Exhibit 10.1

 

 

 

SUN MICROSYSTEMS, INC.

2007 OMNIBUS INCENTIVE PLAN

 

 

 

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TABLE OF CONTENTS

 

               Page 1.    PURPOSE    1 2.    DEFINITIONS    1 3.   
ADMINISTRATION OF THE PLAN    6    3.1.    Board    6    3.2.    Committee    6
   3.3.    Terms of Awards    7    3.4.    No Repricing    8    3.5.    Deferral
Arrangement    8    3.6.    No Liability    9    3.7.    Share
Issuance/Book-Entry    9 4.    STOCK SUBJECT TO THE PLAN    9    4.1.    Number
of Shares Available for Awards    9    4.2.    Adjustments in Authorized Shares
   9    4.3.    Share Usage    9 5.    EFFECTIVE DATE, DURATION AND AMENDMENTS
   10    5.1.    Effective Date    10    5.2.    Term    10    5.3.    Amendment
and Termination of the Plan    10 6.    AWARD ELIGIBILITY AND LIMITATIONS    11
   6.1.    Service Providers and Other Persons    11    6.2.    Successive
Awards and Substitute Awards    11    6.3.    Limitation on Shares of Stock
Subject to Awards and Cash Awards    11 7.    AWARD AGREEMENT    11 8.    TERMS
AND CONDITIONS OF OPTIONS    12    8.1.    Option Price    12    8.2.    Vesting
   12    8.3.    Term    12    8.4.    Termination of Service    12    8.5.   
Limitations on Exercise of Option    13    8.6.    Method of Exercise    13   
8.7.    Rights of Holders of Options    13    8.8.    Delivery of Stock
Certificates    13    8.9.    Transferability of Options    13    8.10.   
Family Transfers    14    8.11.    Limitations on Incentive Stock Options    14
   8.12.    Notice of Disqualifying Disposition    14 9.    TERMS AND CONDITIONS
OF STOCK APPRECIATION RIGHTS    14    9.1.    Right to Payment and Grant Price
   14    9.2.    Other Terms    15

 

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   9.3.    Term    15    9.4.    Transferability of SARS    15    9.5.    Family
Transfers    15 10.    TERMS AND CONDITIONS OF RESTRICTED STOCK AND RESTRICTED
STOCK UNITS    16    10.1.    Grant of Restricted Stock or Restricted Stock
Units    16    10.2.    Restrictions    16    10.3.    Restricted Stock
Certificates    16    10.4.    Rights of Holders of Restricted Stock    16   
10.5.    Rights of Holders of Restricted Stock Units    17       10.5.1. Voting
and Dividend Rights    17       10.5.2. Creditor’s Rights    17    10.6.   
Termination of Service    17    10.7.    Purchase of Restricted Stock    17   
10.8.    Delivery of Stock    17 11.    TERMS AND CONDITIONS OF UNRESTRICTED
STOCK AWARDS    18 12.    FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK    18
   12.1.    General Rule    18    12.2.    Surrender of Stock    18    12.3.   
Cashless Exercise    18    12.4.    Other Forms of Payment    18 13.    TERMS
AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS    19    13.1.    Dividend
Equivalent Rights    19    13.2.    Termination of Service    19 14.    TERMS
AND CONDITIONS OF PERFORMANCE SHARES, PERFORMANCE UNITS, PERFORMANCE AWARDSAND
ANNUAL INCENTIVE AWARDS    19    14.1.    Grant of Performance Units/Performance
Shares    19    14.2.    Value of Performance Units/Performance Shares    19   
14.3.    Earning of Performance Units/Performance Shares    20    14.4.    Form
and Timing of Payment of Performance Units/Performance Shares    20    14.5.   
Performance Conditions    20    14.6.    Performance Awards or Annual Incentive
Awards Granted to Designated Covered Employees    20       14.6.1. Performance
Goals Generally    20       14.6.2. Timing For Establishing Performance Goals   
21       14.6.3. Settlement of Awards; Other Terms    21       14.6.4.
Performance Measures    21       14.6.5. Evaluation of Performance    23      
14.6.6. Adjustment of Performance-Based Compensation.    24

 

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      14.6.7. Administrator Discretion    24    14.7.    Status of Section
Awards Under Code Section 162(m)    24 15.    PARACHUTE LIMITATIONS    24 16.   
REQUIREMENTS OF LAW    25    16.1.    General    25    16.2.    Rule 16b-3    26
17.    EFFECT OF CHANGES IN CAPITALIZATION    26    17.1.    Changes in Stock   
26    17.2.    Reorganization in Which the Company Is the Surviving Entity Which
does not Constitute a Corporate Transaction    27    17.3.    Corporate
Transaction in which Awards are not Assumed    27    17.4.    Corporation
Transaction in which Awards are Assumed    28    17.5.    Adjustments    28   
17.6.    No Limitations on Company    28 18.    GENERAL PROVISIONS    29   
18.1.    Disclaimer of Rights    29    18.2.    Nonexclusivity of the Plan    29
   18.3.    Withholding Taxes    29    18.4.    Captions    30    18.5.    Other
Provisions    30    18.6.    Number and Gender    30    18.7.    Severability   
30    18.8.    Governing Law    30    18.9.    Section 409A of the Code    30

 

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SUN MICROSYSTEMS, INC

2007 OMNIBUS INCENTIVE PLAN

Sun Microsystems, Inc., a Delaware corporation (the “Company”), sets forth
herein the terms of its 2007 Omnibus Incentive Plan (the “Plan”), as follows:

1. PURPOSE

The Plan is intended to enhance the Company’s and its Affiliates’ (as defined
herein) ability to attract and retain highly qualified officers, directors, key
employees, and other persons, and to motivate such persons to serve the Company
and its Affiliates and to expend maximum effort to improve the business results
and earnings of the Company, by providing to such persons an opportunity to
acquire or increase a direct proprietary interest in the operations and future
success of the Company. To this end, the Plan provides for the grant of stock
options, stock appreciation rights, restricted stock, restricted stock units (or
RSUs), unrestricted stock, dividend equivalent rights, and cash awards. Any of
these awards may, but need not, be made as performance incentives to reward
attainment of annual or long-term performance goals in accordance with the terms
hereof. Stock options granted under the Plan may be non-qualified stock options
or incentive stock options, as provided herein, except that stock options
granted to outside directors and any consultants or advisers providing services
to the Company or an Affiliate shall in all cases be non-qualified stock
options.

2. DEFINITIONS

For purposes of interpreting the Plan and related documents (including Award
Agreements), the following definitions shall apply:

2.1 “Administrator” means the Board or, where pursuant to Section 3.2 the Board
has delegated its authority to the Committee or one or more directors of the
Company, the Committee or such directors.

2.2 “Affiliate” means, with respect to the Company, any company or other trade
or business that controls, is controlled by or is under common control with the
Company within the meaning of Rule 405 of Regulation C under the Securities Act,
including, without limitation, any Subsidiary. For purposes of granting stock
options or stock appreciation rights, an entity may not be considered an
Affiliate if it results in noncompliance with Code Section 409A.

2.3 “Annual Incentive Award” means an Award made subject to attainment of
performance goals (as described in Section 14) over a performance period of up
to one year (the Company’s fiscal year, unless otherwise specified by the
Committee).

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2.4 “Award” means a grant of an Option, Stock Appreciation Right, Restricted
Stock, Unrestricted Stock, Restricted Stock Unit, Dividend Equivalent Right,
Performance Share, Performance Unit or cash award under the Plan.

2.5 “Award Agreement” means the agreement between the Company and a Grantee that
evidences and sets out the terms and conditions of an Award.

2.6 “Benefit Arrangement” shall have the meaning set forth in Section 15 hereof.

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

2.8 “Cause” means, as determined by the Administrator and unless otherwise
provided in an applicable agreement with the Company or an Affiliate, that a
termination of Service shall have taken place as a result of (i) any act of
personal dishonesty by a Grantee in connection with his or her responsibilities
as a Service Provider and intended to result in substantial personal enrichment
to the Grantee, (ii) the Grantee’s willful act constituting Gross Misconduct and
which is injurious to the Company, or (iii) a Grantee’s conviction or plea of a
felony which the Administrator reasonably believes had or will have a material
detrimental effect on the Company’s reputation or business.

2.9 “Code” means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.

2.10 “Committee” means a committee of, and designated from time to time by
resolution of, the Board, which shall be constituted as provided in Section 3.2.

2.11 “Company” means Sun Microsystems, Inc.

2.12 “Corporate Transaction” means the occurrence of any of the following:
(i) any person or group of persons (as defined in Section 13(d) and 14(d) of the
Exchange Act) together with its affiliates, excluding employee benefit plans of
the Company, is or becomes, directly or indirectly, the “beneficial owner” (as
defined in Rule 13d-3 of the Exchange Act) of securities of the Company
representing 50% or more of the combined voting power of the Company’s then
outstanding securities; or (ii) a merger or consolidation of the Company with
any other corporation or entity is consummated regardless of which entity is the
survivor, other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or being converted into voting
securities of the surviving entity or its parent) at least 50% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or (iii) the Company
is completely liquidated or all or substantially all of the Company’s assets are
sold.

2.13 “Covered Employee” means a Grantee who is a covered employee within the
meaning of Section 162(m)(3) of the Code.

 

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2.14 “Disability” means the Grantee is unable to perform each of the essential
duties of such Grantee’s position by reason of a medically determinable physical
or mental impairment which is potentially permanent in character or which can be
expected to last for a continuous period of not less than 12 months; provided,
however, that, with respect to rules regarding expiration of an Incentive Stock
Option following termination of the Grantee’s Service, Disability shall mean the
Grantee is unable to engage in any substantial gainful activity by reason of a
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than 12 months.

2.15 “Dividend Equivalent Right” means a right, granted to a Grantee under
Section 13 hereof, to receive cash, Stock, other Awards or other property equal
in value to dividends paid with respect to a specified number of shares of
Stock, or other periodic payments.

2.16 “Effective Date” means November 8, 2007, the date the Plan was approved by
the stockholders.

2.17 “Exchange Act” means the Securities Exchange Act of 1934, as now in effect
or as hereafter amended.

2.18 “Fair Market Value” means the value of a share of Stock, determined as
follows: if on the Grant Date or other determination date the Stock is listed on
an established national or regional stock exchange, or is publicly traded on an
established securities market, the Fair Market Value of a share of Stock shall
be the closing price of the Stock on such exchange or in such market (if there
is more than one such exchange or market the Administrator shall determine the
appropriate exchange or market) on the Grant Date or such other determination
date (or if there is no such reported closing price, the Fair Market Value shall
be the mean between the highest bid and lowest asked prices or between the high
and low sale prices on such trading day) or, if no sale of Stock is reported for
such trading day, on the next preceding day on which any sale shall have been
reported. If the Stock is not listed on such an exchange, quoted on such system
or traded on such a market, Fair Market Value shall be the value of the Stock as
determined by the Administrator in good faith in a manner consistent with Code
Section 409A.

2.19 “Family Member” means a person who is a spouse, former spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister,
brother-in-law, or sister-in-law, including adoptive relationships, of the
Grantee, any person sharing the Grantee’s household (other than a tenant or
employee), a trust in which any one or more of these persons have more than
fifty percent of the beneficial interest, a foundation in which any one or more
of these persons (or the Grantee) control the management of assets, and any
other entity in which one or more of these persons (or the Grantee) own more
than fifty percent of the voting interests.

2.20 “Grant Date” means, as determined by the Administrator, the latest to occur
of (i) the date as of which the Administrator approves an Award, (ii) the date
on which the recipient of an Award first becomes eligible to receive an Award
under Section 6 hereof, or (iii) such other date as may be specified by the
Administrator.

 

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2.21 “Grantee” means a person who receives or holds an Award under the Plan.

2.22 “Gross Misconduct” means (i) theft or damage of Company property, (ii) use,
possession, sale or distribution of illegal drugs, (iii) being under the
influence of alcohol or drugs (except to the extent medically prescribed) while
on duty or on Company premises, (iv) involvement in activities representing
conflicts of interest; (v) improper disclosure of confidential information;
(vi) conduct endangering, or likely to endanger, the health or safety of another
Service Provider, or (vii) falsifying or misrepresenting information on Company
records.

2.23 “Incentive Stock Option” means an “incentive stock option” within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.

2.24 “Non-qualified Stock Option” means an Option that is not an Incentive Stock
Option.

2.25 “Option” means an option to purchase one or more shares of Stock pursuant
to the Plan.

2.26 “Option Price” means the exercise price for each share of Stock subject to
an Option.

2.27 “Other Agreement” shall have the meaning set forth in Section 15 hereof.

2.28 “Outside Director” means a member of the Board who is not an officer or
employee of the Company.

2.29 “Performance Award” means an Award made subject to the attainment of
performance goals (as described in Section 14) over a performance period of up
to five (5) years.

2.30 “Performance-Based Compensation” means compensation under an Award that is
intended to satisfy the requirements of Code Section 162(m) for certain
performance-based compensation paid to Covered Employees. Notwithstanding the
foregoing, nothing in this Plan shall be construed to mean that an Award which
does not satisfy the requirements for performance-based compensation under Code
Section 162(m) does not constitute performance-based compensation for other
purposes, including Code Section 409A.

2.31 “Performance Measures” means measures as described in Section 14 on which
the performance goals are based and which are approved by the Company’s
shareholders pursuant to this Plan in order to qualify Awards as
Performance-Based Compensation.

 

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2.32 “Performance Period” means the period of time during which the performance
goals must be met in order to determine the degree of payout and/or vesting with
respect to an Award.

2.33 “Performance Share” means an Award under Section 14 herein and subject to
the terms of this Plan, denominated in Shares, the value of which at the time it
is payable is determined as a function of the extent to which corresponding
performance criteria have been achieved.

2.34 “Performance Unit” means an Award under Section 14 herein and subject to
the terms of this Plan, denominated in units, the value of which at the time it
is payable is determined as a function of the extent to which corresponding
performance criteria have been achieved. Unless otherwise stated as payable in
shares of Stock, each Performance Unit is valued at one dollar.

2.35 “Plan” means this Sun Microsystems, Inc. 2007 Omnibus Incentive Plan.

2.36 “Prior Plans” means the Sun Microsystems, Inc. 1990 Long-Term Equity
Incentive Plan, the Sun Microsystems, Inc. 1988 Directors’ Stock Option Plan,
and the Sun Microsystems, Inc. Equity Compensation Acquisition Plan.

2.37 “Purchase Price” means the purchase price for each share of Stock pursuant
to a grant of Restricted Stock or Unrestricted Stock.

2.38 “Reporting Person” means a person who is required to file reports under
Section 16(a) of the Exchange Act.

2.39 “Restricted Stock” means shares of Stock, awarded to a Grantee pursuant to
Section 10 hereof.

2.40 “Restricted Stock Unit” or “RSU” means a bookkeeping entry representing the
equivalent of one share of Stock awarded to a Grantee pursuant to Section 10
hereof.

2.41 “SAR Exercise Price” means the per share exercise price of a SAR granted to
a Grantee under Section 9 hereof.

2.42 “Securities Act” means the Securities Act of 1933, as now in effect or as
hereafter amended.

2.43 “Service” means service as a Service Provider to the Company or an
Affiliate. Unless otherwise stated in the applicable Award Agreement, a
Grantee’s change in position or duties shall not result in interrupted or
terminated Service, so long as such Grantee continues to be a Service Provider
to the Company or an Affiliate. Subject to the preceding sentence, whether a
termination of Service shall have occurred for purposes of the Plan shall be
determined by the Administrator, which determination shall be final, binding and
conclusive.

 

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2.44 “Service Provider” means an employee, officer or director of the Company or
an Affiliate, or a consultant or adviser (who is a natural person) currently
providing services to the Company or an Affiliate.

2.45 “Stock” means the common stock, par value $.00067 per share, of the
Company.

2.46 “Stock Appreciation Right” or “SAR” means a right granted to a Grantee
under Section 9 hereof.

2.47 “Subsidiary” means any “subsidiary corporation” of the Company within the
meaning of Section 424(f) of the Code.

2.48 “Substitute Awards” means Awards granted upon assumption of, or in
substitution for, outstanding awards previously granted by a company or other
entity acquired by the Company or any Affiliate or with which the Company or any
Affiliate combines.

2.49 “Ten Percent Stockholder” means an individual who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company, its parent or any of its Subsidiaries. In determining
stock ownership, the attribution rules of Section 424(d) of the Code shall be
applied.

2.50 “Unrestricted Stock” means an Award pursuant to Section 11 hereof.

3. ADMINISTRATION OF THE PLAN

3.1. Board

The Board shall have such powers and authorities related to the administration
of the Plan as are consistent with the Company’s certificate of incorporation
and by-laws and applicable law. The Board shall have full power and authority to
take all actions and to make all determinations required or provided for under
the Plan, any Award or any Award Agreement, and shall have full power and
authority to take all such other actions and make all such other determinations
not inconsistent with the specific terms and provisions of the Plan that the
Board deems to be necessary or appropriate to the administration of the Plan,
any Award or any Award Agreement. All such actions and determinations shall be
by the affirmative vote of a majority of the members of the Board present at a
meeting or by unanimous consent of the Board executed in writing in accordance
with the Company’s certificate of incorporation and by-laws and applicable law.
The interpretation and construction by the Board of any provision of the Plan,
any Award or any Award Agreement shall be final, binding and conclusive.

3.2. Committee.

The Board from time to time may delegate to the Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in Section 3.1 above and other applicable provisions, as the Board shall
determine, consistent with the certificate of incorporation and by-laws of the
Company and applicable law.

 

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(i) Except as provided in Subsection (ii) and except as the Board may otherwise
determine, the Committee, if any, appointed by the Board to administer the Plan
shall consist of two or more Outside Directors of the Company who: (a) qualify
as “outside directors” within the meaning of Section 162(m) of the Code and who
(b) meet such other requirements as may be established from time to time by the
Securities and Exchange Commission for plans intended to qualify for exemption
under Rule 16b-3 (or its successor) under the Exchange Act and who (c) comply
with the independence requirements of the stock exchange on which the Common
Stock is listed.

(ii) The Board may also appoint one or more separate committees of the Board,
each composed of one or more directors of the Company who need not be Outside
Directors, but one of whom must be the Chief Executive Officer (or functional
equivalent), who may administer the Plan with respect to employees or other
Service Providers who are not officers or directors of the Company, may grant
Awards under the Plan to such employees or other Service Providers, and may
determine all terms of such Awards.

In the event that the Plan, any Award or any Award Agreement entered into
hereunder provides for any action to be taken by or determination to be made by
the Board, such action may be taken or such determination may be made by an
Administrator if the power and authority to do so has been delegated to such
Administrator by the Board as provided for in this Section. Unless otherwise
expressly determined by the Board, any such action or determination by the
Administrator shall be final, binding and conclusive. To the extent permitted by
law, the Committee may delegate its authority under the Plan to a member of the
Board.

3.3. Terms of Awards.

Subject to the other terms and conditions of the Plan, the Administrator shall
have full and final authority to:

(i) designate Grantees,

(ii) determine the type or types of Awards to be made to a Grantee,

(iii) determine the number of shares of Stock to be subject to an Award,

(iv) establish the terms and conditions of each Award (including, but not
limited to, the exercise price of any Option, the nature and duration of any
restriction or condition (or provision for lapse thereof) relating to the
vesting, exercise, transfer, or forfeiture of an Award or the shares of Stock
subject thereto, the treatment of an Award in the event of a change of control,
and any terms or conditions that may be necessary to qualify Options as
Incentive Stock Options),

 

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(v) prescribe the form of each Award Agreement evidencing an Award, and

(vi) amend, modify, or supplement the terms of any outstanding Award. Such
authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify Awards to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy, or
custom. Notwithstanding the foregoing, no amendment, modification or supplement
of any Award shall, without the consent of the Grantee, impair the Grantee’s
rights under such Award.

The Company may retain the right in an Award Agreement to cause a forfeiture of
the gain realized by a Grantee on account of actions taken by the Grantee in
violation or breach of or in conflict with any employment agreement,
non-competition agreement, any agreement prohibiting solicitation of employees
or clients of the Company or any Affiliate thereof or any confidentiality
obligation with respect to the Company or any Affiliate thereof or otherwise in
competition with the Company or any Affiliate thereof, to the extent specified
in such Award Agreement applicable to the Grantee. In addition, the Company may
annul an Award if the Grantee is an employee of the Company or an Affiliate
thereof and is terminated for Cause as defined in the applicable Award Agreement
or the Plan, as applicable.

Furthermore, if the Company is required to prepare an accounting restatement due
to the material noncompliance of the Company, as a result of misconduct, with
any financial reporting requirement under the securities laws, the individuals
subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of
2002 and any Grantee who knowingly engaged in the misconduct, was grossly
negligent in engaging in the misconduct, knowingly failed to prevent the
misconduct or was grossly negligent in failing to prevent the misconduct, shall
reimburse the Company the amount of any payment in settlement of an Award earned
or accrued during the twelve-(12)month period following the first public
issuance or filing with the United States Securities and Exchange Commission
(whichever first occurred) of the financial document embodying such financial
reporting requirement.

3.4. No Repricing

Notwithstanding anything in this Plan to the contrary, no amendment or
modification may be made to an outstanding Option or SAR, including, without
limitation, by reducing the exercise price of an Option or replacing an Option
or SAR with cash or another award type, that would be treated as a repricing
under the rules of the stock exchange on which the Stock is listed, in each
case, without the approval of the stockholders of the Company, provided, that,
appropriate adjustments may be made to outstanding Options and SARs pursuant to
Section 17 or Section 5.3 and may be made to make changes to achieve compliance
with applicable law, including Internal Revenue Code Section 409A.

3.5. Deferral Arrangement.

The Administrator may permit or require the deferral of any award payment into a
deferred compensation arrangement, subject to such rules and procedures as it
may establish, which may include provisions for the payment or crediting of
interest or dividend equivalents, including converting such credits into
deferred Stock equivalents. Any such deferrals shall be made in a manner that
complies with Code Section 409A.

 

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3.6. No Liability.

No Administrator shall be liable for any action or determination made in good
faith with respect to the Plan or any Award or Award Agreement.

3.7. Share Issuance/Book-Entry

Notwithstanding any provision of this Plan to the contrary, the issuance of the
Stock under the Plan may be evidenced in such a manner as the Administrator, in
its discretion, deems appropriate, including, without limitation, book-entry
registration or issuance of one or more Stock certificates.

4. STOCK SUBJECT TO THE PLAN

4.1. Number of Shares Available for Awards

Subject to adjustment as provided in Section 17 hereof, the number of shares of
Stock available for issuance under the Plan shall be equal to four hundred and
thirty million (430,000,000), all of which may be granted as Incentive Stock
Options, increased by shares of Stock covered by awards granted under a Prior
Plan that become available for grant pursuant section 4.3 and decreased by the
number of shares of Stock made subject to awards granted under the Prior Plans
between the date the Plan is approved by the Administrator and the Effective
Date. Stock issued or to be issued under the Plan shall be authorized but
unissued shares; or, to the extent permitted by applicable law, issued shares
that have been reacquired by the Company.

4.2. Adjustments in Authorized Shares

The Administrator shall have the right to substitute or assume Awards in
connection with mergers, reorganizations, separations, or other transactions to
which Section 424(a) of the Code applies. The number of shares of Stock reserved
pursuant to Section 4 shall be increased by the corresponding number of Awards
assumed and, in the case of a substitution, by the net increase in the number of
shares of Stock subject to Awards before and after the substitution.

4.3. Share Usage

Shares covered by an Award shall be counted as used as of the Grant Date. Any
shares of Stock that are subject to Awards of Options shall be counted against
the limit set forth in Section 4.1 as one (1) share for every one (1) share
subject to an Award of Options. With respect to SARs, the number of shares
subject to an award of SARs will be counted against the aggregate number of
shares available for issuance under the Plan regardless of the number of shares
actually issued to settle the SAR upon exercise. Any shares that are subject to
Awards other than Options or Stock Appreciation Rights shall be counted against

 

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the limit set forth in Section 4.1 as 2.0 shares for every one (1) share
granted. If any shares covered by an Award granted under the Plan or a Prior
Plan are not purchased or are forfeited or expire, or if an Award otherwise
terminates without delivery of any Stock subject thereto or is settled in cash
in lieu of shares, then the number of shares of Stock counted against the
aggregate number of shares available under the Plan with respect to such Award
shall, to the extent of any such forfeiture, termination or expiration, again be
available for making Awards under the Plan in the same amount as such shares
were counted against the limit set forth in Section 4.1, provided that any
shares covered by an Award granted under a Prior Plan will again be available
for making Awards under the Plan in the same amount as such shares were counted
against the limits set forth in the applicable Prior Plan. The number of shares
of Stock available for issuance under the Plan shall not be increased by (i) any
shares of Stock tendered or withheld or Award surrendered in connection with the
purchase of shares of Stock upon exercise of an Option as described in
Section 12.2, or (ii) any shares of Stock deducted or delivered from an Award
payment in connection with the Company’s tax withholding obligations as
described in Section 18.3.

5. EFFECTIVE DATE, DURATION AND AMENDMENTS

5.1. Effective Date.

The Plan shall be effective as of the Effective Date. Following the Effective
Date, no awards will be made under the Prior Plans.

5.2. Term.

The Plan shall terminate automatically ten (10) years after the Effective Date
and may be terminated on any earlier date as provided in Section 5.3.

5.3. Amendment and Termination of the Plan

The Board may, at any time and from time to time, amend, suspend, or terminate
the Plan as to any shares of Stock as to which Awards have not been made. An
amendment shall be contingent on approval of the Company’s stockholders to the
extent stated by the Board, required by applicable law or required by applicable
stock exchange listing requirements. In addition, an amendment will be
contingent on approval of the Company’s stockholders if the amendment would:
(i) materially increase the benefits accruing to participants under the Plan,
(ii) materially increase the aggregate number of shares of Stock that may be
issued under the Plan, or (iii) materially modify the requirements as to
eligibility for participation in the Plan. No Awards shall be made after
termination of the Plan. No amendment, suspension, or termination of the Plan
shall, without the consent of the Grantee, impair rights or obligations under
any Award theretofore awarded under the Plan.

 

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6. AWARD ELIGIBILITY AND LIMITATIONS

6.1. Service Providers and Other Persons

Subject to this Section 6, Awards may be made under the Plan to: (i) any Service
Provider to the Company or of any Affiliate, including any Service Provider who
is an officer or director of the Company, or of any Affiliate, as the
Administrator shall determine and designate from time to time and (ii) any other
individual whose participation in the Plan is determined to be in the best
interests of the Company by the Administrator.

6.2. Successive Awards and Substitute Awards.

An eligible person may receive more than one Award, subject to such restrictions
as are provided herein. Notwithstanding Sections 8.1 and 9.1, the Option Price
of an Option or the grant price of a SAR that is a Substitute Award may be less
than 100% of the Fair Market Value of a share of Common Stock on the original
date of grant; provided, that, the Option Price or grant price is determined in
accordance with the principles of Code Section 424 and the regulations
thereunder.

6.3. Limitation on Shares of Stock Subject to Awards and Cash Awards.

During any time when the Company has a class of equity security registered under
Section 12 of the Exchange Act:

(i) the maximum number of shares of Stock subject to Options or SARs that can be
awarded under the Plan to any person eligible for an Award under Section 6
hereof is twenty million (20,000,000) per twelve-month period; provided,
however, the maximum number of shares of Stock subject to Options or SARs that
can be awarded under the Plan to any person eligible for an Award under
Section 6 in the year that the person is first employed by the Company is forty
million (40,000,000);

(ii) the maximum number of shares that can be awarded under the Plan, other than
pursuant to an Option or SARs, to any person eligible for an Award under
Section 6 hereof is ten million (10,000,000) per twelve-month period; provided,
however, the maximum number of shares of Stock subject to Awards other than
Options or SARs that can be awarded under the Plan to any person eligible for an
Award under Section 6 in the year that the person is first employed by the
Company is twenty million (20,000,000); and

(iii) the maximum amount that may be earned as an Annual Incentive Award or
other cash Award in any 12 month period by any person eligible for an Award
shall be fifty million dollars ($50,000,000) and the maximum amount that may be
earned as a Performance Award or other cash Award in respect of a performance
period by any person eligible for an Award shall be one hundred million dollars
($100,000,000).

The preceding limitations in this Section 6.3 are subject to adjustment as
provided in Section 17 hereof.

7. AWARD AGREEMENT

Each Award granted pursuant to the Plan shall be evidenced by an Award
Agreement, in such form or forms as the Administrator shall from time to time
determine. Award Agreements granted from time to time or at the same time need
not contain similar provisions but shall be consistent with the terms of the
Plan. Each Award Agreement evidencing an Award of Options shall specify whether
such Options are intended to be Non-qualified Stock Options or Incentive Stock
Options, and in the absence of such specification such options shall be deemed
Non-qualified Stock Options.

 

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8. TERMS AND CONDITIONS OF OPTIONS

8.1. Option Price

The Option Price of each Option shall be fixed by the Administrator and stated
in the Award Agreement evidencing such Option. Except in the case of Substitute
Awards, the Option Price of each Option shall be at least the Fair Market Value
on the Grant Date of a share of Stock; provided, however, that in the event that
a Grantee is a Ten Percent Stockholder, the Option Price of an Option granted to
such Grantee that is intended to be an Incentive Stock Option shall be not less
than 110 percent of the Fair Market Value of a share of Stock on the Grant Date.
In no case shall the Option Price of any Option be less than the par value of a
share of Stock.

8.2. Vesting.

Subject to Sections 8.3 and 17.3 hereof, each Option granted under the Plan
shall become exercisable at such times and under such conditions as shall be
determined by the Administrator and stated in the Award Agreement. For purposes
of this Section 8.2, fractional numbers of shares of Stock subject to an Option
shall be rounded down to the next nearest whole number.

8.3. Term.

Each Option granted under the Plan shall terminate, and all rights to purchase
shares of Stock thereunder shall cease, upon the expiration of ten years from
the date such Option is granted, or under such circumstances and on such date
prior thereto as is set forth in the Plan or as may be fixed by the
Administrator and stated in the Award Agreement relating to such Option;
provided, however, that in the event that the Grantee is a Ten Percent
Stockholder, an Option granted to such Grantee that is intended to be an
Incentive Stock Option shall not be exercisable after the expiration of five
years from its Grant Date. If on the day preceding the date on which a Grantee’s
Options would otherwise terminate, the Fair Market Value of shares of Stock
underlying a Grantee’s Options is greater than the Option Price of such Options,
the Company shall, prior to the termination of such Options and without any
action being taken on the part of the Grantee, consider such Options to have
been exercised by the Grantee. The Company shall deduct from the shares of Stock
deliverable to the Grantee upon such exercise the number of shares of Stock
necessary to satisfy payment of the Option Price and all withholding
obligations.

8.4. Termination of Service.

Each Award Agreement shall set forth the extent to which the Grantee shall have
the right to exercise the Option following termination of the Grantee’s Service.
Such provisions shall be determined in the sole discretion of the Administrator,
need not be uniform among all Options issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of Service.

 

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8.5. Limitations on Exercise of Option.

Notwithstanding any other provision of the Plan, in no event may any Option be
exercised, in whole or in part, prior to the date the Plan is approved by the
stockholders of the Company as provided herein or after the occurrence of an
event referred to in Section 17 hereof which results in termination of the
Option.

8.6. Method of Exercise.

Subject to the terms of Article 12 and Section 18.3, an Option that is
exercisable may be exercised by the Grantee’s delivery to the Company of notice
of exercise on any business day, at the Company’s principal office, on the form
specified by the Company. Such notice shall specify the number of shares of
Stock with respect to which the Option is being exercised and shall be
accompanied by payment in full of the Option Price of the shares for which the
Option is being exercised plus the amount (if any) of federal and/or other taxes
which the Company may, in its judgment, be required to withhold with respect to
an Award.

8.7. Rights of Holders of Options

Unless otherwise stated in the applicable Award Agreement, an individual holding
or exercising an Option shall have none of the rights of a stockholder (for
example, the right to receive cash or dividend payments or distributions
attributable to the subject shares of Stock or to direct the voting of the
subject shares of Stock ) until the shares of Stock covered thereby are fully
paid and issued to him. Except as provided in Section 17 hereof, no adjustment
shall be made for dividends, distributions or other rights for which the record
date is prior to the date of such issuance.

8.8. Delivery of Stock Certificates.

Promptly after the exercise of an Option by a Grantee and the payment in full of
the Option Price, such Grantee shall be entitled to the issuance of a stock
certificate or certificates or, as provided in Section 3.7, a book entry
registration evidencing his or her ownership of the shares of Stock subject to
the Option.

8.9. Transferability of Options

Except as provided in Section 8.10, during the lifetime of a Grantee, only the
Grantee (or, in the event of legal incapacity or incompetency, the Grantee’s
guardian or legal representative) may exercise an Option. Except as provided in
Section 8.10, no Option shall be assignable or transferable by the Grantee to
whom it is granted, other than by will or the laws of descent and distribution.

 

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8.10. Family Transfers.

If authorized in the applicable Award Agreement, a Grantee may transfer, not for
value, all or part of an Option which is not an Incentive Stock Option to any
Family Member. For the purpose of this Section 8.10, a “not for value” transfer
is a transfer which is (i) a gift, (ii) a transfer under a domestic relations
order in settlement of marital property rights; or (iii) a transfer to an entity
in which more than fifty percent of the voting interests are owned by Family
Members (or the Grantee) in exchange for an interest in that entity. Following a
transfer under this Section 8.10, any such Option shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer. Subsequent transfers of transferred Options are prohibited except to
Family Members of the original Grantee in accordance with this Section 8.10 or
by will or the laws of descent and distribution. The events of termination of
Service of Section 8.4 hereof shall continue to be applied with respect to the
original Grantee, following which the Option shall be exercisable by the
transferee only to the extent, and for the periods specified, in Section 8.4.

8.11. Limitations on Incentive Stock Options.

An Option shall constitute an Incentive Stock Option only (i) if the Grantee of
such Option is an employee of the Company or any Subsidiary of the Company;
(ii) to the extent specifically provided in the related Award Agreement; and
(iii) to the extent that the aggregate Fair Market Value (determined at the time
the Option is granted) of the shares of Stock with respect to which all
Incentive Stock Options held by such Grantee become exercisable for the first
time during any calendar year (under the Plan and all other plans of the
Grantee’s employer and its Affiliates) does not exceed $100,000. This limitation
shall be applied by taking Options into account in the order in which they were
granted.

8.12. Notice of Disqualifying Disposition

If any Grantee shall make any disposition of shares of Stock issued pursuant to
the exercise of an Incentive Stock Option under the circumstances described in
Code Section 421(b) (relating to certain disqualifying dispositions), such
Grantee shall notify the Company of such disposition within ten (10) days
thereof.

9. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

9.1. Right to Payment and Grant Price.

A SAR shall confer on the Grantee to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of one share of Stock
on the date of exercise over (B) the grant price of the SAR as determined by the
Administrator. The Award Agreement for a SAR shall specify the grant price of
the SAR, which shall be at least the Fair Market Value of a share of Stock on
the date of grant. SARs may be granted in conjunction with all or part of an
Option granted under the Plan or at any subsequent time during the term of such
Option, in conjunction with all or part of any other Award or without regard to
any Option or other Award; provided that a SAR that is granted subsequent to the
Grant Date of a related Option must have a SAR Price that is no less than the
Fair Market Value of one share of Stock on the SAR Grant Date.

 

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9.2. Other Terms.

The Administrator shall determine at the date of grant or thereafter, the time
or times at which and the circumstances under which a SAR may be exercised in
whole or in part (including based on achievement of performance goals and/or
future service requirements), the time or times at which SARs shall cease to be
or become exercisable following termination of Service or upon other conditions,
the method of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed to be
delivered to Grantees, whether or not a SAR shall be in tandem or in combination
with any other Award, and any other terms and conditions of any SAR.

9.3. Term.

Each SAR granted under the Plan shall terminate, and all rights thereunder shall
cease, upon the expiration of ten years from the date such SAR is granted, or
under such circumstances and on such date prior thereto as is set forth in the
Plan or as may be fixed by the Administrator and stated in the Award Agreement
relating to such SAR.

9.4. Transferability of SARS

Except as provided in Section 9.5, during the lifetime of a Grantee, only the
Grantee (or, in the event of legal incapacity or incompetency, the Grantee’s
guardian or legal representative) may exercise a SAR. Except as provided in
Section 9.5, no SAR shall be assignable or transferable by the Grantee to whom
it is granted, other than by will or the laws of descent and distribution.

9.5. Family Transfers.

If authorized in the applicable Award Agreement, a Grantee may transfer, not for
value, all or part of a SAR to any Family Member. For the purpose of this
Section 9.5, a “not for value” transfer is a transfer which is (i) a gift,
(ii) a transfer under a domestic relations order in settlement of marital
property rights; or (iii) a transfer to an entity in which more than fifty
percent of the voting interests are owned by Family Members (or the Grantee) in
exchange for an interest in that entity. Following a transfer under this
Section 9.5, any such SAR shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer. Subsequent
transfers of transferred SARs are prohibited except to Family Members of the
original Grantee in accordance with this Section 9.5 or by will or the laws of
descent and distribution.

 

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10. TERMS AND CONDITIONS OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS

10.1. Grant of Restricted Stock or Restricted Stock Units.

Awards of Restricted Stock or Restricted Stock Units may be made for no
consideration (other than par value of the shares which is deemed paid by
Services already rendered).

10.2. Restrictions.

At the time a grant of Restricted Stock or Restricted Stock Units is made, the
Administrator may, in its sole discretion, establish a period of time (a
“restricted period”) applicable to such Restricted Stock or Restricted Stock
Units. Each Award of Restricted Stock or Restricted Stock Units may be subject
to a different restricted period. The Administrator may, in its sole discretion,
at the time a grant of Restricted Stock or Restricted Stock Units is made,
prescribe restrictions in addition to or other than the expiration of the
restricted period, including the satisfaction of corporate or individual
performance objectives, which may be applicable to all or any portion of the
Restricted Stock or Restricted Stock Units as described in Article 14. Neither
Restricted Stock nor Restricted Stock Units may be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the restricted period or
prior to the satisfaction of any other restrictions prescribed by the
Administrator with respect to such Restricted Stock or Restricted Stock Units.

10.3. Restricted Stock Certificates.

The Company shall issue, in the name of each Grantee to whom Restricted Stock
has been granted, stock certificates representing the total number of shares of
Restricted Stock granted to the Grantee, as soon as reasonably practicable after
the Grant Date. The Administrator may provide in an Award Agreement that either
(i) the Secretary of the Company shall hold such certificates for the Grantee’s
benefit until such time as the Restricted Stock is forfeited to the Company or
the restrictions lapse, or (ii) such certificates shall be delivered to the
Grantee, provided, however, that such certificates shall bear a legend or
legends that comply with the applicable securities laws and regulations and
makes appropriate reference to the restrictions imposed under the Plan and the
Award Agreement. In the alternative, as provided in Section 3.7, the Company may
make a book entry registration evidencing a Grantee’s ownership of shares of
Restricted Stock.

10.4. Rights of Holders of Restricted Stock.

Unless the Administrator otherwise provides in an Award Agreement, holders of
Restricted Stock shall have the right to vote such Stock and the right to
receive any dividends declared or paid with respect to such Stock. The
Administrator may provide that any dividends paid on Restricted Stock must be
reinvested in shares of Stock, which may or may not be subject to the same
vesting conditions and restrictions applicable to such Restricted Stock. All
distributions, if any, received by a Grantee with respect to Restricted Stock as
a result of any stock split, stock dividend, combination of shares, or other
similar transaction shall be subject to the restrictions applicable to the
original Grant.

 

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10.5. Rights of Holders of Restricted Stock Units.

10.5.1. Voting and Dividend Rights.

Holders of Restricted Stock Units shall have no rights as stockholders of the
Company. The Administrator may provide in an Award Agreement evidencing a grant
of Restricted Stock Units that the holder of such Restricted Stock Units shall
be entitled to receive, upon the Company’s payment of a cash dividend on its
outstanding Stock, a cash payment for each Restricted Stock Unit held equal to
the per-share dividend paid on the Stock. Such Award Agreement may also provide
that such cash payment will be deemed reinvested in additional Restricted Stock
Units at a price per unit equal to the Fair Market Value of a share of Stock on
the date that such dividend is paid.

10.5.2. Creditor’s Rights.

A holder of Restricted Stock Units shall have no rights other than those of a
general creditor of the Company. Restricted Stock Units represent an unfunded
and unsecured obligation of the Company, subject to the terms and conditions of
the applicable Award Agreement.

10.6. Termination of Service.

Unless the Administrator otherwise provides in an Award Agreement or in writing
after the Award Agreement is issued, upon the termination of a Grantee’s
Service, any Restricted Stock or Restricted Stock Units held by such Grantee
that have not vested, or with respect to which all applicable restrictions and
conditions have not lapsed, shall immediately be deemed forfeited. Upon
forfeiture of Restricted Stock or Restricted Stock Units, the Grantee shall have
no further rights with respect to such Award, including but not limited to any
right to vote Restricted Stock or any right to receive dividends with respect to
shares of Restricted Stock or Restricted Stock Units.

10.7. Purchase of Restricted Stock.

The Grantee shall be required, to the extent required by applicable law, to
purchase the Restricted Stock from the Company at a Purchase Price equal to the
greater of (i) the aggregate par value of the shares of Stock represented by
such Restricted Stock or (ii) the Purchase Price, if any, specified in the Award
Agreement relating to such Restricted Stock. The Purchase Price shall be payable
in a form described in Section 12 or, in the discretion of the Administrator, in
consideration for past or future Services rendered to the Company or an
Affiliate.

10.8. Delivery of Stock.

Upon the expiration or termination of any restricted period and the satisfaction
of any other conditions prescribed by the Administrator, the restrictions
applicable to shares of Restricted Stock or Restricted Stock Units settled in
Stock shall lapse, and, unless otherwise provided in the Award Agreement, a
stock certificate for such shares shall be delivered, free of all such
restrictions, to the Grantee or the Grantee’s beneficiary or estate, as the case
may be. Neither the Grantee, nor the Grantee’s beneficiary or estate, shall have
any further rights with regard to a Restricted Stock Unit once the share of
Stock represented by the Restricted Stock Unit has been delivered.

 

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11. TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS

The Administrator may, in its sole discretion, grant (or sell at par value or
such other higher purchase price determined by the Administrator) an
Unrestricted Stock Award to any Grantee pursuant to which such Grantee may
receive shares of Stock free of any restrictions (“Unrestricted Stock”) under
the Plan. Unrestricted Stock Awards may be granted or sold as described in the
preceding sentence in respect of past services and other valid consideration, or
in lieu of, or in addition to, any cash compensation due to such Grantee.

12. FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK

12.1. General Rule.

Payment of the Option Price for the shares purchased pursuant to the exercise of
an Option or the Purchase Price for Restricted Stock shall be made in cash or in
cash equivalents acceptable to the Company.

12.2. Surrender of Stock.

To the extent the Award Agreement so provides, payment of the Option Price for
shares purchased pursuant to the exercise of an Option or the Purchase Price for
Restricted Stock may be made all or in part through the tender or attestation to
the Company of shares of Stock, which shall be valued, for purposes of
determining the extent to which the Option Price or Purchase Price has been paid
thereby, at their Fair Market Value on the date of exercise or surrender.

12.3. Cashless Exercise.

With respect to an Option only (and not with respect to Restricted Stock), to
the extent permitted by law and to the extent the Award Agreement so provides,
payment of the Option Price for shares purchased pursuant to the exercise of an
Option may be made all or in part by delivery (on a form acceptable to the
Administrator) of an irrevocable direction to a licensed securities broker
acceptable to the Company to sell shares of Stock and to deliver all or part of
the sales proceeds to the Company in payment of the Option Price and any
withholding taxes described in Section 18.3.

12.4. Other Forms of Payment.

To the extent the Award Agreement so provides, payment of the Option Price for
shares purchased pursuant to exercise of an Option or the Purchase Price for
Restricted Stock may be made in any other form that is consistent with
applicable laws, regulations and rules, including, without limitation, Service.

 

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13. TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS

13.1. Dividend Equivalent Rights.

A Dividend Equivalent Right is an Award entitling the recipient to receive
credits based on cash distributions that would have been paid on the shares of
Stock specified in the Dividend Equivalent Right (or other award to which it
relates) if such shares had been issued to and held by the recipient. A Dividend
Equivalent Right may be granted hereunder to any Grantee. The terms and
conditions of Dividend Equivalent Rights shall be specified in the grant.
Dividend equivalents credited to the holder of a Dividend Equivalent Right may
be paid currently or may be deemed to be reinvested in additional shares of
Stock, which may thereafter accrue additional equivalents. Any such reinvestment
shall be at Fair Market Value on the date of reinvestment. Dividend Equivalent
Rights may be settled in cash or Stock or a combination thereof, in a single
installment or installments, all determined in the sole discretion of the
Administrator. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon
exercise, settlement, or payment of, or lapse of restrictions on, such other
award, and that such Dividend Equivalent Right shall expire or be forfeited or
annulled under the same conditions as such other award. A Dividend Equivalent
Right granted as a component of another Award may also contain terms and
conditions different from such other award.

13.2. Termination of Service.

Except as may otherwise be provided by the Administrator either in the Award
Agreement or in writing after the Award Agreement is issued, a Grantee’s rights
in all Dividend Equivalent Rights or interest equivalents shall automatically
terminate upon the Grantee’s termination of Service for any reason.

14. TERMS AND CONDITIONS OF PERFORMANCE SHARES, PERFORMANCE UNITS, PERFORMANCE
AWARDS AND ANNUAL INCENTIVE AWARDS

14.1. Grant of Performance Units/Performance Shares.

Subject to the terms and provisions of this Plan, the Administrator, at any time
and from time to time, may grant Performance Units and/or Performance Shares to
Participants in such amounts and upon such terms as the Committee shall
determine.

14.2. Value of Performance Units/Performance Shares.

Each Performance Unit shall have an initial value that is established by the
Administrator at the time of grant. The Administrator shall set performance
goals in its discretion which, depending on the extent to which they are met,
will determine the value and/or number of Performance Units/Performance Shares
that will be paid out to the Participant.

 

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14.3. Earning of Performance Units/Performance Shares.

Subject to the terms of this Plan, after the applicable Performance Period has
ended, the holder of Performance Units/Performance Shares shall be entitled to
receive payout on the value and number of Performance Units/Performance Shares
earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding performance goals have been
achieved.

14.4. Form and Timing of Payment of Performance Units/Performance Shares.

Payment of earned Performance Units/Performance Shares shall be as determined by
the Administrator and as evidenced in the Award Agreement. Subject to the terms
of this Plan, the Administrator, in its sole discretion, may pay earned
Performance Units/Performance Shares in the form of cash or in shares (or in a
combination thereof) equal to the value of the earned Performance
Units/Performance Shares at the close of the applicable Performance Period, or
as soon as practicable after the end of the Performance Period. Any Shares may
be granted subject to any restrictions deemed appropriate by the Committee. The
determination of the Committee with respect to the form of payout of such Awards
shall be set forth in the Award Agreement pertaining to the grant of the Award.

14.5. Performance Conditions.

The right of a Grantee to exercise or receive a grant or settlement of any
Award, and the timing thereof, may be subject to such performance conditions as
may be specified by the Administrator. The Administrator may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions. If and to the extent required under
Code Section 162(m), any power or authority relating to an Award intended to
qualify under Code Section 162(m), shall be exercised by the Committee.

14.6. Performance Awards or Annual Incentive Awards Granted to Designated
Covered Employees.

If and to the extent that the Administrator determines that an Award to be
granted to a Grantee who is designated by the Committee as likely to be a
Covered Employee should qualify as “performance-based compensation” for purposes
of Code Section 162(m), the grant, exercise and/or settlement of such Award
shall be contingent upon achievement of pre-established performance goals and
other terms set forth in this Section 14.6.

14.6.1. Performance Goals Generally.

The performance goals for such Awards shall consist of one or more business
criteria and a targeted level or levels of performance with respect to each of
such criteria, as specified by the Committee consistent with this Section 14.6.
Performance goals shall be objective and shall otherwise meet the requirements
of Code Section 162(m) and

 

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regulations thereunder including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of performance
goals being “substantially uncertain.” The Committee may determine that such
Awards shall be granted, exercised and/or settled upon achievement of any one
performance goal or that two or more of the performance goals must be achieved
as a condition to grant, exercise and/or settlement of such Awards. Performance
goals may differ for Awards granted to any one Grantee or to different Grantees.

14.6.2. Timing For Establishing Performance Goals.

Performance goals shall be established not later than the earlier of (i) 90 days
after the beginning of any performance period applicable to such Awards and
(ii) the day on which 25% of any performance period applicable to such Awards
has expired, or at such other date as may be required or permitted for
“performance-based compensation” under Code Section 162(m).

14.6.3. Settlement of Awards; Other Terms.

Settlement of such Awards shall be in cash, Stock, other Awards or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in connection
with such Awards. The Committee shall specify the circumstances in which such
Performance or Annual Incentive Awards shall be paid or forfeited in the event
of termination of Service by the Grantee prior to the end of a performance
period or settlement of Awards.

14.6.4. Performance Measures.

The performance goals upon which the payment or vesting of an Award to a Covered
Employee that is intended to qualify as Performance-Based Compensation shall be
limited to the following Performance Measures:

(a) net earnings;

(b) operating earnings;

(c) pretax earnings;

(d) earnings (or loss) per share;

(e) share price, including growth measures and total stockholder return and
appreciation in and/or maintenance of the price of the shares of Stock or any
publicly traded securities of the Company;

 

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(f) earnings (or losses), including earnings or losses before taxes, earnings
(or losses) before interest and taxes, earnings (or losses) before interest,
taxes and depreciation, earnings (or losses) before interest, taxes,
depreciation and amortization, or earnings (or losses) before interest, taxes,
depreciation, amortization and stock-based compensation, and other similar
adjustments to earnings (or losses);

(g) sales or revenue, or sales or revenue growth, whether in general, by type of
product or service, or by type of customer;

(h) net income (or loss) before or after taxes and before or after allocation of
corporate overhead and bonus;

(i) operating income (or loss) before or after taxes;

(j) gross, cash or operating margins;

(k) gross profits;

(l) return measures, including return on assets or net assets, capital
(including total capital or invested capital), investment, equity, sales or net
sales, or revenue;

(m) cash flow, including operating cash flow, free cash flow, cash flow return
on equity, cash flow return on investment, and cash flow per share (before or
after dividends);

(n) economic value added models or equivalent metrics;

(o) productivity ratios;

(p) expense targets;

(q) market share;

(r) financial ratios as provided in credit agreements of the Company and its
subsidiaries;

(s) working capital targets;

(t) year-end cash;

 

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(u) debt reductions;

(v) reductions in cost;

(w) improvement in or attainment of expense levels or working capital levels;

(x) shareholder equity;

(y) implementation, completion or attainment of measurable objectives with
respect to research, development, products or projects, recruiting and
maintaining personnel, and strategic and operational initiatives;

(z) completion of acquisitions of business or companies.

(aa) completion of divestitures and asset sales; and

(bb) any combination of any of the foregoing business criteria.

Any Performance Measure(s) may be used to measure the performance of the
Company, Subsidiary, and/or Affiliate as a whole or any business unit of the
Company, Subsidiary, and/or Affiliate or any combination thereof, as the
Committee may deem appropriate, or any of the above Performance Measures as
compared to the performance of a group of comparator companies, or published or
special index that the Committee, in its sole discretion, deems appropriate, or
the Company may select Performance Measure (f) above as compared to various
stock market indices. The Committee also has the authority to provide for
accelerated vesting of any Award based on the achievement of performance goals
pursuant to the Performance Measures specified in this Section 14.

14.6.5. Evaluation of Performance.

The Committee may provide in any such Award that any evaluation of performance
may include or exclude any of the following events that occur during a
Performance Period: (a) asset write-downs; (b) litigation or claim judgments or
settlements; (c) the effect of changes in tax laws, accounting principles, or
other laws or provisions affecting reported results; (d) any reorganization and
restructuring programs; (e) extraordinary nonrecurring items as described in
Accounting Principles Board Opinion No. 30 and/or in management’s discussion and
analysis of financial condition and results of operations appearing in the
Company’s annual report to shareholders for the applicable year;
(f) acquisitions or divestitures; and (g) foreign exchange gains and losses. To
the extent such inclusions or exclusions affect Awards to Covered Employees,
they shall be prescribed in a form that meets the requirements of Code
Section 162(m) for deductibility.

 

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14.6.6. Adjustment of Performance-Based Compensation.

Awards that are intended to qualify as Performance-Based Compensation may not be
adjusted upward. The Administrator shall retain the discretion to adjust such
Awards downward, either on a formula or discretionary basis, or any combination
as the Committee determines.

14.6.7. Administrator Discretion.

In the event that applicable tax and/or securities laws change to permit
Administrator discretion to alter the governing Performance Measures without
obtaining shareholder approval of such changes, the Administrator shall have
sole discretion to make such changes without obtaining shareholder approval
provided the exercise of such discretion does not violate Code Section 409A. In
addition, in the event that the Committee determines that it is advisable to
grant Awards that shall not qualify as Performance-Based Compensation, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m) and base vesting on Performance Measures other than those set
forth in Section 14.6.4.

14.7. Status of Section Awards Under Code Section 162(m).

It is the intent of the Company that Awards under Section 14.6 hereof granted to
persons who are designated by the Committee as likely to be Covered Employees
within the meaning of Code Section 162(m) and regulations thereunder shall, if
so designated by the Committee, constitute “qualified performance-based
compensation” within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Section 14.6, including the definitions of
Covered Employee and other terms used therein, shall be interpreted in a manner
consistent with Code Section 162(m) and regulations thereunder. The foregoing
notwithstanding, because the Committee cannot determine with certainty whether a
given Grantee will be a Covered Employee with respect to a fiscal year that has
not yet been completed, the term Covered Employee as used herein shall mean only
a person designated by the Committee, at the time of grant of an Award, as
likely to be a Covered Employee with respect to that fiscal year. If any
provision of the Plan or any agreement relating to such Awards does not comply
or is inconsistent with the requirements of Code Section 162(m) or regulations
thereunder, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.

15. PARACHUTE LIMITATIONS

Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Company or any Affiliate, except an agreement, contract, or
understanding that expressly addresses Section 280G or Section 4999 of the Code
(an “Other Agreement”), and notwithstanding any formal or informal plan or other
arrangement for the direct or indirect provision of compensation to the Grantee
(including groups or classes of Grantees or beneficiaries of which the Grantee
is a member), whether or not such compensation is deferred, is in cash, or is in
the form of a benefit to or for the Grantee (a “Benefit Arrangement”), if the
Grantee is a “disqualified individual,” as defined in Section 280G(c) of the
Code, any Option, Restricted Stock,

 

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Restricted Stock Unit, Performance Share or Performance Unit held by that
Grantee and any right to receive any payment or other benefit under this Plan
shall not become exercisable or vested (i) to the extent that such right to
exercise, vesting, payment, or benefit, taking into account all other rights,
payments, or benefits to or for the Grantee under this Plan, all Other
Agreements, and all Benefit Arrangements, would cause any payment or benefit to
the Grantee under this Plan to be considered a “parachute payment” within the
meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute
Payment”) and (ii) if, as a result of receiving a Parachute Payment, the
aggregate after-tax amounts received by the Grantee from the Company under this
Plan, all Other Agreements, and all Benefit Arrangements would be less than the
maximum after-tax amount that could be received by the Grantee without causing
any such payment or benefit to be considered a Parachute Payment. In the event
that the receipt of any such right to exercise, vesting, payment, or benefit
under this Plan, in conjunction with all other rights, payments, or benefits to
or for the Grantee under any Other Agreement or any Benefit Arrangement would
cause the Grantee to be considered to have received a Parachute Payment under
this Plan that would have the effect of decreasing the after-tax amount received
by the Grantee as described in clause (ii) of the preceding sentence, then the
Grantee shall have the right, in the Grantee’s sole discretion, to designate
those rights, payments, or benefits under this Plan, any Other Agreements, and
any Benefit Arrangements that should be reduced or eliminated so as to avoid
having the payment or benefit to the Grantee under this Plan be deemed to be a
Parachute Payment.

16. REQUIREMENTS OF LAW

16.1. General.

The Company shall not be required to sell or issue any shares of Stock under any
Award if the sale or issuance of such shares would constitute a violation by the
Grantee, any other individual exercising an Option, or the Company of any
provision of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations. If at
any time the Company shall determine, in its discretion, that the listing,
registration or qualification of any shares subject to an Award upon any
securities exchange or under any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the issuance or purchase of
shares hereunder, no shares of Stock may be issued or sold to the Grantee or any
other individual exercising an Option pursuant to such Award unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company, and
any delay caused thereby shall in no way affect the date of termination of the
Award. Without limiting the generality of the foregoing, in connection with the
Securities Act, upon the exercise of any Option or any SAR that may be settled
in shares of Stock or the delivery of any shares of Stock underlying an Award,
unless a registration statement under such Act is in effect with respect to the
shares of Stock covered by such Award, the Company shall not be required to sell
or issue such shares unless the Administrator has received evidence satisfactory
to it that the Grantee or any other individual exercising an Option may acquire
such shares pursuant to an exemption from registration under the Securities Act.
Any determination in this connection by the Administrator shall be final,
binding, and conclusive. The Company may, but shall in no event be obligated to,
register any securities covered hereby pursuant to the Securities Act. The
Company shall not be obligated to take any affirmative action in order to cause
the exercise of an Option or a SAR or the issuance of

 

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shares of Stock pursuant to the Plan to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option (or SAR that may be settled in shares of Stock) shall
not be exercisable until the shares of Stock covered by such Option (or SAR) are
registered or are exempt from registration, the exercise of such Option (or SAR)
under circumstances in which the laws of such jurisdiction apply shall be deemed
conditioned upon the effectiveness of such registration or the availability of
such an exemption.

16.2. Rule 16b-3.

During any time when the Company has a class of equity security registered under
Section 12 of the Exchange Act, it is the intent of the Company that Awards
pursuant to the Plan and the exercise of Options and SARs granted hereunder will
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the
extent that any provision of the Plan or action by the Administrator does not
comply with the requirements of Rule 16b-3, it shall be deemed inoperative to
the extent permitted by law and deemed advisable by the Administrator, and shall
not affect the validity of the Plan. In the event that Rule 16b-3 is revised or
replaced, the Administrator may exercise its discretion to modify this Plan in
any respect necessary to satisfy the requirements of, or to take advantage of
any features of, the revised exemption or its replacement.

17. EFFECT OF CHANGES IN CAPITALIZATION

17.1. Changes in Stock.

If the number of outstanding shares of Stock is increased or decreased or the
shares of Stock are changed into or exchanged for a different number or kind of
shares or other securities of the Company on account of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration by
the Company occurring after the Effective Date, the number and kinds of shares
for which grants of Options and other Awards may be made under the Plan,
including, without limitation, the limits set forth in Section 6.3, shall be
adjusted proportionately and accordingly by the Company. In addition, the number
and kind of shares for which Awards are outstanding shall be adjusted
proportionately and accordingly so that the proportionate interest of the
Grantee immediately following such event shall, to the extent practicable, be
the same as immediately before such event. Any such adjustment in outstanding
Options or SARs shall not change the aggregate Option Price or SAR Exercise
Price payable with respect to shares that are subject to the unexercised portion
of an outstanding Option or SAR, as applicable, but shall include a
corresponding proportionate adjustment in the Option Price or SAR Exercise Price
per share. The conversion of any convertible securities of the Company shall not
be treated as an increase in shares effected without receipt of consideration.
Notwithstanding the foregoing, in the event of any distribution to the Company’s
stockholders of securities of any other entity or other assets (including an
extraordinary dividend but excluding a non-extraordinary dividend of the
Company) without receipt of consideration by the Company, the Company shall, in
such manner as the Company deems appropriate, adjust (i) the number and kind of
shares subject to outstanding Awards and/or (ii) the exercise price of
outstanding Options and Stock Appreciation Rights to reflect such distribution.

 

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17.2. Reorganization in Which the Company Is the Surviving Entity Which does not
Constitute a Corporate Transaction.

Subject to Section 17.3 hereof, if the Company shall be the surviving entity in
any reorganization, merger, or consolidation of the Company with one or more
other entities which does not constitute a Corporate Transaction, any Option or
SAR theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option or SAR would have been entitled immediately following such
reorganization, merger, or consolidation, with a corresponding proportionate
adjustment of the Option Price or SAR Exercise Price per share so that the
aggregate Option Price or SAR Exercise Price thereafter shall be the same as the
aggregate Option Price or SAR Exercise Price of the shares remaining subject to
the Option or SAR immediately prior to such reorganization, merger, or
consolidation. Subject to any contrary language in an Award Agreement evidencing
an Award, any restrictions applicable to such Award shall apply as well to any
replacement shares received by the Grantee as a result of the reorganization,
merger or consolidation. In the event of a transaction described in this
Section 17.2, Restricted Stock Units shall be adjusted so as to apply to the
securities that a holder of the number of shares of Stock subject to the
Restricted Stock Units would have been entitled to receive immediately following
such transaction.

17.3. Corporate Transaction in which Awards are not Assumed.

Upon the occurrence of a Corporate Transaction in which outstanding Options,
SARs, Restricted Stock Units and Restricted Stock are not being assumed or
continued:

(i) all outstanding shares of Restricted Stock shall be deemed to have vested,
and all Restricted Stock Units shall be deemed to have vested and the shares of
Stock subject thereto shall be delivered, immediately prior to the occurrence of
such Corporate Transaction, and

(ii) either of the following two actions shall be taken:

(A) fifteen days prior to the scheduled consummation of a Corporate Transaction,
all Options and SARs outstanding hereunder shall become immediately exercisable
and shall remain exercisable for a period of fifteen days, or

(B) the Administrator may elect, in its sole discretion, to cancel any
outstanding Awards of Options, Restricted Stock, Restricted Stock Units, and/or
SARs and pay or deliver, or cause to be paid or delivered, to the holder thereof
an amount in cash or securities having a value (as determined by the
Administrator acting in good faith), in the case of Restricted Stock or
Restricted Stock Units, equal to the formula or fixed price per share paid to
holders of shares of Stock and, in the case of Options or SARs, equal to the
product of the number of shares of Stock subject to the Option or SAR (the
“Award Shares”) multiplied by the amount, if any, by which (I) the formula or
fixed price per share paid to holders of shares of Stock pursuant to such
transaction exceeds (II) the Option Price or SAR Exercise Price applicable to
such Award Shares.

 

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With respect to the Company’s establishment of an exercise window, (i) any
exercise of an Option or SAR during such fifteen-day period shall be conditioned
upon the consummation of the event and shall be effective only immediately
before the consummation of the event, and (ii) upon consummation of any
Corporate Transaction, the Plan and all outstanding but unexercised Options and
SARs shall terminate. The Administrator shall send notice of an event that will
result in such a termination to all individuals who hold Options and SARs not
later than the time at which the Company gives notice thereof to its
stockholders.

17.4. Corporation Transaction in which Awards are Assumed.

The Plan, Options, SARs, Restricted Stock Units and Restricted Stock theretofore
granted shall continue in the manner and under the terms so provided in the
event of any Corporate Transaction to the extent that provision is made in
writing in connection with such Corporate Transaction for the assumption or
continuation of the Options, SARs, Restricted Stock Units and Restricted Stock
theretofore granted, or for the substitution for such Options, SARs, Restricted
Stock Units and Restricted Stock for new common stock options and stock
appreciation rights and new common stock units and restricted stock relating to
the stock of a successor entity, or a parent or subsidiary thereof, with
appropriate adjustments as to the number of shares (disregarding any
consideration that is not common stock) and option and stock appreciation right
exercise prices.

17.5. Adjustments

Adjustments under this Section 17 related to shares of Stock or securities of
the Company shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. No fractional shares or other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share. The Administrator shall determine the
effect of a Corporate Transaction upon Awards other than Options, SARs,
Restricted Stock Units and Restricted Stock, and such effect shall be set forth
in the appropriate Award Agreement. The Administrator may provide in the Award
Agreements at the time of grant, or any time thereafter with the consent of the
Grantee, for different provisions to apply to an Award in place of those
described in Sections 17.1, 17.2, 17.3 and 17.4. This Section 17 does not limit
the Company’s ability to provide for alternative treatment of Awards outstanding
under the Plan in the event of change of control events that are not Corporate
Transactions.

17.6. No Limitations on Company

The making of Awards pursuant to the Plan shall not affect or limit in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets.

 

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18. GENERAL PROVISIONS

18.1. Disclaimer of Rights

No provision in the Plan or in any Award or Award Agreement shall be construed
to confer upon any individual the right to remain in the employ or service of
the Company or any Affiliate, or to interfere in any way with any contractual or
other right or authority of the Company either to increase or decrease the
compensation or other payments to any individual at any time, or to terminate
any employment or other relationship between any individual and the Company. In
addition, notwithstanding anything contained in the Plan to the contrary, unless
otherwise stated in the applicable Award Agreement, no Award granted under the
Plan shall be affected by any change of duties or position of the Grantee, so
long as such Grantee continues to be a director, officer, consultant or employee
of the Company or an Affiliate. The obligation of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual obligation
to pay only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be interpreted to require
the Company to transfer any amounts to a third party trustee or otherwise hold
any amounts in trust or escrow for payment to any Grantee or beneficiary under
the terms of the Plan.

18.2. Nonexclusivity of the Plan

Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Administrator to adopt such
other incentive compensation arrangements (which arrangements may be applicable
either generally to a class or classes of individuals or specifically to a
particular individual or particular individuals) as the Administrator in its
discretion determines desirable, including, without limitation, the granting of
stock options otherwise than under the Plan.

18.3. Withholding Taxes

The Company or an Affiliate, as the case may be, shall have the right to deduct
from payments of any kind otherwise due to a Grantee any federal, state, or
local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to an Award or upon the
issuance of any shares of Stock upon the exercise of an Option or pursuant to an
Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay to
the Company or the Affiliate, as the case may be, any amount that the Company or
the Affiliate may reasonably determine to be necessary to satisfy such
withholding obligation. Subject to the prior approval of the Company or the
Affiliate, which may be withheld by the Company or the Affiliate, as the case
may be, in its sole discretion, the Grantee may elect to satisfy such
obligations, in whole or in part, (i) by causing the Company or the Affiliate to
withhold shares of Stock otherwise issuable to the Grantee or (ii) by delivering
to the Company or the Affiliate shares of Stock already owned by the Grantee.
The shares of Stock so delivered or withheld shall have an aggregate Fair Market
Value equal to such withholding obligations. The Fair Market Value of the shares
of Stock used to satisfy such withholding obligation shall be determined by the
Company or the Affiliate as of the date that the amount of tax to be withheld is
to be determined. A Grantee who has made an election pursuant to this
Section 18.3 may satisfy his or her withholding obligation only

 

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with shares of Stock that are not subject to any repurchase, forfeiture,
unfulfilled vesting, or other similar requirements. The maximum number of shares
of Stock that may be withheld from any Award to satisfy any federal, state or
local tax withholding requirements upon the exercise, vesting, lapse of
restrictions applicable to such Award or payment of shares pursuant to such
Award, as applicable, cannot exceed such number of shares having a Fair Market
Value equal to the minimum statutory amount required by the Company to be
withheld and paid to any such federal, state or local taxing authority with
respect to such exercise, vesting, lapse of restrictions or payment of shares.

18.4. Captions

The use of captions in this Plan or any Award Agreement is for the convenience
of reference only and shall not affect the meaning of any provision of the Plan
or such Award Agreement.

18.5. Other Provisions

Each Award granted under the Plan may contain such other terms and conditions
not inconsistent with the Plan as may be determined by the Administrator, in its
sole discretion.

18.6. Number and Gender

With respect to words used in this Plan, the singular form shall include the
plural form, the masculine gender shall include the feminine gender, etc., as
the context requires.

18.7. Severability

If any provision of the Plan or any Award Agreement shall be determined to be
illegal or unenforceable by any court of law in any jurisdiction, the remaining
provisions hereof and thereof shall be severable and enforceable in accordance
with their terms, and all provisions shall remain enforceable in any other
jurisdiction.

18.8. Governing Law

The validity and construction of this Plan and the instruments evidencing the
Awards hereunder shall be governed by the laws of the State of Delaware, other
than any conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this Plan and the instruments evidencing the
Awards granted hereunder to the substantive laws of any other jurisdiction.

18.9. Section 409A of the Code

The Administrator intends to comply with Section 409A of the Code (“Section
409A”), or an exemption to Section 409A, with regard to Awards hereunder that
constitute nonqualified deferred compensation within the meaning of
Section 409A. To the extent that the Administrator determines that a Grantee
would be subject to the additional 20% tax imposed on certain nonqualified
deferred compensation plans pursuant to Section 409A as a result of any
provision of any Award granted under this Plan, such provision shall be deemed
amended to the minimum extent necessary to avoid application of such additional
tax. The nature of any such amendment shall be determined by the Administrator.

* * *

 

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To record adoption of the Plan by the Board as of October 31, 2007, and approval
of the Plan by the stockholders on November 8, 2007, the Company has caused its
authorized officer to execute the Plan.

 

SUN MICROSYSTEMS, INC. BY:   /s/ Maria Pizzoli ITS: Assistant Secretary

 

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