Exhibit 10.1

 

SONUS NETWORKS, INC.

 

2007 STOCK INCENTIVE PLAN, AS AMENDED

 

1.             Purpose.

 

The purpose of this 2007 Stock Incentive Plan (the “Plan”) of Sonus
Networks, Inc., a Delaware corporation (the “Company”), is to advance the
interests of the Company’s stockholders by enhancing the Company’s ability to
attract, retain and motivate persons who are expected to make important
contributions to the Company and by providing such persons with equity ownership
opportunities and performance-based incentives that are intended to align their
interests with those of the Company’s stockholders. Except where the context
otherwise requires, the term “Company” shall include any of the Company’s
present or future parent or subsidiary corporations as defined in
Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the “Code”) and any other business venture
(including, without limitation, joint venture or limited liability company) in
which the Company has a controlling interest, as determined by the Board of
Directors of the Company (the “Board”).

 

2.             Eligibility.

 

All of the Company’s employees, officers, directors, consultants and advisors
are eligible to receive options, stock appreciation rights (“SARs”), restricted
stock, restricted stock units and other stock-based awards (each, an “Award”)
under the Plan. Each person who receives an Award under the Plan is deemed a
“Participant”.

 

3.             Administration and Delegation.

 

(a)           Administration by Board of Directors.  The Plan will be
administered by the Board. The Board shall have authority to grant Awards and to
adopt, amend and repeal such administrative rules, guidelines and practices
relating to the Plan as it shall deem advisable. The Board may construe and
interpret the terms of the Plan and any Award agreements entered into under the
Plan. The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board’s sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.

 

(b)           Appointment of Committees.  To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a “Committee”). All references in
the Plan to the “Board” shall mean the Board or a Committee of the Board or the
officers referred to in Section 3(c) to the

 

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extent that the Board’s powers or authority under the Plan have been delegated
to such Committee or officers.

 

(c)           Delegation to Officers.  To the extent permitted by applicable
law, the Board may delegate to one or more officers of the Company the power to
grant Awards (subject to any limitations under the Plan) to employees or
officers of the Company or any of its present or future subsidiary corporations
and to exercise such other powers under the Plan as the Board may determine,
provided that the Board shall fix the terms of the Awards to be granted by such
officers (including the exercise price of such Awards, which may include a
formula by which the exercise price will be determined) and the maximum number
of shares subject to Awards that the officers may grant; provided further,
however, that no officer shall be authorized to grant Awards to any “executive
officer” of the Company (as defined by Rule 3b-7 under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)) or to any “officer” of the Company
(as defined by Rule 16a-1 under the Exchange Act).

 

4.             Stock Available for Awards.

 

(a)           Number of Shares.  Subject to adjustment under Section 9, the
aggregate number of shares of common stock, $0.001 par value per share, of the
Company (the “Common Stock”) reserved for Awards under the Plan is 55,902,701.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.

 

(b)           Share Count.  Shares issued pursuant to Awards of Restricted Stock
or Restricted Stock Units or Other Stock Unit Awards will count against the
shares of Common Stock available for issuance under the Plan as one and one-half
(1.5) shares for every one (1) share issued in connection with the Award. Shares
issued pursuant to the exercise of Options will count against the shares
available for issuance under the Plan as one (1) share for every one (1) share
to which such exercise relates. The total number of shares subject to SARs that
are settled in shares shall be counted in full against the number of shares
available for issuance under the Plan, regardless of the number of shares
actually issued upon settlement of the SARs. If Awards are settled in cash, the
shares that would have been delivered had there been no cash settlement shall
not be counted against the shares available for issuance under the Plan. If any
Award expires or is terminated, surrendered or canceled without having been
fully exercised, is forfeited in whole or in part (including as the result of
shares of Common Stock subject to such Award being repurchased by the Company at
the original issuance price pursuant to a contractual repurchase right), then
the shares of Common Stock covered by such Award shall again become available
for the grant of Awards under the Plan; provided that any one (1) share issued
as Restricted Stock or subject to a Restricted Stock Unit Award or Other Stock
Unit Award that is forfeited or terminated shall be credited as one and one-half
(1.5) shares when determining the number of shares that shall again become
available for Awards under the Plan. Shares that are exchanged by a Participant
or withheld by the Company as full or partial payment in connection with any
Award under the Plan, as well as any shares exchanged by a Participant or
withheld by the Company to satisfy the tax withholding obligations related to
any Award, shall not be available for subsequent Awards under the Plan. In the
case of Incentive Stock Options (as hereinafter defined), the foregoing
provisions shall be subject to any limitations under the Code.

 

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(c)           Sub-limits.  Subject to adjustment under Section 9, the following
sub-limits on the number of shares subject to Awards shall apply:

 

(1)           Section 162(m) Per-Participant Limit.  The maximum number of
shares of Common Stock with respect to which Awards may be granted to any
Participant under the Plan shall be 2,000,000 per calendar year. For purposes of
the foregoing limit, the combination of an Option in tandem with a SAR (as each
is hereafter defined) shall be treated as a single Award. The per-Participant
limit described in this Section 4(b)(1) shall be construed and applied
consistently with Section 162(m) of the Code or any successor provision thereto,
and the regulations thereunder (“Section 162(m)”).

 

(2)           Limit on Awards to Directors.  The maximum number of shares with
respect to which Awards may be granted to any director who is not an employee of
the Company at the time of grant shall be 100,000 per calendar year.

 

(d)           Substitute Awards.  In connection with a merger or consolidation
of an entity with the Company or the acquisition by the Company of property or
stock of an entity, the Board may grant Awards in substitution for any options
or other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Awards may be granted on such terms as the Board deems
appropriate in the circumstances, notwithstanding any limitations on Awards
contained in the Plan. Substitute Awards shall not count against the overall
share limit set forth in Section 4(a) or any sublimits contained in the Plan,
except as may be required by reason of Section 422 and related provisions of the
Code.

 

5.             Stock Options.

 

(a)           General.  The Board may grant options to purchase Common Stock
(each, an “Option”) and determine the number of shares of Common Stock to be
covered by each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option that is not an Incentive Stock Option (as
hereinafter defined) shall be designated a “Nonstatutory Stock Option.”

 

(b)           Incentive Stock Options.  An Option that the Board intends to be
an “incentive stock option” as defined in Section 422 of the Code (an “Incentive
Stock Option”) shall only be granted to employees of Sonus Networks, Inc., any
of Sonus Networks, Inc.’s present or future parent or subsidiary corporations as
defined in Sections 424(e) or (f) of the Code, and any other entities the
employees of which are eligible to receive Incentive Stock Options under the
Code, and shall be subject to and shall be construed consistently with the
requirements of Section 422 of the Code. The Company shall have no liability to
a Participant, or any other party, if an Option (or any part thereof) that is
intended to be an Incentive Stock Option is not an Incentive Stock Option or for
any action taken by the Board, including without limitation the conversion of an
Incentive Stock Option to a Nonstatutory Stock Option.

 

(c)           Exercise Price.  The Board shall establish the exercise price of
each Option and specify such exercise price in the applicable option agreement.
The exercise price shall be not less than 100% of the Fair Market Value (as
defined below) on the date the Option is granted;

 

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provided that if the Board approves the grant of an Option with an exercise
price to be determined on a future date, the exercise price shall be not less
than 100% of the Fair Market Value on such future date.

 

(d)           Duration of Options.  Each Option shall be exercisable at such
times and subject to such terms and conditions as the Board may specify in the
applicable option agreement, provided, however, that no Option will be granted
for a term in excess of 10 years.

 

(e)           Exercise of Option.  Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board,
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised. Shares of Common Stock subject to the
Option will be delivered by the Company as soon as practicable following
exercise.

 

(f)            Payment Upon Exercise.  Common Stock purchased upon the exercise
of an Option granted under the Plan shall be paid for as follows:

 

(1)           in cash or by check, payable to the order of the Company;

 

(2)           except as may otherwise be provided in the applicable option
agreement, by (i) delivery of an irrevocable and unconditional undertaking by a
creditworthy broker to deliver promptly to the Company sufficient funds to pay
the exercise price and any required tax withholding or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price and any required tax withholding;

 

(3)           to the extent provided for in the applicable option agreement or
approved by the Board, in its sole discretion, by delivery (either by actual
delivery or attestation) of shares of Common Stock owned by the Participant
valued at their fair market value as determined by (or in a manner approved by)
the Board (“Fair Market Value”), provided (i) such method of payment is then
permitted under applicable law, (ii) such Common Stock, if acquired directly
from the Company, was owned by the Participant for such minimum period of time,
if any, as may be established by the Board in its discretion and (iii) such
Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting
or other similar requirements;

 

(4)           to the extent permitted by applicable law and provided for in the
applicable option agreement or approved by the Board, in its sole discretion, by
(i) delivery of a promissory note of the Participant to the Company on terms
determined by the Board or (ii) payment of such other lawful consideration as
the Board may determine; or

 

(5)           by any combination of the above permitted forms of payment.

 

(g)           Fair Market Value.  Fair Market Value of a share of Common Stock
for purposes of the Plan will be determined as follows:

 

(1)           if the Common Stock trades on a national securities exchange, the
closing sale price (for the primary trading session) on the date of grant; or

 

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(2)           if the Common Stock does not trade on any such exchange, the
average of the closing bid and asked prices as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System (“Nasdaq”)
for the date of grant; or

 

(3)           if no such closing sale price information is available, the
average of bids and asked prices that Nasdaq reports for the date of grant; or

 

(4)           if there are no such closing bid and asked prices, the average of
the bid and asked prices as reported by any other commercial service for the
date of grant.

 

For any date that is not a trading day, the Fair Market Value of a share of
Common Stock for such date will be determined by using the closing sale price or
average of the bid and asked prices, as appropriate, for the immediately
following trading day and with the timing in the formulas above adjusted
accordingly. The Board can substitute a particular time of day or other measure
of “closing sale price” or “bid and asked prices” if appropriate because of
exchange or market procedures or can, in its sole discretion, use weighted
averages either on a daily basis or such longer period as complies with Code
Section 409A.

 

(h)           Limitation on Repricing.  Unless such action is approved by the
Company’s stockholders: (1) no outstanding Option granted under the Plan may be
amended to provide an exercise price per share that is lower than the
then-current exercise price per share of such outstanding Option (other than
adjustments pursuant to Section 9), (2) the Board may not cancel any outstanding
option (whether or not granted under the Plan) and grant in substitution
therefore new Awards under the Plan covering the same or a different number of
share of Common Stock and having an exercise price per share lower than the
then-current exercise price per share of the cancelled option, and (3) no
outstanding Option granted under the Plan may be purchased by the Company for
cash.

 

6.             Stock Appreciation Rights.

 

(a)           General.  The Board may grant Awards consisting of a SAR entitling
the holder, upon exercise, to receive an amount in Common Stock or cash or a
combination thereof (such form to be determined by the Board) determined in
whole or in part by reference to appreciation, from and after the date of grant,
in the Fair Market Value of a share of Common Stock over the exercise price
established pursuant to Section 6(c). The date as of which such appreciation or
other measure is determined shall be the exercise date.

 

(b)           Grants.  SARs may be granted in tandem with, or independently of,
Options granted under the Plan.

 

(1)           Tandem Awards.  When SARs are expressly granted in tandem with
Options, (i) the SAR will be exercisable only at such time or times, and to the
extent, that the related Option is exercisable (except to the extent designated
by the Board in connection with a Reorganization Event) and will be exercisable
in accordance with the procedure required for exercise of the related Option;
(ii) the SAR will terminate and no longer be exercisable upon the termination or
exercise of the related Option, except to the extent designated by the Board in
connection with a Reorganization Event and except that a SAR granted with
respect to less than the full number of shares covered by an Option will not be
reduced until the number of shares as

 

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to which the related Option has been exercised or has terminated exceeds the
number of shares not covered by the SAR; (iii) the Option will terminate and no
longer be exercisable upon the exercise of the related SAR; and (iv) the SAR
will be transferable only with the related Option.

 

(2)           Independent SARs.  A SAR not expressly granted in tandem with an
Option will become exercisable at such time or times, and on such conditions, as
the Board may specify in the SAR Award.

 

(c)           Exercise Price.  The Board shall establish the exercise price of
each SAR and specify it in the applicable SAR agreement. The exercise price
shall not be less than 100% of the Fair Market Value on the date the SAR is
granted; provided that if the Board approves the grant of a SAR with an exercise
price to be determined on a future date, the exercise price shall be not less
than 100% of the Fair Market Value on such future date.

 

(d)           Term.  The term of a SAR shall not be more than 10 years from the
date of grant.

 

(e)           Exercise.  SARs may be exercised by delivery to the Company of a
written notice of exercise signed by the proper person or by any other form of
notice (including electronic notice) approved by the Board, together with any
other documents required by the Board.

 

(f)            Limitation of Repricing.  Unless such action is approved by the
Company’s stockholders: (1) no outstanding SAR granted under the Plan may be
amended to provide an exercise price per share that is lower than the
then-current exercise price per share of such outstanding SAR (other than
adjustments pursuant to Section 9), (2) the Board may not cancel any outstanding
SAR (whether or not granted under the Plan) and grant in substitution therefor
new Awards under the Plan covering the same or a different number of shares of
Common Stock and having an exercise price per share lower than the then-current
exercise price per share of the cancelled SAR, and (3) no outstanding SAR
granted under the Plan may be purchased by the Company for cash.

 

7.             Restricted Stock; Restricted Stock Units.

 

(a)           General.  The Board may grant Awards entitling recipients to
acquire shares of Common Stock (“Restricted Stock”), subject to the right of the
Company to repurchase all or part of such shares at their issue price or other
stated or formula price (or to require forfeiture of such shares if issued at no
cost) from the recipient in the event that conditions specified by the Board in
the applicable Award are not satisfied prior to the end of the applicable
restriction period or periods established by the Board for such Award. Instead
of granting Awards for Restricted Stock, the Board may grant Awards entitling
the recipient to receive shares of Common Stock or cash to be delivered at the
time such Award vests (“Restricted Stock Units”) (Restricted Stock and
Restricted Stock Units are each referred to herein as a “Restricted Stock
Award”).

 

(b)           Terms and Conditions for all Restricted Stock Awards.  The Board
shall determine the terms and conditions of a Restricted Stock Award, including
the conditions for vesting and repurchase (or forfeiture) and the issue price,
if any.

 

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(c)           Additional Provisions Relating to Restricted Stock.

 

(1)           Dividends.  Participants holding shares of Restricted Stock will
be entitled to all ordinary cash dividends paid with respect to such shares,
unless otherwise provided by the Board; provided, however, that dividends on
Restricted Stock that are subject to performance conditions will either be
accumulated or reinvested and paid upon vesting of the underlying Restricted
Stock. Unless otherwise provided by the Board, if any dividends or distributions
are paid in shares, or consist of a dividend or distribution to holders of
Common Stock other than an ordinary cash dividend, the shares, cash or other
property will be subject to the same restrictions on transferability and
forfeitability as the shares of Restricted Stock with respect to which they were
paid. Each dividend payment will be made no later than the end of the calendar
year in which the dividends are paid to stockholders of that class of stock or,
if later, the 15th day of the third month following the date the dividends are
paid to stockholders of that class of stock.

 

(2)           Stock Certificates.  The Company may require that any stock
certificates issued in respect of shares of Restricted Stock shall be deposited
in escrow by the Participant, together with a stock power endorsed in blank,
with the Company (or its designee). At the expiration of the applicable
restriction periods, the Company (or such designee) shall deliver the
certificates no longer subject to such restrictions to the Participant or if the
Participant has died, to the beneficiary designated, in a manner determined by
the Board, by a Participant to receive amounts due or exercise rights of the
Participant in the event of the Participant’s death (the “Designated
Beneficiary”). In the absence of an effective designation by a Participant,
“Designated Beneficiary” shall mean the Participant’s estate.

 

(d)           Additional Provisions Relating to Restricted Stock Units.

 

(1)           Settlement.  Upon the vesting of and/or lapsing of any other
restrictions (i.e., settlement) with respect to each Restricted Stock Unit, the
Participant shall be entitled to receive from the Company one share of Common
Stock or an amount of cash equal to the Fair Market Value of one share of Common
Stock, as provided in the applicable Award agreement. The Board may, in its
discretion, provide that settlement of Restricted Stock Units shall be deferred,
on a mandatory basis or at the election of the Participant.

 

(2)           Voting Rights.  A Participant shall have no voting rights with
respect to any Restricted Stock Units.

 

(3)           Dividend Equivalents.  To the extent provided by the Board, in its
sole discretion, a grant of Restricted Stock Units may provide Participants with
the right to receive an amount equal to any dividends or other distributions
declared and paid on an equal number of outstanding shares of Common Stock
(“Dividend Equivalents”); provided, however, that Dividend Equivalents on
Restricted Stock Units that are subject to performance conditions will either we
accumulated or reinvested and paid upon vesting of the underlying Restricted
Stock Unit. Dividend Equivalents may be paid currently or credited to an account
for the Participants, may be settled in cash and/or shares of Common Stock and
may be subject to the same restrictions on transfer and forfeitability as the
Restricted Stock Units with respect to which paid, as determined by the Board in
its sole discretion, subject in each case to such terms and

 

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conditions as the Board shall establish, in each case to be set forth in the
applicable Award agreement.

 

8.             Other Stock Unit Awards.

 

Other Awards of shares of Common Stock, and other Awards that are valued in
whole or in part by reference to, or are otherwise based on, shares of Common
Stock or other property, may be granted hereunder to Participants (“Other Stock
Unit Awards”), including without limitation Awards entitling recipients to
receive shares of Common Stock to be delivered in the future. Such Other Stock
Unit Awards shall also be available as a form of payment in the settlement of
other Awards granted under the Plan or as payment in lieu of compensation to
which a Participant is otherwise entitled. Other Stock Unit Awards may be paid
in shares of Common Stock or cash, as the Board shall determine. Subject to the
provisions of the Plan, the Board shall determine the terms and conditions of
each Other Stock Unit Award, including any purchase price applicable thereto.

 

9.             Adjustments for Changes in Common Stock and Certain Other Events.

 

(a)           Changes in Capitalization.  In the event of any stock split,
reverse stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any dividend or distribution to holders of Common Stock other than
an ordinary cash dividend, (i) the number and class of securities available
under this Plan, (ii) the sub-limits set forth in Section 4(b), (iii) the number
and class of securities and exercise price per share of each outstanding Option,
(iv) the share- and per-share provisions and the exercise price of each SAR,
(v) the number of shares subject to and the repurchase price per share subject
to each outstanding Restricted Stock Award and (vi) the share- and
per-share-related provisions and the purchase price, if any, of each outstanding
Other Stock Unit Award, shall be equitably adjusted by the Company (or
substituted Awards may be made, if applicable) in the manner determined by the
Board. Without limiting the generality of the foregoing, in the event the
Company effects a split of the Common Stock by means of a stock dividend and the
exercise price of and the number of shares subject to an outstanding Option are
adjusted as of the date of the distribution of the dividend (rather than as of
the record date for such dividend), then an optionee who exercises an Option
between the record date and the distribution date for such stock dividend shall
be entitled to receive, on the distribution date, the stock dividend with
respect to the shares of Common Stock acquired upon such Option exercise,
notwithstanding the fact that such shares were not outstanding as of the close
of business on the record date for such stock dividend.

 

(b)           Reorganization Events.

 

(1)           Definition.  A “Reorganization Event” shall mean: (a) any merger
or consolidation of the Company with or into another entity as a result of which
all of the Common Stock of the Company is converted into or exchanged for the
right to receive cash, securities or other property or is cancelled, (b) any
exchange of all of the Common Stock of the Company for cash, securities or other
property pursuant to a share exchange transaction or (c) any liquidation or
dissolution of the Company.

 

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(2)           Consequences of a Reorganization Event on Awards Other than
Restricted Stock Awards.  In connection with a Reorganization Event, the Board
may take any one or more of the following actions as to all or any (or any
portion of) outstanding Awards other than Restricted Stock Awards on such terms
as the Board determines: (i) provide that Awards shall be assumed, or
substantially equivalent Awards shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), (ii) upon written notice to a
Participant, provide that the Participant’s unexercised Awards will terminate
immediately prior to the consummation of such Reorganization Event unless
exercised by the Participant within a specified period following the date of
such notice, (iii) provide that outstanding Awards shall become exercisable,
realizable, or deliverable, or restrictions applicable to an Award shall lapse,
in whole or in part prior to or upon such Reorganization Event, (iv) in the
event of a Reorganization Event under the terms of which holders of Common Stock
will receive upon consummation thereof a cash payment for each share surrendered
in the Reorganization Event (the “Acquisition Price”), make or provide for a
cash payment to a Participant equal to the excess, if any, of (A) the
Acquisition Price times the number of shares of Common Stock subject to the
Participant’s Awards (to the extent the exercise price does not exceed the
Acquisition Price) over (B) the aggregate exercise price of all such outstanding
Awards and any applicable tax withholdings, in exchange for the termination of
such Awards, (v) provide that, in connection with a liquidation or dissolution
of the Company, Awards shall convert into the right to receive liquidation
proceeds (if applicable, net of the exercise price thereof and any applicable
tax withholdings) and (vi) any combination of the foregoing. In taking any of
the actions permitted under this Section 9(b), the Board shall not be obligated
by the Plan to treat all Awards, all Awards held by a Participant, or all Awards
of the same type, identically.

 

For purposes of clause (i) above, an Option shall be considered assumed if,
following consummation of the Reorganization Event, the Option confers the right
to purchase, for each share of Common Stock subject to the Option immediately
prior to the consummation of the Reorganization Event, the consideration
(whether cash, securities or other property) received as a result of the
Reorganization Event by holders of Common Stock for each share of Common Stock
held immediately prior to the consummation of the Reorganization Event (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding shares of Common Stock);
provided, however, that if the consideration received as a result of the
Reorganization Event is not solely common stock of the acquiring or succeeding
corporation (or an affiliate thereof), the Company may, with the consent of the
acquiring or succeeding corporation, provide for the consideration to be
received upon the exercise of Options to consist solely of common stock of the
acquiring or succeeding corporation (or an affiliate thereof) equivalent in
value (as determined by the Board) to the per share consideration received by
holders of outstanding shares of Common Stock as a result of the Reorganization
Event.

 

(3)           Consequences of a Reorganization Event on Restricted Stock
Awards.  Upon the occurrence of a Reorganization Event other than a liquidation
or dissolution of the Company, the repurchase and other rights of the Company
under each outstanding Restricted Stock Award shall inure to the benefit of the
Company’s successor and shall, unless the Board determines otherwise, apply to
the cash, securities or other property which the Common Stock was converted into
or exchanged for pursuant to such Reorganization Event in the same manner and to
the same extent as they applied to the Common Stock subject to such Restricted
Stock

 

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Award. Upon the occurrence of a Reorganization Event involving the liquidation
or dissolution of the Company, except to the extent specifically provided to the
contrary in the instrument evidencing any Restricted Stock Award or any other
agreement between a Participant and the Company, all restrictions and conditions
on all Restricted Stock Awards then outstanding shall automatically be deemed
terminated or satisfied.

 

(c)           Acquisition.  An “Acquisition” shall mean any (i) merger or
consolidation in which the Company is a constituent party or a subsidiary of the
Company is a constituent party and the Company issues shares of its capital
stock pursuant to such merger or consolidation, which results in the voting
securities of the Company outstanding immediately prior thereto representing
immediately thereafter (either by remaining outstanding or by being converted
into voting securities of the surviving or acquiring entity (the “Acquiror”))
less than a majority of the combined voting power of the voting securities of
the Company or the Acquiror outstanding immediately after such merger or
consolidation or (ii) sale, transfer or other disposition of all or
substantially all of the assets of the Company. The effect of an Acquisition on
any Award granted under the Plan shall be specified in the agreement evidencing
such Award.

 

10.          General Provisions Applicable to Awards.

 

(a)           Transferability of Awards.  Awards (other than vested Restricted
Stock Awards) shall not be sold, assigned, transferred, pledged or otherwise
encumbered by the person to whom they are granted, either voluntarily or by
operation of law, except by will or the laws of descent and distribution or,
other than in the case of an Incentive Stock Option, pursuant to a qualified
domestic relations order, and, during the life of the Participant, shall be
exercisable only by the Participant; provided, however, that the Board may
permit or provide in an Award for the gratuitous transfer of the Award by the
Participant to or for the benefit of any immediate family member, family trust
or other entity established for the benefit of the Participant and/or an
immediate family member thereof if, with respect to such proposed transferee,
the Company would be eligible to use a Form S-8 for the registration of the sale
of the Common Stock subject to such Award under the Securities Act of 1933, as
amended; provided, further, that the Company shall not be required to recognize
any such transfer until such time as the Participant and such permitted
transferee shall, as a condition to such transfer, deliver to the Company a
written instrument in form and substance satisfactory to the Company confirming
that such transferee shall be bound by all of the terms and conditions of the
Award. References to a Participant, to the extent relevant in the context, shall
include references to authorized transferees.

 

(b)           Documentation.  Each Award shall be evidenced in such form
(written, electronic or otherwise) as the Board shall determine. Each Award may
contain terms and conditions in addition to those set forth in the Plan.

 

(c)           Board Discretion.  Except as otherwise provided by the Plan, each
Award may be made alone or in addition or in relation to any other Award. The
terms of each Award need not be identical, and the Board need not treat
Participants uniformly.

 

(d)           Termination of Status.  The Board shall determine the effect on an
Award of the disability, death, termination of employment, authorized leave of
absence or other change in the

 

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employment or other status of a Participant and the extent to which, and the
period during which, the Participant, or the Participant’s legal representative,
conservator, guardian or Designated Beneficiary, may exercise rights under the
Award.

 

(e)           Withholding.  The Participant must satisfy all applicable federal,
state, and local or other income and employment tax withholding obligations
before the Company will deliver stock certificates or otherwise recognize
ownership of Common Stock under an Award. The Company may decide to satisfy the
withholding obligations through additional withholding on salary or wages. If
the Company elects not to or cannot withhold from other compensation, the
Participant must pay the Company the full amount, if any, required for
withholding or have a broker tender to the Company cash equal to the withholding
obligations. Payment of withholding obligations is due before the Company will
issue any shares on exercise or release from forfeiture of an Award or, if the
Company so requires, at the same time as is payment of the exercise price unless
the Company determines otherwise. If provided for in an Award or approved by the
Board in its sole discretion, a Participant may satisfy such tax obligations in
whole or in part by delivery of shares of Common Stock, including shares
retained from the Award creating the tax obligation, valued at their Fair Market
Value; provided, however, except as otherwise provided by the Board, that the
total tax withholding where stock is being used to satisfy such tax obligations
cannot exceed the Company’s minimum statutory withholding obligations (based on
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to such supplemental taxable
income). Shares surrendered to satisfy tax withholding requirements cannot be
subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements.

 

(f)            Amendment of Award.  The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided either (i) that the Participant’s consent to such action shall
be required unless the Board determines that the action, taking into account any
related action, would not materially and adversely affect the Participant or
(ii) that the change is permitted under Section 9 hereof.

 

(g)           Conditions on Delivery of Stock.  The Company will not be
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restrictions from shares previously delivered under the Plan until
(i) all conditions of the Award have been met or removed to the satisfaction of
the Company, (ii) in the opinion of the Company’s counsel, all other legal
matters in connection with the issuance and delivery of such shares have been
satisfied, including any applicable securities laws and any applicable stock
exchange or stock market rules and regulations, and (iii) the Participant has
executed and delivered to the Company such representations or agreements as the
Company may consider appropriate to satisfy the requirements of any applicable
laws, rules or regulations.

 

(h)           Acceleration.  The Board may at any time provide that any Award
shall become immediately exercisable in full or in part, free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.

 

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(i)            Performance Awards.

 

(1)           Grants.  Restricted Stock Awards and Other Stock Unit Awards under
the Plan may be made subject to the achievement of performance goals pursuant to
this Section 10(i) (“Performance Awards”), subject to the limit in
Section 4(b)(1) on shares covered by such grants.

 

(2)           Committee.  Grants of Performance Awards to any Covered Employee
intended to qualify as “performance-based compensation” under
Section 162(m) (“Performance-Based Compensation”) shall be made only by a
Committee (or subcommittee of a Committee) comprised solely of two or more
directors eligible to serve on a committee making Awards qualifying as
“performance-based compensation” under Section 162(m). In the case of such
Awards granted to Covered Employees, references to the Board or to a Committee
shall be deemed to be references to such Committee or subcommittee. “Covered
Employee” shall mean any person who is a “covered employee” under
Section 162(m)(3) of the Code.

 

(3)           Performance Measures.  For any Award that is intended to qualify
as Performance-Based Compensation, the Committee shall specify that the degree
of granting, vesting and/or payout shall be subject to the achievement of one or
more objective performance measures established by the Committee, which shall be
based on the relative or absolute attainment of specified levels of one or any
combination of the following: (a) net income, (b) earnings before or after
discontinued operations, interest, taxes, depreciation and/or amortization,
(c) operating profit before or after discontinued operations and/or taxes,
(d) sales, (e) sales growth, (f) earnings growth, (g) cash flow or cash
position, (h) gross margins, (i) stock price, (j) market share, (k) return on
sales, assets, equity or investment, (l) improvement of financial ratings,
(m) achievement of balance sheet or income statement objectives or (n) total
stockholder return, and may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated. The
Committee may specify that such performance measures shall be adjusted to
exclude any one or more of (i) extraordinary items, (ii) gains or losses on the
dispositions of discontinued operations, (iii) the cumulative effects of changes
in accounting principles, (iv) the writedown of any asset, and (v) charges for
restructuring and rationalization programs. Such performance measures: (i) may
vary by Participant and may be different for different Awards; (ii) may be
particular to a Participant or the department, branch, line of business,
subsidiary or other unit in which the Participant works and may cover such
period as may be specified by the Committee; and (iii) shall be set by the
Committee within the time period prescribed by, and shall otherwise comply with
the requirements of, Section 162(m). Awards that are not intended to qualify as
Performance-Based Compensation may be based on these or such other performance
measures as the Board may determine.

 

(4)           Adjustments.  Notwithstanding any provision of the Plan, with
respect to any Performance Award that is intended to qualify as
Performance-Based Compensation, the Committee may adjust downwards, but not
upwards, the cash or number of Shares payable pursuant to such Award, and the
Committee may not waive the achievement of the applicable performance measures
except in the case of the death or disability of the Participant or a change in
control of the Company.

 

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(5)           Other.  The Committee shall have the power to impose such other
restrictions on Performance Awards as it may deem necessary or appropriate to
ensure that such Awards satisfy all requirements for Performance-Based
Compensation.

 

11.          Miscellaneous.

 

(a)           No Right To Employment or Other Status.  No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.

 

(b)           No Rights As Stockholder.  Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder of such shares.

 

(c)           Effective Date and Term of Plan.  The Plan shall become effective
on the date the Plan is approved by the Company’s stockholders (the “Effective
Date”). No Awards shall be granted under the Plan after the completion of
10 years from the Effective Date, but Awards previously granted may extend
beyond that date.

 

(d)           Amendment of Plan.  The Board may amend, suspend or terminate the
Plan or any portion thereof at any time provided that (i) to the extent required
by Section 162(m), no Award granted to a Participant that is intended to comply
with Section 162(m) after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award, unless and until such
amendment shall have been approved by the Company’s stockholders if required by
Section 162(m) (including the vote required under Section 162(m)); (ii) no
amendment that would require stockholder approval under the rules of The NASDAQ
Stock Market (“NASDAQ”) may be made effective unless and until such amendment
shall have been approved by the Company’s stockholders; and (iii) if the NASDAQ
amends its corporate governance rules so that such rules no longer require
stockholder approval of “material amendments” to equity compensation plans,
then, from and after the effective date of such amendment to the NASDAQ rules,
no amendment to the Plan (A) materially increasing the number of shares
authorized under the Plan (other than pursuant to Section 9), (B) expanding the
types of Awards that may be granted under the Plan, or (C) materially expanding
the class of participants eligible to participate in the Plan shall be effective
unless stockholder approval is obtained. In addition, if at any time the
approval of the Company’s stockholders is required as to any other modification
or amendment under Section 422 of the Code or any successor provision with
respect to Incentive Stock Options, the Board may not effect such modification
or amendment without such approval. Unless otherwise specified in the amendment,
any amendment to the Plan adopted in accordance with this Section 11(d) shall
apply to, and be binding on the holders of, all Awards outstanding under the
Plan at the time the amendment is adopted, provided the Board determines that
such amendment does not materially and adversely affect the rights of
Participants under the Plan. No Award shall be made that is conditioned upon
stockholder approval of any amendment to the Plan.

 

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(e)           Provisions for Foreign Participants.  The Board may modify Awards
or Options granted to Participants who are foreign nationals or employed outside
the United States or establish subplans or procedures under the Plan to
recognize differences in laws, rules, regulations or customs of such foreign
jurisdictions with respect to tax, securities, currency, employee benefit or
other matters.

 

(f)            Compliance With Code Section 409A.  No Award shall provide for
deferral of compensation that does not comply with Section 409A of the Code,
unless the Board, at the time of grant, specifically provides that the Award is
not intended to comply with Section 409A of the Code. The Company shall have no
liability to a Participant, or any other party, if an Award that is intended to
be exempt from, or compliant with, Section 409A is not so exempt or compliant or
for any action taken by the Board.

 

(g)           Governing Law.  The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, excluding choice-of-law principles of the law of such
state that would require the application of the laws of a jurisdiction other
than such state.

 

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