Exhibit 10.38      

PG&E Corporation

2006 Long-Term Incentive Plan

 

 
 
 

--------------------------------------------------------------------------------

 

PLAN HISTORY AND NOTES TO COMPANY

December 15, 2004
Board adopts Plan with a reserve of 12 million shares.
   
April 20, 2005
Shareholders approve Plan.
   
January 1, 2006
Plan Effective Date
   
February 15, 2006
Change in control provisions are amended
   
December 20, 2006
Board amends Section 7 containing the terms for automatic awards for
Non-Employee Directors, effective January 1, 2007
   
October 17, 2007
Board amends Section 7 as follows:
Define “Grant Date” for a particular calendar year as the first business day in
March of that calendar year.  Previously, the grant date for awards in 2006 and
2007 was the first business day in January of that particular calendar
year.  This amendment becomes effective starting with grants for 2008.
Amend the basis for calculating the per share value of stock option awards, so
it is based on the average closing price of Stock during the months of November,
December, and January preceding the grant.  Previously, the per share value of
stock options awards for grants in 2006 and 2007 was based on the average
closing price of Stock during the preceding month of November.  This amendment
becomes effective starting with grants for 2008.
Clarify the language for settling restricted stock awards upon a Nonemployee
Director’s retirement from the Board, to indicate that shares credited to a
Nonemployee Director’s Restricted Stock Unit account may be settled after a
Nonemployee Director ceases to be a member of the Board of Directors following
five years of service on the Board.
   
September 17, 2008
Board amends Section 7 containing the terms for automatic awards for Nonemployee
Directors, effective January 1, 2009, to increase the total value of annual
equity awards to Nonemployee Directors from $80,000 to $90,000.  Of this amount,
$45,000 of equity awards shall be Restricted Stock, and the remaining $45,000
shall be a mixture of Options and Restricted Stock Units, consistent with the
Plan and with each Nonemployee Director’s election.
   
Effective January 1, 2009
Plan is amended to comply with the final regulations under Section 409A of the
Code

 
 
 
i

--------------------------------------------------------------------------------

 

   
February 18, 2009
Plan is amended to delay grant and pricing of 2009 grants for non-employee
directors, to be consistent with 2009 grants to employees.

 
ii

--------------------------------------------------------------------------------

 

  TABLE OF CONTENTS        
1.
Establishment, Purpose and Term of Plan
1
 
1.1
Establishment
1
 
1.2
Purpose
1
 
1.3
Term of Plan
1
       
2.
Definitions and Construction
1
 
2..1
Definitions
1
 
2.2
Construction
7
       
3.
Administration
7
 
3.1
Administration by the Committee
7
 
3.2
Authority of Officers
8
 
3.3
Administration with Respect to Insiders
8
 
3.4
Committee Complying with Section 162(m)
8
 
3.5
Powers of the Committee
8
 
3.6
Option or SAR Repricing
9
 
3.7
Indemnification
10
       
4.
Shares Subject to Plan
10
 
4.1
Maximum Number of Shares Issuable
10
 
4.2
Adjustments for Changes in Capital Structure
10
     
5.
Eligibility and Award Limitations
11
 
5.1
Persons Eligible for Awards
11
 
5.2
Participation
11
 
5.3
Incentive Stock Option Limitations
11
 
5.4
Award Limits
12
     
6.
Terms and Conditions of Options
13
 
6.1
Exercise Price
13
 
6.2
Exercisability and Term of Options
13
 
6.3
Payment of Exercise Price
14
 
6.4
Effect of Termination of Service
14
 
6.5
Transferability of Options
15
       
7.
Terms and Conditions of Nonemployee Director Awards
15
 
7.1
Automatic Grant of Restricted Stock
15
 
7.2
Annual Election to Receive Nonstatutory Stock Option and Restricted Stock Units
15

 
i

--------------------------------------------------------------------------------

 
7.3
Grant of Nonstatutory Stock Option
16
 
7.4
Grant of Restricted Stock Unit
16
 
7.5
Effect of Termination of Service as a Nonemployee Director
18
 
7.6
Effect of Change in Control on Nonemployee Director Awards
19
 
7.7
Right to Decline Nonemployee Director Awards
19
       
8.
Terms and Conditions of Stock Appreciation Rights
19
 
8.1
Types of SARs Authorized
20
 
8.2
Exercise Price
20
 
8.3
Exercisability and Term of SARs
20
 
8.4
Deemed Exercise of SARs
20
 
8.5
Effect of Termination of Service
20
 
8.6
Nontransferability of SARs
20
       
9.
Terms and Conditions of Restricted Stock Awards
21
 
9.1
Types of Restricted Stock Awards Authorized
21
 
9.2
Purchase Price
21
 
9.3
Purchase Period
21
 
9.4
Vesting and Restrictions on Transfer
21
 
9.5
Voting Rights, Dividends and Distributions
21
 
9.6
Effect of Termination of Service
22
 
9.7
Nontransferability of Restricted Stock Award Rights
22
       
10.
Terms and Conditions of Performance Awards
22
 
10.1
Types of Performance Awards Authorized
22
 
10.2
Initial Value of Performance Shares and Performance Units
22
 
10.3
Establishment of Performance Period, Performance Goals and Performance Award
Formula
23
 
10.4
Measurement of Performance Goals
23
 
10.5
Settlement of Performance Awards
24
 
10.6
Voting Rights, Dividend Equivalent Rights and Distributions
24
 
10.7
Effect of Termination of Service
25
 
10.8
Nontransferability of Performance Awards
25
       
11.
Terms and Conditions of Restricted Stock Unit Awards
26
 
11.1
Grant of Restricted Stock Unit Awards
26
 
11.2
Vesting
26
 
11.3
Voting Rights, Dividend Equivalent Rights and Distributions
26
 
11.4
Effect of Termination of Service
27
 
11.5
Settlement of Restricted Stock Unit Awards
27
 
11.6
Nontransferability of Restricted Stock Unit Awards
27

 
ii

--------------------------------------------------------------------------------

 

       
12.
Deferred Compensation Awards
27
 
12.1
Establishment of Deferred Compensation Award Programs
27
 
12.2
Terms and Conditions of Deferred Compensation Awards
28
       
13.
Other Stock-Based Awards
29
     
14.
Change in Control
29
 
14.1
Effect of Change in Control on Options and SARs
29
 
14.2
Effect of Change in Control on Restricted Stock and Other Awards
29
 
14.3
Nonemployee Director Awards
29
       
15.
Compliance with Securities Law
30
     
16.
Tax Withholding
30
 
16.1
Tax Withholding in General
30
 
16.2
Withholding in Shares
30
       
17.
Amendment or Termination of Plan
30
     
18.
Miscellaneous Provisions
31
 
18.1
Repurchase Rights
31
 
18.2
Provision of Information
31
 
18.3
Rights as Employee, Consultant or Director
31
 
18.4
Rights as a Shareholder
31
 
18.5
Fractional Shares
31
 
18.6
Severability
31
 
18.7
Beneficiary Designation
32
 
18.8
Unfunded Obligation
32
 
18.9
Choice of Law
32
 
18.10
Section 409A of the Code
32
     

 
iii

--------------------------------------------------------------------------------

 
PG&E Corporation
2006 Long-Term Incentive Plan
(As adopted effective January 1, 2006, and
as amended effective on February 15, 2006, December 20, 2006, October 17, 2007,
September 17, 2008, January 1, 2009, and February 18, 2009)

1.           Establishment, Purpose and Term of Plan.
 
1.1           Establishment.  The PG&E Corporation 2006 Long-Term Incentive Plan
(the “Plan”) is hereby established effective as of January 1, 2006 (the
“Effective Date”), provided it has been approved by the shareholders of the
Company.
 
1.2           Purpose.  The purpose of the Plan is to advance the interests of
the Participating Company Group and its shareholders by providing an incentive
to attract and retain the best qualified personnel to perform services for the
Participating Company Group, by motivating such persons to contribute to the
growth and profitability of the Participating Company Group, by aligning their
interests with interests of the Company’s shareholders, and by rewarding such
persons for their services by tying a significant portion of their total
compensation package to the success of the Company.  The Plan seeks to achieve
this purpose by providing for Awards in the form of Options, Stock Appreciation
Rights, Restricted Stock Awards, Performance Shares, Performance Units,
Restricted Stock Units, Deferred Compensation Awards and other Stock-Based
Awards as described below.
 
1.3           Term of Plan.  The Plan shall continue in effect until the earlier
of its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Awards
granted under the Plan have lapsed.  However, all Awards shall be granted, if at
all, within ten (10) years from the Effective Date.  Moreover, Incentive Stock
Options shall not be granted later than ten (10) years from the date of
shareholder approval of the Plan.
 
2.           Definitions and Construction.
 
2.1           Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:
 
(a)           “Affiliate” means (i) an entity, other than a Parent Corporation,
that directly, or indirectly through one or more intermediary entities, controls
the Company or (ii) an entity, other than a Subsidiary Corporation, that is
controlled by the Company directly, or indirectly through one or more
intermediary entities.  For this purpose, the term “control” (including the term
“controlled by”) means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of the relevant
entity, whether through the ownership of voting securities, by contract or
otherwise; or shall have such other meaning assigned such term for the purposes
of registration on Form S-8 under the Securities Act.
 

 
1

--------------------------------------------------------------------------------

 

(b)           “Award” means any Option, SAR, Restricted Stock Award, Performance
Share, Performance Unit, Restricted Stock Unit or Deferred Compensation Award or
other Stock-Based Award granted under the Plan.
 
(c)           “Award Agreement” means a written agreement between the Company
and a Participant setting forth the terms, conditions and restrictions of the
Award granted to the Participant.
 
(d)           “Board” means the Board of Directors of the Company.
 
(e)           “Change in Control” means, unless otherwise defined by the
Participant’s Award Agreement or contract of employment or service, the
occurrence of any of the following:
 
(i)           any “person” (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act, but excluding any benefit plan for Employees or any trustee,
agent or other fiduciary for any such plan acting in such person’s capacity as
such fiduciary), directly or indirectly, becomes the “beneficial owner” (as
defined in Rule 13d-3 promulgated under the Exchange Act), of stock of the
Company representing twenty percent (20%) or more of the combined voting power
of the Company’s then outstanding voting stock; or
 
(ii)           during any two consecutive years, individuals who at the
beginning of such period constitute the Board cease for  any reason to
constitute at least a majority of the Board, unless the election, or the
nomination for election by the shareholders of the Company, of each new Director
was approved by a vote of at least two-thirds (2/3) of the Directors then still
in office who were Directors at the beginning of the period; or
 
(iii)           the consummation of any consolidation or merger of the Company
other than a merger or consolidation which would result in the voting stock of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting stock of the
surviving entity or any parent of such surviving entity) at least seventy
percent (70%) of the Combined Voting Power of the Company, such surviving entity
or the parent of such surviving entity outstanding immediately after the merger
or consolidation; or
 
(iv)           the approval of the Shareholders of the Company of any (1) sale,
lease, exchange or other transfer (in one or a series of related transactions)
of all or substantially all of the assets of the Company, or (2) any plan or
proposal for the liquidation or dissolution of the Company.
 
For purposes of paragraph (iii), the term “Combined Voting Power” shall mean the
combined voting power of the Company’s or other relevant entity’s then
outstanding voting stock.
 
(f)           “Code” means the Internal Revenue Code of 1986, as amended, and
any applicable regulations promulgated thereunder.
 
(g)           “Committee” means the Compensation Committee or other committee of
the Board duly appointed to administer the Plan and having such powers as shall
be specified by
 
2

--------------------------------------------------------------------------------

 
the Board.  If no committee of the Board has been appointed to administer the
Plan, the Board shall exercise all of the powers of the Committee granted
herein, and, in any event, the Board may in its discretion exercise any or all
of such powers.
 
(h)           “Company” means PG&E Corporation, a California corporation, or any
successor corporation thereto.
 
(i)           “Consultant” means a person engaged to provide consulting or
advisory services (other than as an Employee or a member of the Board) to a
Participating Company, provided that the identity of such person, the nature of
such services or the entity to which such services are provided would not
preclude the Company from offering or selling securities to such person pursuant
to the Plan in reliance on registration on a Form S-8 Registration Statement
under the Securities Act.
 
(j)           “Deferred Compensation Award” means an award of Stock Units
granted to a Participant pursuant to Section 12 of the Plan.
 
(k)           “Director” means a member of the Board.
 
(l)           “Disability” means the permanent and total disability of the
Participant, within the meaning of Section 22(e)(3) of the Code, except as
otherwise set forth in the Plan or an Award Agreement.
 
(m)           “Dividend Equivalent” means a credit, made at the discretion of
the Committee or as otherwise provided by the Plan, to the account of a
Participant in an amount equal to the cash dividends paid on one share of Stock
for each share of Stock represented by an Award held by such Participant.
 
(n)           “Employee” means any person treated as an employee (including an
Officer or a member of the Board who is also treated as an employee) in the
records of a Participating Company and, with respect to any Incentive Stock
Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a member of the Board nor
payment of a director’s fee shall be sufficient to constitute employment for
purposes of the Plan.  The Company shall determine in good faith and in the
exercise of its discretion whether an individual has become or has ceased to be
an Employee and the effective date of such individual’s employment or
termination of employment, as the case may be.  For purposes of an individual’s
rights, if any, under the Plan as of the time of the Company’s determination,
all such determinations by the Company shall be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency
subsequently makes a contrary determination.
 
(o)           “Exchange Act” means the Securities Exchange Act of 1934, as
amended.
 
(p)           “Fair Market Value” means, as of any date, the value of a share of
Stock or other property as determined by the Committee, in its discretion, or by
the Company, in its discretion, if such determination is expressly allocated to
the Company herein, subject to the following:
 

 
3

--------------------------------------------------------------------------------

 

(i)           Except as otherwise determined by the Committee, if, on such date,
the Stock is listed on a national or regional securities exchange or market
system, the Fair Market Value of a share of Stock shall be the closing price of
a share of Stock as quoted on the New York Stock Exchange or such other national
or regional securities exchange or market system constituting the primary market
for the Stock, as reported in The Wall Street Journal or such other source as
the Company deems reliable.  If the relevant date does not fall on a day on
which the Stock has traded on such securities exchange or market system, the
date on which the Fair Market Value shall be established shall be the last day
on which the Stock was so traded prior to the relevant date, or such other
appropriate day as shall be determined by the Committee, in its discretion.
 
(ii)           Notwithstanding the foregoing, the Committee may, in its
discretion, determine the Fair Market Value on the basis of the opening,
closing, high, low or average sale price of a share of Stock or the actual sale
price of a share of Stock received by a Participant, on such date, the preceding
trading day, the next succeeding trading day or an average determined over a
period of trading days.  The Committee may vary its method of determination of
the Fair Market Value as provided in this Section for different purposes under
the Plan.
 
(iii)           If, on such date, the Stock is not listed on a national or
regional securities exchange or market system, the Fair Market Value of a share
of Stock shall be as determined by the Committee in good faith without regard to
any restriction other than a restriction which, by its terms, will never lapse.
 
(q)           “Incentive Stock Option” means an Option intended to be (as set
forth in the Award Agreement) and which qualifies as an incentive stock option
within the meaning of Section 422(b) of the Code.
 
(r)           “Insider” means an Officer, a Director or any other person whose
transactions in Stock are subject to Section 16 of the Exchange Act.
 
(s)           “Mandatory Retirement” means retirement as a Director at age 70 or
at such other age as may be specified in the retirement policy for the Board in
effect at the time of a Nonemployee Director’s termination of Service as a
Director.
 
(t)           “Net-Exercise” means a procedure by which the Participant will be
issued a number of shares of Stock determined in accordance with the following
formula:
 
X = Y(A-B)/A, where
X = the number of shares of Stock to be issued to the Participant upon exercise
of the Option;
Y = the total number of shares with respect to which the Participant has elected
to exercise the Option;
A = the Fair Market Value of one (1) share of Stock;
B = the exercise price per share (as defined in the Participant’s Award
Agreement).

 
4

--------------------------------------------------------------------------------

 

                        (u)            “Nonemployee Director” means a Director
who is not an Employee.
 
(v)           “Nonemployee Director Award” means an Award granted to a
Nonemployee Director pursuant to Section 7 of the Plan.
 
(w)           “Nonstatutory Stock Option” means an Option not intended to be (as
set forth in the Award Agreement) an incentive stock option within the meaning
of Section 422(b) of the Code.
 
(x)           “Officer” means any person designated by the Board as an officer
of the Company.
 
(y)           “Option” means the right to purchase Stock at a stated price for a
specified period of time granted to a Participant pursuant to Section 6 or
Section 7 of the Plan.  An Option may be either an Incentive Stock Option or a
Nonstatutory Stock Option.
 
(z)           “Option Expiration Date” means the date of expiration of the
Option’s term as set forth in the Award Agreement.
 
(aa)           “Parent Corporation” means any present or future “parent
corporation” of the Company, as defined in Section 424(e) of the Code.
 
(bb)           “Participant” means any eligible person who has been granted one
or more Awards.
 
(cc)           “Participating Company” means the Company or any Parent
Corporation, Subsidiary Corporation or Affiliate.
 
(dd)           “Participating Company Group” means, at any point in time, all
entities collectively which are then Participating Companies.
 
(ee)           “Performance Award” means an Award of Performance Shares or
Performance Units.
 
(ff)           “Performance Award Formula” means, for any Performance Award, a
formula or table established by the Committee pursuant to Section 10.3 of the
Plan which provides the basis for computing the value of a Performance Award at
one or more threshold levels of attainment of the applicable Performance Goal(s)
measured as of the end of the applicable Performance Period.
 
(gg)           “Performance Goal” means a performance goal established by the
Committee pursuant to Section 10.3 of the Plan.
 
(hh)           “Performance Period” means a period established by the Committee
pursuant to Section 10.3 of the Plan at the end of which one or more Performance
Goals are to be measured.
 

 
5

--------------------------------------------------------------------------------

 

(ii)           “Performance Share” means a bookkeeping entry representing a
right granted to a Participant pursuant to Section 10 of the Plan to receive a
payment equal to the value of a Performance Share, as determined by the
Committee, based on performance.
 
(jj)           “Performance Unit” means a bookkeeping entry representing a right
granted to a Participant pursuant to Section 10 of the Plan to receive a payment
equal to the value of a Performance Unit, as determined by the Committee, based
upon performance.
 
(kk)           “Restricted Stock Award” means an Award of Restricted Stock.
 
(ll)           “Restricted Stock Unit” or “Stock Unit” means a bookkeeping entry
representing a right granted to a Participant pursuant to Section 11 or
Section 12 of the Plan, respectively, to receive a share of Stock on a date
determined in accordance with the provisions of Section 11 or Section 12, as
applicable, and the Participant’s Award Agreement.
 
(mm)                      “Restriction Period” means the period established in
accordance with Section 9.4 of the Plan during which shares subject to a
Restricted Stock Award are subject to Vesting Conditions.
 
(nn)           “Retirement” means termination as an Employee of a Participating
Company at age 55 or older, provided that the Participant was an Employee for at
least five consecutive years prior to the date of such termination.
 
(oo)           “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended
from time to time, or any successor rule or regulation.
 
(pp)           “SAR” or “Stock Appreciation Right” means a bookkeeping entry
representing, for each share of Stock subject to such SAR, a right granted to a
Participant pursuant to Section 8 of the Plan to receive payment in any
combination of shares of Stock or cash of an amount equal to the excess, if any,
of the Fair Market Value of a share of Stock on the date of exercise of the SAR
over the exercise price.
 
(qq)           “Section 162(m)” means Section 162(m) of the Code.
 
(rr)           “Section 409A Change in Control” means a “change in the ownership
or effective control of the corporation, or in the ownership of a substantial
portion of the assets of the corporation,” within the meaning of Section 409A of
the Code, as such definition applies to the Company.
 
(ss)           “Securities Act” means the Securities Act of 1933, as amended.
 
(tt)           “Separation from Service” means a Participant’s “separation from
service,” within the meaning of Section 409A of the Internal Revenue Code.
 
(uu)           “Service” means a Participant’s employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant.  A Participant’s Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Participant renders such
Service or a change in the
 
6

--------------------------------------------------------------------------------

 
Participating Company for which the Participant renders such Service, provided
that there is no interruption or termination of the Participant’s
Service.  Furthermore, a Participant’s Service shall not be deemed to have
terminated if the Participant takes any military leave, sick leave, or other
bona fide leave of absence approved by the Company.  However, if any such leave
taken by a Participant exceeds ninety (90) days, then on the one hundred
eighty-first (181st) day following the commencement of such leave any Incentive
Stock Option held by the Participant shall cease to be treated as an Incentive
Stock Option and instead shall be treated thereafter as a Nonstatutory Stock
Option, unless the Participant’s right to return to Service with the
Participating Company Group is guaranteed by statute or
contract.  Notwithstanding the foregoing, unless otherwise designated by the
Company or required by law, a leave of absence shall not be treated as Service
for purposes of determining vesting under the Participant’s Award Agreement.  A
Participant’s Service shall be deemed to have terminated either upon an actual
termination of Service or upon the entity for which the Participant performs
Service ceasing to be a Participating Company.  Subject to the foregoing, the
Company, in its discretion, shall determine whether the Participant’s Service
has terminated and the effective date of such termination.
 
(vv)           “Stock” means the common stock of the Company, as adjusted from
time to time in accordance with Section 4.2 of the Plan.
 
(ww)          “Stock-Based Awards” means any award that is valued in whole or in
part by reference to, or is otherwise based on, the Stock, including dividends
on the Stock, but not limited to those Awards described in Sections 6 through 12
of the Plan.
 
(xx)           “Subsidiary Corporation” means any present or future “subsidiary
corporation” of the Company, as defined in Section 424(f) of the Code.
 
(yy)           “Ten Percent Owner” means a Participant who, at the time an
Option is granted to the Participant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company (other than an Affiliate) within the meaning of
Section 422(b)(6) of the Code.
 
(zz)           “Vesting Conditions” mean those conditions established in
accordance with Section 9.4 or Section 11.2 of the Plan prior to the
satisfaction of which shares subject to a Restricted Stock Award or Restricted
Stock Unit Award, respectively, remain subject to forfeiture or a repurchase
option in favor of the Company upon the Participant’s termination of Service.
 
2.2           Construction.  Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan.  Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the
singular.  Use of the term “or” is not intended to be exclusive, unless the
context clearly requires otherwise.
 
3.           Administration.
 
3.1           Administration by the Committee.  The Plan shall be administered
by the Committee.  All questions of interpretation of the Plan or of any Award
shall be determined by
 
7

--------------------------------------------------------------------------------

 
the Committee, and such determinations shall be final and binding upon all
persons having an interest in the Plan or such Award.
 
3.2           Authority of Officers.  Any Officer shall have the authority to
act on behalf of the Company with respect to any matter, right, obligation,
determination or election which is the responsibility of or which is allocated
to the Company herein, provided the Officer has apparent authority with respect
to such matter, right, obligation, determination or election.  In addition, to
the extent specified in a resolution adopted by the Board, the Chief Executive
Officer of the Company shall have the authority to grant Awards to an Employee
who is not an Insider and who is receiving a salary below the level which
requires approval by the Committee; provided that the terms of such Awards
conform to guidelines established by the Committee and provided further that at
the time of making such Awards the Chief Executive Officer also is a Director.
 
3.3           Administration with Respect to Insiders.  With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.
 
3.4           Committee Complying with Section 162(m).  While the Company is a
“publicly held corporation” within the meaning of Section 162(m), the Board may
establish a Committee of “outside directors” within the meaning of
Section 162(m) to approve the grant of any Award which might reasonably be
anticipated to result in the payment of employee remuneration that would
otherwise exceed the limit on employee remuneration deductible for income tax
purposes pursuant to Section 162(m).
 
3.5           Powers of the Committee.  In addition to any other powers set
forth in the Plan and subject to the provisions of the Plan, the Committee shall
have the full and final power and authority, in its discretion:
 
(a)           to determine the persons to whom, and the time or times at which,
Awards shall be granted and the number of shares of Stock or units to be subject
to each Award based on the recommendation of the Chief Executive Officer of the
Company (except that Awards to the Chief Executive Officer shall be based on the
recommendation of the independent members of the Board in compliance with
applicable stock exchange rules and Awards to Nonemployee Directors shall be
granted automatically pursuant to Section 7 of the Plan);
 
(b)           to determine the type of Award granted and to designate Options as
Incentive Stock Options or Nonstatutory Stock Options;
 
(c)           to determine the Fair Market Value of shares of Stock or other
property;
 
(d)           to determine the terms, conditions and restrictions applicable to
each Award (which need not be identical) and any shares acquired pursuant
thereto, including, without limitation, (i) the exercise or purchase price of
shares purchased pursuant to any Award, (ii) the method of payment for shares
purchased pursuant to any Award, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with Award, including by the
withholding or delivery of shares of Stock, (iv) the timing, terms and
conditions of the exercisability or vesting of any Award or any shares acquired
pursuant thereto, (v) the
 
8

--------------------------------------------------------------------------------

 
Performance Award Formula and Performance Goals applicable to any Award and the
extent to which such Performance Goals have been attained, (vi) the time of the
expiration of any Award, (vii) the effect of the Participant’s termination of
Service on any of the foregoing, and (viii) all other terms, conditions and
restrictions applicable to any Award or shares acquired pursuant thereto not
inconsistent with the terms of the Plan;
 
(e)           to determine whether an Award will be settled in shares of Stock,
cash, or in any combination thereof;
 
(f)           to approve one or more forms of Award Agreement;
 
(g)           to amend, modify, extend, cancel or renew any Award or to waive
any restrictions or conditions applicable to any Award or any shares acquired
pursuant thereto;
 
(h)           to accelerate, continue, extend or defer the exercisability or
vesting of any Award or any shares acquired pursuant thereto, including with
respect to the period following a Participant’s termination of Service;
 
(i)           without the consent of the affected Participant and
notwithstanding the provisions of any Award Agreement to the contrary, to
unilaterally substitute at any time a Stock Appreciation Right providing for
settlement solely in shares of Stock in place of any outstanding Option,
provided that such Stock Appreciation Right covers the same number of shares of
Stock and provides for the same exercise price (subject in each case to
adjustment in accordance with Section 4.2) as the replaced Option and otherwise
provides substantially equivalent terms and conditions as the replaced Option,
as determined by the Committee;
 
(j)           to prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or to adopt sub-plans or supplements to, or alternative
versions of, the Plan, including, without limitation, as the Committee deems
necessary or desirable to comply with the laws or regulations of or to
accommodate the tax policy, accounting principles or custom of, foreign
jurisdictions whose citizens may be granted Awards;
 
(k)           to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award Agreement and to make all other
determinations and take such other actions with respect to the Plan or any Award
as the Committee may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law; and
 
(l)           to delegate to the Chief Executive Officer or the Senior Vice
President of Human Resources the authority with respect to ministerial matters
regarding the Plan and Awards made under the Plan.
 
3.6           Option or SAR Repricing. Without the affirmative vote of holders
of a majority of the shares of Stock cast in person or by proxy at a meeting of
the shareholders of the Company at which a quorum representing a majority of all
outstanding shares of Stock is present or represented by proxy, the Board shall
not approve a program providing for either (a) the cancellation of outstanding
Options or SARs and the grant in substitution therefore of new Options or SARs
having a lower exercise price or (b) the amendment of outstanding Options or
SARs to reduce the exercise price thereof.  This paragraph shall not be
construed to apply to
 
9

--------------------------------------------------------------------------------

 
“issuing or assuming a stock option in a transaction to which section 424(a)
applies,” within the meaning of Section 424 of the Code.
 
3.7           Indemnification.  In addition to such other rights of
indemnification as they may have as members of the Board or the Committee or as
officers or employees of the Participating Company Group, members of the Board
or the Committee and any officers or employees of the Participating Company
Group to whom authority to act for the Board, the Committee or the Company is
delegated shall be indemnified by the Company against all reasonable expenses,
including attorneys’ fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.
 
4.           Shares Subject to Plan.
 
4.1           Maximum Number of Shares Issuable.  Subject to adjustment as
provided in Section 4.2 and subject to Section 409A of the Code, the maximum
aggregate number of shares of Stock that may be issued under the Plan shall be
twelve million (12,000,000) and shall consist of authorized but unissued or
reacquired shares of Stock or any combination thereof.  If an outstanding Award
for any reason expires or is terminated or canceled without having been
exercised or settled in full, or if shares of Stock acquired pursuant to an
Award subject to forfeiture or repurchase are forfeited or repurchased by the
Company, the shares of Stock allocable to the terminated portion of such Award
or such forfeited or repurchased shares of Stock shall again be available for
issuance under the Plan.  Shares of Stock shall not be deemed to have been
issued pursuant to the Plan (a) with respect to any portion of an Award that is
settled in cash or (b) to the extent such shares are withheld or reacquired by
the Company in satisfaction of tax withholding obligations pursuant to
Section 16.2.  Upon payment in shares of Stock pursuant to the exercise of an
SAR, the number of shares available for issuance under the Plan shall be reduced
only by the number of shares actually issued in such payment.  If the exercise
price of an Option is paid by tender to the Company, or attestation to the
ownership, of shares of Stock owned by the Participant, or by means of a
Net-Exercise, the number of shares available for issuance under the Plan shall
be reduced only by the net number of shares for which the Option is exercised.
 
4.2           Adjustments for Changes in Capital Structure.  Subject to any
required action by the shareholders of the Company, in the event of any change
in the Stock effected without receipt of consideration by the Company, whether
through merger, consolidation, reorganization, reincorporation,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares,
or similar change in the capital structure of the Company, or in the event of
payment of a dividend or distribution to the
 
10

--------------------------------------------------------------------------------

 
shareholders of the Company in a form other than Stock (excepting normal cash
dividends) that has a material effect on the Fair Market Value of shares of
Stock, appropriate adjustments shall be made in the number and kind of shares
subject to the Plan and to any outstanding Awards, in the Award limits set forth
in Section 5.4, in the Nonemployee Director Awards to be granted automatically
pursuant to Section 7, and in the exercise or purchase price per share under any
outstanding Award in order to prevent dilution or enlargement of Participants’
rights under the Plan.  For purposes of the foregoing, conversion of any
convertible securities of the Company shall not be treated as “effected without
receipt of consideration by the Company.”  Any fractional share resulting from
an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest
whole number.  The Committee in its sole discretion, may also make such
adjustments in the terms of any Award to reflect, or related to, such changes in
the capital structure of the Company or distributions as it deems appropriate,
including modification of Performance Goals, Performance Award Formulas and
Performance Periods.  The adjustments determined by the Committee pursuant to
this Section 4.2 shall be final, binding and conclusive.
 
5.           Eligibility and Award Limitations.
 
5.1           Persons Eligible for Awards.  Awards may be granted only to
Employees, Consultants and Directors.  For purposes of the foregoing sentence,
“Employees,” “Consultants”and “Directors” shall include prospective Employees,
prospective Consultants and prospective Directors to whom Awards are granted in
connection with written offers of an employment or other service relationship
with the Participating Company Group; provided, however, that no Stock subject
to any such Award shall vest, become exercisable or be issued prior to the date
on which such person commences Service.  A Nonemployee Director Award may be
granted only to a person who, at the time of grant, is a Nonemployee Director.
 
5.2           Participation.  Awards other than Nonemployee Director Awards are
granted solely at the discretion of the Committee.  Eligible persons may be
granted more than one Award.  However, excepting Nonemployee Director Awards,
eligibility in accordance with this Section shall not entitle any person to be
granted an Award, or, having been granted an Award, to be granted an additional
Award.
 
5.3           Incentive Stock Option Limitations.
 
(a)           Persons Eligible.  An Incentive Stock Option may be granted only
to a person who, on the effective date of grant, is an Employee of the Company,
a Parent Corporation or a Subsidiary Corporation (each being an “ISO-Qualifying
Corporation”).  Any person who is not an Employee of an ISO-Qualifying
Corporation on the effective date of the grant of an Option to such person may
be granted only a Nonstatutory Stock Option.  An Incentive Stock Option granted
to a prospective Employee upon the condition that such person become an Employee
of an ISO-Qualifying Corporation shall be deemed granted effective on the date
such person commences Service with an ISO-Qualifying Corporation, with an
exercise price determined as of such date in accordance with Section 6.1.
 
(b)           Fair Market Value Limitation.  To the extent that options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by a
Participant for the first time during any

 
11

--------------------------------------------------------------------------------

 
calendar year for stock having a Fair Market Value greater than One Hundred
Thousand Dollars ($100,000), the portion of such options which exceeds such
amount shall be treated as Nonstatutory Stock Options.  For purposes of this
Section, options designated as Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
stock shall be determined as of the time the option with respect to such stock
is granted.  If the Code is amended to provide for a limitation different from
that set forth in this Section, such different limitation shall be deemed
incorporated herein effective as of the date and with respect to such Options as
required or permitted by such amendment to the Code.  If an Option is treated as
an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by
reason of the limitation set forth in this Section, the Participant may
designate which portion of such Option the Participant is exercising.  In the
absence of such designation, the Participant shall be deemed to have exercised
the Incentive Stock Option portion of the Option first.  Upon exercise, shares
issued pursuant to each such portion shall be separately identified.
 
5.4           Award Limits.
 
(a)           Maximum Number of Shares Issuable Pursuant to Incentive Stock
Options.  Subject to adjustment as provided in Section 4.2, the maximum
aggregate number of shares of Stock that may be issued under the Plan pursuant
to the exercise of Incentive Stock Options shall not exceed twelve million
(12,000,000) shares.  The maximum aggregate number of shares of Stock that may
be issued under the Plan pursuant to all Awards other than Incentive Stock
Options shall be the number of shares determined in accordance with Section 4.1,
subject to adjustment as provided in Section 4.2 and further subject to the
limitation set forth in Section 5.4(b) below.
 
(b)           Aggregate Limit on Full Value Awards.  Subject to adjustment as
provided in Section 4.2, in no event shall more than twelve million (12,000,000)
shares in the aggregate be issued under the Plan pursuant to the exercise or
settlement of Restricted Stock Awards, Restricted Stock Unit Awards and
Performance Awards (“Full Value Awards”).  Except with respect to a maximum of
five percent (5%) of the shares of Stock authorized in this Section 5.4(b), any
Full Value Awards which vest on the basis of the Participant’s continued Service
shall not provide for vesting which is any more rapid than annual pro rata
vesting over a three (3) year period and any Full Value Awards which vest upon
the attainment of Performance Goals shall provide for a Performance Period of at
least twelve (12) months.
 
(c)           Section 162(m) Award Limits.  The following limits shall apply to
the grant of any Award if, at the time of grant, the Company is a “publicly held
corporation” within the meaning of Section 162(m).
 
(i)           Options and SARs.  Subject to adjustment as provided in
Section 4.2, no Employee shall be granted within any fiscal year of the Company
one or more Options or Freestanding SARs which in the aggregate are for more
than 400,000 shares of Stock reserved for issuance under the Plan.
 
(ii)           Restricted Stock and Restricted Stock Unit Awards.  Subject to
adjustment as provided in Section 4.2, no Employee shall be granted within any
fiscal year of the Company one or more Restricted Stock Awards or Restricted
Stock Unit Awards, subject to
 
12

--------------------------------------------------------------------------------

 
Vesting Conditions based on the attainment of Performance Goals, for more than
400,000 shares of Stock reserved for issuance under the Plan.
 
(iii)           Performance Awards.  Subject to adjustment as provided in
Section 4.2, no Employee shall be granted (1) Performance Shares which could
result in such Employee receiving more than 400,000 shares of Stock reserved for
issuance under the Plan for each full fiscal year of the Company contained in
the Performance Period for such Award, or (2) Performance Units which could
result in such Employee receiving more than two million dollars ($2 million) for
each full fiscal year of the Company contained in the Performance Period for
such Award.  No Participant may be granted more than one Performance Award for
the same Performance Period.
 
6.           Terms and Conditions of Options.
 
Options shall be evidenced by Award Agreements specifying the number of shares
of Stock covered thereby, in such form as the Committee shall from time to time
establish.  No Option or purported Option shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Award
Agreement.  Award Agreements evidencing Options may incorporate all or any of
the terms of the Plan by reference and, except as otherwise set forth in
Section 7 with respect to Nonemployee Director Options, shall comply with and be
subject to the following terms and conditions:
 
6.1           Exercise Price.  The exercise price for each Option shall be
established in the discretion of the Committee; provided, however, that (a) the
exercise price per share shall be not less than the Fair Market Value of a share
of Stock on the effective date of grant of the Option and (b) no Incentive Stock
Option granted to a Ten Percent Owner shall have an exercise price per share
less than one hundred ten percent (110%) of the Fair Market Value of a share of
Stock on the effective date of grant of the Option.  Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than the minimum exercise
price set forth above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.
 
6.2           Exercisability and Term of Options.  Options shall be exercisable
at such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Committee and set forth in the Award Agreement evidencing such Option; provided,
however, that (a) no Option shall be exercisable after the expiration of ten
(10) years after the effective date of grant of such Option, (b) no Incentive
Stock Option granted to a Ten Percent Owner shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option,
and (c) no Option granted to a prospective Employee, prospective Consultant or
prospective Director may become exercisable prior to the date on which such
person commences Service.  Subject to the foregoing, unless otherwise specified
by the Committee in the grant of an Option, any Option granted hereunder shall
terminate ten (10) years after the effective date of grant of the Option, unless
earlier terminated in accordance with its provisions.
 

 
13

--------------------------------------------------------------------------------

 

6.3           Payment of Exercise Price.
 
(a)           Forms of Consideration Authorized.  Except as otherwise provided
below, payment of the exercise price for the number of shares of Stock being
purchased pursuant to any Option shall be made (i) in cash, by check or in cash
equivalent, (ii) by tender to the Company, or attestation to the ownership, of
shares of Stock owned by the Participant having a Fair Market Value not less
than the exercise price, (iii) by delivery of a properly executed notice of
exercise together with irrevocable instructions to a broker providing for the
assignment to the Company of the proceeds of a sale or loan with respect to some
or all of the shares being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System) (a “Cashless Exercise”), (iv) by delivery of a properly
executed notice of exercise electing a Net-Exercise, (v) by such other
consideration as may be approved by the Committee from time to time to the
extent permitted by applicable law, or (vi) by any combination thereof.  The
Committee may at any time or from time to time grant Options which do not permit
all of the foregoing forms of consideration to be used in payment of the
exercise price or which otherwise restrict one or more forms of consideration.
 
(b)           Limitations on Forms of Consideration.
 
(i)           Tender of Stock.  Notwithstanding the foregoing, an Option may not
be exercised by tender to the Company, or attestation to the ownership, of
shares of Stock to the extent such tender or attestation would constitute a
violation of the provisions of any law, regulation or agreement restricting the
redemption of the Company’s stock.
 
(ii)           Cashless Exercise.  The Company reserves, at any and all times,
the right, in the Company’s sole and absolute discretion, to establish, decline
to approve or terminate any program or procedures for the exercise of Options by
means of a Cashless Exercise, including with respect to one or more Participants
specified by the Company notwithstanding that such program or procedures may be
available to other Participants.
 
6.4           Effect of Termination of Service.
 
(a)           Option Exercisability.  Subject to earlier termination of the
Option as otherwise provided herein and unless otherwise provided by the
Committee, an Option shall be exercisable after a Participant’s termination of
Service only during the applicable time periods provided in the Award Agreement.
 
(b)           Extension if Exercise Prevented by Law.  Notwithstanding the
foregoing, unless the Committee provides otherwise in the Award Agreement, if
the exercise of an Option within the applicable time periods is prevented by the
provisions of Section 14.1 below, the Option shall remain exercisable until
three (3) months (or such longer period of time as determined by the Committee,
in its discretion) after the date the Participant is notified by the Company
that the Option is exercisable, but in any event no later than the Option
Expiration Date.
 
(c)           Extension if Participant Subject to
Section 16(b).  Notwithstanding the foregoing, if a sale within the applicable
time periods of shares acquired upon the exercise of the
 
14

--------------------------------------------------------------------------------

 
Option would subject the Participant to suit under Section 16(b) of the Exchange
Act, the Option shall remain exercisable until the earliest to occur of (i) the
tenth (10th) day following the date on which a sale of such shares by the
Participant would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day after the Participant’s termination of Service, or
(iii) the Option Expiration Date.
 
6.5           Transferability of Options.  During the lifetime of the
Participant, an Option shall be exercisable only by the Participant or the
Participant’s guardian or legal representative.  Prior to the issuance of shares
of Stock upon the exercise of an Option, the Option shall not be subject in any
manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent and
distribution.  Notwithstanding the foregoing, to the extent permitted by the
Committee, in its discretion, and set forth in the Award Agreement evidencing
such Option, a Nonstatutory Stock Option shall be assignable or transferable
subject to the applicable limitations, if any, described in the General
Instructions to Form S-8 Registration Statement under the Securities Act.  
 
7.           Terms and Conditions of Nonemployee Director Awards.
 
Nonemployee Director Awards shall be evidenced by Award Agreements in such form
as the Board shall from time to time establish.  Such Award Agreements may
incorporate all or any of the terms of the Plan by reference, shall be automatic
and non-discretionary and shall comply with and be subject to the terms and
conditions set forth in this Section 7.
 
For purposes of this Section 7, Nonemployee Director awards for any given
calendar year shall be granted on the first business day of March in that
calendar year, except that awards made in the year 2009 shall be granted on
March 9, 2009 (the “Grant Date”).
 
7.1           Automatic Grant of Restricted Stock.
 
(a)           Timing and Amount of Grant.  For each calendar year, each person
who is a Nonemployee Director on the Grant Date shall be granted a Restricted
Stock Award to purchase a number of shares of Stock determined by dividing
forty-five thousand dollars ($45,000) by the Fair Market Value of the Stock on
the Grant Date, and rounding down to the nearest whole number, except that for
awards granted in 2009 the number of shares shall be determined by dividing
$45,000 by the average Fair Market Value of the Stock for the first five trading
days of March 2009.
 
(b)           Vesting.  The shares subject to the Restricted Stock Award granted
pursuant to Section 7.1(a) shall vest in equal annual installments of twenty
percent (20%) on each anniversary of the Grant Date, with one hundred percent
(100%) of the shares vested on the fifth anniversary of the Grant Date.
 
7.2           Annual Election to Receive Nonstatutory Stock Option and
Restricted Stock Units.  On a date no later than December 31 of each calendar
year during the term of the Plan, each person who is then a Nonemployee Director
shall deliver to the Board a written election to receive either Nonstatutory
Stock Options or Restricted Stock Units, or both, with an aggregate value of
$45,000, on the Grant Date for the following calendar year, provided the person
 
15

--------------------------------------------------------------------------------

 
continues to be a Nonemployee Director on the Grant Date.  A Nonemployee
Director may allocate between Nonstatutory Stock Options and Restricted Stock
Units in minimum increments with a value equal to $5,000, as determined in
accordance with Sections 7.3 and 7.4.  All awards of Nonstatutory Stock Options
and Restricted Stock Units made to Nonemployee Directors shall comply with the
provisions of Sections 7.3 and 7.4, respectively.  A Nonemployee Director who
fails to make a timely election or who first becomes a Nonemployee Director
after December 31 but before the Grant Date for the following calendar year
shall be awarded Nonstatutory Stock Options and Restricted Stock Units each with
a value of $22,500, as determined in accordance with Sections 7.3 and 7.4,
provided the Nonemployee Director continues to be a Nonemployee Director on the
Grant Date.
 
7.3           Grant of Nonstatutory Stock Option.
 
(a)           Timing and Amount of Grant.  For each calendar year, unless a
Nonemployee Director made an election to decline the award of a Nonstatutory
Stock Option in accordance with Section 7.7, each person who is a Nonemployee
Director on the Grant Date  shall receive a grant of a Nonstatutory Stock Option
with an aggregate value equal to $5,000, $10,000, $15,000, $20,000, $25,000
$30,000, $35,000, $40,000, or $45,000 as previously elected by the Nonemployee
Director (or $22,500 in the case of a Nonemployee Director who failed to make a
timely election or who became a Nonemployee Director before the Grant Date for a
particular year but after December 31 of the previous year) (the “Elected Option
Value”).
 
The number of shares subject to the Nonstatutory Stock Option shall be
determined by dividing the Elected Option Value by the value of a Nonstatutory
Stock Option to purchase a single share of Stock as of the Grant Date.  The per
share option value shall be calculated in accordance with the Black-Scholes
stock option valuation method using the average closing price of Stock during
the preceding months of November, December, and January, and reducing the per
option value by twenty percent (20%).  The resulting number of shares subject to
the Nonstatutory Stock Option shall be rounded down to the nearest whole
share.  No person shall receive more than one grant of Nonstatutory Stock
Options pursuant to this Section 7.3(a) during any calendar year.
 
(b)           Exercise Price and Payment.  The exercise price of each
Nonstatutory Stock Option granted pursuant to Section 7.3(a) shall be the Fair
Market Value of the Stock on the Grant Date.  The payment of the exercise price
for the number of shares of Stock being purchased pursuant to the Nonstatutory
Stock Option shall be made in accordance with the provisions of Section 6.3.
 
(c)           Vesting and Exercisability.  The Nonstatutory Stock Option granted
in accordance with this Section shall become vested and exercisable as to one
third (1/3) of the shares subject to the Nonstatutory Stock Option on the
second, third and fourth anniversaries of the Grant Date, respectively.  The
Nonstatutory Stock Option shall terminate ten (10) years after the Grant Date,
unless earlier terminated in accordance with its provisions.
 
7.4           Grant of Restricted Stock Unit.
 
(a)           Timing and Amount of Grant.  For each calendar year, unless a
Nonemployee Director made an election to decline the award of a Restricted Stock
Unit in
 
16

--------------------------------------------------------------------------------

 
accordance with Section 7.7, on the Grant Date each person who is a Nonemployee
Director on the Grant Date shall receive a grant of a Restricted Stock Unit
Award with an aggregate value (as determined by the Fair Market Value of the
Stock on the Grant Date) equal to $5,000, $10,000, $15,000, $20,000, $25,000,
$30,000, $35,000, $40,000, or $45,000, as previously elected by the Nonemployee
Director (or $22,500 in the case of a Nonemployee Director who failed to make a
timely election or who became a Nonemployee Director after December 31 but
before the Grant Date) (the “Elected Stock Unit Value”).  The number of shares
subject to the Restricted Stock Unit Award shall be determined by dividing the
Elected Stock Unit Value by the Fair Market Value of the Stock as of the Grant
Date (including fractions computed to three decimal places), except that for
awards in 2009, the number of shares subject to the Restricted Stock Unit Awards
shall be determined by dividing the Elected Stock Unit value by the average Fair
Market Value of the Stock for the first five trading days of March 2009
(including fractions computed to three decimal places).  The Restricted Stock
Units awarded to a Nonemployee Director shall be credited to the director’s
Restricted Stock Unit account.  Each Restricted Stock Unit awarded to a
Nonemployee Director in accordance with this Section 7.4(a) shall be deemed to
be equal to one (1) (or fraction thereof) share of Stock on the Grant Date, and
shall thereafter fluctuate in value in accordance with the Fair Market Value of
the Stock.  No person shall receive more than one grant of Restricted Stock
Units pursuant to this Section 7.4(a) during any calendar year.
 
(b)           Dividend Rights.  Each Nonemployee Director’s Restricted Stock
Unit account shall be credited quarterly on each dividend payment date with
additional shares of Restricted Stock Units (including fractions computed to
three decimal places) determined by dividing (1) the amount of cash dividends
paid on such date with respect to the number of shares of Stock represented by
the Restricted Stock Units previously credited to the account by (2) the Fair
Market Value per share of Stock on such date.  Such additional Restricted Stock
Units shall be subject to the same terms and conditions and shall be settled in
the same manner and at the same time as the Restricted Stock Units originally
subject to the Restricted Stock Unit Award.
 
(c)           Settlement of Restricted Stock Unit Award.  Settlement of the
shares credited to a Nonemployee Director’s Restricted Stock Unit account shall
be made as to all shares of Stock covered by the Restricted Stock Unit upon the
earliest of (i) the Nonemployee Director’s Separation from Service due to
Mandatory Retirement, (ii) the Nonemployee Director’s Separation from Service
after five years of continuous service on the Board (“Director Retirement”),
(iii) the Nonemployee Director’s death, (iv) the Nonemployee Directors
Disability (within the meaning of Section 409A of the Code), (v) a Change in
Control that also constitutes a Section 409A Change in Control and (vi) the
Nonemployee Director’s Separation from Service following a Change in
Control.  Settlement shall be made only in the form of shares of Stock equal to
the number of Restricted Stock Units credited to the Nonemployee Director’s
account on the date of distribution, rounded down to the nearest whole
share.  In the event of a distribution pursuant to Section 7(c)(iii) or
7(c)(iv), the Nonemployee Director shall receive the Stock in a lump sum
distribution at the time of the applicable distribution event.  In the case of
Sections 7(c)(i), 7(c)(ii), 7(c)(v) and 7(c)(vi), the Nonemployee Director shall
receive the Stock in a lump sum distribution in January of the year following
the year in which the applicable distribution event occurs; provided, however,
that the Nonemployee Director may elect, no later than December 31 of the
calendar year prior the date of grant of the Restricted Stock Unit (or such
later time permitted by Section 409A), (1) to receive a series of ten or less
approximately equal annual installments commencing no later than January of the
year following the year in
 
17

--------------------------------------------------------------------------------

 
which the applicable distribution event occurred (such election to apply to all
such distribution events) or (2) to instead receive a lump sum at the time that
the applicable distribution event occurs (such election to apply to all such
distribution events).
 
7.5           Effect of Termination of Service as a Nonemployee Director.
 
(a)           Status of Award.  Subject to earlier termination of the
Nonemployee Director Award as otherwise provided herein, the status of a
Nonemployee Director Award shall be determined as follows:
 
(i)           Death or Disability.  If the Nonemployee Director’s Service
terminates due to death or Disability (1) all shares subject to the Restricted
Stock Award shall become fully vested, and the Participant (or the Participant’s
legal representative or other person who acquired the rights to the Restricted
Stock by reason of the Participant’s death) shall have the right to resell or
transfer such shares at any time; and (2) all Nonstatutory Stock Options held by
the Participant shall become fully vested and exercisable, and the Participant
(or the Participant’s legal representative or other person who acquired the
rights to the Nonstatutory Stock Option by reason of the Participant’s death)
shall have the right to exercise the Nonstatutory Stock Options until the
earlier of (a) the date that is twelve (12) months after the date on which the
Participant’s Service terminated, or (b) the Option Expiration Date.  If the
Nonemployee Director becomes “disabled,” within the meaning of Section 409A of
the Code or in the event of the Nonemployee Director’s death, all Restricted
Stock Units credited to the Nonemployee Director’s account shall immediately
vest and become payable, in accordance with Section 7(c), to the Participant (or
the Participant’s legal representative or other person who acquired the rights
to the Restricted Stock Units by reason of the Participant’s death) in the form
of a number of shares of Stock equal to the number of Restricted Stock Units
credited to the Restricted Stock Unit account, rounded down to the nearest whole
share.
 
(ii)           Mandatory Retirement.  If the Participant’s Service terminates
because of the Mandatory Retirement of the Participant (1) all shares subject to
the Restricted Stock Award shall become fully vested, and the Participant shall
have the right to resell or transfer such shares at any time; and (2) all
Nonstatutory Stock Options held by the Participant shall become fully vested and
exercisable and the Participant shall have the right to exercise the
Nonstatutory Stock Options until the earlier of (a) the date that is five (5)
years after the date on which the Participant’s Service terminated, or (b) the
Option Expiration Date.  If the Nonemployee Director Separates from Service due
to Mandatory Retirement, all Restricted Stock Units credited to the Nonemployee
Director’s account shall immediately vest and become payable to the Participant
in accordance with Section 7.4(c) above.
 
(iii)           Other Termination of Service.  If the Participant’s Service
terminates for any reason other than those enumerated in Sections 7.5(a)(i) and
7.5(a)(ii), (1) any unvested shares of Restricted Stock shall be forfeited to
the Company and from and after the date of such termination, the Participant
shall cease to be a shareholder with respect to such forfeited shares and shall
have no dividend, voting or other rights with respect thereto and (2) the
unvested portion of any Nonstatutory Stock Option shall terminate, and any
portion of the Nonstatutory Stock Option exercisable by the Participant on the
date on which the Participant’s Service terminated may be exercised until the
earlier of (a) the date that is three (3) months after the date
 
18

--------------------------------------------------------------------------------

 
on which the Participant’s Service terminated, or (b) the Option Expiration
Date.  If the Nonemployee Director Separates from Service prior to the
occurrence of any of the distribution events set forth in Section 7.4(c), all
Restricted Stock Units credited to the Participant’s account shall be forfeited
on the date of such Separation from Service; provided, however, that if the
Nonemployee Director Separates from Service due to a pending Disability
determination such forfeiture shall not occur until a finding that such
Disability has not occurred.
 
(iv)           Notwithstanding the provisions of Section 7.5(i) through 7.5(iii)
above, the Board, in its sole discretion, may establish different terms and
conditions pertaining to Nonemployee Director Awards.
 
(b)           Extension if Exercise Prevented by Law.  Notwithstanding the
foregoing, if the exercise of a Nonstatutory Stock Option within the applicable
time periods set forth in Section 7.5(a) is prevented by the provisions of
Section 14.1 below, the Nonstatutory Stock Option shall remain exercisable until
three (3) months after the date the Participant is notified by the Company that
the Nonstatutory Stock Option is exercisable, but in any event no later than the
Option Expiration Date.
 
(c)           Extension if Participant Subject to
Section 16(b).  Notwithstanding the foregoing, if a sale within the applicable
time periods set forth in Section 7.5(a) of shares acquired upon the exercise of
the Nonstatutory Stock Option would subject the Participant to suit under
Section 16(b) of the Exchange Act, the Nonstatutory Stock Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following
the date on which a sale of such shares by the Participant would no longer be
subject to such suit, (ii) the one hundred and ninetieth (190th) day after the
Participant’s termination of Service, or (iii) the Option Expiration Date.
 
7.6           Effect of Change in Control on Nonemployee Director Awards.  Upon
the occurrence of a Change in Control, (i) the vesting of all shares of
Restricted Stock granted pursuant to Section 7.1(a) shall be accelerated so that
all such shares become fully vested, (ii) the vesting of Nonstatutory Stock
Options granted pursuant to Section 7.3(a) shall be accelerated and such
Nonstatutory Stock Options shall remain fully exercisable until the Option
Expiration Date, and (iii) all Restricted Stock Units shall immediately vest and
be settled in accordance with Section 7.4(c).  
 
7.7           Right to Decline Nonemployee Director Awards.  Notwithstanding the
foregoing, any person may elect not to receive a Nonemployee Director Award by
delivering written notice of such election to the Board no later than the day
prior to the date such Nonemployee Director Award would otherwise be granted.  A
person so declining a Nonemployee Director Award shall receive no payment or
other consideration in lieu of such declined Nonemployee Director Award.  A
person who has declined a Nonemployee Director Award may revoke such election by
delivering written notice of such revocation to the Board no later than the day
prior to the date such Nonemployee Director Award would be granted.
 
8.           Terms and Conditions of Stock Appreciation Rights.
 

 
19

--------------------------------------------------------------------------------

 

            Stock Appreciation Rights shall be evidenced by Award Agreements
specifying the number of shares of Stock subject to the Award, in such form as
the Committee shall from time to time establish.  No SAR or purported SAR shall
be a valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement.  Award Agreements evidencing SARs may incorporate all
or any of the terms of the Plan by reference and shall comply with and be
subject to the following terms and conditions:
 
8.1           Types of SARs Authorized.  SARs may be granted in tandem with all
or any portion of a related Option (a “Tandem SAR”) or may be granted
independently of any Option (a “Freestanding SAR”).  A Tandem SAR may be granted
either concurrently with the grant of the related Option or at any time
thereafter prior to the complete exercise, termination, expiration or
cancellation of such related Option.
 
8.2           Exercise Price.  The exercise price for each SAR shall be
established in the discretion of the Committee; provided, however, that (a) the
exercise price per share subject to a Tandem SAR shall be the exercise price per
share under the related Option and (b) the exercise price per share subject to a
Freestanding SAR shall be not less than the Fair Market Value of a share of
Stock on the effective date of grant of the SAR.
 
8.3           Exercisability and Term of SARs.
 
(a)           Tandem SARs.  Tandem SARs shall be exercisable only at the time
and to the extent, and only to the extent, that the related Option is
exercisable, subject to such provisions as the Committee may specify where the
Tandem SAR is granted with respect to less than the full number of shares of
Stock subject to the related Option.
 
(b)           Freestanding SARs.  Freestanding SARs shall be exercisable at such
time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Committee and set forth in the Award Agreement evidencing such SAR; provided,
however, that no Freestanding SAR shall be exercisable after the expiration of
ten (10) years after the effective date of grant of such SAR.
 
8.4           Deemed Exercise of SARs.  If, on the date on which an SAR would
otherwise terminate or expire, the SAR by its terms remains exercisable
immediately prior to such termination or expiration and, if so exercised, would
result in a payment to the holder of such SAR, then any portion of such SAR
which has not previously been exercised shall automatically be deemed to be
exercised as of such date with respect to such portion.
 
8.5           Effect of Termination of Service.  Subject to earlier termination
of the SAR as otherwise provided herein and unless otherwise provided by the
Committee in the grant of an SAR and set forth in the Award Agreement, an SAR
shall be exercisable after a Participant’s termination of Service only as
provided in the Award Agreement.
 
8.6           Nontransferability of SARs.  During the lifetime of the
Participant, an SAR shall be exercisable only by the Participant or the
Participant’s guardian or legal representative.  Prior to the exercise of an
SAR, the SAR shall not be subject in any manner to anticipation, alienation,
sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by
creditors of the
 
20

--------------------------------------------------------------------------------

 
 
Participant or the Participant’s beneficiary, except transfer by will or by the
laws of descent and distribution.
 

 
9.           Terms and Conditions of Restricted Stock Awards.
 
Restricted Stock Awards shall be evidenced by Award Agreements specifying the
number of shares of Stock subject to the Award, in such form as the Committee
shall from time to time establish.  No Restricted Stock Award or purported
Restricted Stock Award shall be a valid and binding obligation of the Company
unless evidenced by a fully executed Award Agreement.  Award Agreements
evidencing Restricted Stock Awards may incorporate all or any of the terms of
the Plan by reference and shall comply with and be subject to the following
terms and conditions:
 
9.1           Types of Restricted Stock Awards Authorized.  Restricted Stock
Awards may or may not require the payment of cash compensation for the
stock.  Restricted Stock Awards may be granted upon such conditions as the
Committee shall determine, including, without limitation, upon the attainment of
one or more Performance Goals described in Section 10.4.  If either the grant of
a Restricted Stock Award or the lapsing of the Restriction Period is to be
contingent upon the attainment of one or more Performance Goals, the Committee
shall follow procedures substantially equivalent to those set forth in
Sections 10.3 through 10.5(a).
 
9.2           Purchase Price.  The purchase price, if any, for shares of Stock
issuable under each Restricted Stock Award and the means of payment shall be
established by the Committee in its discretion.  
 
9.3           Purchase Period.  A Restricted Stock Award requiring the payment
of cash consideration shall be exercisable within a period established by the
Committee; provided, however, that no Restricted Stock Award granted to a
prospective Employee, prospective Consultant or prospective Director may become
exercisable prior to the date on which such person commences Service.
 
9.4           Vesting and Restrictions on Transfer.  Shares issued pursuant to
any Restricted Stock Award may or may not be made subject to Vesting Conditions
based upon the satisfaction of such Service requirements, conditions,
restrictions or performance criteria, including, without limitation, Performance
Goals as described in Section 10.4, as shall be established by the Committee and
set forth in the Award Agreement evidencing such Award.  During any Restriction
Period in which shares acquired pursuant to a Restricted Stock Award remain
subject to Vesting Conditions, such shares may not be sold, exchanged,
transferred, pledged, assigned or otherwise disposed of other than as provided
in the Award Agreement or as provided in Section 9.7.  Upon request by the
Company, each Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.
 

 
21

--------------------------------------------------------------------------------

 

9.5           Voting Rights, Dividends and Distributions.  Except as provided in
this Section, Section 9.4 and any Award Agreement, during the Restriction Period
applicable to shares subject to a Restricted Stock Award, the Participant shall
have all of the rights of a shareholder of the Company holding shares of Stock,
including the right to vote such shares and to receive all dividends and other
distributions paid with respect to such shares.  However, in the event of a
dividend or distribution paid in shares of Stock or any other adjustment made
upon a change in the capital structure of the Company as described in
Section 4.2, any and all new, substituted or additional securities or other
property (other than normal cash dividends) to which the Participant is entitled
by reason of the Participant’s Restricted Stock Award shall be immediately
subject to the same Vesting Conditions as the shares subject to the Restricted
Stock Award with respect to which such dividends or distributions were paid or
adjustments were made.
 
9.6           Effect of Termination of Service.  Unless otherwise provided by
the Committee in the grant of a Restricted Stock Award and set forth in the
Award Agreement, if a Participant’s Service terminates for any reason, whether
voluntary or involuntary (including the Participant’s death or disability), then
the Participant shall forfeit to the Company any shares acquired by the
Participant pursuant to a Restricted Stock Award which remain subject to Vesting
Conditions as of the date of the Participant’s termination of Service in
exchange for the payment of the purchase price, if any, paid by the
Participant.  The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to
one or more persons as may be selected by the Company.
 
9.7           Nontransferability of Restricted Stock Award Rights.  Prior to the
issuance of shares of Stock pursuant to a Restricted Stock Award, rights to
acquire such shares shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance or
garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or the laws of descent and distribution.  All rights
with respect to a Restricted Stock Award granted to a Participant hereunder
shall be exercisable during his or her lifetime only by such Participant or the
Participant’s guardian or legal representative.
 
10.           Terms and Conditions of Performance Awards.
 
Performance Awards shall be evidenced by Award Agreements in such form as the
Committee shall from time to time establish.  No Performance Award or purported
Performance Award shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement.  Award Agreements evidencing
Performance Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:
 
10.1           Types of Performance Awards Authorized.  Performance Awards may
be in the form of either Performance Shares or Performance Units.  Each Award
Agreement evidencing a Performance Award shall specify the number of Performance
Shares or Performance Units subject thereto, the Performance Award Formula, the
Performance Goal(s) and Performance Period applicable to the Award, and the
other terms, conditions and restrictions of the Award.
 

 
22

--------------------------------------------------------------------------------

 

10.2           Initial Value of Performance Shares and Performance
Units.  Unless otherwise provided by the Committee in granting a Performance
Award, each Performance Share shall have an initial value equal to the Fair
Market Value of one (1) share of Stock, subject to adjustment as provided in
Section 4.2, on the effective date of grant of the Performance Share.  Each
Performance Unit shall have an initial value determined by the Committee.  The
final value payable to the Participant in settlement of a Performance Award
determined on the basis of the applicable Performance Award Formula will depend
on the extent to which Performance Goals established by the Committee are
attained within the applicable Performance Period established by the Committee.
 
10.3           Establishment of Performance Period, Performance Goals and
Performance Award Formula.  In granting each Performance Award, the Committee
shall establish in writing the applicable Performance Period, Performance Award
Formula and one or more Performance Goals which, when measured at the end of the
Performance Period, shall determine on the basis of the Performance Award
Formula the final value of the Performance Award to be paid to the
Participant.  To the extent compliance with the requirements under
Section 162(m) with respect to “performance-based compensation” is desired, the
Committee shall establish the Performance Goal(s) and Performance Award Formula
applicable to each Performance Award no later than the earlier of (a) the date
ninety (90) days after the commencement of the applicable Performance Period or
(b) the date on which 25% of the Performance Period has elapsed, and, in any
event, at a time when the outcome of the Performance Goals remains substantially
uncertain.  Once established, the Performance Goals and Performance Award
Formula shall not be changed during the Performance Period.  The Company shall
notify each Participant granted a Performance Award of the terms of such Award,
including the Performance Period, Performance Goal(s) and Performance Award
Formula.
 
10.4           Measurement of Performance Goals.  Performance Goals shall be
established by the Committee on the basis of targets to be attained
(“Performance Targets”) with respect to one or more measures of business or
financial performance (each, a “Performance Measure”), subject to the following:
 
(a)           Performance Measures.  Performance Measures shall have the same
meanings as used in the Company’s financial statements, or, if such terms are
not used in the Company’s financial statements, they shall have the meaning
applied pursuant to generally accepted accounting principles, or as used
generally in the Company’s industry.  Performance Measures shall be calculated
with respect to the Company and each Subsidiary Corporation consolidated
therewith for financial reporting purposes or such division or other business
unit as may be selected by the Committee.  For purposes of the Plan, the
Performance Measures applicable to a Performance Award shall be calculated in
accordance with generally accepted accounting principles, but prior to the
accrual or payment of any Performance Award for the same Performance Period and
excluding the effect (whether positive or negative) of any change in accounting
standards or any extraordinary, unusual or nonrecurring item, as determined by
the Committee, occurring after the establishment of the Performance Goals
applicable to the Performance Award.  Each such adjustment, if any, shall be
made solely for the purpose of providing a consistent basis from period to
period for the calculation of Performance Measures in order to prevent the
dilution or enlargement of the Participant’s rights with respect to a
Performance Award.  Performance Measures may be one or more of the following, as
 
23

--------------------------------------------------------------------------------

 
determined by the Committee:  (i) sales revenue; (ii) gross margin;
(iii) operating margin; (iv) operating income; (v) pre-tax profit; (vi) earnings
before interest, taxes and depreciation and amortization; (vii) net income;
(viii) expenses; (ix) the market price of the Stock; (x) earnings per share;
(xi) return on shareholder equity; (xii) return on capital; (xiii) return on net
assets; (xiv) economic value added; and (xv) market share; (xvi) customer
service; (xvii) customer satisfaction; (xviii) safety; (xix) total shareholder
return; or (xx) such other measures as determined by the Committee consistent
with this Section 10.4(a).
 
(b)           Performance Targets.  Performance Targets may include a minimum,
maximum, target level and intermediate levels of performance, with the final
value of a Performance Award determined under the applicable Performance Award
Formula by the level attained during the applicable Performance Period.  A
Performance Target may be stated as an absolute value or as a value determined
relative to a standard selected by the Committee.
 
10.5           Settlement of Performance Awards.
 
(a)           Determination of Final Value.  As soon as practicable, but no
later than the 15th day of the third month following the completion of the
Performance Period applicable to a Performance Award, the Committee shall
certify in writing the extent to which the applicable Performance Goals have
been attained and the resulting final value of the Award earned by the
Participant and to be paid upon its settlement in accordance with the applicable
Performance Award Formula.
 
(b)           Discretionary Adjustment of Award Formula.  In its discretion, the
Committee may, either at the time it grants a Performance Award or at any time
thereafter, provide for the positive or negative adjustment of the Performance
Award Formula applicable to a Performance Award that is not intended to
constitute “qualified performance based compensation” to a “covered employee”
within the meaning of Section 162(m) (a “Covered Employee”) to reflect such
Participant’s individual performance in his or her position with the Company or
such other factors as the Committee may determine.  With respect to a
Performance Award intended to constitute qualified performance-based
compensation to a Covered Employee, the Committee shall have the discretion to
reduce some or all of the value of the Performance Award that would otherwise be
paid to the Covered Employee upon its settlement notwithstanding the attainment
of any Performance Goal and the resulting value of the Performance Award
determined in accordance with the Performance Award Formula.  
 
(c)           Payment in Settlement of Performance Awards.  As soon as
practicable following the Committee’s determination and certification in
accordance with Sections 10.5(a) and (b) but, in any case, no later than the
15th day of the third month following completion of the Performance Period
applicable to a Performance Award, payment shall be made to each eligible
Participant (or such Participant’s legal representative or other person who
acquired the right to receive such payment by reason of the Participant’s death)
of the final value of the Participant’s Performance Award.  Payment of such
amount shall be made in cash, shares of Stock, or a combination thereof as
determined by the Committee.
 
10.6           Voting Rights, Dividend Equivalent Rights and
Distributions.  Participants shall have no voting rights with respect to shares
of Stock represented by Performance Share
 
24

--------------------------------------------------------------------------------

 
Awards until the date of the issuance of such shares, if any (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company).  However, the Committee, in its discretion, may
provide in the Award Agreement evidencing any Performance Share Award that the
Participant shall be entitled to receive Dividend Equivalents with respect to
the payment of cash dividends on Stock having a record date prior to the date on
which the Performance Shares are settled or forfeited.  Such Dividend
Equivalents, if any, shall be credited to the Participant in the form of
additional whole Performance Shares as of the date of payment of such cash
dividends on Stock.  The number of additional Performance Shares (rounded to the
nearest whole number) to be so credited shall be determined by dividing (a) the
amount of cash dividends paid on such date with respect to the number of shares
of Stock represented by the Performance Shares previously credited to the
Participant by (b) the Fair Market Value per share of Stock on such
date.  Dividend Equivalents may be paid currently or may be accumulated and paid
to the extent that Performance Shares become nonforfeitable, as determined by
the Committee in accordance with Section 409A of the Code.  Settlement of
Dividend Equivalents may be made in cash, shares of Stock, or a combination
thereof as determined by the Committee, and may be paid on the same basis as
settlement of the related Performance Share as provided in
Section 10.5.  Dividend Equivalents shall not be paid with respect to
Performance Units.  In the event of a dividend or distribution paid in shares of
Stock or any other adjustment made upon a change in the capital structure of the
Company as described in Section 4.2, appropriate adjustments shall be made in
the Participant’s Performance Share Award so that it represents the right to
receive upon settlement any and all new, substituted or additional securities or
other property (other than normal cash dividends) to which the Participant would
be entitled by reason of the shares of Stock issuable upon settlement of the
Performance Share Award, and all such new, substituted or additional securities
or other property shall be immediately subject to the same Performance Goals as
are applicable to the Award.
 
10.7           Effect of Termination of Service.  Unless otherwise provided by
the Committee in the grant of a Performance Award and set forth in the Award
Agreement, the effect of a Participant’s termination of Service on the
Performance Award shall be as follows:
 
(a)           Death or Disability.  If the Participant’s Service terminates
because of the death or Disability of the Participant before the completion of
the Performance Period applicable to the Performance Award, the final value of
the Participant’s Performance Award shall be determined by the extent to which
the applicable Performance Goals have been attained with respect to the entire
Performance Period and shall be prorated based on the number of months of the
Participant’s Service during the Performance Period.  Payment shall be made
following the end of the Performance Period in any manner permitted by
Section 10.5.
 
(b)           Other Termination of Service.  If the Participant’s Service
terminates for any reason except death or Disability before the completion of
the Performance Period applicable to the Performance Award, such Award shall be
forfeited in its entirety; provided, however, that in the event of an
involuntary termination of the Participant’s Service, the Committee, in its sole
discretion, may waive the automatic forfeiture of all or any portion of any such
Award.
 
25

--------------------------------------------------------------------------------

 
    10.8           Nontransferability of Performance Awards.  Prior to
settlement in accordance with the provisions of the Plan, no Performance Award
shall be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant’s beneficiary, except transfer by will or by the
laws of descent and distribution.  All rights with respect to a Performance
Award granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.
 
11.           Terms and Conditions of Restricted Stock Unit Awards.
 
Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying
the number of Restricted Stock Units subject to the Award, in such form as the
Committee shall from time to time establish.  No Restricted Stock Unit Award or
purported Restricted Stock Unit Award shall be a valid and binding obligation of
the Company unless evidenced by a fully executed Award Agreement.  Award
Agreements evidencing Restricted Stock Units may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
 
11.1           Grant of Restricted Stock Unit Awards.  Restricted Stock Unit
Awards may be granted upon such conditions as the Committee shall determine,
including, without limitation, upon the attainment of one or more Performance
Goals described in Section 10.4.  If either the grant of a Restricted Stock Unit
Award or the Vesting Conditions with respect to such Award is to be contingent
upon the attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 10.3
through 10.5(a).
 
11.2           Vesting.  Restricted Stock Units may or may not be made subject
to Vesting Conditions based upon the satisfaction of such Service requirements,
conditions, restrictions or performance criteria, including, without limitation,
Performance Goals as described in Section 10.4, as shall be established by the
Committee and set forth in the Award Agreement evidencing such Award.
 
11.3           Voting Rights, Dividend Equivalent Rights and
Distributions.  Participants shall have no voting rights with respect to shares
of Stock represented by Restricted Stock Units until the date of the issuance of
such shares (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company).  However, the Committee,
in its discretion, may provide in the Award Agreement evidencing any Restricted
Stock Unit Award that the Participant shall be entitled to receive Dividend
Equivalents with respect to the payment of cash dividends on Stock having a
record date prior to the date on which Restricted Stock Units held by such
Participant are settled.  Such Dividend Equivalents, if any, shall be paid by
crediting the Participant with additional whole Restricted Stock Units as of the
date of payment of such cash dividends on Stock.  The number of additional
Restricted Stock Units (rounded to the nearest whole number) to be so credited
shall be determined by dividing (a) the amount of cash dividends paid on such
date with respect to the number of shares of Stock represented by the Restricted
Stock Units previously credited to the Participant by (b) the Fair Market Value
per share of Stock on such date.  Such additional Restricted Stock Units shall
be subject to the same terms and conditions and shall be settled in the same
manner and at the same time as the Restricted Stock Units originally subject to
the Restricted Stock Unit Award,
 
26

--------------------------------------------------------------------------------

 
provided that Dividend Equivalents may be settled in cash, shares of Stock, or a
combination thereof as determined by the Committee.  In the event of a dividend
or distribution paid in shares of Stock or any other adjustment made upon a
change in the capital structure of the Company as described in Section 4.2,
appropriate adjustments shall be made in the Participant’s Restricted Stock Unit
Award so that it represents the right to receive upon settlement any and all
new, substituted or additional securities or other property (other than normal
cash dividends) to which the Participant would be entitled by reason of the
shares of Stock issuable upon settlement of the Award, and all such new,
substituted or additional securities or other property shall be immediately
subject to the same Vesting Conditions as are applicable to the Award.
 
11.4           Effect of Termination of Service.  Unless otherwise provided by
the Committee in the grant of a Restricted Stock Unit Award and set forth in the
Award Agreement, if a Participant’s Service terminates for any reason, whether
voluntary or involuntary (including the Participant’s death or disability), then
the Participant shall forfeit to the Company any Restricted Stock Units pursuant
to the Award which remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service.
 
11.5           Settlement of Restricted Stock Unit Awards.  The Company shall
issue to a Participant on the date on which Restricted Stock Units subject to
the Participant’s Restricted Stock Unit Award vest or on such other date
determined by the Committee, in its discretion, and set forth in the Award
Agreement one (1) share of Stock (and/or any other new, substituted or
additional securities or other property pursuant to an adjustment described in
Section 11.3) for each Restricted Stock Unit then becoming vested or otherwise
to be settled on such date, subject to the withholding of applicable
taxes.  Notwithstanding the foregoing, if permitted by the Committee and set
forth in the Award Agreement, the Participant may elect in accordance with terms
specified in the Award Agreement to defer receipt of all or any portion of the
shares of Stock or other property otherwise issuable to the Participant pursuant
to this Section.
 
11.6           Nontransferability of Restricted Stock Unit Awards.  Prior to the
issuance of shares of Stock in settlement of a Restricted Stock Unit Award, the
Award shall not be subject in any manner to anticipation, alienation, sale,
exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or
by the laws of descent and distribution.  All rights with respect to a
Restricted Stock Unit Award granted to a Participant hereunder shall be
exercisable during his or her lifetime only by such Participant or the
Participant’s guardian or legal representative.
 
12.           Deferred Compensation Awards.
 
12.1           Establishment of Deferred Compensation Award Programs.  This
Section 12 shall not be effective unless and until the Committee determines to
establish a program pursuant to this Section.  The Committee, in its discretion
and upon such terms and conditions as it may determine, may establish one or
more programs pursuant to the Plan under which:
 
(a)           Participants designated by the Committee who are Insiders or
otherwise among a select group of highly compensated Employees may irrevocably
elect, prior to a date specified by the Committee, to reduce such Participant’s
compensation otherwise payable in cash (subject to any minimum or maximum
reductions imposed by the Committee) and to be granted
 
27

--------------------------------------------------------------------------------

 
automatically at such time or times as specified by the Committee one or more
Awards of Stock Units with respect to such numbers of shares of Stock as
determined in accordance with the rules of the program established by the
Committee and having such other terms and conditions as established by the
Committee.
 
(b)           Participants designated by the Committee who are Insiders or
otherwise among a select group of highly compensated Employees may irrevocably
elect, prior to a date specified by the Committee, to be granted automatically
an Award of Stock Units with respect to such number of shares of Stock and upon
such other terms and conditions as established by the Committee in lieu of cash
or shares of Stock otherwise issuable to such Participant upon the settlement of
a Performance Award or Performance Unit.
 
12.2           Terms and Conditions of Deferred Compensation Awards.  Deferred
Compensation Awards granted pursuant to this Section 12 shall be evidenced by
Award Agreements in such form as the Committee shall from time to time
establish.  No such Deferred Compensation Award or purported Deferred
Compensation Award shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement.  Award Agreements evidencing
Deferred Compensation Awards may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and
conditions:
 
(a)           Vesting Conditions.  Deferred Compensation Awards shall not be
subject to any vesting conditions.
 
(b)           Terms and Conditions of Stock Units.
 
(i)           Voting Rights, Dividend Equivalent Rights and
Distributions.  Participants shall have no voting rights with respect to shares
of Stock represented by Stock Units until the date of the issuance of such
shares (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company).  However, a Participant shall
be entitled to receive Dividend Equivalents with respect to the payment of cash
dividends on Stock having a record date prior to the date on which Stock Units
held by such Participant are settled.  Such Dividend Equivalents shall be paid
by crediting the Participant with additional whole and/or fractional Stock Units
as of the date of payment of such cash dividends on Stock.  The method of
determining the number of additional Stock Units to be so credited shall be
specified by the Committee and set forth in the Award Agreement.  Such
additional Stock Units shall be subject to the same terms and conditions and
shall be settled in the same manner and at the same time as the Stock Units
originally subject to the Stock Unit Award.  In the event of a dividend or
distribution paid in shares of Stock or any other adjustment made upon a change
in the capital structure of the Company as described in Section 4.2, appropriate
adjustments shall be made in the Participant’s Stock Unit Award so that it
represents the right to receive upon settlement any and all new, substituted or
additional securities or other property (other than normal cash dividends) to
which the Participant would be entitled by reason of the shares of Stock
issuable upon settlement of the Award.
 
(ii)           Settlement of Stock Unit Awards.  A Participant electing to
receive an Award of Stock Units pursuant to this Section 12, shall specify at
the time of such
 
28

--------------------------------------------------------------------------------

 
election a settlement date with respect to such Award in accordance with rules
established by the Committee.  The Company shall issue to the Participant upon
the earlier of the settlement date elected by the Participant or the date of the
Participant’s Separation from Service, a number of whole shares of Stock equal
to the number of whole Stock Units subject to the Stock Unit Award.  Such shares
of Stock shall be fully vested, and the Participant shall not be required to pay
any additional consideration (other than applicable tax withholding) to acquire
such shares.  Any fractional Stock Unit subject to the Stock Unit Award shall be
settled by the Company by payment in cash of an amount equal to the Fair Market
Value as of the payment date of such fractional share.
 
(iii)           Nontransferability of Stock Unit Awards.  Prior to their
settlement in accordance with the provision of the Plan, no Stock Unit Award
shall be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant’s beneficiary, except transfer by will or by the
laws of descent and distribution.  All rights with respect to a Stock Unit Award
granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.
 
13.           Other Stock-Based Awards.
 
In addition to the Awards set forth in Sections 6 through 12 above, the
Committee, in its sole discretion, may carry out the purpose of this Plan by
awarding Stock-Based Awards as it determines to be in the best interests of the
Company and subject to such other terms and conditions as it deems necessary and
appropriate.
 
14.           Change in Control.
 
14.1           Effect of Change in Control on Options and SARs.  In the event of
a Change in Control, the surviving, continuing, successor, or purchasing
corporation or other business entity or parent thereof, as the case may be (the
“Acquiror”), may, without the consent of any Participant, either assume or
continue the Company’s rights and obligations under outstanding Options or SARs
or substitute for outstanding Options or SARs substantially equivalent options
or SARs covering the Acquiror’s stock.  Any Options or SARs which are neither
assumed or continued by the Acquiror in connection with the Change in Control
nor exercised as of the Change in Control shall, contingent on the Change in
Control, become fully vested and exercisable immediately prior to the Change in
Control.  Options and SARs which are assumed or continued in connection with a
Change in Control shall be subject to such additional accelerated vesting and/or
exercisability in connection with the Participant’s subsequent termination of
Service as the Board may determine.
 
14.2           Effect of Change in Control on Other Awards.  In the event of a
Change in Control, the Acquiror may, without the consent of any Participant,
either assume or continue the Company’s rights and obligations under outstanding
Awards other than Options or SARs or substitute for such Awards substantially
equivalent Awards covering the Acquiror’s stock.  Any such Awards which are
neither assumed or continued by the Acquiror in connection with the Change in
Control shall, contingent on the Change in Control, become fully vested.  Awards
which are assumed or continued in connection with a Change in Control shall be
subject to such
 
29

--------------------------------------------------------------------------------

 
additional accelerated vesting or lapse of restrictions in connection with the
Participant’s subsequent termination of Service as the Board may determine.
 
14.3           Nonemployee Director Awards.  Notwithstanding the foregoing,
Nonemployee Director Awards shall be subject to the terms of Section 7, and not
this Section 14.
 
15.           Compliance with Securities Law.
 
The grant of Awards and the issuance of shares of Stock pursuant to any Award
shall be subject to compliance with all applicable requirements of federal,
state and foreign law with respect to such securities and the requirements of
any stock exchange or market system upon which the Stock may then be listed.  In
addition, no Award may be exercised or shares issued pursuant to an Award unless
(a) a registration statement under the Securities Act shall at the time of such
exercise or issuance be in effect with respect to the shares issuable pursuant
to the Award or (b) in the opinion of legal counsel to the Company, the shares
issuable pursuant to the Award may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities
Act.  The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be
necessary to the lawful issuance and sale of any shares hereunder shall relieve
the Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained.  As a
condition to issuance of any Stock, the Company may require the Participant to
satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
 
16.           Tax Withholding.
 
16.1           Tax Withholding in General.  The Company shall have the right to
deduct from any and all payments made under the Plan, or to require the
Participant, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise or Net Exercise of an Option, to make adequate
provision for, the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to an Award
or the shares acquired pursuant thereto.  The Company shall have no obligation
to deliver shares of Stock, to release shares of Stock from an escrow
established pursuant to an Award Agreement, or to make any payment in cash under
the Plan until the Participating Company Group’s tax withholding obligations
have been satisfied by the Participant.
 
16.2           Withholding in Shares.  The Company shall have the right, but not
the obligation, to deduct from the shares of Stock issuable to a Participant
upon the exercise or settlement of an Award, or to accept from the Participant
the tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group.  The Fair Market Value of any
shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates.
 
17.           Amendment or Termination of Plan.

 
30

--------------------------------------------------------------------------------

 

 
The Board or the Committee may amend, suspend or terminate the Plan at any
time.  However, without the approval of the Company’s shareholders, there shall
be (a) no increase in the maximum aggregate number of shares of Stock that may
be issued under the Plan (except by operation of the provisions of Section 4.2),
(b) no change in the class of persons eligible to receive Incentive Stock
Options, and (c)  no other amendment of the Plan that would require approval of
the Company’s shareholders under any applicable law, regulation or
rule.  Notwithstanding the foregoing, only the Board may amend Section 7.  No
amendment, suspension or termination of the Plan shall affect any then
outstanding Award unless expressly provided by the Board or the Committee.  In
any event, no amendment, suspension or termination of the Plan may adversely
affect any then outstanding Award without the consent of the Participant unless
necessary to comply with any applicable law, regulation or rule.
 
18.           Miscellaneous Provisions.
 
18.1           Repurchase Rights.  Shares issued under the Plan may be subject
to one or more repurchase options, or other conditions and restrictions as
determined by the Committee in its discretion at the time the Award is
granted.  The Company shall have the right to assign at any time any repurchase
right it may have, whether or not such right is then exercisable, to one or more
persons as may be selected by the Company.  Upon request by the Company, each
Participant shall execute any agreement evidencing such transfer restrictions
prior to the receipt of shares of Stock hereunder and shall promptly present to
the Company any and all certificates representing shares of Stock acquired
hereunder for the placement on such certificates of appropriate legends
evidencing any such transfer restrictions.
 
18.2           Provision of Information.  Each Participant shall be given access
to information concerning the Company equivalent to that information generally
made available to the Company’s common shareholders.
 
18.3           Rights as Employee, Consultant or Director.  No person, even
though eligible pursuant to Section 5, shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a
Participant.  Nothing in the Plan or any Award granted under the Plan shall
confer on any Participant a right to remain an Employee, Consultant or Director
or interfere with or limit in any way any right of a Participating Company to
terminate the Participant’s Service at any time.  To the extent that an Employee
of a Participating Company other than the Company receives an Award under the
Plan, that Award shall in no event be understood or interpreted to mean that the
Company is the Employee’s employer or that the Employee has an employment
relationship with the Company.
 
18.4           Rights as a Shareholder.  A Participant shall have no rights as a
shareholder with respect to any shares covered by an Award until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company).  No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such shares are issued, except as provided
in Section 4.2 or another provision of the Plan.
 
18.5           Fractional Shares.  The Company shall not be required to issue
fractional shares upon the exercise or settlement of any Award.

 
31

--------------------------------------------------------------------------------

 
 
18.6           Severability.  If any one or more of the provisions (or any part
thereof) of this Plan shall be held invalid, illegal or unenforceable in any
respect, such provision shall be modified so as to make it valid, legal and
enforceable, and the validity, legality and enforceability of the remaining
provisions (or any part thereof) of the Plan shall not in any way be affected or
impaired thereby.
 
18.7           Beneficiary Designation.  Subject to local laws and procedures,
each Participant may file with the Company a written designation of a
beneficiary who is to receive any benefit under the Plan to which the
Participant is entitled in the event of such Participant’s death before he or
she receives any or all of such benefit.  Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant’s lifetime.  If a married Participant
designates a beneficiary other than the Participant’s spouse, the effectiveness
of such designation may be subject to the consent of the Participant’s
spouse.  If a Participant dies without an effective designation of a beneficiary
who is living at the time of the Participant’s death, the Company will pay any
remaining unpaid benefits to the Participant’s legal representative.
 
18.8           Unfunded Obligation.  Participants shall have the status of
general unsecured creditors of the Company.  Any amounts payable to Participants
pursuant to the Plan shall be unfunded and unsecured obligations for all
purposes, including, without limitation, Title I of the Employee Retirement
Income Security Act of 1974.  No Participating Company shall be required to
segregate any monies from its general funds, or to create any trusts, or
establish any special accounts with respect to such obligations.  The Company
shall retain at all times beneficial ownership of any investments, including
trust investments, which the Company may make to fulfill its payment obligations
hereunder.  Any investments or the creation or maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary
relationship between the Committee or any Participating Company and a
Participant, or otherwise create any vested or beneficial interest in any
Participant or the Participant’s creditors in any assets of any Participating
Company.  The Participants shall have no claim against any Participating Company
for any changes in the value of any assets which may be invested or reinvested
by the Company with respect to the Plan.  Each Participating Company shall be
responsible for making benefit payments pursuant to the Plan on behalf of its
Participants or for reimbursing the Company for the cost of such payments, as
determined by the Company in its sole discretion.  In the event the respective
Participating Company fails to make such payment or reimbursement, a
Participant’s (or other individual’s) sole recourse shall be against the
respective Participating Company, and not against the Company.  A Participant’s
acceptance of an Award pursuant to the Plan shall constitute agreement with this
provision.
 
18.9           Choice of Law.  Except to the extent governed by applicable
federal law, the validity, interpretation, construction and performance of the
Plan and each Award Agreement shall be governed by the laws of the State of
California, without regard to its conflict of law rules.
 
18.10         Section 409A of the Code.  Notwithstanding anything to the
contrary in the Plan, to the extent any Award payable in connection with a
Participant's Separation from Service constitutes deferred compensation subject
to (and not exempt from) Section 409A of the Code
 
32

--------------------------------------------------------------------------------

 
and (ii) the Participant is deemed at the time of such separation to be a
“specified employee" under Section 409A of the Code and the Treasury regulations
thereunder, then payment shall not be made or commence until the earlier of (i)
six (6)-months after such Separation from Service or (ii) the date of the
Participant’s death following such Separation from Service; provided, however,
that such delay shall only be effected to the extent required to avoid adverse
tax treatment to the Participant, including (without limitation) the additional
twenty percent (20%) tax for which the Participant would otherwise be liable
under Section 409A(a)(1)(B) of the Code in the absence of such delay.  Upon the
expiration of the applicable delay period, any payment which would have
otherwise been paid during that period (whether in a single sum or in
installments) in the absence of this paragraph shall be paid to the Participant
or the Participant’s beneficiary in one lump sum on the first business day
immediately following such delay.
 

33

--------------------------------------------------------------------------------