (the “Trust”) for Participants. Except
    for the right to direct the trustee as to the manner which the
    Shares are to be voted, a Participant shall not have any rights
    with respect to any Shares credited to the Participant’s
    Stock Account and transferred to the Trust until the date the
    Participant ceases, for any reason, to serve as a director of
    the Company. Dividends on the Shares held in Stock Accounts will
    be credited to the Participant’s Stock Account to be used
    to acquire additional Shares.

 

    8. AMENDMENT, SUSPENSION, AND TERMINATION.

 

    8.1.  In General. The Board may suspend
    or terminate the Plan (or any portion thereof) at any time and
    may amend the Plan at any time and from time to time in such
    respects as the Board may deem advisable to ensure that any and
    all Awards conform to or otherwise reflect any change in
    applicable laws or regulations, or to permit the Company, or the
    Participants to benefit from any change in applicable laws or
    regulations, or in any other respect the Board may deem to be in
    the best interests of the Company or any Subsidiary. No such
    amendment, suspension, or termination shall (a) subject

    

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    to Section 11.2, materially adversely affect the rights of
    any Participant under any outstanding Awards, without the
    consent of such Participant, or (b) except as contemplated
    by Section 9, increase the number of Shares available for
    Awards pursuant to Section 6 without shareowner approval.
    In addition, the Company will obtain shareowner approval of any
    modification of the Plan or Awards to the extent required by
    applicable laws or regulations or the regulations of any stock
    exchange upon which the Shares are then listed that purport to
    (i) materially modify the requirements as to eligibility
    for participant in the Plan, (ii) allow the repurchase of
    unvested Awards for cash or other property (other than in
    connection with a Change in Control), or (iii) extend the
    termination date of the Plan.

 

    8.2.  Award Agreement Modifications. The
    Committee may (in its sole discretion) amend or modify at any
    time and from time to time the terms and provisions of any
    outstanding Awards in any manner to the extent that the
    Committee under the Plan or any Award Agreement could have
    initially determined the restrictions, terms and provisions of
    such Awards, including, without limitation, changing or
    accelerating the date or dates as of which such Awards shall
    become unrestricted. No such amendment or modification shall,
    however, materially adversely affect the rights of any
    Participant under any such Award without the consent of such
    Participant. Notwithstanding the foregoing, without the consent
    of affected Participants, Awards may be amended or revised when
    necessary to avoid the imposition of additional tax under
    Section 409A of the Code.

 

    9. CHANGES IN CAPITALIZATION AND OTHER
    MATTERS.

 

    9.1.  No Corporate Action Restriction.
    The existence of the Plan, any Award Agreement
    and/or the
    Awards granted hereunder shall not limit, affect or restrict in
    any way the right or power of the Board or the shareowners of
    the Company to make or authorize (a) any adjustment,
    recapitalization, reorganization or other change in the
    Company’s or any Subsidiary’s capital structure or its
    business, (b) any merger, consolidation or change in the
    ownership of the Company or any Subsidiary, (c) any issue
    of bonds, debentures, capital, preferred or prior preference
    stocks ahead of or affecting the Company’s or any
    Subsidiary’s capital stock or the rights thereof,
    (d) any dissolution or liquidation of the Company or any
    Subsidiary, (e) any sale or transfer of all or any part of
    the Company’s or any Subsidiary’s assets or business,
    or (f) any other corporate act or proceeding by the Company
    or any Subsidiary. No Participant, beneficiary or any other
    person shall have any claim against any member of the Board or
    the Committee, the Company or any Subsidiary, or any employees,
    officers, shareowners or agents of the Company or any
    Subsidiary, as a result of any such action.

 

    9.2.  Recapitalization Adjustments. In
    the event of a dividend or other distribution (whether in the
    form of cash, Shares, other securities or other property) other
    than regular cash dividends, recapitalization, stock split,
    reverse stock split, reorganization, merger, consolidation,
    split-up,
    spin-off, combination, Change in Control or exchange of common
    stock or other securities of the Company, or other corporate
    transaction or event affects the Shares such that an adjustment
    is necessary or appropriate in order to prevent dilution or
    enlargement of benefits or potential benefits intended to be
    made available under the Plan, the Board shall equitably adjust
    (i) the number of Shares or other securities of the Company
    (or number and kind of other securities or property) with
    respect to which Awards may be granted and (ii) the number
    of Shares or other securities of the Company (or number and kind
    of other securities or property) subject to outstanding Awards
    or make provision for an immediate cash payment to the holder of
    an outstanding Award in consideration for the cancellation of
    such Award.

 

    9.3.  Mergers. If the Company enters
    into or is involved in any merger, reorganization, Change in
    Control or other business combination with any person or entity
    (a “Merger Event”), the Board may, prior
    to such Merger Event and effective upon such Merger Event, take
    such action as it deems appropriate, including, but not limited
    to, replacing any Restricted Shares with substitute awards in
    respect of the shares, other securities or other property of the
    surviving corporation or any affiliate of the surviving
    corporation on such terms and conditions, as to the number of
    shares and otherwise, which shall substantially preserve the
    value, rights and benefits of any affected Restricted Shares
    granted hereunder as of the date of the consummation of the
    Merger Event, and make additional adjustments
    and/or
    settlements of other outstanding Restricted Shares as it
    determines to be fair and equitable to affected Participants.

 

    Upon receipt by any affected Participant of any such awards (or
    payment) as a result of any such Merger Event, such
    Participant’s affected Restricted Shares for which such
    substitute awards (or payment) were received shall be thereupon
    cancelled without the need for obtaining the consent of any such
    affected Participant.

    

    4

 

    9.4.  Change in Control Provisions.

 

    (a) Impact of Event. Notwithstanding any
    other provision of the Plan to the contrary and unless otherwise
    determined by the Committee prior to the occurrence of a Change
    in Control, in the event of a Change in Control:

 

    (i) Any Restricted Shares outstanding as of the date such
    Change in Control is determined to have occurred, and which are
    not then vested, shall become fully vested; and

 

    (ii) The Committee may also make additional adjustments
    and/or
    settlements of outstanding Restricted Shares as it deems
    appropriate and consistent with the Plan’s purposes.

 

    (b) Definition of Change in Control. For
    purposes of the Plan, a “Change in Control”
    shall mean the happening of any of the following events:

 

    (i) An acquisition after the date hereof by any individual,
    entity or group (within the meaning of Section 13(d)(3) or
    14(d)(2) of the Exchange Act) (a
    “Person”) of beneficial ownership
    (within the meaning of
    Rule 13d-3
    promulgated under the Exchange Act) of 20% or more of either
    (a) the then outstanding shares of common stock of the
    Company (the “Outstanding Company Common
    Stock”) or (b) the combined voting power of
    the then outstanding voting securities of the Company entitled
    to vote generally in the election of directors (the
    “Outstanding Company Voting
    Securities”); excluding, however, the following:

 

    (A) any acquisition directly from the Company, other than
    an acquisition by virtue of the exercise of a conversion
    privilege unless the security being so converted was itself
    acquired directly from the Company or approved by the Incumbent
    Board (as defined below),

 

    (B) any increase in beneficial ownership of a Person as a
    result of any acquisition by the Company,

 

    (C) any acquisition by any employee benefit plan (or
    related trust) sponsored or maintained by the Company or any
    entity controlled by the Company,

 

    (D) any acquisition by an underwriter temporarily holding
    Company securities pursuant to an offering of such
    securities, or

 

    (E) any acquisition pursuant to a transaction which
    complies with clauses (1), (2) and (3) of
    subsection (iii) of this Section 9.4(b); or

 

    (ii) A change in the composition of the Board such that the
    individuals who, as of the Effective Date of the Plan,
    constitute the Board (such Board shall be hereinafter referred
    to as the “Incumbent Board”) cease for
    any reason to constitute at least a majority of the Board;
    provided, however, for purposes of this Section, that any
    individual who becomes a member of the Board subsequent to the
    Effective Date of the Plan, whose election, or nomination for
    election by the Company’s shareowners, was approved by a
    vote of at least a majority of those individuals who are members
    of the Board and who were also members of the Incumbent Board
    (or deemed to be such pursuant to this proviso), either by a
    specific vote or by approval of the proxy statement of the
    Company in which such person is named as a nominee for director,
    without written objection to such nomination shall be considered
    as though such individual were a member of the Incumbent Board;
    but, provided further, that any such individual whose initial
    assumption of office occurs as a result of either an actual or
    threatened election contest with respect to the election or
    removal of directors or other actual or threatened solicitation
    of proxies or consents by or on behalf of a Person other than
    the Board shall not be so considered as a member of the
    Incumbent Board; or

 

    (iii) Consummation of a reorganization, merger or
    consolidation (or similar transaction), a sale or other
    disposition of all or substantially all of the assets of the
    Company, or the acquisition of assets or stock of another
    entity; in each case, unless immediately following such
    transaction:

 

    (A) all or substantially all of the individuals and
    entities who are the beneficial owners, respectively, of the
    Outstanding Company Common Stock and Outstanding Company Voting
    Securities immediately prior to such transaction will
    beneficially own, directly or indirectly, more than 60% of,
    respectively, the outstanding shares of common stock, and the
    combined voting power of the then outstanding voting securities
    entitled to vote generally in the election of directors, as the
    case may be, of the corporation resulting from such transaction
    (including, without limitation, a corporation which as a result
    of such transaction owns the Company or all or substantially all
    of the Company’s assets either directly or through one or
    more subsidiaries) in substantially the same proportions as
    their ownership, immediately prior to such transaction, of the
    Outstanding Company Common Stock and Outstanding Company Voting
    Securities, as the case may be,

    

    5

 

    (B) no Person (other than the Company, any employee benefit
    plan (or related trust) of the Company or such corporation
    resulting from such transaction) will beneficially own, directly
    or indirectly, 20% or more of, respectively, the outstanding
    shares of common stock of the corporation resulting from such
    transaction or the combined voting power of the outstanding
    voting securities of such corporation entitled to vote generally
    in the election of directors except, to the extent that such
    ownership existed prior to the transaction, and

 

    (C) individuals who were members of the Incumbent Board at
    the time of the Board’s approval of the execution of the
    initial agreement providing for such transaction will constitute
    at least a majority of the members of the board of directors of
    the corporation resulting from such transaction (including,
    without limitation, a corporation which as a result of such
    transaction owns the Company or all or substantially all of the
    Company’s assets either directly or through one or more
    subsidiaries); or

 

    (iv) The approval by the shareowners of the Company of a
    complete liquidation or dissolution of the Company.

 

    10. FOREIGN DIRECTORS. Without amending the
    Plan, Awards granted to Participants who are foreign nationals
    may have such terms and conditions different from those
    specified in the Plan as may, in the judgment of the Committee,
    be necessary or desirable to foster and promote achievement of
    the purposes of the Plan and, in furtherance of such purposes,
    the Committee may make such modifications, amendments,
    procedures, subplans and the like as may be necessary or
    advisable to comply with provisions of laws in other countries
    or jurisdictions in which the Company or its Subsidiaries
    operate or have Non-Employee Directors.

 

    11. MISCELLANEOUS.

 

    11.1.  Tax Withholding. The Company
    shall have the right to deduct from any payment or settlement
    under the Plan, or the delivery, transfer or vesting of any
    Shares or Restricted Shares, any domestic or foreign federal,
    state, local or other taxes of any kind which the Committee, in
    its sole discretion, deems necessary to be withheld to comply
    with the Code
    and/or any
    other applicable law, rule or regulation. Shares may be used to
    satisfy any such tax withholding. Such Shares will be valued
    based on the Fair Market Value of such Shares of the date the
    tax withholding is required to be made, such date to be
    determined by the Committee. In addition, the Company shall have
    the right to require payment from a Participant to cover any
    applicable withholding or other employment taxes due upon any
    payment or settlement under the Plan.

 

    11.2.  Listing, Registration and Other Legal
    Compliance. No Awards shall be required to be issued or
    granted under the Plan unless legal counsel for the Company
    shall be satisfied that such issuance or grant will be in
    compliance with all applicable federal and state securities laws
    and regulations and any other applicable laws or regulations.
    The Committee may require, as a condition of any payment or
    share issuance, that certain agreements, undertakings,
    representations, certificates,
    and/or
    information, as the Committee may deem necessary or advisable,
    be executed or provided to the Company to assure compliance with
    all such applicable laws or regulations. Certificates for Shares
    delivered under the Plan may be subject to such stock-transfer
    orders and such other restrictions as the Committee may deem
    advisable under the rules, regulations, or other requirements of
    the Securities and Exchange Commission, any stock exchange upon
    which the common stock is then listed, and any applicable
    federal or state securities law. In addition, if at any time
    specified herein (or in any Award Agreement or otherwise) for
    (a) the making of any Award, or the making of any
    determination, (b) the issuance or other distribution of
    Shares, or (c) the payment of amounts to or through a
    Participant with respect to any Award, any law, rule, regulation
    or other requirement of any governmental authority or agency
    shall require either the Company, any Subsidiary or any
    Non-Employee Director (or any estate, designated beneficiary or
    other legal representative thereof) to take any action in
    connection with any such determination, any such Shares to be
    issued or distributed, any such payment, or the making of any
    such determination, as the case may be, shall be deferred until
    such required action is taken. With respect to persons subject
    to Section 16 of the Exchange Act, transactions under the
    Plan are intended to comply with all applicable conditions of
    Rule 16b-3
    promulgated under the Exchange Act.

 

    11.3.  Award Agreements. Each
    Non-Employee Director receiving an Award under the Plan shall
    enter into an Award Agreement with the Company in a form
    specified by the Committee. Each such Participant shall agree to
    the restrictions, terms and conditions of the Award set forth
    therein and in the Plan.

 

    11.4.  Designation of Beneficiary. Each
    Non-Employee Director to whom an Award has been made under the
    Plan may designate a beneficiary or beneficiaries to receive any
    payment which under the terms of the Plan and the relevant Award
    Agreement may become 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

    

    6

 

    effective until received by the Committee. If no beneficiary has
    been designated by a deceased Participant, or if the designated
    beneficiaries have predeceased the Participant, the beneficiary
    shall be the Participant’s estate. If the Participant
    designates more than one beneficiary, any payments under the
    Plan to such beneficiaries shall be made in equal shares unless
    the Participant has expressly designated otherwise, in which
    case the payments shall be made in the shares designated by the
    Participant.

 

    11.5.  No Obligation to Re-elect.
    Nothing in the Plan shall be deemed to create any obligation on
    the part of the Board of Directors to nominate any Director for
    re-election by the Company’s shareowners.

 

    11.6.  Plan Not Exclusive. The adoption
    of the Plan shall not preclude the adoption by appropriate means
    of any other equity or other incentive plan for Non-Employee
    Directors.

 

    11.7.  Governing Law. The Plan and all
    actions taken thereunder shall be governed by and construed in
    accordance with the laws of the State of Delaware, without
    reference to the principles of conflict of laws thereof. Any
    titles and headings herein are for reference purposes only, and
    shall in no way limit, define or otherwise affect the meaning,
    construction or interpretation of any provisions of the Plan.

 

    12. EFFECTIVE DATE AND TERM OF PLAN. The Plan
    shall be effective as of February 20, 2009 (the
    “Effective Date”), subject to approval
    by the Company’s shareowners. If shareowner approval is not
    obtained at the 2009 Annual Meeting of Shareowners, the Plan
    shall be nullified. The Plan shall terminate on
    February 19, 2019 (or such earlier date that the Plan may
    be terminated by the Board), but the term of Awards granted
    theretofore may extend beyond that date.

    

    7EXHIBIT 10.1
------------

                                   PHAZAR CORP

                           2009 EQUITY INCENTIVE PLAN

As Adopted by the Board of Directors on April 8, 2009

1.   PURPOSE.

     The purpose of this Plan is to provide incentives to attract, retain and
motivate eligible persons whose present and potential contributions are
important to the success of the Company and its Subsidiaries by offering them an
opportunity to participate in the Company's future performance through awards of
Options, the right to purchase Common Stock and Stock Bonuses. Capitalized terms
not defined in the text are defined in Section 2.

2.   DEFINITIONS.

     As used in this Plan, the following terms will have the following meanings:

"AWARD" means any award under this Plan, including any Option, Stock Award or
 -----
Stock Bonus.

"AWARD AGREEMENT" means, with respect to each Award, the signed written
 ---------------
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.

"BOARD" means the Board of Directors of the Company.
 -----

"CAUSE" means any cause, as defined by applicable law, for the termination of a
 -----
Participant's employment with the Company or a Parent or Subsidiary of the
Company.

"CODE" means the Internal Revenue Code of 1986, as amended.
 ----

"COMPANY" means PHAZAR CORP, a Delaware corporation, or any successor
 -------
corporation.

"DISABILITY" means a disability, whether temporary or permanent, partial or
 ----------
total, as determined by the Board.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
 ------------

"EXERCISE PRICE" means the price at which a holder of an Option may purchase the
 --------------
Shares issuable upon exercise of the Option.

                                EXHIBIT 10.1 - 1
<PAGE>
"FAIR MARKET VALUE" means, as of any date, the value of a share of the Company's
 -----------------
Common Stock determined as follows:

     (a) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of determination if
at least one hundred shares were traded on such date, otherwise the closing
price on the last preceding date on which at least one hundred shares were
traded, on the principal national securities exchange on which the Common Stock
is listed or admitted to trading;

     (b) if such Common Stock is quoted on the NASDAQ National Market or the
NASDAQ Capital Market, its closing price on the NASDAQ National Market or the
NASDAQ Capital Market, respectively, on the date of determination;

     (c) if neither of the foregoing is applicable, by the Board in good faith.

"INSIDER" means an officer or director of the Company or any other person whose
 -------
transactions in the Company's Common Stock are subject to Section 16 of the
Exchange Act.

"OPTION" means an award of an option to purchase Shares pursuant to Section 6.
 ------
"PARENT" means any corporation (other than the Company) in an unbroken chain of
 ------
corporations ending with the Company if each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.

"PARTICIPANT" means a person who receives an Award under this Plan.
 -----------

"PERFORMANCE FACTORS" means the factors selected by the Board, in its sole and
 -------------------
absolute discretion, to determine whether the performance goals applicable to
Awards have been satisfied, including, without limitation, the following
factors:

     (a) Net revenue and/or net revenue growth;

     (b) Earnings before income taxes and amortization and/or earnings before
         income taxes and amortization growth;

     (c) Operating income and/or operating income growth;

     (d) Net income and/or net income growth;

     (e) Earnings per share and/or earnings per share growth;

     (f) Total stockholder return and/or total stockholder return growth;

     (g) Return on equity;

     (h) Operating cash flow return on income;

                                EXHIBIT 10.1 - 2
<PAGE>
     (i) Adjusted operating cash flow return on income;

     (j) Economic value added; and

     (k) Individual business objectives.

"PERFORMANCE PERIOD" means the period of service determined by the Board, not to
 ------------------
exceed five years, during which years of service or performance is to be
measured for Stock Awards or Stock Bonuses, if such Awards are restricted.

"PLAN" means this PHAZAR CORP 2009 Equity Incentive Plan, as amended from time
 ----
to time.

"PURCHASE PRICE" means the price at which the Participant of a Stock Award may
 --------------
purchase the Shares.

"SEC" means the Securities and Exchange Commission.
 ---

"SECURITIES ACT" means the Securities Act of 1933, as amended.
 --------------

"SHARES" means shares of the Company's Common Stock reserved for issuance under
 ------
this Plan, as adjusted pursuant to Sections 3 and 18, and any successor
security.

"STOCK AWARD" means an award of Shares pursuant to Section 7.
 -----------

"STOCK BONUS" means an award of Shares, or cash in lieu of Shares, pursuant to
 -----------
Section 8.

"SUBSIDIARY" means any corporation (other than the Company) in an unbroken chain
 ----------
of corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

"TERMINATION" or "TERMINATED" means, for purposes of this Plan with respect to a
 -----------      ----------
Participant, that the Participant has for any reason ceased to provide services
as an employee, officer, director, consultant, independent contractor or advisor
to the Company or a Parent or Subsidiary of the Company. An employee will not be
deemed to have ceased to provide services in the case of (i) sick leave, (ii)
military leave, or (iii) any other leave of absence approved by the Company,
provided that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute or unless provided otherwise pursuant to a formal policy adopted from
time to time by the Company and issued and promulgated to employees in writing.

                                EXHIBIT 10.1 - 3
<PAGE>
In the case of any employee on an approved leave of absence, the Board may make
such provisions respecting suspension of vesting of the Award while on leave
from the employ of the Company or a Subsidiary as it may deem appropriate,
except that in no event may an Option be exercised after the expiration of the
term set forth in the Option agreement. The Board will have sole discretion to
determine whether a Participant has ceased to provide services and the effective
date on which the Participant ceased to provide services (the "Termination
Date").

3.   SHARES SUBJECT TO THE PLAN.

     3.1 Number of Shares Available. Subject to Sections 3.2 and 18, the total
         --------------------------
aggregate number of Shares reserved and available for grant and issuance
pursuant to this Plan shall be 273,600 Shares and will include Shares that are
subject to: (a) issuance upon exercise of an Option but cease to be subject to
such Option for any reason other than exercise of such Option; (b) an Award
granted hereunder but forfeited or repurchased by the Company at the original
issue price; and (c) an Award that otherwise terminates without Shares being
issued. At all times the Company shall reserve and keep available a sufficient
number of Shares as shall be required to satisfy the requirements of all
outstanding Options granted under this Plan and all other outstanding but
unvested Awards granted under this Plan.

     3.2 Adjustment of Shares. In the event that the number of outstanding
         --------------------
shares is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the number of
Shares reserved for issuance under this Plan, (b) the Exercise Prices of and
number of Shares subject to outstanding Options, and (c) the number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the stockholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share will not be issued but will either be replaced by a cash payment equal
to the Fair Market Value of such fraction of a Share or will be rounded up to
the nearest whole Share, as determined by the Board.

4.   ELIGIBILITY.

     ISOs (as defined in Section 6 below) may be granted only to employees
(including officers and directors who are deemed to be employees) of the Company
or of a Parent or Subsidiary of the Company. All other Awards may be granted to
officers, directors, employees, agents and consultants of the Company or any
Parent or Subsidiary of the Company, provided such consultants, independent
contractors and advisors render bona-fide services not in connection with the
offer and sale of securities in a capital-raising transaction or promotion of
the Company's securities. A person may be granted more than one Award under this
Plan.

5.   ADMINISTRATION.

     5.1 Board. The Plan shall be administered and interpreted by the Board.
         -----

                                EXHIBIT 10.1 - 4
<PAGE>
     5.2 Board Authority. The Board will have the authority to:
         ---------------

         (a) construe and interpret this Plan, any Award Agreement and any other
             agreement or document executed pursuant to this Plan;

         (b) prescribe, amend and rescind rules and regulations relating to this
             Plan or any Award;

         (c) select persons to receive Awards;

         (d) determine the form, terms and conditions of Awards;

         (e) determine the number of Shares or other consideration subject to
             Awards;

         (f) determine whether Awards will be granted singly, in combination
             with, in tandem with, in replacement of, or as alternatives to,
             other Awards under this Plan or any other incentive or compensation
             plan of the Company or any Parent or Subsidiary of the Company;

         (g) grant waivers of Plan or Award conditions;

         (h) determine the vesting, exercisability and payment of Awards;

         (i) correct any defect, supply any omission or reconcile any
             inconsistency in this Plan, any Award or any Award Agreement;

         (j) determine whether an Award has been earned;

         (k) amend or terminate the Plan, provided, however, the Board will not
             amend the Plan in any manner that requires shareholder approval
             without such approval; and

         (l) make all other determinations necessary or advisable for the
             administration of this Plan.

     5.3 Board Discretion. Any determination made by the Board with respect to
         ----------------
any Award will be made at the time of grant of the Award or, unless in
contravention of any express term of this Plan or Award, at any later time, and
such determination will be final and binding on the Company and on all persons
having an interest in any Award under this Plan. No member of the Board shall be
personally liable for any action taken or decision made in good faith relating
to this Plan, and all members of the Board shall be fully protected and
indemnified to the fullest extent permitted under applicable law by the Company
in respect to any such action, determination, or interpretation.

6.   OPTIONS.

     The Board may grant Options to eligible persons and will determine whether
such Options will be Incentive Stock Options within the meaning of the Code
("ISO") or Nonqualified Stock Options ("NQSOs"), the number of Shares subject to
the Option, the Exercise Price of the Option, the period during which the Option
may be exercised, and all other terms and conditions of the Option, subject to
the following:
                                 EXHIBIT 10.1 - 5
<PAGE>
     6.1 Form of Option Grant. Each Option granted under this Plan will be
         --------------------
evidenced by an Award Agreement which will expressly identify the Option as an
ISO or an NQSO (hereinafter referred to as the "Stock Option Agreement"), and
will be in such form and contain such provisions (which need not be the same for
each Participant) as the Board may from time to time approve, and which will
comply with and be subject to the terms and conditions of this Plan.

     6.2 Date of Grant. The date of grant of an Option will be the date on which
         -------------
the Board makes the determination to grant such Option, unless otherwise
specified by the Board. The Stock Option Agreement and a copy of this Plan will
be delivered to the Participant within a reasonable time after the granting of
the Option.

     6.3 Exercise Period. Options may be exercisable within the times or upon
         ---------------
the events determined by the Board as set forth in the Stock Option Agreement
governing such Option; provided, however, that no Option will be exercisable
after the expiration of ten (10) years from the date the Option is granted; and
provided further that no ISO granted to a person who directly or by attribution
owns more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any Parent or Subsidiary of the Company
("Ten Percent Stockholder") will be exercisable after the expiration of five (5)
years from the date the ISO is granted. The Board also may provide for Options
to become exercisable at one time or from time to time, periodically or
otherwise, in such number of Shares or percentage of Shares as the Board
determines, provided, however, that in all events a Participant will be entitled
to exercise an Option at the rate of at least 20% per year over five years from
the date of grant, subject to reasonable conditions such as continued
employment; and further provided that an Option granted to a Participant who is
an officer or director may become fully exercisable at any time or during any
period established by the Company.

     6.4 Exercise Price. The Exercise Price of an Option will be determined by
         --------------
the Board when the Option is granted and may not be less than 85% of the Fair
Market Value of the Shares on the date of grant; provided that: (a) the Exercise
Price of an ISO will be not less than 100% of the Fair Market Value of the
Shares on the date of grant; and (b) the Exercise Price of any Option granted to
a Ten Percent Stockholder will not be less than 110% of the Fair Market Value of
the Shares on the date of grant. Payment for the Shares purchased must be made
in accordance with Section 9 of this Plan.

     6.5 Method of Exercise. Options may be exercised only by delivery to the
         ------------------
Company of a written stock option exercise agreement (the "Exercise Agreement")
in a form approved by the Board, (which need not be the same for each
Participant), stating the number of Shares being purchased, the restrictions
imposed on the Shares purchased under such Exercise Agreement, if any, and such
representations and agreements regarding the Participant's investment intent and
access to information and other matters, if any, as may be required or desirable
by the Company to comply with applicable securities laws, together with payment
in full of the Exercise Price for the number of Shares being purchased.

                                EXHIBIT 10.1 - 6
<PAGE>
     6.6 Termination. Notwithstanding the exercise periods set forth in the
         -----------
Stock Option Agreement, exercise of an Option will always be subject to the
following:

          (a) If the Participant's service is Terminated for any reason except
death or disability, then the Participant may exercise such Participant's
Options only to the extent that such Options would have been exercisable upon
the Termination Date, but must be exercised no later than three (3) months after
the Termination Date (or such longer time period not exceeding five (5) years as
may be approved by the Board, with any exercise beyond three (3) months after
the Termination Date deemed to be an NQSO).

          (b) If the Participant's service is Terminated because of the
Participant's death or Disability (or the Participant dies within three (3)
months after a Termination other than for Cause or because of Participant's
Disability), then the Participant's Options may be exercised only to the extent
that such Options would have been exercisable by the Participant on the
Termination Date and must be exercised by the Participant (or the Participant's
legal representative) no later than twelve (12) months after the Termination
Date (or such longer time period not exceeding five (5) years as may be approved
by the Board, with any such exercise beyond (i) three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant's death or Disability, or (ii) twelve (12) months after the
Termination Date when the Termination is for Participant's death or Disability,
deemed to be an NQSO).

          (c) Notwithstanding the provisions in paragraph 6.6(a) above, if the
Participant's service is Terminated for Cause, neither the Participant, the
Participant's estate nor such other person who may then hold the Option shall be
entitled to exercise any Option with respect to any Shares whatsoever, after
Termination, whether or not after Termination the Participant may receive
payment from the Company or a Subsidiary for vacation pay, for services rendered
prior to Termination, for services rendered for the day on which Termination
occurs, for salary in lieu of notice, or for any other benefits. For the purpose
of this paragraph, Termination shall be deemed to occur on the date when the
Company dispatches notice or advice to the Participant that his or her service
is Terminated.

     6.7 Limitations on Exercise. The Board may specify a reasonable minimum
         -----------------------
number of Shares that may be purchased on any exercise of an Option, provided
that such minimum number will not prevent the Participant from exercising an
Option for the full number of Shares for which it is then exercisable.

     6.8 Limitations on ISO. The aggregate Fair Market Value (determined as of
         ------------------
the date of grant) of Shares with respect to which ISO are exercisable for the
first time by a Participant during any calendar year (under this Plan or under
any other incentive stock option plan of the Company, Parent or Subsidiary of
the Company) will not exceed $100,000. If the Fair Market Value of Shares on the
date of grant with respect to which ISO are exercisable for the first time by a
Participant during any calendar year exceeds $100,000, then the Options for the
first $100,000 worth of Shares to become exercisable in such calendar year will
be ISO and the Options for the amount in excess of $100,000 that become

                                EXHIBIT 10.1 - 7
<PAGE>
exercisable in that calendar year will be NQSOs. In the event that the Code or
the regulations promulgated thereunder are amended after the Effective Date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISO, such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.

     6.9 Modification, Extension or Renewal. The Board may modify, extend or
         ----------------------------------
renew outstanding Options and authorize the grant of new Options in substitution
therefore, provided that any such action may not, without the written consent of
a Participant, impair any of such Participant's rights under any Option
previously granted. Any outstanding ISO that is modified, extended, renewed or
otherwise altered will be treated in accordance with Section 424(h) of the Code.
The Board may reduce the Exercise Price of outstanding Options without the
consent of Participants affected by a written notice to them; provided, however,
that the Exercise Price may not be reduced below the minimum Exercise Price that
would be permitted under Section 6.4 of this Plan for Options granted on the
date the action is taken to reduce the Exercise Price.

     6.10 No Disqualification. Notwithstanding any other provision in this Plan,
          -------------------
no term of this Plan relating to ISO will be interpreted, amended or altered,
nor will any discretion or authority granted under this Plan be exercised, so as
to disqualify this Plan under Section 422 of the Code or, without the consent of
the Participant affected, to disqualify any ISO under Section 422 of the Code.

7.   STOCK AWARD.

     A Stock Award is an offer by the Company to sell to an eligible person
Shares that may or may not be subject to restrictions. The Board will determine
to whom an offer will be made, the number of Shares the person may purchase, the
price to be paid (the "Purchase Price"), the restrictions to which the Shares
will be subject, if any, and all other terms and conditions of the Stock Award,
subject to the following:

     7.1 Form of Stock Award. All purchases under a Stock Award made pursuant to
         -------------------
this Plan will be evidenced by an Award Agreement (the "Stock Purchase
Agreement") that will be in such form (which need not be the same for each
Participant) as the Board will from time to time approve, and will comply with
and be subject to the terms and conditions of this Plan. The offer of a Stock
Award will be accepted by the Participant's execution and delivery of the Stock
Purchase Agreement and payment for the Shares to the Company in accordance with
the Stock Purchase Agreement.

     7.2 Purchase Price. The Purchase Price of Shares sold pursuant to a Stock
         --------------
Award will be determined by the Board on the date the Stock Award is granted and
may not be less than 85% of the Fair Market Value of the Shares on the grant
date, except in the case of a sale to a Ten Percent Stockholder, in which case
the Purchase Price will be 100% of the Fair Market Value. Payment of the
Purchase Price must be made in accordance with Section 9 of this Plan.

                                EXHIBIT 10.1 - 8
<PAGE>
     7.3 Terms of Stock Awards. Stock Awards may be subject to such restrictions
         ---------------------
as the Board may impose. These restrictions may be based upon completion of a
specified number of years of service with the Company or upon completion of the
performance goals as set out in advance in the Participant's individual Stock
Purchase Agreement. Stock Awards may vary from Participant to Participant and
between groups of Participants. Prior to the grant of a Stock Award subject to
restrictions, the Board shall: (a) determine the nature, length and starting
date of any Performance Period for the Stock Award; (b) select from among the
Performance Factors to be used to measure performance goals, if any; and (c)
determine the number of Shares that may be awarded to the Participant. Prior to
the transfer of any Stock Award, the Board shall determine the extent to which
such Stock Award has been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Stock Awards that
are subject to different Performance Periods and have different performance
goals and other criteria.

     7.4 Termination During Performance Period. If a Participant is Terminated
         -------------------------------------
during a Performance Period for any reason, then such Participant will be
entitled to payment (whether in Shares, cash or otherwise) with respect to the
Stock Award only to the extent earned as of the date of Termination in
accordance with the Stock Purchase Agreement, unless the Board determines
otherwise.

8.   STOCK BONUSES.

     8.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares for
         -----------------------
extraordinary services rendered to the Company or any Parent or Subsidiary of
the Company. A Stock Bonus will be awarded pursuant to an Award Agreement (the
"Stock Bonus Agreement") that will be in such form (which need not be the same
for each Participant) as the Board will from time to time approve, and will
comply with and be subject to the terms and conditions of this Plan. A Stock
Bonus may be awarded upon satisfaction of such performance goals as are set out
in advance in the Participant's individual Award Agreement (the "Performance
Stock Bonus Agreement"). Stock Bonuses may vary from Participant to Participant
and between groups of Participants, and may be based upon the achievement of the
Company, Parent or Subsidiary and/or individual performance factors or upon such
other criteria as the Board may determine.

     8.2 Terms of Stock Bonuses. The Board will determine the number of Shares
         ----------------------
to be awarded to the Participant. If the Stock Bonus is being earned upon the
satisfaction of performance goals pursuant to a Performance Stock Bonus
Agreement, then the Board will: (a) determine the nature, length and starting
date of any Performance Period for each Stock Bonus; (b) select from among the
Performance Factors to be used to measure the performance, if any; and (c)
determine the number of Shares that may be awarded to the Participant. Prior to
the payment of any Stock Bonus, the Board shall determine the extent to which
such Stock Bonuses have been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Stock Bonuses that
are subject to different Performance Periods and different performance goals and
other criteria. The number of Shares may be fixed or may vary in accordance with
such performance goals and criteria as may be determined by the Board. The Board

                                EXHIBIT 10.1 - 9
<PAGE>
may adjust the performance goals applicable to the Stock Bonuses to take into
account changes in law and accounting or tax rules and to make such adjustments
as the Board deems necessary or appropriate to reflect the impact of
extraordinary or unusual items, events or circumstances to avoid windfalls or
hardships.

     8.3 Form of Payment. The earned portion of a Stock Bonus may be paid to the
          --------------
Participant by the Company either currently or on a deferred basis, as agreed by
the Participant and the Company, with such interest or dividend equivalent, if
any, as the Board may determine. Payment of an interest or dividend equivalent
(if any) may be made in the form of cash or whole Shares or a combination
thereof, either in a lump sum payment or in installments, as the Board will
determine.

9.   PAYMENT FOR SHARE PURCHASES.

     Payment for Shares purchased pursuant to this Plan must be made in cash (by
check) or, where expressly approved for the Participant by the Board and where
permitted by law:

     (a) by cancellation of indebtedness of the Company to the Participant;

     (b) by surrender of shares that either: (1) have been owned by the
Participant for more than six (6) months and have been paid for within the
meaning of SEC Rule 144; or (2) were obtained by the Participant in the public
market;

     (c) by waiver of compensation due or accrued to the Participant for
services rendered;

     (d) with respect only to purchases upon exercise of an Option, and provided
that a public market for the Company's stock exists:

(1) through a "same day sale" commitment from the Participant and a
broker-dealer that is a member of the Financial Industry Regulatory Authority (a
"FINRA Dealer") whereby the Participant irrevocably elects to exercise the
Option and to sell a portion of the Shares so purchased to pay for the Exercise
Price, and whereby the FINRA Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the Company; or

(2) through a "margin" commitment from the Participant and a FINRA Dealer
whereby the Participant irrevocably elects to exercise the Option and to pledge
the Shares so purchased to the FINRA Dealer in a margin account as security for
a loan from the FINRA Dealer in the amount of the Exercise Price, and whereby
the FINRA Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or

     (e) by any combination of the foregoing.

10.  WITHHOLDING TAXES.

     10.1 Withholding Generally. Whenever Shares are to be issued in
          ---------------------
satisfaction of Awards granted under this Plan, the Company may require the

                               EXHIBIT 10.1 - 10
<PAGE>
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.

     10.2 Stock Withholding. When, under applicable tax laws, a participant
          -----------------
incurs tax liability in connection with the exercise or vesting of any Award
that is subject to tax withholding and the Participant is obligated to pay the
Company the amount required to be withheld, the Board may allow the Participant
to satisfy the minimum withholding tax obligation by electing to have the
Company withhold from the Shares to be issued that number of Shares having a
Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be
determined. All elections by a Participant to have Shares withheld for this
purpose will be made in accordance with the requirements established by the
Board and will be in writing in a form acceptable to the Board.

11.  PRIVILEGES OF STOCK OWNERSHIP.

     11.1 Voting and Dividends. No Participant will have any of the rights of a
          --------------------
stockholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant will be
a stockholder and will have all the rights of a stockholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are issued pursuant to a Stock Award with restrictions, then any new,
additional or different securities the Participant may become entitled to
receive with respect to such Shares by virtue of a stock dividend, stock split
or any other change in the corporate or capital structure of the Company will be
subject to the same restrictions as the Stock Award.

     11.2 Financial Statements. The Company will provide publicly available
          --------------------
financial information,, including financial statements to each Participant prior
to such Participant's purchase of Shares under this Plan, and to each
Participant annually during the period such Participant has Awards outstanding;
provided, however, the Company will not be required to provide such financial
statements to Participants whose services in connection with the Company assure
them access to equivalent information.

12.  NON-TRANSFERABILITY.

     Awards of Shares granted under this Plan, and any interest therein, will
not be transferable or assignable by the Participant, and may not be made
subject to execution, attachment or similar process, other than by will or by
the laws of descent and distribution. Awards of Options granted under this Plan,
and any interest therein, will not be transferable or assignable by the
Participant, and may not be made subject to execution, attachment or similar
process, other than by will or by the laws of descent and distribution, by
instrument to an inter vivos or testamentary trust in which the options are to
be passed to beneficiaries upon the death of the trustor, or by gift to

                               EXHIBIT 10.1 - 11
<PAGE>
"immediate family" as that term is defined in 17 C.F.R. 240.16a-1(e). During the
lifetime of the Participant an Award will be exercisable only by the
Participant. During the lifetime of the Participant, any elections with respect
to an Award may be made only by the Participant unless otherwise determined by
the Board and set forth in the Award Agreement with respect to Awards that are
not ISOs.

13.  CERTIFICATES.

     All certificates for Shares or other securities delivered under this Plan
will be subject to such stop transfer orders, legends and other restrictions as
the Board may deem necessary or advisable, including restrictions under any
applicable federal, state or foreign securities law, or any rules, regulations
and other requirements of the SEC or any stock exchange or automated quotation
system upon which the Shares may be listed or quoted.

14.  ESCROW; PLEDGE OF SHARES.

     To enforce any restrictions on a Participant's Shares, the Board may
require the Participant to deposit all certificates representing Shares,
together with stock powers or other instruments of transfer approved by the
Board appropriately endorsed in blank, with the Company or an agent designated
by the Company to hold in escrow until such restrictions have lapsed or
terminated, and the Board may cause a legend or legends referencing such
restrictions to be placed on the certificates.

15.  EXCHANGE AND BUYOUT OF AWARDS.

     The Board may, at any time or from time to time, authorize the Company,
with the consent of the respective Participants, to issue new Awards in exchange
for the surrender and cancellation of any or all outstanding Awards. The Board
may at any time buy from a Participant an Award previously granted with payment
in cash, Shares or other consideration, based on such terms and conditions as
the Board and the Participant may agree.

16.  SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.

     An Award will not be effective unless such Award is in compliance with all
applicable federal and state securities laws, rules and regulations of any
governmental body, and the requirements of any stock exchange or automated
quotation system upon which the Shares may then be listed or quoted, as they are
in effect on the date of grant of the Award and also on the date of exercise or
other issuance. Notwithstanding any other provision in this Plan, the Company
will have no obligation to issue or deliver certificates for Shares under this
Plan prior to: (a) obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable; and/or (b) completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the registration, qualification
or listing requirements of any state securities laws, stock exchange or
automated quotation system, and the Company will have no liability for any
inability or failure to do so.

17.  NO OBLIGATION TO EMPLOY.

                               EXHIBIT 10.1 - 12
<PAGE>
     Nothing in this Plan or any Award granted under this Plan will confer or be
deemed to confer on any Participant any right to continue in the employ of, or
to continue any other relationship with, the Company or any Parent or Subsidiary
of the Company or limit in any way the right of the Company or any Parent or
Subsidiary of the Company to terminate Participant's employment or other
relationship at any time, with or without cause.

18.  CORPORATE TRANSACTIONS.

     18.1 Assumption or Replacement of Awards by Successor. In the event of
          ------------------------------------------------
(a)a dissolution or liquidation of the Company, (b) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale, or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction, any or all outstanding Awards may be assumed, converted or
replaced by the successor corporation (if any), which assumption, conversion or
replacement will be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to Participants as was provided to stockholders (after
taking into account the existing provisions of the Awards). The successor
corporation may also issue, in place of outstanding Shares of the Company held
by the Participant, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the Participant. In the event such
successor corporation (if any) refuses to assume or substitute Awards, as
provided above, pursuant to a transaction described in this Subsection 18.1, (i)
the vesting of any or all Awards granted pursuant to this Plan will accelerate
upon a transaction described in this Section 18 and (ii) any or all Options
granted pursuant to this Plan will become exercisable in full prior to the
consummation of such event at such time and on such conditions as the Board
determines. If such Options are not exercised prior to the consummation of the
corporate transaction, they shall terminate at such time as determined by the
Board.

     18.2 Other Treatment of Awards. Subject to any greater rights granted to
          -------------------------
Participants under the foregoing provisions of this Section 18, in the event of
the occurrence of any transaction described in Section 18.1, any outstanding
Awards will be treated as provided in the applicable agreement or plan of
merger, consolidation, dissolution, liquidation, or sale of assets.

     18.3 Assumption of Awards by the Company. The Company, from time to time,
          -----------------------------------
also may substitute or assume outstanding awards granted by another company,
whether in connection with an acquisition of such other company or otherwise, by

                               EXHIBIT 10.1 - 13
<PAGE>
either; (a) granting an Award under this Plan in substitution of such other
company's award; or (b) assuming such award as if it had been granted under this
Plan if the terms of such assumed award could be applied to an Award granted
under this Plan. Such substitution or assumption will be permissible if the
holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.

19.  ADOPTION AND STOCKHOLDER APPROVAL.

     This Plan will become effective on the date on which it is adopted by the
Board (the "Effective Date"). Upon the Effective Date, the Board may grant
Awards pursuant to this Plan. The Company intends to seek stockholder approval
of the Plan within twelve (12) months after the date this Plan is adopted by the
Board; provided, however, if the Company fails to obtain stockholder approval of
the Plan during such 12-month period, pursuant to Section 422 of the Code, any
Option granted as an ISO at any time under the Plan will not qualify as an ISO
within the meaning of the Code and will be deemed to be an NQSO. Further, said
Awards made before obtaining stockholder approval shall be conditional upon
stockholder approval and consistent with NASDAQ Rule 4350(i), the Company may
not issue securities pursuant to Awards before obtaining stockholder approval
for this plan.

20.  TERM OF PLAN/GOVERNING LAW.

     Unless earlier terminated as provided herein, this Plan will terminate ten
(10) years from the date this Plan is adopted by the Board or, if earlier, the
date of stockholder approval. This Plan and all agreements thereunder shall be
governed by and construed in accordance with the laws of the State of Texas.

21.  AMENDMENT OR TERMINATION OF PLAN.

     The Board may at any time terminate or amend this Plan in any respect,
including without limitation amendment of any form of Award Agreement or
instrument to be executed pursuant to this Plan; provided, however, that the
Board will not, without the approval of the stockholders of the Company, amend
this Plan in any manner that requires such stockholder approval.

22.  NONEXCLUSIVITY OF THE PLAN.

     Neither the adoption of this Plan by the Board, the submission of this Plan
to the stockholders of the Company for approval, nor any provision of this Plan
will be construed as creating any limitations on the power of the Board to adopt
such additional compensation arrangements as it may deem desirable, including,
without limitation, the granting of stock options and bonuses otherwise than
under this Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.

                               EXHIBIT 10.1 - 14
<PAGE>
23.   ACTION BY BOARD.

Any action permitted or required to be taken by the Board or any decision or
determination permitted or required to be made by the Board pursuant to this
Plan shall be taken or made in the Board's sole and absolute discretion.

                               EXHIBIT 10.1 - 15

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