EXHIBIT 10.1

VONAGE HOLDINGS CORP.

2006 INCENTIVE PLAN

Amended as of October 2, 2009

 

1. Purposes of the Plan

The purposes of the Plan are to (a) promote the long-term success of the Company
and its Subsidiaries and to increase stockholder value by providing Eligible
Persons with incentives to contribute to the long-term growth and profitability
of the Company by offering them an opportunity to obtain a proprietary interest
in the Company through the grant of equity-based other incentive awards and
(b) assist the Company in attracting, retaining and motivating highly qualified
individuals who are in a position to make significant contributions to the
Company and its Subsidiaries.

 

2. Definitions and Rules of Construction

(a) Definitions

For purposes of the Plan, the following capitalized words shall have the
meanings set forth below:

“Affiliate” means any Parent or Subsidiary.

“Annual Award” means an Award granted pursuant to Section 11 of the Plan.

“Award” means an Option, Restricted Stock, Restricted Stock Unit, Stock
Appreciation Right, Performance Stock, Performance Unit, Annual Award or Other
Award granted by the Committee pursuant to the terms of the Plan.

“Award Document” means an agreement, certificate or other type or form of
document or documentation approved by the Committee that sets forth the terms
and conditions of an Award. An Award Document may be in written, electronic or
other media, may be limited to a notation on the books and records of the
Company and, unless the Committee requires otherwise, need not be signed by a
representative of the Company or a Participant.

“Beneficial Owner” has the meaning set forth in Rule 13d-3 under the Exchange
Act.

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

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“Change of Control” means:

(i) Any Person becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 30 percent or more of the combined voting
power of the Company’s then outstanding securities; or

(ii) The following individuals cease for any reason to constitute a majority of
the number of directors then serving: individuals who, on the Effective Date,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including, but not limited to, a consent solicitation, relating to the
election of directors of the Company) whose appointment or election by the Board
or nomination for election by the Company’s stockholders was approved or
recommended by a vote of at least a majority of the directors then still in
office who either were directors on the Effective Date or whose appointment,
election or nomination for election was previously so approved or recommended;
or

(iii) There is consummated a merger or consolidation of the Company or any
Subsidiary with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity or any parent thereof), in combination with the ownership
of any trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any Subsidiary of the Company, more than 50 percent of
the combined voting power of the securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person is
or becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing 30 percent or more of the combined voting power of the
Company’s then outstanding securities; or

(iv) The stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale or
disposition by the company of all or substantially all of the Company’s assets,
other than a sale or disposition by the Company of all or substantially all of
the Company’s assets to an entity, more than 50 percent of the combined voting
power of the voting securities of which are owned by stockholders of the Company
in substantially the same proportions as their ownership of the Company
immediately prior to such sale.

Notwithstanding the foregoing, to the extent that any Award the payment or
settlement of which will accelerate upon a Change of Control provides for a
“deferral of compensation” within the meaning of Section 409A of the Code, no
event set forth herein shall constitute a Change of Control for purposes of the
Plan or any Award Document unless such event also constitutes a “change in
ownership,” “change in effective control,” or “change in the ownership of a
substantial portion of the Company’s assets” within the meaning of Section 409A
of the Code.

 

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“Code” means the Internal Revenue Code of 1986, as amended, and the applicable
rulings and regulations promulgated thereunder.

“Committee” means the Compensation Committee of the Board, any successor
committee thereto or any other committee appointed from time to time by the
Board to administer the Plan, which committee shall meet the requirements of
Section 162(m) of the Code, Section 16(b) of the Exchange Act and the applicable
rules of the Exchange; provided, however, that, if any Committee member is found
not to have met the qualification requirements of Section 162(m) of the Code and
Section 16(b) of the Exchange Act, any actions taken or Awards granted by the
Committee shall not be invalidated by such failure to so qualify.

“Common Stock” means the common stock of the Company or such other class of
share or other securities as may be applicable under Section 14 of the Plan.

“Company” means Vonage Holdings Corp., a Delaware corporation, or any successor
to all or substantially all of the Company’s business that adopts the Plan.

“Effective Date” means the effective date of the initial public offering of the
Company.

“Eligible Persons” means the individuals or entities described in Section 4(a)
of the Plan who are eligible for Awards under the Plan.

“Exchange” means the New York Stock Exchange or such other securities exchange
or quotation system on which the Company may be listed from time to time.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

“Fair Market Value” means, with respect to a share of Common Stock, the fair
market value thereof as of the relevant date of determination, as determined in
accordance with the valuation methodology approved by the Committee. In the
absence of any alternative valuation methodology approved by the Committee, the
Fair Market Value of a share of Common Stock shall equal the closing selling
price of a share of Common Stock on the trading day for which such valuation is
made as reported on the Exchange or such other securities exchange or quotation
system as may be designated by the Committee. 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 for the immediately preceding trading
day and with the timing above adjusted accordingly.

“Incentive Stock Option” means an Option that is intended to comply with the
requirements of Section 422 of the Code or any successor provision thereto.

 

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“Non-Employee Director” means any member of the Board who is not an officer or
employee of the Company or any Subsidiary.

“Nonqualified Stock Option” means an Option that is not intended to comply with
the requirements of Section 422 of the Code or any successor provision thereto.

“Option” means an Incentive Stock Option or Nonqualified Stock Option granted
pursuant to Section 7 of the Plan.

“Other Award” means any form of Award other than an Option, Restricted Stock,
Restricted Stock Unit, Stock Appreciation Right, Performance Stock, Performance
Unit or Annual Award granted pursuant to Section 12 of the Plan.

“Parent” means a corporation that owns or beneficially owns a majority of the
outstanding voting stock or voting power of the Company. Notwithstanding the
above, with respect to an Incentive Stock Option, Parent shall have the meaning
set forth in Section 424(e) of the Code.

“Participant” means an Eligible Person who has been granted an Award under the
Plan.

“Performance Goal” means the performance measures established by the Committee,
from among the performance criteria provided in Section 6(h) of the Plan, and
set forth in the applicable Award Document.

“Performance Period” means the period established by the Committee and set forth
in the applicable Award Document over which Performance Goals are measured.

“Performance Stock” means a Target Number of Shares granted pursuant to
Section 10(a) of the Plan.

“Performance Unit” means a right to receive a Target Number of Shares or cash in
the future granted pursuant to Section 10(b) of the Plan.

“Permitted Transferees” means 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.

“Person” means any person, entity or “group” within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, except that such term
shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or any of its Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, (iv) a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, or (v) a person or group
as used in Rule 13d-1(b) under the Exchange Act.

 

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“Plan” means this Vonage Holdings Corp. 2006 Incentive Plan, as amended or
restated from time to time.

“Plan Limit” means the maximum aggregate number of Shares that may be issued for
all purposes under the Plan as set forth in Section 5(a) of the Plan.

“Plan Year” means the fiscal year of the Company or, if different, the calendar
year, as determined by the Committee.

“Prior Plan” means the 2001 Stock Incentive Plan of Vonage Holdings Corp.

“Restricted Stock” means one or more Shares granted or sold pursuant to
Section 9(a) of the Plan.

“Retirement Plan” means the Vonage 401(k) Retirement Plan or any successor
thereto.

“Restricted Stock Unit” means a right to receive one or more Shares (or cash, if
applicable) in the future granted pursuant to Section 9(b) of the Plan.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

“Shares” means shares of Common Stock, as may be adjusted pursuant to Section 14
of the Plan.

“Stock Appreciation Right” means a right to receive all or some portion of the
appreciation on Shares granted pursuant to Section 8 of the Plan.

“Subsidiary” means a business venture (including, without limitation, joint
venture or limited liability company) in which the Company has a controlling
interest, as determined by the Board. Notwithstanding the above, with respect to
an Incentive Stock Option, “Subsidiary” shall have the meaning set forth in
Section 424(f) of the Code.

“Substitute Award” means any Award granted upon assumption of, or in
substitution or exchange for, outstanding employee equity awards previously
granted by a company or other entity acquired by the Company or with which the
Company combines pursuant to the terms of an equity compensation plan that was
approved by the stockholders of such company or other entity.

“Target Number” or “Target Payment” means the target number of Shares or cash
value established by the Committee and set forth in the applicable Award
Document.

 

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(b) Rules of Construction

The masculine pronoun shall be deemed to include the feminine pronoun, and the
singular form of a word shall be deemed to include the plural form, unless the
context requires otherwise. Unless the text indicates otherwise, references to
sections are to sections of the Plan.

 

3. Administration

(a) Committee

The Plan shall be administered by the Committee, which shall have full power and
authority, subject to the express provisions hereof, to:

(i) select the Participants from the Eligible Persons;

(ii) grant Awards in accordance with the Plan;

(iii) determine the number of Shares subject to each Award or the cash amount
payable in connection with an Award;

(iv) determine the terms and conditions of each Award, including, without
limitation, those related to term, permissible methods of exercise, vesting,
cancellation, payment, settlement, exercisability, Performance Periods,
Performance Goals, and the effect, if any, of a Participant’s termination of
employment with the Company or any of its Subsidiaries or, subject to
Section 6(d), a Change of Control of the Company;

(v) subject to Sections 17 and 18(e), amend the terms and conditions of an Award
after the granting thereof;

(vi) specify and approve the provisions of the Award Documents delivered to
Participants in connection with their Awards;

(vii) construe and interpret any Award Document delivered under the Plan;

(viii) make factual determinations in connection with the administration or
interpretation of the Plan;

(ix) adopt, prescribe, amend, waive and rescind administrative regulations,
rules and procedures relating to the Plan;

(x) employ such legal counsel, independent auditors and consultants as it deems
desirable for the administration of the Plan and to rely upon any advice,
opinion or computation received therefrom;

(xi) vary the terms of Awards to take account of tax and securities law and
other regulatory requirements or to procure favorable tax treatment for
Participants;

(xii) correct any defects, supply any omission or reconcile any inconsistency in
any Award Document or the Plan; and

 

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(xiii) make all other determinations and take any other action desirable or
necessary to interpret, construe or implement properly the provisions of the
Plan or any Award Document.

(b) Plan Construction and Interpretation

The Committee shall have full power and authority, subject to the express
provisions hereof, to construe and interpret the Plan.

(c) Determinations of Committee Final and Binding

All determinations by the Committee in carrying out and administering the Plan
and in construing and interpreting the Plan shall be made in the Committee’s
sole discretion and shall be final, binding and conclusive for all purposes and
upon all persons interested herein.

(d) Delegation of Authority

To the extent permitted by applicable law, the Board or the Committee may
delegate to a subcommittee or subcommittees of the Committee or to one or more
officers of the Company the power to grant Options and other Awards that
constitute rights under Delaware law (subject to any limitations under the Plan)
to employees or officers of the Company or any of its present or future
Affiliates and to exercise such other powers under the Plan as the Board or the
Committee may determine, provided that the Board or the Committee shall fix the
terms of the Awards to be granted by such officers (including the exercise price
of the Awards, which may include a formula by which the exercise price will be
determined) and the maximum number of shares subject to such 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 Exchange Act) or to any “officer” of the Company (as
defined by Rule 16a-1 under the Exchange Act), nor shall such delegation apply
to Section 17 of the Plan. The Board may not delegate authority under this
Section 3(d) to grant restricted stock, unless Delaware law then permits such
delegation. For purposes of the Plan, reference to the Committee shall be deemed
to refer to any subcommittee, subcommittees, or other persons or groups of
persons to whom the Board or the Committee delegates authority pursuant to this
Section 3(d).

(e) Liability of Committee

Subject to applicable laws, rules and regulations: (i) no member of the Board or
Committee (or its delegates) shall be liable for any good faith action or
determination made in connection with the operation, administration or
interpretation of the Plan and (ii) the members of the Board or the Committee
(and its delegates) shall be entitled to indemnification and reimbursement in
the manner provided in the Company’s Certificate of Incorporation as it may be
amended from time to time. In the performance of its responsibilities with
respect to the Plan, the Committee shall be entitled to rely upon information
and/or advice furnished by the Company’s officers or employees, the Company’s
accountants, the Company’s counsel and any other party the Committee deems
necessary, and no member of the Committee shall be liable for any action taken
or not taken in reliance upon any such information and/or advice.

 

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(f) Action by the Board

Anything in the Plan to the contrary notwithstanding, subject to applicable
laws, rules and regulations, any authority or responsibility that, under the
terms of the Plan, may be exercised by the Committee may alternatively be
exercised by the Board.

 

4. Eligibility

(a) Eligible Persons

Awards may be granted to officers, employees, directors, Non-Employee Directors,
consultants, advisors and independent contractors of the Company or any of its
Subsidiaries or joint ventures, partnerships or business organizations in which
the Company or its Subsidiaries have an equity interest; provided, however, that
only employees of the Company or a Parent or Subsidiary may be granted Incentive
Stock Options. The Committee shall have the authority to select the persons to
whom Awards may be granted and to determine the type, number and terms of Awards
to be granted to each such Participant. Under the Plan, references to
“employment” or “employed” include the engagement of Participants who are
consultants, advisors and independent contractors of the Company or its
Subsidiaries and the service of Participants who are Non-Employee Directors,
except for purposes of determining eligibility to be granted Incentive Stock
Options.

(b) Grants to Participants

The Committee shall have no obligation to grant any Eligible Person an Award or
to designate an Eligible Person as a Participant solely by reason of such
Eligible Person having received a prior Award or having been previously
designated as a Participant. The Committee may grant more than one Award to a
Participant and may designate an Eligible Person as a Participant for
overlapping periods of time.

 

5. Shares Subject to the Plan

(a) Plan Limit

Subject to adjustment in accordance with Section 14, the maximum aggregate
number of Shares that may be issued for all purposes under the Plan (the “Plan
Limit”) shall be equal to (x) 15 percent of (1) the number of issued and
outstanding Shares, from time to time, divided by (2) 0.85, less (y) the number
of Shares that are available for issuance under the Prior Plan. In addition,
following termination of the Prior Plan, the Plan Limit shall be increased by
the number of any remaining Shares available for issuance under the Prior Plan
or that become available for issuance upon cancellation or expiration, without
exercise or settlement, of awards under the Prior Plan. Shares to be issued
under the Plan may be authorized and unissued shares, issued shares that have
been reacquired by the Company (in the open-market or in private transactions)
and that are being held in treasury, or a combination thereof.

 

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(b) Rules Applicable to Determining Shares Available for Issuance

The number of Shares remaining available for issuance will be reduced by the
number of Shares subject to outstanding Awards and, for Awards that are not
denominated by Shares, by the number of Shares actually delivered upon
settlement or payment of the Award. For purposes of determining the number of
Shares that remain available for issuance under the Plan, (i) the number of
Shares that are tendered by a Participant or withheld by the Company to pay the
exercise price of an Award or to satisfy the Participant’s tax withholding
obligations in connection with the exercise or settlement of an Award and
(ii) all of the Shares covered by a stock-settled Stock Appreciation Right, to
the extent exercised, will not be added back to the Plan Limit. In addition, for
purposes of determining the number of Shares that remain available for issuance
under the Plan, the number of Shares corresponding to Awards under the Plan that
are forfeited or cancelled or otherwise expire for any reason without having
been exercised or settled or that is settled through issuance of consideration
other than Shares (including, without limitation, cash) shall be added back to
the Plan Limit and again be available for the grant of Awards; provided,
however, that this provision shall not be applicable with respect to (i) the
cancellation of a Stock Appreciation Right granted in tandem with an Option upon
the exercise of the Option or (ii) the cancellation of an Option granted in
tandem with a Stock Appreciation Right upon the exercise of the Stock
Appreciation.

(c) Special Limits

Anything to the contrary in Section 5(a) notwithstanding, but subject to
adjustment under Section 14, the following special limits shall apply to Shares
available for Awards under the Plan:

(i) the maximum number of Shares that may be issued pursuant to awards of
Incentive Stock Options shall equal 20,000,000 Shares;

(ii) the maximum number of Shares that may be issued pursuant to Options and
Stock Appreciation Rights granted to any Eligible Person in any calendar year
shall equal 10,000,000 Shares;

(iii) the maximum amount that may be paid pursuant to Annual Awards granted to
any Eligible Person in any calendar year is $5,000,000; and

(iv) the maximum amount that may be paid and the maximum number of Shares that
may be issued pursuant to Awards (other than those Awards set forth in
Section 5(c)(ii) and 5(c)(iii)) that may be awarded to any Eligible Person in
any calendar year is $10,000,000 (with respect to Awards denominated in cash) or
10,000,000 Shares (with respect to Awards denominated in Shares).

(d) Any Shares underlying Substitute Awards shall not be counted against the
number of Shares remaining for issuance and shall not be subject to
Section 5(c).

 

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6. Awards in General

(a) Types of Awards

Awards under the Plan may consist of Options, Restricted Stock, Restricted Stock
Units, Stock Appreciation Rights, Performance Stock, Performance Units, Annual
Awards and Other Awards. Any Award described in Sections 7 through 12 may be
granted singly or in combination or tandem with any other Award, as the
Committee may determine. Awards under the Plan may be made in combination with,
in replacement of, or as alternatives to awards or rights under any other
compensation or benefit plan of the Company, including the plan of any acquired
entity.

(b) Terms Set Forth in Award Document

The terms and conditions of each Award shall be set forth in an Award Document
in a form approved by the Committee for such Award, which Award Document shall
contain terms and conditions not inconsistent with the Plan. Notwithstanding the
foregoing, and subject to applicable laws, the Committee may accelerate (i) the
vesting or payment of any Award, (ii) the lapse of restrictions on any Award or
(iii) the date on which any Award first becomes exercisable. The terms of Awards
may vary among Participants, and the Plan does not impose upon the Committee any
requirement to make Awards subject to uniform terms. Accordingly, the terms of
individual Award Documents may vary.

(c) Termination of Employment

The Committee shall specify at or after the time of grant of an Award the
provisions governing the disposition of an Award in the event of a Participant’s
termination of employment with the Company or any of its Subsidiaries. Subject
to applicable laws, rules and regulations, in connection with a Participant’s
termination of employment, the Committee shall have the discretion to accelerate
the vesting, exercisability or settlement of, eliminate the restrictions and
conditions applicable to, or extend the post-termination exercise period of an
outstanding Award. Such provisions may be specified in the applicable Award
Document or determined at a subsequent time.

(d) Change of Control

(i) The Committee shall have full authority to determine the effect, if any, of
a Change of Control of the Company or any Subsidiary on the vesting,
exercisability, settlement, payment or lapse of restrictions applicable to an
Award, which effect may be specified in the applicable Award Document or
determined at a subsequent time. Subject to applicable laws, rules and
regulations, the Board or the Committee shall, at any time prior to, coincident
with or after the effective time of a Change of Control, take such actions as it
may consider appropriate, including, without limitation: (A) providing for the
acceleration of any vesting conditions relating to the exercise or settlement of
an Award or that an Award shall terminate or expire unless exercised or settled
in full on or before a date fixed by the Committee; (B) making such adjustments
to the Awards then outstanding as the Committee deems appropriate to reflect
such Change of Control; (C) causing the Awards then outstanding to be assumed,
or new rights substituted therefor, by the surviving corporation in such Change
of Control; or (D) permitting or

 

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requiring Participants to surrender outstanding Options and Stock Appreciation
Rights in exchange for a cash payment equal to the difference between the
highest price paid for a Share in the Change of Control transaction and the
Exercise Price of the Award.

(ii) Subject to applicable laws, rules and regulations, the Committee may
provide, in an Award Document or subsequent to the grant of an Award, for the
accelerated vesting, exercisability and/or the deemed attainment of a
Performance Goal with respect to an Award upon specified events similar to a
Change of Control.

(iii) Notwithstanding any other provision of the Plan or any Award Document, the
provisions of this Section 6(d) may not be terminated, amended, or modified upon
or after a Change of Control in a manner that would adversely affect a
Participant’s rights with respect to an outstanding Award without the prior
written consent of the Participant. Subject to Section 17, the Board, upon
recommendation of the Committee, may terminate, amend or modify this
Section 6(d) at any time and from time to time prior to a Change of Control.

(e) Dividends and Dividend Equivalents

The Committee may provide Participants with the right to receive dividends or
payments equivalent to dividends or interest with respect to an outstanding
Award, which payments can either be paid currently or deemed to have been
reinvested in Shares, and can be made in Shares, cash or a combination thereof,
as the Committee shall determine; provided, however, that the terms of any
reinvestment of dividends must comply with all applicable laws, rules and
regulations, including, without limitation, Section 409A of the Code.
Notwithstanding the foregoing, no dividends or dividend equivalents shall be
paid with respect to Options or Stock Appreciation Rights.

(f) Fractional Shares

No fractional Shares shall be issued or delivered pursuant to any Award under
the Plan. The Committee shall determine whether cash, Awards, or other property
shall be issued or paid in lieu of fractional Shares, or whether such fractional
Shares or any rights thereto shall be forfeited or otherwise eliminated.

(g) Rights of a Stockholder

A Participant shall have no rights as a stockholder with respect to Shares
covered by an Award (including voting rights) until the date the Participant or
his nominee becomes the holder of record of such Shares. No adjustment shall be
made for dividends or other rights for which the record date is prior to such
date, except as provided in Section 14.

(h) Performance-Based Awards

(i) The Committee may determine whether any Award under the Plan is intended to
be “performance-based compensation” as that term is used in Section 162(m) of
the Code. Any such Awards designated to be “performance-based compensation”
shall be conditioned on the achievement of one or more Performance Goals to the
extent required by Section 162(m) of the Code and will be subject to all other
conditions and requirements of Section 162(m). The

 

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Performance Goals will be comprised of specified levels of one or more of the
following performance measures as the Committee deems appropriate: net earnings
or net income (before or after taxes); earnings per share; net sales or revenue
growth; net operating profit; return measures (including, but not limited to,
return on assets, capital, equity, sales, or revenue); cash flow (including, but
not limited to, operating cash flow, free cash flow, cash flow return on equity,
and cash flow return on investment); earnings before or after taxes, interest,
depreciation, and/or amortization; gross or operating margins; productivity
ratios; share price (including, but not limited to, growth measures and total
shareholder return); expense targets; margins; operating efficiency; market
share; customer satisfaction; working capital targets; cash value added;
economic value added; market penetration; and product introductions, in each
case determined in accordance with generally accepted accounting principles
(subject to modifications approved by the Committee) consistently applied on a
business unit, divisional, subsidiary or consolidated basis or any combination
thereof. The Performance Goals may be described in terms of objectives that are
related to the individual Participant or objectives that are Company-wide or
related to a Subsidiary, division, department, region, function or business unit
and may be measured on an absolute or cumulative basis or on the basis of
percentage of improvement over time, and may be measured in terms of Company
performance (or performance of the applicable Subsidiary, division, department,
region, function or business unit) or measured relative to selected peer
companies or a market or other index. In addition, for Awards not intended to
qualify as “performance-based compensation” under Section 162(m) of the Code,
the Committee may establish Performance Goals based on other criteria as it
deems appropriate.

(ii) The Participants will be designated, and the applicable Performance Goals
will be established, by the Committee within 90 days following the commencement
of the applicable Performance Period (or such earlier or later date permitted or
required by Section 162(m) of the Code). Each Participant will be assigned a
Target Number or Target Payment payable if Performance Goals are achieved. Any
payment of an Award granted with Performance Goals shall be conditioned on the
written certification of the Committee in each case that the Performance Goals
and any other material conditions were satisfied. The Committee may determine,
at the time of Award grant, that if performance exceeds the specified
Performance Goals, the Award may be settled with payment greater than the Target
Number or Target Payment, but in no event may such payment exceed the limits set
forth in Section 5(c). The Committee retains the right to reduce any Award
notwithstanding the attainment of the Performance Goals.

(i) Deferrals

In accordance with the procedures authorized by, and subject to the approval of,
the Committee, Participants may be given the opportunity to defer the payment or
settlement of an Award to one or more dates selected by the Participant;
provided, however, that the terms of any deferrals must comply with all
applicable laws, rules and regulations, including, without limitation,
Section 409A of the Code. No deferral opportunity shall exist with respect to an
Award unless explicitly permitted by the Committee on or after the time of
grant.

 

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(j) Repricing of Options and Stock Appreciation Rights

Notwithstanding anything in the Plan to the contrary, an Option or Stock
Appreciation Right shall not be granted in substitution for a previously granted
Option or Stock Appreciation Right being canceled or surrendered as a condition
of receiving a new Award, if the new Award would have a lower exercise price
than the Award it replaces, nor shall the exercise price of an Option or Stock
Appreciation Right be reduced once the Option or Stock Appreciation Right is
granted. The foregoing shall not (i) prevent adjustments pursuant to Section 14
or (ii) apply to grants of Substitute Awards.

 

7. Terms and Conditions of Options

(a) General

The Committee, in its discretion, may grant Options to Eligible Persons and
shall determine whether such Options shall be Incentive Stock Options or
Nonqualified Stock Options. Each Option shall be evidenced by an Award Document
that shall expressly identify the Option as an Incentive Stock Option or
Nonqualified Stock Option, and be in such form and contain such provisions as
the Committee shall from time to time deem appropriate.

(b) Exercise Price

The exercise price of an Option shall be fixed by the Committee at the time of
grant or shall be determined by a method specified by the Committee at the time
of grant. In no event shall the exercise price of an Option be less than 100
percent of the Fair Market Value of a Share on the date of grant; provided,
however that the exercise price of a Substitute Award granted as an Option shall
be determined in accordance with Section 409A of the Code and may be less than
100 percent of the Fair Market Value.

(c) Term

An Option shall be effective for such term as shall be determined by the
Committee and as set forth in the Award Document relating to such Option, and
the Committee may extend the term of an Option after the time of grant;
provided, however, that the term of an Option may in no event extend beyond the
tenth anniversary of the date of grant of such Option.

(d) Exercise; Payment of Exercise Price

Options shall be exercised by delivery of a notice of exercise in a form
approved by the Company. Subject to the provisions of the applicable Award
Document, the exercise price of an Option may be paid (i) in cash or cash
equivalents, (ii) by actual delivery or attestation to ownership of freely
transferable Shares already owned by the person exercising the Option, (iii) by
a combination of cash and Shares equal in value to the exercise price,
(iv) through net share settlement or similar procedure involving the withholding
of Shares subject to the Option with a value equal to the exercise price or
(v) by such other means as the Committee may authorize.

 

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(e) Incentive Stock Options

The exercise price per Share of an Incentive Stock Option shall be fixed by the
Committee at the time of grant or shall be determined by a method specified by
the Committee at the time of grant, but in no event shall the exercise price of
an Incentive Stock Option be less than 100 percent of the Fair Market Value of a
Share on the date of grant. No Incentive Stock Option may be issued pursuant to
the Plan to any individual who, at the time the Incentive Stock Option is
granted, owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or any of its Subsidiaries,
unless (i) the exercise price determined as of the date of grant is at least 110
percent of the Fair Market Value on the date of grant of the Shares subject to
such Incentive Stock Option and (ii) the Incentive Stock Option is not
exercisable more than five years from the date of grant thereof. No Participant
shall be granted any Incentive Stock Option that would result in such
Participant receiving a grant of Incentive Stock Options that would have an
aggregate Fair Market Value in excess of $100,000, determined as of the time of
grant, and that would be exercisable for the first time by such Participant
during any calendar year. No Incentive Stock Option may be granted under the
Plan after the tenth anniversary of the date on which the Plan is adopted by the
Board. The terms of any Incentive Stock Option granted under the Plan shall
comply in all respects with the provisions of Section 422 of the Code, or any
successor provision thereto, as amended from time to time.

 

8. Terms and Conditions of Stock Appreciation Rights

(a) General

The Committee, in its discretion, may grant Stock Appreciation Rights to
Eligible Persons. A Stock Appreciation Right shall entitle a Participant to
receive, upon satisfaction of the conditions to payment specified in the
applicable Award Document, an amount equal to the excess, if any, of the Fair
Market Value on the exercise date of the number of Shares for which the Stock
Appreciation Right is exercised over the grant price for such Stock Appreciation
Right specified in the applicable Award Document. The grant price per share of
Shares covered by a Stock Appreciation Right shall be fixed by the Committee at
the time of grant or, alternatively, shall be determined by a method specified
by the Committee at the time of grant, but in no event shall the grant price of
a Stock Appreciation Right be less than 100 percent of the Fair Market Value of
a Share on the date of grant; provided, however, that the grant price of a
Substitute Award granted as a Stock Appreciation Rights shall be in accordance
with Section 409A of the Code and may be less than 100 percent of the Fair
Market Value. Payments to a Participant upon exercise of a Stock Appreciation
Right may be made in cash or Shares, having an aggregate Fair Market Value as of
the date of exercise equal to the excess, if any, of the Fair Market Value on
the exercise date of the number of Shares for which the Stock Appreciation Right
is exercised over the grant price for such Stock Appreciation Right. The term of
a Stock Appreciation Right settled in Shares shall not exceed ten years.

(b) Stock Appreciation Rights in Tandem with Options

A Stock Appreciation Right granted in tandem with an Option may be granted
either at the same time as such Option or subsequent thereto. If granted in
tandem with an

 

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Option, a Stock Appreciation Right shall cover the same number of Shares as
covered by the Option (or such lesser number of shares as the Committee may
determine) and shall be exercisable only at such time or times and to the extent
the related Option shall be exercisable, and shall have the same term as the
related Option. The grant price of a Stock Appreciation Right granted in tandem
with an Option shall equal the per-share exercise price of the Option to which
it relates. Upon exercise of a Stock Appreciation Right granted in tandem with
an Option, the related Option shall be canceled automatically to the extent of
the number of Shares covered by such exercise; conversely, if the related Option
is exercised as to some or all of the shares covered by the tandem grant, the
tandem Stock Appreciation Right shall be canceled automatically to the extent of
the number of Shares covered by the Option exercise.

 

9. Terms and Conditions of Restricted Stock and Restricted Stock Units

(a) Restricted Stock

The Committee, in its discretion, may grant or sell Restricted Stock to Eligible
Persons. An Award of Restricted Stock shall consist of one or more Shares
granted or sold to an Eligible Person, and shall be subject to the terms,
conditions and restrictions set forth in the Plan and established by the
Committee in connection with the Award and specified in the applicable Award
Document. Restricted Stock may, among other things, be subject to restrictions
on transferability, vesting requirements or other specified circumstances under
which it may be canceled.

(b) Restricted Stock Units

The Committee, in its discretion, may grant Restricted Stock Units to Eligible
Persons. A Restricted Stock Unit shall entitle a Participant to receive, subject
to the terms, conditions and restrictions set forth in the Plan and the
applicable Award Document, one or more Shares. Restricted Stock Units may, among
other things, be subject to restrictions on transferability, vesting
requirements or other specified circumstances under which they may be canceled.
If and when the cancellation provisions lapse, the Restricted Stock Units shall
become Shares owned by the applicable Participant or, at the sole discretion of
the Committee, cash, or a combination of cash and Shares, with a value equal to
the Fair Market Value of the Shares at the time of payment.

 

10. Terms and Conditions of Performance Stock and Performance Units

(a) Performance Stock

The Committee may grant Performance Stock to Eligible Persons. An Award of
Performance Stock shall consist of a Target Number of Shares granted to an
Eligible Person subject to achievement of Performance Goals over the applicable
Performance Period, and shall be subject to the terms, conditions and
restrictions set forth in the Plan and established by the Committee in
connection with the Award and specified in the applicable Award Document.

 

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(b) Performance Units

The Committee, in its discretion, may grant Performance Units to Eligible
Persons. A Performance Unit shall entitle a Participant to receive, subject to
the terms, conditions and restrictions set forth in the Plan and established by
the Committee in connection with the Award and specified in the applicable Award
Document, a number of Shares or cash based on the Target Number or Target
Payment, but which may vary above or below the Target Number or Target Payment,
and the level of achievement of the Performance Goals under the Award over the
applicable Performance Period. At the sole discretion of the Committee,
Performance Units shall be settled through the delivery of Shares or cash, or a
combination of Shares and cash, with a value equal to the Fair Market Value of
the underlying Shares as of the last day of the applicable Performance Period.

 

11. Terms and Conditions of Annual Awards

The Committee, in its discretion, may grant Annual Awards to Eligible Persons
with respect to a Plan Year. An Annual Award shall entitle a Participant to
receive, subject to the terms, conditions and restrictions set forth in the Plan
and established by the Committee in connection with the Award and specified in
the applicable Award Document, payment of an amount based on the Target Payment,
but which may vary above or below the Target Payment, and the level of
achievement of the Performance Goals under the Award over the applicable Plan
Year. At the sole discretion of the Committee, Annual Awards shall be settled
through the delivery of cash or Shares, or a combination of cash and Shares,
with the value of any Shares deemed to be equal to their Fair Market Value as of
the last day of the applicable Plan Year.

 

12. Other Awards

The Committee shall have the authority to specify the terms and provisions of
other forms of equity-based or equity-related Awards not described above that
the Committee determines to be consistent with the purpose of the Plan and the
interests of the Company, which Awards may provide for cash payments based in
whole or in part on the value or future value of Shares, for the acquisition or
future acquisition of Shares, or any combination thereof.

 

13. Certain Restrictions

(a) Transfers

No Award shall be transferable other than pursuant to a beneficiary designation
under Section 13(c), by last will and testament or by the laws of descent and
distribution or, except in the case of an Incentive Stock Option, pursuant to a
domestic relations order, as the case may be; provided, however, that the
Committee may, subject to applicable laws, rules and regulations and such terms
and conditions as it shall specify, permit the transfer of an Award, other than
an Incentive Stock Option, for no consideration to a Permitted Transferee. Any
Award transferred to a Permitted Transferee shall be further transferable only
by last will and testament or the laws of descent and distribution or, for no
consideration, to another Permitted Transferee of the Participant.

 

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(b) Award Exercisable Only by Participant

During the lifetime of a Participant, an Award shall be exercisable only by the
Participant or by a Permitted Transferee to whom such Award has been transferred
in accordance with Section 13(a). The grant of an Award shall impose no
obligation on a Participant to exercise or settle the Award.

(c) Beneficiary Designation

The beneficiary or beneficiaries of the Participant to whom any benefit under
the Plan is to be paid in case of his death before he receives any or all of
such benefit shall be determined under the Retirement Plan. In lieu of such
determination, a Participant may, from time to time, name any beneficiary or
beneficiaries to receive any benefit in case of his death before he receives any
or all of such benefit. Each such designation shall revoke all prior
designations by the same Participant and will be effective only when filed by
the Participant in writing (in such form or manner as may be prescribed by the
Committee) with the Company during the Participant’s lifetime. In the absence of
a valid designation under the Retirement Plan or as provided above, if no
validly designated beneficiary survives the Participant or if each surviving
validly designated beneficiary is legally impaired or prohibited from receiving
the benefits under an Award, the Participant’s beneficiary shall be the
Participant’s estate.

 

14. Recapitalization or Reorganization

(a) Authority of the Company and Stockholders

The existence of the Plan, the Award Documents and the Awards granted hereunder
shall not affect or restrict in any way the right or power of the Company or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company’s capital
structure or business, any merger or consolidation of the Company, any issue of
stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Shares or the rights thereof or which are convertible into or
exchangeable for Shares, or the dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.

(b) Change in Capitalization

Notwithstanding any provision of the Plan or any Award Document, the number and
kind of Shares authorized for issuance under Section 5, including the maximum
number of Shares available under the special limits provided for in
Section 5(c), may be equitably adjusted in the sole discretion of the Committee
in the event of a stock split, reverse stock spit, stock dividend,
recapitalization, reorganization, partial or complete liquidation,
reclassification, merger, consolidation, separation, extraordinary cash
dividend, split-up, spin-off, combination, exchange of Shares, warrants or
rights offering to purchase Shares at a price substantially below Fair Market
Value, or any other corporate event or distribution of stock or property of the
Company affecting the Shares in order to preserve, but not increase, the
benefits or potential benefits intended to be made available under the Plan. In
addition, upon the occurrence of any of

 

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the foregoing events, the number and kind of Shares subject to any outstanding
Award and the exercise price per Share (or the grant price per Share, as the
case may be), if any, under any outstanding Award may be equitably adjusted
(including by payment of cash to a Participant) in the sole discretion of the
Committee in order to preserve the benefits or potential benefits intended to be
made available to Participants. Such adjustments shall be made by the Committee.
Unless otherwise determined by the Committee, such adjusted Awards shall be
subject to the same restrictions and vesting or settlement schedule to which the
underlying Award is subject.

 

15. Term of the Plan

Unless earlier terminated pursuant to Section 17, the Plan shall terminate on
the tenth anniversary of the Effective Date, except with respect to Awards then
outstanding. No Awards may be granted under the Plan after the tenth anniversary
of the Effective Date.

 

16. Effective Date

The Plan shall become effective on the Effective Date, subject to approval by
the stockholders of the Company prior thereto.

 

17. Amendment and Termination

Subject to applicable laws, rules and regulations, the Board may at any time
terminate or, from time to time, amend, modify or suspend the Plan; provided,
however, that no termination, amendment, modification or suspension (i) will be
effective without the approval of the stockholders of the Company if such
approval is required under applicable laws, rules and regulations, including the
rules of the Exchange and (ii) shall materially and adversely alter or impair
the rights of a Participant in any Award previously made under the Plan without
the consent of the holder thereof. Notwithstanding the foregoing, the Board
shall have broad authority to amend the Plan or any Award under the Plan without
the consent of a Participant to the extent it deems necessary or desirable
(a) to comply with, take into account changes in, or interpretations of,
applicable tax laws, securities laws, employment laws, accounting rules and
other applicable laws, rules and regulations, (b) to take into account unusual
or nonrecurring events or market conditions (including, without limitation, the
events described in Section 14), or (c) to take into account significant
acquisitions or dispositions of assets or other property by the Company.

 

18. Miscellaneous

(a) Tax Withholding

The Company or a Subsidiary, as appropriate, may require any individual entitled
to receive a payment of an Award to remit to the Company, prior to payment, an
amount sufficient to satisfy any applicable tax withholding requirements. In the
case of an Award payable in Shares, the Company or a Subsidiary, as appropriate,
may permit or require a Participant to satisfy, in whole or in part, such
obligation to remit taxes by directing the Company to withhold shares that would
otherwise be received by such individual or to repurchase shares that were
issued to the Participant to satisfy the minimum statutory

 

18

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withholding rates for any applicable tax withholding purposes, in accordance
with all applicable laws and pursuant to such rules as the Committee may
establish from time to time. The Company or a Subsidiary, as appropriate, shall
also have the right to deduct from all cash payments made to a Participant
(whether or not such payment is made in connection with an Award) any applicable
taxes required to be withheld with respect to such payments.

(b) No Right to Awards or Employment

No person shall have any claim or right to receive Awards under the Plan.
Neither the Plan, the grant of Awards under the Plan nor any action taken or
omitted to be taken under the Plan shall be deemed to create or confer on any
Eligible Person any right to be retained in the employ of the Company or any
Subsidiary or other Affiliate thereof, or to interfere with or to limit in any
way the right of the Company or any Subsidiary or other Affiliate thereof to
terminate the employment of such Eligible Person at any time. No Award shall
constitute salary, recurrent compensation or contractual compensation for the
year of grant, any later year or any other period of time. Payments received by
a Participant under any Award made pursuant to the Plan shall not be included
in, nor have any effect on, the determination of employment-related rights or
benefits under any other employee benefit plan or similar arrangement provided
by the Company and the Subsidiaries, unless otherwise specifically provided for
under the terms of such plan or arrangement or by the Committee.

(c) Securities Law Restrictions

An Award may not be exercised or settled, and no Shares may be issued in
connection with an Award, unless the issuance of such shares (i) has been
registered under the Securities Act, (ii) has qualified under applicable state
“blue sky” laws (or the Company has determined that an exemption from
registration and from qualification under such state “blue sky” laws is
available) and (iii) complies with all applicable foreign securities laws. The
Committee may require each Participant purchasing or acquiring Shares pursuant
to an Award under the Plan to represent to and agree with the Company in writing
that such Eligible Person is acquiring the Shares for investment purposes and
not with a view to the distribution thereof. All certificates for Shares
delivered under the Plan shall be subject to such stock-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission
and the Exchange, and any applicable securities law, and the Committee may cause
a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.

(d) Section 162(m) of the Code

The Plan is intended to comply in all respects with Section 162(m) of the Code;
provided, however, that in the event the Committee determines that compliance
with Section 162(m) of the Code is not desired with respect to a particular
Award, compliance with Section 162(m) of the Code will not be required. In
addition, if any provision of this Plan would cause Awards that are intended to
constitute “qualified performance-based compensation” under Section 162(m) of
the Code, to fail to so qualify, that provision shall be severed from, and shall
be deemed not to be a part of, the Plan, but the other provisions hereof shall
remain in full force and effect.

 

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(e) Section 409A of the Code

Notwithstanding any contrary provision in the Plan or an Award Document, if any
provision of the Plan or an Award Document contravenes, or would cause an Award
to be subject to additional taxes, accelerated taxation, interest and/or
penalties under, Section 409A of the Code, such provision of the Plan or Award
Document may be modified by the Committee without consent of the Participant in
any manner the Committee deems reasonable or necessary. In making such
modifications the Committee shall attempt, but shall not be obligated, to
maintain, to the maximum extent practicable, the original intent of the
applicable provision without contravening the requirements of Section 409A of
the Code. Moreover, any discretionary authority that the Committee may have
pursuant to the Plan shall not be applicable to an Award to the extent such
Award is subject to, and such discretionary authority would contravene,
Section 409A of the Code.

(f) Awards to Individuals Subject to Laws of a Jurisdiction Outside of the
United States

To the extent that Awards under the Plan are awarded to Eligible Persons who are
domiciled or resident outside of the United States or to persons who are
domiciled or resident in the United States but who are subject to the tax laws
of a jurisdiction outside of the United States, the Committee may adjust the
terms of the Awards granted hereunder to such person (i) to comply with the
laws, rules and regulations of such jurisdiction and (ii) to permit the grant of
the Award not to be a taxable event to the Participant. The authority granted
under the previous sentence shall include the discretion for the Committee to
adopt, on behalf of the Company, one or more sub-plans applicable to separate
classes of Eligible Persons who are subject to the laws of jurisdictions outside
of the United States.

(g) Satisfaction of Obligations

Subject to applicable law, the Company may apply any cash, Shares, securities or
other consideration received upon exercise or settlement of an Award to any
obligations a Participant owes to the Company and the Subsidiaries in connection
with the Plan or otherwise, including, without limitation, any tax obligations
or obligations under a currency facility established in connection with the
Plan.

(h) No Limitation on Corporate Actions

Nothing contained in the Plan shall be construed to prevent the Company or any
Subsidiary from taking any corporate action, whether or not such action would
have an adverse effect on any Awards made under the Plan. No Participant,
beneficiary or other person shall have any claim against the Company or any
Subsidiary as a result of any such action.

(i) Unfunded Plan

The Plan is intended to constitute an unfunded plan for incentive compensation.
Prior to the issuance of Shares, cash or other form of payment in connection
with an Award, nothing contained herein shall give any Participant any rights
that are greater than those of a general unsecured creditor of the Company. The
Committee may, but is not obligated, to

 

20

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authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Shares with respect to awards hereunder.

(j) Successors

All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

(k) Application of Funds

The proceeds received by the Company from the sale of Shares pursuant to Awards
will be used for general corporate purposes.

(l) Award Document

In the event of any conflict or inconsistency between the Plan and any Award
Document, the Plan shall govern and the Award Document shall be interpreted to
minimize or eliminate any such conflict or inconsistency.

(m) Headings

The headings of Sections herein are included solely for convenience of reference
and shall not affect the meaning of any of the provisions of the Plan.

(n) Severability

If any provision of this Plan is held unenforceable, the remainder of the Plan
shall continue in full force and effect without regard to such unenforceable
provision and shall be applied as though the unenforceable provision were not
contained in the Plan.

(o) Expenses

The costs and expenses of administering the Plan shall be borne by the Company.

(p) Arbitration

Any dispute, controversy or claim arising out of or relating to the Plan that
cannot be resolved by the Participant on the one hand, and the Company on the
other, shall be submitted to arbitration in the State of New Jersey under the
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association; provided, however, that any such submission by the
Participant must be made within one year of the date of the events giving rise
to such dispute, controversy or claim. The determination of the arbitrator shall
be conclusive and binding on the Company and the Participant, and judgment may
be entered on the arbitrator’s award in any court having jurisdiction. The
expenses of such arbitration shall be borne by the Company; provided, however,
that each party shall bear its own legal expenses unless the Participant is the
prevailing party, in which case the Company shall promptly pay or

 

21

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reimburse the Participant for the reasonable legal fees and expenses incurred by
the Participant in connection with such contest or dispute (excluding any fees
payable pursuant to a contingency fee arrangement).

(q) Governing Law

Except as to matters of federal law, the Plan and all actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
New York.

 

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