Document:

ScanSource Ex10.5 9.30.12 Q1 10Q

Exhibit 10.5
SCANSOURCE, INC.
NON-QUALIFIED DEFERRED COMPENSATION PLAN
As Amended and Restated Effective January 1, 2005
(Including Amendments through December 2010)

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	Section 1
	

Purpose and Administration

1.1.    Name of Plan.  ScanSource, Inc. (the “Company”) hereby adopts the ScanSource, Inc. Deferred Compensation Plan (the “Plan”), as set forth herein.
1.2.    Effective Date of Amended and Restated Plan.  The Plan was originally established effective July 1, 2004.  This document sets forth the terms of the Plan as amended and restated effective as of January 1, 2005 to comply with the requirements of Code Section 409A.
1.3.    Purpose.  The Company has established the Plan primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees of the Participating Employers.  The Plan is intended to be a top-hat plan as described in Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and is intended to comply with Code Section 409A.  The Company intends that the Plan (and each Trust under the Plan as described in Section 13.2) shall be treated as unfunded for tax purposes and for purposes of Title I of ERISA and the Code.  The Plan is not intended to qualify under Code Section 401(a).  

A Participating Employer’s obligations hereunder, if any, to a Participant (or to a Participant’s beneficiary) shall be unsecured and shall be a mere promise by the Participating Employer to make payments hereunder in the future.  A Participant (and, if applicable, the Participant’s beneficiary) shall be treated as a general unsecured creditor of any Participating Employer.
1.4.    Administration.  The Plan shall be administered by the committee appointed by the Company’s Board of Directors. 
		
	(a)
	Authority.  The Plan Administrative Committee shall have full authority and power to administer and construe the Plan, subject to applicable requirements of law.  Without limiting the generality of the foregoing, the Plan Administrative Committee shall have the following powers and duties:

		
	(i)
	To make and enforce such rules and regulations as it deems necessary or proper for the administration of the Plan;

		
	(ii)
	To interpret the Plan and to decide all questions concerning the Plan;

		
	(iii)
	To designate persons eligible to participate in the Plan, subject to the approval of the Board;

		
	(iv)
	To determine the amount and the recipient of any payments to be made under the Plan;

		
	(v)
	To designate and value any investments deemed held in the Accounts;

		
	(vi)
	To appoint such agents, counsel, accountants, consultants and other persons as may be required to assist in administering the Plan; and

		
	(vii)
	To make all other determinations and to take all other steps necessary or advisable for the administration of the Plan.

Subject to paragraph (b) below, all decisions made by the Plan Administrative Committee pursuant to the provisions of the Plan shall be made in its sole discretion and shall be final, conclusive, and binding upon all parties.
		
	(b)
	Authority of Board of Directors.  Notwithstanding anything in this Plan to the contrary, the Board shall have the power 

2

		
	(i)
	to review and approve the persons who will be eligible to participate in the Plan; and

		
	(ii)
	to make determinations with respect to the participation and benefits of to any member of the Plan Administrative Committee who is a participant in the Plan.

		
	(c)
	Delegation of Duties.  The Plan Administrative Committee may delegate such of its duties and may engage such experts and other persons as it deems appropriate in connection with administering the Plan.  The Plan Administrative Committee shall be entitled to rely conclusively upon, and shall be fully protected in any action taken by the Plan Administrative Committee, in good faith in reliance upon any opinions or reports furnished to it by any such experts or other persons.

		
	(d)
	Expenses.  All expenses incurred prior to the termination of the Plan that shall arise in connection with the administration of the Plan, including, without limitation, administrative expenses and compensation and other expenses and charges of any actuary, counsel, accountant, specialist, or other person who shall be employed by the Plan Administrative Committee in connection with the administration of the Plan shall be paid by the Participating Employers.

		
	(e)
	Indemnification of Plan Administrative Committee.  The Participating Employers agree to indemnify and to defend to the fullest extent permitted by law any person serving as a member of the Plan Administrative Committee, and each employee of a Participating Employer or any of their affiliated companies appointed by the Plan Administrative Committee to carry out duties under this Plan, against all liabilities, damages, costs and expenses (including attorneys’ fees and amounts paid in settlement of any claims approved by the Company) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith.

		
	(f)
	Liability.  To the extent permitted by law, neither the Plan Administrative Committee nor any other person shall incur any liability for any acts or for any failure to act except for liability arising out of such person’s own willful misconduct or willful breach of the Plan.

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SECTION 2    
Definitions

For purposes of the Plan, the following words and phrases shall have the meanings set forth below, unless their context clearly requires a different meaning:
2.1.    Account.  “Deferred Compensation Account” means the bookkeeping account maintained for the Participant in accordance with Section 7.1 and which includes the following subaccounts:
		
	(a)
	“In-Service Distribution Sub-Account(s)” means the Account(s) established under a Participant’s Account in connection with the Participant’s election of one or more scheduled In-Service Distribution Dates pursuant to Section 6.1.

		
	(b)
	“Separation from Service Distribution Sub-Account” means the Account established under a Participant’s Account in connection with the Participant’s Separation from Service distribution pursuant to Section 6.2.

2.2.    Affiliate.  “Affiliate” means any corporation which is a member of a controlled group of corporations (as defined in Code Section 414(b)) which includes the Company and any trade or business (whether or not incorporated) which is under common control (as defined in Code Section 414(c)) with the Company.
2.3.    Board.  “Board” means the Board of Directors of ScanSource, Inc.
2.4.    Change in Control.  “Change in Control” means (a) a change in the ownership of the Company as determined in accordance with Treasury Regulation section 1.409A-3(i)(5)(v), (b) a change in effective control of the Company as determined in accordance with Treasury Regulation section 1.409A-3(i)(5)(vi), or (c) a change in the ownership of a substantial portion of the assets of the Company as determined in accordance with Treasury Regulation section 1.409A-3(i)(5)(vii).
2.5.    Code.  “Code” means the Internal Revenue Code of 1986, as amended from time to time.  Any reference to a section of the Code includes any comparable section or sections of any future legislation that amends, supplements or supersedes that section.
2.6.    Company.  “Company” means ScanSource, Inc. or any successor company that adopts this Plan.
2.7.    Compensation.  “Compensation” means such forms of compensation payable in cash as may be designated by the Plan Administrative Committee, from time to time, in its sole discretion, as eligible for deferral under this Plan.  Compensation may include, but shall be not limited to, base salary, and any bonus compensation, payable to the Participant. 
2.8.    Compensation Deferrals.  “Compensation Deferrals” means the amount of Compensation that a Participant elects to defer pursuant to Section 4.
2.9.    Deferral Election.  “Deferral Election” means an election made by a Participant pursuant to Section 4 to defer Compensation.
2.10.    Discretionary Matching Contribution.  “Discretionary Matching Contribution” means the contribution deemed credited to a Participant’s Account pursuant to Section 5.
2.11.    Eligible Employee.  “Eligible Employee” means an employee of a Participating Employer who has been designated pursuant to Section 3 as eligible to make contributions to the Plan.

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2.12.    ERISA.  “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.  Any reference to a section of ERISA includes any comparable section or sections of any future legislation that amends, supplements or supersedes that section.
2.13.    In-Service Distribution Date.  “In-Service Distribution Date” means the date selected by the Participant for commencement of a scheduled in-service distribution pursuant to Section 6.1.
2.14.    Participant.  “Participant” means an Employee who meets the eligibility criteria set forth in Section 3 and who has made a Deferral Election in accordance with the terms of the Plan.
2.15.    Participating Employer.  “Participating Employer” means ScanSource, Inc., and any of its participating Affiliates, or any successor companies.
2.16.    Plan Administrative Committee.  “Plan Administrative Committee” means the committee appointed by the Company’s Board of Directors to administer the Plan.  
2.17.    Plan Year.  “Plan Year” means (a) with respect to the year in which the Plan first became effective, July 1, 2004 through December 31, 2004 and (b) beginning January 1, 2005, the calendar year. 
2.18.    Retirement Date.  “Retirement Date” means 
		
	(a)
	Prior to January 1, 2009, the date on which a Participant separates from service after reaching age 65; and

		
	(b)
	On and after January 1, 2009,  the date on which a Participant separates from service after reaching 55 and completing at least 10 years of service as an employee of a Participating Employer.

2.19.    ScanSource Controlled Group.  “ScanSource Controlled Group” means the Company and its Affiliates.
2.20.    Separation from Service or Separate from Service.  A Participant will be considered to Separate from Service if he or she dies, retires, or otherwise has a termination of employment with the ScanSource Controlled Group, subject to the following: 
		
	(a)
	For this purpose, the employment relationship is treated as continuing intact while the individual is on military leave, sick leave, or other bona fide leave of absence (such as temporary employment by the government) if the period of such leave does not exceed six (6) months, or if longer, so long as the individual’s right to reemployment with the ScanSource Controlled Group is provided either by statute or by contract.  If the period of leave exceeds six (6) months and the individual’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period.

		
	(b)
	The determination of whether a Participant has separated from service shall be determined based on the facts and circumstances in accordance with the rules set forth in Code Section 409A and the regulations thereunder.

2.21.    Totally Disabled or Total Disability.  
		
	(a)
	Prior to January 1, 2005, a Participant shall be considered to be “Totally Disabled” or to have a “Total Disability” if he or she becomes entitled to receive disability benefits under a Participating Employer’s long-term disability insurance plan.

		
	(b)
	On and after January 1, 2005, a Participant shall be considered to be “Total Disabled” if he or she meets one of the following requirements:

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	(i)
	The Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months. 

		
	(ii)
	The Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of a Participating Employer.

		
	(iii)
	The Participant is determined to be totally disabled by the Social Security Administration.

2.22.    Valuation Date.  “Valuation Date” means each business day the financial markets and Wachovia are open, unless the underlying investment requires a less frequent valuation.
2.23.    Other Definitions.  In addition to the terms defined in this Section 2, other terms are defined when first used in Sections of this Plan.

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SECTION 3    
 Eligibility and Participation

3.1.    Eligible Employees.  Only employees who are designated by the Plan Administrative Committee and approved by the Board shall be eligible to participate in the Plan.  See Appendix B.
3.2.    Participation.  
		
	(g)
	An Eligible Employee shall become a Participant in the Plan by (i) completing and submitting to the Company a Deferral Election in accordance with Section 4 below, and (ii) complying with such terms and conditions as the Board and/or the Plan Administrative Committee may from time to time establish for the implementation of the Plan, including, but not limited to, any condition the Board and/or the Plan Administrative Committee may deem necessary or appropriate for the Participating Employers to meet their obligations under the Plan.

		
	(h)
	An employee shall only be a Participant eligible to have compensation deferred under this Plan only while he or she is employed by a Participating Employer and is designated as an Eligible Employee.  If an employee subsequently ceases to be a designated Eligible Employee after becoming a Participant, he or she shall remain a Participant for the other purposes of the Plan to the extent of any existing Account balance subject to Section 14.1.

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SECTION 4    
Compensation Deferrals

4.1.    Election to Defer Compensation.  An Eligible Employee may elect to defer receipt of Compensation as follows:  
		
	(i)
	General Rule.  Except as otherwise provided in this Section, an election to defer receipt of Compensation for services to be performed during a calendar year must be made no later than the December 31 preceding the calendar year during which the Participant will perform services.

		
	(j)
	Performance-Based Compensation.  In the case of Compensation that qualifies as “performance-based compensation” for purposes of Code Section 409A, an election to defer receipt of such compensation must be made no later than the date that is six (6) months before the end of the performance period for such performance-based compensation.

		
	(k)
	First Year of Eligibility.  In the case of the first year in which an employee becomes eligible to participate in the Plan, an initial deferral election must be made not later than thirty (30) days after the date the employee becomes eligible to participate in the Plan.  Such election shall apply only with respect to compensation paid for services to be performed subsequent to the election.  

This paragraph will not apply to an Eligible Employee who is a participant in any other account balance deferred compensation plans maintained by any member of the ScanSource Controlled Group which is required to be aggregated with this Plan under Code Section 409A.
4.2.    Amount of Compensation Deferral.  A Participant may elect to defer receipt of a percentage of his or her Compensation payable for a Plan Year subject to the following rules:
		
	(a)
	The maximum percentage Compensation that can be deferred for a Plan Year will be determined by the Plan Administrative Committee at least thirty (30) days prior to the beginning of the Plan Year.  

		
	(b)
	The amount of the deferral elected for the Plan Year cannot reduce the Participant’s cash compensation below the amount the Participating Employer determines necessary to satisfy applicable federal, state and local income and employment withholding taxes and any obligations to make benefit plan contributions.

4.3.    Election of In-Service Distribution Date.  A Participant may elect to have the total amount of Compensation Deferrals and Discretionary Matching Contributions credited to his or her Account for a particular Plan Year, and any earnings thereon, distributed at a designated date prior to his or her Separation from Service in accordance with Section 6.
4.4.    Election of Form of Payment of Retirement Distribution.  A Participant may elect whether payment of his or her Account will be made in a lump sum or installments following his or her Retirement Date in accordance with Section 6.  Such election shall be made at the time the Participant first elects to participate in this Plan.
4.5.    Election of Distribution Upon Change In Control.  A Participant may elect to have his or her Account distributed immediately following a Change in Control.  Such election shall be made at the time the Participant first elects to participate in this Plan.  Any such election shall be irrevocable.
4.6.    General Rules Applicable to Elections.  Elections under this Article 4 shall be made in the form, manner, and in accordance with the notice requirements, prescribed by the Plan Administrative Committee.  Except as otherwise provided in this Plan, the elections made by a Participant with respect to Compensation Deferrals for a calendar year shall become irrevocable as of the last date on which such election can be made for the calendar year pursuant to this Article 4.

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4.7.    Cancellation of Deferral Election.  
		
	(a)
	The Plan Administrative Committee may permit a Participant to cancel a Deferral Election during a calendar year if it determines either of the following circumstances has occurred:

		
	(i)
	The Participant has an “unforeseeable emergency” as defined in Section 7.03 below or a hardship distribution (pursuant to Treasury Regulation §1.401(k)-1(d)(3)) from a 401(k) plan sponsored by a Participating Employer.  If approved by the Plan Administrative Committee, such cancellation shall take effect as of the first payroll period next following approval by the Plan Administrative Committee. 

		
	(ii)
	The Participant incurs a disability.  If approved by the Plan Administrative Committee, such cancellation such cancellation shall take effect no later than the end of the calendar year or the 15th day of the third month following the date Participant incurs a disability.  Solely for purposes of this clause (ii), a disability refers to any medically determinable physical or mental impairment resulting in the Participant’s inability to perform the duties of his or her position or any substantially similar position, where such impairment can be expected to result in death or can be expected to last for a continuous period of not less than six months.

		
	(b)
	If a Participant cancels a Deferral Election during a calendar year, he or she will not be permitted to make a new deferral election with respect to Compensation relating to services performed during the same calendar year.

4.8.    Crediting of Compensation Deferrals.
		
	(a)
	The amount of Compensation deferred by a Participant shall be credited to the Participant’s Account as of the Valuation Date coincident with or immediately following the date such Compensation  would, but for the Participant’s Deferral Election, be payable to the Participant.

		
	(b)
	The Compensation Deferrals, and the earnings thereon, credited to the Participant’s Compensation Deferral Account shall be immediately 100% vested and nonforfeitable at all times.

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SECTION 5    
Discretionary Matching Contributions

5.1.    Discretionary Matching Contribution.  
		
	(c)
	For any Plan Year, a Participating Employer may credit to the Deferred Compensation Account of any Participant employed by that Participating Employer with a Discretionary Matching Contribution in such amount as may be determined by the Participating Employer in its sole discretion at least thirty (30) days prior to the beginning of the Plan Year.  

		
	(d)
	The amount of the Discretionary Matching Contribution to be credited to a Participant’s Account for a Plan Year shall be equal to such dollar amount, such percentage of a Participant’s Compensation Deferrals, or any combination thereof, as may be determined by the Participating Employer in its sole discretion.

		
	(e)
	Any Discretionary Matching Contribution will be credited to a Participant’s Account as of the Valuation Date specified by the Participating Employer.

5.2.    Vesting of Discretionary Matching Contribution.  
		
	(a)
	Except as otherwise provide in paragraph (b) below and subject to Section 10, the Discretionary Matching Contribution credited to a Participant’s Account with respect to a particular Plan Year shall become vested in accordance with the following schedule:

	
		
	Years of Service Completed Following Plan Year for which Contribution is Credited
	Vested Percentage

	Less than 3 Years of Service
	0%

	3 Years of Service
	50%

	4 Years of Service
	75%

	5 or more Years of Service
	100%

A Participant will be credited with a Year of Service if 
		
	(i)
	he or she is actively employed by a Participating Employer for a continuous period of at least 6 full months during a Plan Year and is actively employed by a Participating Employer as of the last day of the Plan Year, or

		
	(ii)
	he or she fails to meet the active employment requirement in clause (i) above solely as a result of an approved leave of absence.

		
	(b)
	Notwithstanding the foregoing vesting schedule – 

		
	(i)
	Solely for purposes of determining the vesting of Discretionary Matching Contributions credited to a Participant’s Account with respect to the Plan Year ended December 31, 2005, the number of Years of Service completed by such Participant will be determined during the period beginning as of July 1, 2005. 

		
	(ii)
	The balance credited to a Participant’s Participating Employer Contribution Account shall be become fully vested if the Participant remains continuously employed by a Participating Employer or an Affiliate until his or her death, Total Disability, Retirement Date or the occurrence of a Change in Control.

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SECTION 6    
Distribution Elections

Subject to the other terms contained in this Plan, a Participant may make the following distribution elections:
6.1.    Election of Designated In-Service Distribution Date(s).  The Participant may elect to have the total amount of Compensation Deferrals and vested Discretionary Matching Contributions credited to his or her Account for a particular Plan Year, and any earnings thereon, distributed in a lump sum at a specified date prior to his or her Separation from Service subject to the following rules:
		
	(c)
	The specified in-service distribution date cannot be earlier than the end of the five (5) Plan Year period following the Plan Year for which such Compensation Deferrals and Discretionary Matching Contributions are credited to his or her Account.  

		
	(d)
	If a Participant fails to make an in-service distribution election with respect to Compensation Deferrals and Discretionary Matching Contributions for a calendar year, then such Compensation Deferrals or Discretionary Matching Contributions will be allocated to the Participant’s Separation from Service Distribution Sub-Account.

		
	(e)
	Such election shall be made at the same time the Participant makes the Deferral Election in accordance with Section 4 for that Plan Year.  Except as otherwise provided in paragraph (e) below, any such election shall be irrevocable.

		
	(f)
	A separate In-Service Distribution Sub-Account will be established and maintained as part of the Participant’s Account for each In-Service Distribution Date elected by the Participant.  Such Account shall be credited or charged with (i) the amounts of Compensation Deferrals and Discretionary Matching Contributions designated by the Participant to be distributed as of the In-Service Distribution Date, (ii) a portion of the income, gains, losses, and expenses of investments deemed held in the Participant’s Account as allocated based on the Compensation Deferrals and Discretionary Matching Contributions credited to such Sub-Account and (iii) distributions from such Sub-Account.  

		
	(g)
	A Participant may change his or her specified in-service distribution date only in accordance with the following rules:

		
	(i)
	Such election may not take effect until at least twelve (12) months after the date on which the election is made.

		
	(ii)
	The new distribution date cannot be less than five (5) years from the date such payment otherwise would have been paid but for the new election. 

		
	(iii)
	Such election must be at least twelve (12) months prior to the date the first payment is scheduled to be paid.

6.2.    Election of Form of Payment Upon Separation from Service.  
		
	(a)
	Unless a Participant elects otherwise, the vested balance credited to his or her Separation from Service Distribution Sub-Account will be distributed in a single lump sum payment.

		
	(b)
	A Participant may elect to have the vested balance credited to his or her Separation from Service Distribution Sub-Account distributed in substantially equal monthly installment payments for a period of 36, 48 or 60 months.  Notwithstanding the foregoing, the installment payment option will become effective only if the Participant Separates from Service after his or her Retirement Date.  

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	(c)
	Except as otherwise provided in Appendix A to this Plan, a Participant may change his or her retirement distribution election only in accordance with the following rules:

		
	(i)
	Such election may not take effect until at least twelve (12) months after the date on which the election is made.

		
	(ii)
	The new distribution date cannot be less than five (5) years from the date such payment otherwise would have been paid but for the new election. 

		
	(iii)
	Such election must be at least twelve (12) months prior to the date the first payment is scheduled to be paid.

		
	(d)
	A separate Separation from Service Distribution Sub-Account will be established and maintained as part of the Participant’s Account.  Such Account shall be credited or charged with (i) the amount of Compensation Deferrals and Discretionary Matching Contributions to be distributed following the Participant’s Separation from Service, (ii) a portion of the income, gains, losses, and expenses of investments deemed held in the Participant’s Account as allocated based on the Compensation Deferrals and Discretionary Matching Contributions credited to such Sub-Account and (iii) distributions from such Sub-Account. 

6.3.    Election of Distribution Upon Change in Control.  A Participant may elect to have his or her Account distributed immediately following a Change in Control.  Such election shall be made at the time the Participant first elects to participate in this Plan.  Any such election shall be irrevocable. 
6.4.    General Rules.  Elections under this Section 6 shall be made in the form, manner, and in accordance with the notice requirements prescribed by the Plan Administrative Committee.  Except as otherwise provided in this Plan, if a Participant fails to make a distribution election under this Section 6, the balance credited to his or her Account will be distributed in a single lump sum payment following his or her Separation from Service date.

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SECTION 7    
Deferred Compensation Accounts

7.1.    Participant’s Accounts.  The Company shall establish and maintain a separate memorandum account in the name of each Participant.  Such account shall be credited or charged with (a) the Participant’s Compensation Deferrals, if any; (b) Discretionary Matching Contributions, if any; (c) income, gains, losses, and expenses of investments deemed held in such account; and (d) distributions from such account. 
7.2.    Investment of Accounts.
		
	(a)
	The amount credited to a Participant’s Account shall be deemed to be invested and reinvested in mutual funds, stocks, bonds, securities, and any other assets or investment vehicles, as may be selected by the Plan Administrative Committee in its sole discretion; provided that in no event shall such Accounts be deemed to be invested in securities issued by the Company. 

		
	(b)
	A Participant may elect the manner in which his or her Account is deemed to be invested and reinvested among the deemed investment options selected by the Plan Administrative Committee.  A Participant’s investment election shall remain in effect until the Participant properly files a change of election with the Plan Administrative Committee.  In the event that any Participant fails to make an election with respect to the investment of all or a portion of the balance in his or her account at any time, the Participant shall be deemed to have elected that such balance be deemed to be invested in a money market (or equivalent) fund and such assets shall remain in such investment fund until such time as the Participant directs otherwise.

		
	(c)
	A Participant’s investment direction (or any change in his or her investment direction) shall be made in the form, manner, and in accordance with the notice requirements, prescribed by the Plan Administrative Committee.

		
	(d)
	A Participant, by electing to participate in this Plan, agrees on behalf of himself or herself and his or her designated beneficiaries, to assume all risk in connection with any increase or decrease in value of the investments which are deemed to be held in his or her account.  Each Participant further agrees that the Plan Administrative Committee and the Participating Employer shall not in any way be held liable for any investment decisions or for the failure to make any investments by the Plan Administrative Committee.

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SECTION 8    
Distribution Prior to Separation from Service

8.1.    Distribution of In-Service Distribution Sub-Account(s).  
		
	(e)
	Commencement of Payment.  Subject to paragraph (c), payment of a Participant’s In-Service Distribution Sub-Account will be paid in a lump sum distribution within the calendar month following the calendar month of the In-Service Distribution Date applicable to such Sub-Account. 

		
	(f)
	Amount of Payment.  The amount of the lump sum payment will be equal to the value of the In-Service Distribution Account as of the last valuation date preceding the date of payment.

		
	(g)
	Separation from Service Prior to In-Service Distribution Date.  If the Participant Separates from Service prior to the commencement of distribution of an In-Service Distribution Sub-Account, then such In-Service Distribution Sub-Account shall be distributed at the same time and in the same manner as the Participant’s Separation from Service Distribution Sub-Account.

8.2.    Financial Hardship.  The Plan Administrative Committee, in its sole discretion, may permit a hardship payment to be made to a Participant at any time prior to Separation from Service in the event of an “unforeseeable emergency”.  Withdrawals of amounts because of an unforeseeable emergency will be permitted to the extent reasonably needed to satisfy the emergency need.
		
	(a)
	For purposes of this Section, an “unforeseeable emergency” is a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

		
	(b)
	The circumstances that will constitute an unforeseeable emergency will depend upon the facts of each case, but, in any case, payment may not be made to the extent that such hardship is or may be relieved:

		
	(iii)
	Through reimbursement or compensation by insurance or otherwise;

		
	(iv)
	By liquidation of the Participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or

		
	(v)
	By cessation of Compensation Deferrals under the Plan.

8.3.    Distribution Upon Change in Control.  If a Participant has elected to receive distribution of his or her Account upon the occurrence of a Change in Control, the balance credited to the Participant’s Account, shall be distributed to the Participant in a single lump sum payment within 30 days after the Change in Control.

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SECTION 9    
Distribution Following Separation from Service

9.1.    Distribution from Separation from Service Distribution Sub-Account.  
		
	(c)
	Commencement of Payment.  Payment of a Participant’s Separation from Service Distribution Sub-Account will commence as of the first calendar month following the calendar month of the Participant’s Separation from Service date.

Notwithstanding the foregoing, in no event shall payment to a Participant who is a “specified employee” within the meaning of Code Section 409A on his or her Separation from Service date, commence earlier than the first day following the end of the six (6) month period following such date.
		
	(d)
	Form of Payment.

		
	(iv)
	Separation from Service Prior to Retirement Date.  In the event that a Participant Separates from Service for any reason other than death or Total Disability prior to reaching his or her Retirement Date, then notwithstanding any election made under Section 7.02 above, the amount credited to the Participant’s Separation from Service Distribution Sub-Account will be distributed to the Participant in a single lump sum payment.

		
	(v)
	Separation from Service at or after Retirement Date.  If a Participant Separates from Service at or after reaching his or her Retirement Date, his or her Separation from Service Distribution Sub-Account will be distributed to the Participant in accordance with his or her election of a lump sum payment or installment payments under Section 7.02 above.  

		
	(e)
	Amount of Payment.

		
	(i)
	Lump Sum Amount.  The amount of the lump sum payment will be equal to the value of the Separation from Service Distribution Account as of the last valuation date preceding the date of payment.

		
	(ii)
	Installment Payments.  Each annual installment payment shall be in the amount equal to (A) the value of the Separation from Service Distribution Sub-Account, as of the last valuation date preceding the date of payment, divided by (B) the number of installment payments not yet distributed.

Notwithstanding the foregoing, if the balance credited to the Participant’s Account as of his or her Separation from Service date does not exceed the applicable dollar limit on elective 401(k) plan deferrals then in effect under Code Section 402(g)(1)(B), then distribution will be made in a single lump sum payment within the calendar month following the calendar month of the Participant’s Separation from Service date.
9.2.    Separation from Service Due to Total Disability.  In the event that a Participant separates from service at any time by reason of becoming Totally Disabled, the balance credited to his or her Account will be distributed to the Participant in a single lump payment within the calendar month following the calendar month of the Participant’s Separation from Service date.
9.3.    Death.  
		
	(c)
	In the event that a Participant’s employment is terminated by reason of his or her death, the balance credited to his or her Account will be distributed to the Participant’s designated beneficiary in a single lump payment within the calendar month following the calendar month of the Participant’s death.

15

		
	(d)
	In the event a Participant dies after the commencement of installment payments, but prior to the completion of all such payments due and owing hereunder, the remaining balance credited to his or her Account will be distributed to the Participant’s designated beneficiary in a single lump payment within the calendar month following the calendar month in which the Plan Administrative Committee receives satisfactory proof of the Participant’s death. 

9.4.    Designated Beneficiary.
		
	(a)
	The Participant may name a beneficiary or beneficiaries to receive the balance of the Participant’s Deferred Compensation Account in the event of the Participant’s death prior to the payment of the Participant’s entire Deferred Compensation Account.  To be effective, any beneficiary designation must be filed in writing with the Plan Administrative Committee in accordance with rules and procedures adopted by the Plan Administrative Committee for that purpose.

		
	(b)
	A Participant may revoke an existing beneficiary designation by filing another written beneficiary designation with the Plan Administrative Committee.  The latest beneficiary designation received by the Plan Administrative Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Plan Administrative Committee prior to the Participant’s death.  

		
	(c)
	If no beneficiary is named by a Participant, or if the Participant survives all of the Participant’s named beneficiaries and does not designate another beneficiary, the Participant’s Deferred Compensation Account shall be paid in the following order of precedence:

		
	(i)
	The Participant’s spouse;

		
	(ii)
	The Participant’s children (including adopted children) per stirpes; or

		
	(iii)
	The Participant’s estate.

16

SECTION 10    
Forfeiture of Benefits  

10.1.    Notwithstanding anything in this Plan to the contrary, if the Plan Administrative Committee, in its sole discretion, determines that 
		
	(c)
	the Participant’s employment with the Participating Employer has been terminated for Good Cause or, 

		
	(d)
	if at any time during which a Participant is entitled to receive payments under the Plan, the Participant has breached any of his or her post-employment obligations, including, but not limited to, any restrictive covenants or obligations under any agreement and general release, 

then the Plan Administrative Committee may cause the Participant’s entire interest in benefits attributable to his or her Employer Contribution Account to be forfeited and discontinued, or may cause the Participant’s payments of benefits under the Plan to be limited or suspended for such other period the Plan Administrative Committee finds advisable under the circumstances, and may take any other action and seek any other relief the Plan Administrative Committee, in its sole discretion, deems appropriate.  
10.2.    “Good Cause” means the Participant’s fraud, dishonesty, or willful violation of any law or significant policy of the Participating Employer that is committed in connection with the Participant’s employment by or association with the Company or Affiliate.  Whether a Participant has been terminated for Good Cause shall be determined by the Plan Administrative Committee. 
Regardless of whether a Participant’s employment initially was considered to be terminated for any reason other than Good Cause, the Participant’s employment will be considered to have been terminated for Good Cause for purposes of this Plan if the Plan Administrative Committee subsequently determines that the Participant engaged in an act constituting Good Cause.
10.3.    The decision of the Plan Administrative Committee shall be final.  The omission or failure of the Plan Administrative Committee to exercise this right at any time shall not be deemed a waiver of its right to exercise such right in the future.  The exercise of discretion will not create a precedent in any future cases.

17

SECTION 11    
Appeals Procedure

11.1.    The Plan Administrative Committee shall approve or wholly or partially deny all claims for benefits under the Plan within a reasonable period of time after all required documentation has been furnished to the Plan Administrative Committee.
11.2.    If a claim is wholly or partially denied, the Plan Administrative Committee shall provide the claimant with written notice setting forth the specific reasons for the denial, making reference to the pertinent provisions of the Plan or the Plan documents on which the denial is based; describe any additional material or information that should be received before the claim may be acted upon favorably, and explain why such material or information, if any, is needed; and inform the person making the claim of his or her right pursuant to this Section to request review of the decision by the Plan Administrative Committee.
11.3.    A claimant shall have the right to request a review of the decision denying the claim.  Such request must be made by filing a written application for review with the Plan Administrative Committee no later than sixty (60) days after receipt by the claimant of written notice of the denial of his or her claim.  The claimant may review pertinent Plan documents and shall submit such written comments and other information which he or she wishes the Plan Administrative Committee to consider in connection with his or her claim.
11.4.    The Plan Administrative Committee may hold any hearing or conduct any independent investigation which it deems necessary to render its decision on review.  Such decision shall be made as soon as practicable after the Plan Administrative Committee receives the request for review.  Written notice of the decision on review shall be promptly furnished to the claimant and shall include specific reasons for the decision.
11.5.    For all purposes under the Plan, decisions on claims (where no review is requested) and decisions on review (where review is requested) shall be final, binding and conclusive on all interested persons.

18

SECTION 12    
Amendment or Termination of the Plan

12.1.    The Plan Administrative Committee may, in its sole discretion, terminate, suspend or amend this Plan at any time or from time to time, in whole or in part, with respect to any Participants or beneficiaries whether or not payments have commenced to such Participants or beneficiaries.  Notwithstanding the foregoing, no amendment, termination, or suspension of the Plan will affect a Participant’s right to receive amounts previously deferred under the Plan.
12.2.    In the event the Plan is terminated and liquidated in accordance with the requirements described in Treasury Regulation section 1.409A-3(j)(4)(ix), the Plan Administrative Committee shall distribute the remaining amounts in Participants’ Accounts at such times and in such ways as the Plan Administrative Committee, in its sole discretion, may deem appropriate.

19

SECTION 13    
Unfunded Plan; Change in Control

13.1.    Unfunded Plan.  Nothing in this Plan shall be construed as giving any Participant, or his or her legal representative or designated beneficiary, any claim against any specific assets of the Company or any of its affiliated companies or as imposing any trustee relationship upon the Company or any of its affiliated companies in respect of the Participant.  The Participating Employers shall not be required to segregate any assets in order to provide for the satisfaction of the obligations hereunder.  Investments deemed held in the Accounts shall continue to be a part of the general funds of the applicable Participating Employers, and no individual or entity other than the Participating Employer shall have any interest whatsoever in such funds.  If and to the extent that the Participant or his or her legal representative or designated beneficiary acquires a right to receive any payment pursuant to this Plan, such right shall be no greater than the right of an unsecured general creditor of the applicable Participating Employer.
13.2.    Rabbi Trust.  The Participating Employers shall establish a trust (or trusts) for the purpose of providing funds for the payment of the amounts credited to Participants under the Plan subject to the following rules:
		
	(a)
	Such trust(s) shall be an irrevocable grantor trust containing provisions which are the same as, or are similar to, the provisions contained in the model “rabbi trust” set forth in Internal Revenue Service Revenue Procedure 92-64 (or any successor guidance issued by the IRS). 

		
	(b)
	The Participating Employers shall make contributions to the trust(s) equal to the amount of the Compensation Deferrals and Discretionary Matching Contributions as soon as practicable, but in no event later five (5) business days, following the date on which such contributions are credited to Participants’ Accounts.

		
	(c)
	The Participating Employers shall pay all costs relating to the establishment and maintenance of the trust(s) and the investment of funds held in such trust(s).

13.3.    Change in Control.  In the event of a Change in Control, the Participating Employers shall, as soon as possible, but in no event later than five (5) business days following a Change in Control, make an irrevocable contribution to the trust(s) established pursuant to Section 13.2 in an amount that is sufficient to pay the total amount credited to all Accounts under the Plan as of the date of the Change in Control.

20

SECTION 14    
Miscellaneous Provisions

14.1.    Acceleration or Delay of Payments Permitted Under Code Section 409a.
		
	(d)
	Acceleration of Payments.  The Plan Administrative Committee may, its discretion, accelerate the payment of all or a portion of a Participant’s vested Account prior to the time specified in this Plan to the extent such acceleration is permitted by Treasury Regulation Section 1.409A-3(j)(4).  Such permitted accelerations shall include payments to comply with domestic relations orders, payments to comply with conflicts of interest laws, payment of employment taxes, payment upon income inclusion under Code Section 409A, and/or such other circumstances as are permitted by the regulations.

		
	(e)
	Delay of Payments.  The Plan Administrative Committee may, in its discretion, delay the payment of all or a portion of a Participant’s Account in such circumstances as may be permitted under Code Section 409A.

14.2.    Benefits Non-Assignable.  Benefits under the Plan may not be anticipated, assigned or alienated, and will not be subject to claims of a Participant’s creditors by any process whatsoever, except as specifically provided in this Plan or by the Plan Administrative Committee in its sole discretion.
14.3.    Right to Withhold Taxes.  The Participating Employers shall have the right to withhold such amounts from any payment under this Plan as it determines necessary to fulfill any federal, state, or local wage or compensation withholding requirements.
14.4.    No Right to Continued Employment.  Neither the Plan, nor any action taken under the Plan, shall confer upon any Participant any right to continuance of employment by the Company or any of its affiliated companies nor shall it interfere in any way with the right of the Company or any of its affiliated companies to terminate any Participant’s employment at any time.
14.5.    Mental or Physical Incompetency.  If the Plan Administrative Committee determines that any person entitled to payments under the Plan is incompetent by reason of physical or mental disability, as established by a court of competent jurisdiction, the Plan Administrative Committee may cause all payments thereafter becoming due to such person to be made to any other person for his or her benefit, without responsibility to follow the application of amounts so paid.  Payments made pursuant to this Section shall completely discharge the Plan Administrative Committee and the Participating Employer.
14.6.    Unclaimed Benefit.  Each Participant shall keep the Plan Administrative Committee informed in writing of his or her current address and the current address of his or her beneficiary.  The Plan Administrative Committee shall not be obligated to search for the whereabouts of any person.  If the location of a Participant is not made known to the Plan Administrative Committee within three (3) years after the date on which payment of the Participant’s Account may first be made, payment may be made as though the Participant had died at the end of the three (3) year period.  If, within one additional year after such three (3) year period has elapsed, or, within three years after the actual death of a Participant, the Plan Administrative Committee is unable to locate any designated beneficiary of the Participant, then the Participating Employer shall have no further obligation to pay any benefit hereunder to such Participant or beneficiary or any other person and such benefit shall be irrevocably forfeited.
14.7.    Suspension of Payments.  If any controversy, doubt or disagreement should arise as to the person to whom any distribution or payment should be made, the Plan Administrative Committee, in its discretion, may, without any liability whatsoever, retain the funds involved or the sum in question pending settlement or resolution to the Plan Administrative Committee’s satisfaction of the matter, or pending a final adjudication by a court of competent jurisdiction.
14.8.    Governing Laws.  The provisions of the Plan shall be construed, administered and enforced according to applicable Federal law and the laws of State of South Carolina.

21

14.9.    Severability.  The provisions of the Plan are severable.  If any provision of the Plan is deemed legally or factually invalid or unenforceable to any extent or in any application, then the remainder of the provision and the Plan, except to such extent or in such application, shall not be affected, and each and every provision of the Plan shall be valid and enforceable to the fullest extent and in the broadest application permitted by law.
14.10.    No Other Agreements or Understandings.  This Plan represents the sole agreement between the Participating Employers and Participants concerning its subject matter, and it supersedes all prior agreements, arrangements, understandings, warranties, representations, and statements between or among the parties concerning its subject matter.

22

IN WITNESS WHEREOF, the Company has caused this Plan to be executed by it’s duly authorized officer on this 22nd day of December, 2010.

SCANSOURCE, INC.
(the “Company”)

By: Richard P. Cleys                

Title:  VP & CFO                                           

ATTEST:

By:  Amy Pharr            

Title: Director, Compensation    

23

 APPENDIX A
Code Section 409A Transition Rules

		
	1.
	Notwithstanding anything in the Plan to the contrary, a Participant who has made a deferral election with respect to Compensation earned or payable on or after January 1, 2005, may reduce or revoke any current deferral election prior to December 31, 2005 or such earlier date as may be specified by the Plan Administrative Committee.

		
	2.
	Notwithstanding anything in the Plan to the contrary, a Participant may choose a new distribution date for the payment of his or her In-Service Distribution Sub-Account(s) and/or may make a new election with respect to the form of payment of the Account portion of his or her Separation from Service Sub-Account in accordance with the following rules: 

		
	(a)
	An election to change a time and form of payment of payment made on or after January 1, 2005 and on or before December 31, 2005 may apply only to amounts that would not otherwise be payable in 2005 and may not cause an amount to be paid in 2005 that would not otherwise be payable in 2005;

		
	(b)
	An election to change a time and form of payment of payment made on or after January 1, 2006 and on or before December 31, 2006 may apply only to amounts that would not otherwise be payable in 2006 and may not cause an amount to be paid in 2006 that would not otherwise be payable in 2006; 

		
	(c)
	An election to change a time and form of payment of payment made on or after January 1, 2007 and on or before December 31, 2007 may apply only to amounts that would not otherwise be payable in 2007 and may not cause an amount to be paid in 2007 that would not otherwise be payable in 2007; and

		
	(d)
	An election to change a time and form of payment of payment made on or after January 1, 2008 and on or before December 31, 2008 may apply only to amounts that would not otherwise be payable in 2008 and may not cause an amount to be paid in 2008 that would not otherwise be payable in 2008.

		
	3.
	Any election pursuant to this Appendix shall be made in such form and manner as may be required by the Plan Administrative Committee.

242012 Q3 10Q Ex 10.1 2005 Restricted Stock - Stock Option Plan Amend 10-29-12

Exhibit 10.1

FELCOR LODGING TRUST INCORPORATED

2005 Restricted Stock and Stock Option Plan

(as amended through October 29, 2012)

FELCOR LODGING TRUST INCORPORATED 
2005 Restricted Stock and Stock Option Plan 

Section 1.     Establishment, Purpose, and Effective Date of Plan 

1.1     Establishment. FelCor Lodging Trust Incorporated, a Maryland corporation, hereby establishes the “FELCOR LODGING TRUST INCORPORATED 2005 RESTRICTED STOCK AND STOCK OPTION PLAN” (the “Plan”) for Independent Directors, executive officers and key employees. The Plan permits the grant of stock options and restricted stock as a payout media for payments under the plan.

1.2     Purpose. The purpose of the Plan is to advance the interests of the Company, by encouraging and providing for the acquisition of an equity interest in the success of the Company by Independent Directors, executive officers and key employees, by providing additional incentives and motivation toward superior performance of the Company, and by enabling the Company to attract and retain the services of Independent Directors, executive officers and key employees upon whose judgment, interest, and special effort the successful conduct of its operations is largely dependent.

1.3     Effective Date. The Plan shall become effective on February 18, 2005, (“Effective Date”), although it is subject to shareholder approval as provided in Section 6.1. 

Section 2.     Definitions 

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

(a)    “Award” means, collectively, each Option, Restricted Stock or Restricted Stock Unit, granted under this Plan, except that where it shall be appropriate to identify the specific type of Award, reference shall be made to the specific type of Award. 

(b)    “Award Agreement” means a written agreement between the Company and a holder of an Award evidencing the terms and conditions of an individual Award grant.  Each Award Agreement will be subject to the terms and conditions of the Plan and need not be identical.

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

(d)    “Code” means the Internal Revenue Code of 1986, as amended.

(e)    “Committee” means the Compensation Committee of the Board; provided, however, that for any grant to an Independent Director, the remaining members of the Board shall serve as the Compensation Committee with respect to such grant, including, but not limited to, the approval of the grant. The Board, as a whole, may take any action which the Committee is authorized to take hereunder. 

(f)    “Company” means FelCor Lodging Trust Incorporated, a Maryland corporation. 

(g)    “Disability” means an individual who 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 twelve (12) months.

(h)    “Employee” means an employee (including officers and directors who are also employees) of the Company or its subsidiaries, affiliates (including partnerships) or any branch or division thereof.

(i)    “Fair Market Value”  of a share of Stock means the reported closing sales price of the Stock on the New York Stock Exchange Composite Tape on that date, or if no closing price is reported on that date, on the last preceding date on which such closing price of the Stock was so reported.  If the Stock is not traded on the New York Stock Exchange at the time a determination of its Fair Market Value is required to be made hereunder, its Fair Market Value shall be deemed to be equal to the average between the closing bid and asked prices of the Stock on the most recent date on which the Stock was publicly traded.  In the event the Stock is not publicly traded at the time a determination of its value is required to be made hereunder, the determination of its Fair Market Value shall be made by the Committee in such manner as it deems appropriate.

(j)    “Independent Director” means a director of the Company who is not an Employee. 

(k)    “Option” means the right to purchase Stock at a stated price for a specified period of time.  For purposes of the Plan, an Option may be either (i) an “incentive stock option” within the meaning of Section 422 of the Code or (ii) a “nonstatutory stock option.”

(l)    “Participant” means any Employee or Independent Director designated by the Committee to participate in the Plan.

(m)    “Period of Restriction” means (i) with respect to shares of Restricted Stock, the period during which the transfer of such shares is restricted pursuant to Section 8 of the Plan and (ii) with respect to Restricted Stock Units, the period beginning on when such Restricted Stock Units are granted to a Participant and ending when the shares of Stock underlying such Restricted Stock Units are to be issued to the Participant in accordance with the Award Agreement.

(n)    “Restricted Stock” means Stock granted to a Participant pursuant to Section 8 of the Plan.

(o)    “Restricted Stock Units” means a number of hypothetical Stock units granted to a Participant pursuant to Section 8 of the Plan having a value equal to the Fair Market Value of an identical number of shares of Stock; such units provide for the issuance of an identical number of shares of Stock to such Participant (or other compensation having a value equal to the corresponding Stock), subject to satisfaction of certain conditions.

(p)    “Stock” means the common stock of the Company, par value of $.01 per share.

2.2    Gender and Number.  Except when otherwise indicated by the context, words in the masculine gender when used in the Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular.

-2-

Section 3.    Eligibility and Participation

3.1    Eligibility and Participation.  Participants in the Plan shall be selected by the Committee from among the Independent Directors and Employees who, in the opinion of the Committee, are in a position to contribute materially to the Company's continued growth and development and to its long-term financial success.

Section 4.    Administration

4.1     Administration. The Committee shall be responsible for the administration of the Plan. The Committee, by majority action thereof, is authorized to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company, and to make all other determinations necessary or advisable for the administration of the Plan. Determinations, interpretations, or other actions made or taken by the Committee pursuant to the provisions of the Plan shall be final and binding and conclusive for all purposes and upon all persons whomsoever. 

Section 5.     Stock Subject to Plan 

5.1     Number. The total number of shares of Stock subject to Awards under the Plan may not exceed 6,000,000, subject to adjustment upon the occurrence of any of the events indicated in Section 5.3 hereof. The shares to be delivered under the Plan may consist, in whole or in part, of authorized but unissued Stock or treasury Stock, not reserved for any other purpose. Without limitation, no officer of the Company or other person whose compensation may be subject to the limitations on deductibility under Section 162(m) of the Code shall be eligible to receive Awards pursuant to this Plan in excess of 250,000 shares of Stock in any fiscal year (the “Section 162(m) Maximum”). 
5.2     Lapsed Awards. If any Award granted under the Plan terminates, expires, lapses or is canceled for any reason, any shares of Stock subject to such Award again shall be available for the grant of an Award hereunder. The Committee shall not, unless approved by (or subject to the approval of) shareholders, effect a repricing of all or any of the Options outstanding under the Plan at any time. Further, except as otherwise provided in Section 7.11 hereof, the Committee shall not, without the consent of the affected Optionee, have the authority to effect the cancellation or modification of any or all outstanding Options. 
5.3     Adjustment in Capitalization. In the event of any change in the outstanding shares of Stock that occurs after the Effective Date by reason of a Stock dividend or split, recapitalization, merger, consolidation, combination, exchange of shares, or other similar corporate change, the aggregate number of shares of Stock subject to the Plan and to each Award hereunder, and to the stated Option price (if any) of each Award, shall be adjusted appropriately by the Committee or the Board, whose determination shall be conclusive; provided, however, that fractional shares shall be rounded to the nearest whole share. In such event, the Committee or the Board also shall have discretion to make appropriate adjustments in the number and type of shares subject to an Award of Restricted Stock under the Plan pursuant to the terms of such an Award. In the event of a merger or consolidation where the Company is not the surviving corporation, the surviving corporation shall be required to assume the outstanding Awards which have not been canceled, and the Committee, in its sole discretion, shall adjust the number of shares, and the Option price (if any), so as to neither reduce or enlarge the rights of the Participant, including, but not limited to, dividing the shares and the Option price (if any) by the exchange ratio. 

-3-

Section 6.     Shareholder Approval and Duration of Plan 
6.1     Shareholder Approval. All Awards granted under this Plan are subject to, and may not be exercised before, and will be rescinded and become void in the absence of, the approval of this Plan by a majority of the shareholders voting thereon at a meeting of shareholders, at which a quorum is present, held prior to the first anniversary of the Effective Date of this Plan. 
6.2     Duration of Plan. The Plan shall remain in effect, subject to the Board's right to earlier terminate pursuant to Section 10 hereof, until all Stock subject to it shall have been purchased or acquired pursuant to the provisions hereof. Notwithstanding the foregoing, no Option may be granted under the Plan on or after the tenth anniversary of the Effective Date. 
Section 7.     Stock Options 
7.1     Grant of Options. Subject to the provisions of Sections 5 and 6, Options may be granted to Participants at any time and from time to time as shall be determined by the Committee, and for all purposes hereof, the date of such grant shall be the date on which the Committee takes formal action to grant an Option, provided that it is followed, as soon as reasonably practicable, by written notice to the person receiving the Option. The Committee shall have complete discretion in determining the number of Options granted to each Participant and the terms and provisions thereof. The Committee may grant any type of Option to purchase Stock that is permitted by law at the time of grant; provided, however, that the aggregate Fair Market Value (determined at the time the Option is granted) of the Stock, with respect to which all incentive stock options granted under any plan of the Company are exercisable for the first time by a Participant during any calendar year, may not exceed $100,000. Nothing in this Section 7 of the Plan shall be deemed to prevent the grant of nonstatutory stock options in amounts that exceed the maximum established by Section 422 of the Code. 
7.2     Option Agreement. Each Option shall be evidenced by an Option agreement that shall specify the type of Option granted, the Option price, the duration of the Option, the number of shares of Stock to which the Option pertains, and such other provisions as the Committee shall determine. 
7.3     Option Price. The Option price of each share of Stock subject to each Option granted pursuant to this Plan shall be determined by the Committee at the time the Option is granted and, in the case of incentive stock options, shall not be less than 100% of the Fair Market Value of a share of Stock on the date the Option is granted, as determined by the Committee. In the case of incentive stock options granted to any person who owns, directly or indirectly, Stock possessing more than ten percent (10%) of the total combined voting power of all classes of Stock (“Ten Percent Owner”), the Option price shall not be less than 110% of the Fair Market Value of a share of Stock on the date the Option is granted. The Option price of each share of Stock subject to a nonstatutory stock option under this Plan shall be determined by the Committee, in its sole discretion, prior to granting the Option. 
7.4     Duration of Options. Each Option shall expire at such time as the Committee shall determine at the time it is granted, provided, however, that no incentive stock option shall be exercisable later than ten (10) years from the date of its grant, and no incentive stock option granted to a Ten Percent Owner shall be exercisable later than five (5) years from the date of its grant. 

-4-

7.5     Exercise of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for all Participants. Unless otherwise expressly provided in the Option, no Option may be exercised within six (6) months after the date of grant. Each Option that is intended to qualify as an incentive stock option pursuant to Section 422 of the Code shall comply with the applicable provisions of the Code pertaining to such Options. Without limitation, the Committee may, in its sole discretion, accelerate the date on which any Option may be exercised, or on which restrictions on Restricted Stock shall lapse. 
7.6     Payment. The Option price of Stock acquired upon exercise of any Option, and applicable withholding as described in Sections 11.1 and 11.2, shall be paid in full on the date of exercise, by certified or cashier's check, by wire transfer, by money order, through a broker assisted exercise, with Stock (but with Stock only if expressly permitted by the terms of the Option), or by a combination of the above. If the Option Price is permitted to be, and is, paid in whole or in part with Stock, the value of the Stock surrendered shall be its Fair Market Value on the date surrendered. The proceeds from payment of Option prices shall be added to the general funds of the Company and shall be used for general corporate purposes. For purposes of this Section 7.6, “broker assisted exercise” shall mean a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable written instructions to (a) a Committee designated brokerage firm to effect the immediate sale of the shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Option price plus all applicable withholding and employment taxes required, and (b) the Committee to deliver the certificates for the shares directly to such brokerage firm in order to complete the sale. 
7.7     Restrictions on Stock Transferability. The Committee shall impose such restrictions on any shares of Stock acquired pursuant to the exercise of an Option under the Plan as it may deem advisable, including, without limitation, restrictions under applicable federal securities law, under the requirements of any stock exchange upon which such shares of Stock are then listed, and under any blue sky or state securities laws applicable to such shares. 
7.8     Termination of Employment Due to Death or Disability. Unless otherwise expressly provided in the Option, if the employment of a Participant is terminated by reason of death or Disability, the rights under any then outstanding Option shall terminate upon the first to occur of (i) the expiration date of the Option or (ii) the first anniversary of such date of termination of employment. 

7.9     Termination of Employment Other than for Death or Disability. Unless otherwise expressly provided in the Option, if the employment of the Participant shall terminate for any reason other than death or Disability, the rights under any then outstanding Option shall terminate upon the first to occur of (i) the expiration date of the Option or (ii) ninety (90) days after such date of termination of employment. 
7.10     Nontransferability of Options. Unless otherwise expressly provided in the Option, no Option granted under the Plan may be sold, transferred pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution. Further, all Options granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant. 
7.11     Cancellation. Unless otherwise expressly provided in the Option of reference, in the event of a merger or consolidation where the Company is not the surviving corporation (or survives only as the 80% or greater owned subsidiary of another corporation), the Committee, in its sole discretion may cancel, by giving written notice (a “Cancellation Notice”), effective immediately prior to the consummation of such transaction, all or any of the vested portion of any, or all, Options that remain unexercised on such date. Such Cancellation Notice shall be given a reasonable period of time (but not less than 15 days) prior to the proposed date of such cancellation, and may be given either before or after shareholder approval (if any is required) of the transaction. 

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Section 8.    Restricted Stock; Restricted Stock Units
8.1    Grants of Restricted Stock and/or Restricted Stock Units. Subject to the provisions of Sections 5 and 6, the Committee, at any time and from time to time, may grant shares of Restricted Stock and/or Restricted Stock Units under the Plan to such Participants and in such amounts as it shall determine. Each such grant shall be evidenced by a written Award Agreement that specifies the Period of Restriction and other specific terms of the Award. Without limitation, the Committee may accelerate the date on which restrictions lapse with respect to any Restricted Stock and/or Restricted Stock Units.  Upon the expiration or termination of the Period of Restriction and the satisfaction of any other conditions prescribed by the Committee (including, without limitation, the Participant's satisfaction of applicable tax withholding obligations attributable to the Award), the restrictions applicable to the Restricted Stock or Restricted Stock Units will lapse and the number of shares of Stock with respect to which the restrictions have lapsed will be delivered, free of any restrictions except those that may be imposed by law, the terms of the Plan or the terms of an Award Agreement, to the Participant or the Participant's beneficiary or estate, as the case may be, unless such Award is subject to a deferral condition that complies with Code Section 409A and the regulations and interpretive authority issued thereunder as may be allowed or required by the Committee in its sole discretion.  The Company will not be required to deliver any fractional share of Stock but will pay, in lieu thereof, the Fair Market Value of such fractional share in cash to the Participant or the Participant's beneficiary or estate, as the case may be.  With respect only to Restricted Stock Units, unless otherwise subject to a deferred settlement date specified in the Award Agreement that complies with Code Section 409A requirements, the Stock will be issued and delivered, and the Participant will be entitled to the beneficial ownership rights of such Stock, as soon as practicable after the Period of  Restriction lapses, but not later than (i) the later of (x) the date that is 2 1⁄2 months after the end of the Participant's taxable year for which the Period of Restriction ends and the Restricted Stock Unit is no longer subject to a substantial risk of forfeiture; or (y) the date that is 2 1⁄2 months after the end of the Company's taxable year for which the Period of Restriction ends and the Restricted Stock Unit is no longer subject to a substantial risk of forfeiture; or (ii) such earlier date as may be necessary to avoid application of Code Section 409A to such Award.
8.2    Transferability. Except as provided in Section 8.6 hereof, the shares of Restricted Stock or Restricted Stock Units granted hereunder may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated for such period of time as shall be determined by the Committee and shall be specified in the Award Agreement, or upon earlier satisfaction of other conditions as specified by the Committee in its sole discretion and set forth in the Award Agreement.
8.3    Other Restrictions. The Committee may impose such other restrictions on any shares of Restricted Stock and Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, restrictions under applicable federal or state securities laws, and may legend the certificates representing such shares to give appropriate notice of such restrictions.
8.4    Voting Rights. Participants holding shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those shares during the Period of Restriction.  Participants awarded Restricted Stock Units hereunder shall have no voting rights with respect to those Restricted Stock Units until the issuance and delivery of shares of Stock in respect thereof on the later of the lapse of the Period of Restriction or the settlement date specified in the Award Agreement.  

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8.5    Dividends and Other Distributions. During the Period of Restriction, Participants holding shares of Restricted Stock or granted Restricted Stock Units hereunder shall not be entitled to receive cash dividends distributed with respect to those shares or with respect to Stock underlying Restricted Stock Units. To the extent such shares of Restricted Stock or Restricted Stock Units are not forfeited by such Participants prior to the end of the Period of Restriction, such Participants shall be entitled to receive cash payments immediately following the end of the Period of Restriction equal to the cash dividends that would otherwise have been paid with respect to those shares of Restricted Stock that were not forfeited during the Period of Restriction or the shares of Stock issued with respect to Restricted Stock Units had they been issued and outstanding throughout the Period of Restriction.
8.6    Termination of Employment. Unless otherwise expressly provided in the Award Agreement or any other agreement between a Participant and the Company, in the event that such Participant's employment with the Company is terminated for any reason during the Period of Restriction (including death), then any shares of Restricted Stock and any Restricted Stock Units still subject to restrictions at the date of such termination automatically shall be forfeited.
Section 9.     Rights of Employees 
9.1     Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. 
Section 10.     Amendment, Modification and Termination of Plan 
10.1     Amendment, Modification, and Termination of Plan. The Board at any time may terminate, and from time to time may amend or modify the Plan, and may amend or modify Awards hereunder; provided, however, that no amendment of the Plan or of any Award hereunder, without approval of the shareholders within one year after the adoption of such amendment, may (a) increase the aggregate number of shares of Stock that may be issued under the Plan; (b) extend the term of the Plan; or (c) materially modify the requirements as to eligibility to receive Awards under the Plan. No amendment, modification, or termination of the Plan shall in any manner adversely affect any Award theretofore granted under the Plan, without the consent of the affected Participant(s). 
Section 11.     Miscellaneous Provisions 
11.1     Tax Withholding. Without limitation, on the date an Award is taken into a Participant's income, the Company shall have the right to withhold, or to require a Participant to remit to the Company, an amount sufficient to satisfy the Company's resulting federal, state, and local withholding and employment tax requirements with respect to such Award. 
11.2     Stock Withholding Elections. On the date an Award is includible in a Participant's income, the Company shall have the right to withhold, or to require a Participant to remit to the Company, an amount sufficient to satisfy the Company's resulting federal, state, and local income tax and employment tax withholding requirements with respect to such Award, except that the Committee may permit, and the terms of an Award may provide that, a Participant may make an irrevocable election to have shares of Stock otherwise issuable thereunder withheld having an aggregate Fair Market Value sufficient to satisfy the Company's minimum total federal, state and local income and employment tax withholding obligations associated with the transaction. Any such elections, if available, must be made by a Participant on or prior to the tax date. 

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11.3     Severability. If any provision of this Plan, or any Award, is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of this Plan or any Award, but such provision shall be fully severable, and the Plan or Award, as applicable, shall be construed and enforced as if the illegal or invalid provision had never been included in the Plan or Award, as applicable. 
11.4     Notice. Whenever any notice is required or permitted under this Plan, such notice must be in writing and personally delivered or sent by mail or delivery by a nationally recognized courier service. Any notice required or permitted to be delivered under this Plan shall be deemed to be delivered on the date on which it is personally delivered, or, if mailed, whether actually received or not, on the third Business Day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address that such person has previously specified in accordance with this Subsection, or, if by courier, seventy-two (72) hours after it is sent, addressed as described in this Subsection. The Company or the Participant may change, at any time and from time to time, by written notice to the other, the address that it or he had previously specified for receiving notices; provided further, that a Participant who is not an Employee must file such written notice with the Committee. Until changed in accordance with this Plan, the Company and the Participant shall be deemed to have specified as its and his address for receiving notices (i) as to the Company, the principal executive offices of the Company, and (ii) as to the Participant, (A) where the Participant is an Employee, the most current address of the Participant set forth in the Company's employment records, and (B) where Participant is not an Employee, the address set forth in the most recent notice. Any person entitled to notice under this Plan may waive such notice. Without limiting the generality of the forgoing, for all purposes hereof, the address of the Company shall be the address of the Committee. 
Section 12.     Indemnification 
12.1     Indemnification. Each person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan made in good faith and against and from any and all amounts paid by him in settlement thereof, with the Company's approval, or paid by him in satisfaction of any judgment in any such action, suit or proceeding against him, provided he shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not apply to any acts of willful misconduct by any member of the Committee or the Board. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Charter or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. 
Section 13.     Requirements of Law 
13.1     Requirements of Law. The granting of Awards and the issuance of shares of Stock upon the exercise of an Option shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 
13.2     Governing Law. The Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Maryland.

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