EXHIBIT 10.39

 

SYNOPSYS, INC.

 

2006 EMPLOYEE EQUITY INCENTIVE PLAN

 

ADOPTED BY THE BOARD OF DIRECTORS:  MARCH 3, 2006

APPROVED BY THE STOCKHOLDERS:  APRIL 25, 2006

TERMINATION DATE:  MARCH 3, 2016

 

1.                                      GENERAL.

 

(a)                                  Successor and Continuation of Prior Plans. 
The Plan is intended as the successor and continuation of the (i) Synopsys, Inc.
1992 Stock Option Plan, (ii) Synopsys, Inc. 1998 Nonstatutory Stock Option Plan,
and (iii) Synopsys, Inc. 2005 Assumed Stock Option Plan (collectively, the
“Prior Plans”).  Following the Effective Date, no additional stock awards shall
be granted under the Prior Plans.  Any shares remaining available for issuance
pursuant to the exercise of options under the Prior Plans shall become available
for issuance pursuant to Stock Awards granted hereunder.  Any shares subject to
outstanding stock awards granted under the Prior Plans that expire or terminate
for any reason prior to exercise or settlement shall become available for
issuance pursuant to Stock Awards granted hereunder.  On the Effective Date, all
outstanding stock options granted under the Prior Plans shall be deemed to be
stock options granted pursuant to the Plan, but shall remain subject to the
terms of the Prior Plans with respect to which they were originally granted. 

 

(b)                                  Eligible Award Recipients.  The persons
eligible to receive Awards are Employees and Consultants.  Non-employee
Directors are not eligible to receive Awards under this Plan. 

 

(c)                                  Available Awards.  The Plan provides for
the grant of the following Stock Awards: (i) Incentive Stock Options,
(ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards, (iv) Restricted
Stock Unit Awards, (v) Stock Appreciation Rights, (vi) Performance Stock Awards,
and (vii) Other Stock Awards.  The Plan also provides for the grant of
Performance Cash Awards. 

 

(d)                                  Purpose.  The Company, by means of the
Plan, seeks to secure and retain the services of the group of persons eligible
to receive Stock Awards as set forth in Section 1(b), to provide incentives for
such persons to exert maximum efforts for the success of the Company and any
Affiliate and to provide a means by which such eligible recipients may be given
an opportunity to benefit from increases in value of the Common Stock through
the granting of Stock Awards.

 

2.                                      DEFINITIONS.

 

As used in the Plan, the following definitions shall apply to the capitalized
terms indicated below:

 

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(a)                                  “Affiliate” means (i) any corporation
(other than the Company) in an unbroken chain of corporations ending with the
Company, provided each corporation in the unbroken chain (other than the
Company) owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain, and (ii) any corporation (other than
the Company) in an unbroken chain of corporations beginning with the Company,
provided each corporation (other than the last corporation) in the unbroken
chain owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.  The Board shall have the authority to
determine (i) the time or times at which the ownership tests are applied, and
(ii) whether “Affiliate” includes entities other than corporations within the
foregoing definition. 

 

(b)                                  “Award” means a Stock Award or a
Performance Cash Award. 

 

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

 

(d)                                  “Capitalization Adjustment” has the meaning
ascribed to that term in Section 9(a).

 

(e)                                  “Cause” means, with respect to a
Participant, the occurrence of any of the following: (i) the Participant commits
an act of dishonesty in connection with the Participant’s responsibilities as an
Employee or Consultant; (ii) the Participant commits a felony or any act of
moral turpitude; (iii) the Participant commits any willful or grossly negligent
act that constitutes gross misconduct and/or injures, or is reasonably likely to
injure, the Company or any Affiliate; or (iv) the Participant willfully and
materially violates (A) any written policies or procedures of the Company or any
Affiliate, or (B) the Participant’s obligations to the Company or any
Affiliate.  The determination that a termination is for Cause shall be made by
the Company in its sole discretion.  Any determination by the Company that the
Continuous Service of a Participant was terminated with or without Cause for the
purposes of outstanding Awards held by such Participant shall have no effect
upon any determination of the rights or obligations of the Company or such
Participant for any other purpose.

 

(f)                                    “Change in Control” means the occurrence,
in a single transaction or in a series of related transactions, of any one or
more of the following events:

 

(i)                                    any Exchange Act Person becomes the
Owner, directly or indirectly, of securities of the Company representing more
than fifty percent (50%) of the combined voting power of the Company’s then
outstanding securities other than by virtue of a merger, consolidation or
similar transaction.  Notwithstanding the foregoing, a Change in Control shall
not be deemed to occur (A) on account of the acquisition of securities of the
Company by an investor, any affiliate thereof or any other Exchange Act Person
from the Company in a transaction or series of related transactions the primary
purpose of which is to obtain financing for the Company through the issuance of
equity securities or (B) solely because the level of Ownership held by any
Exchange Act Person (the “Subject Person”) exceeds the designated percentage
threshold of the outstanding voting securities as a result of a repurchase or
other acquisition of voting securities by the Company reducing the number of
shares outstanding, provided that if a Change in Control would occur (but for
the operation of this sentence) as a

 

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result of the acquisition of voting securities by the Company, and after such
share acquisition, the Subject Person becomes the Owner of any additional voting
securities that, assuming the repurchase or other acquisition had not occurred,
increases the percentage of the then outstanding voting securities Owned by the
Subject Person over the designated percentage threshold, then a Change in
Control shall be deemed to occur;

 

(ii)                                there is consummated a merger, consolidation
or similar transaction involving (directly or indirectly) the Company and,
immediately after the consummation of such merger, consolidation or similar
transaction, the stockholders of the Company immediately prior thereto do not
Own, directly or indirectly, either (A) outstanding voting securities
representing more than fifty percent (50%) of the combined outstanding voting
power of the surviving Entity in such merger, consolidation or similar
transaction or (B) more than fifty percent (50%) of the combined outstanding
voting power of the parent of the surviving Entity in such merger, consolidation
or similar transaction, in each case in substantially the same proportions as
their Ownership of the outstanding voting securities of the Company immediately
prior to such transaction;

 

(iii)                            the stockholders of the Company approve or the
Board approves a plan of complete dissolution or liquidation of the Company, or
a complete dissolution or liquidation of the Company shall otherwise occur;

 

(iv)                               there is consummated a sale, lease, exclusive
license or other disposition of all or substantially all of the consolidated
assets of the Company and its Subsidiaries, other than a sale, lease, license or
other disposition of all or substantially all of the consolidated assets of the
Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the
combined voting power of the voting securities of which are Owned by
stockholders of the Company in substantially the same proportions as their
Ownership of the outstanding voting securities of the Company immediately prior
to such sale, lease, license or other disposition; or

 

(v)                                   individuals who, on the date this Plan is
adopted by the Board, are members of the Board (the “Incumbent Board”) cease for
any reason to constitute at least a majority of the members of the Board;
provided, however, that if the appointment or election (or nomination for
election) of any new Board member was approved or recommended by a majority vote
of the members of the Incumbent Board then still in office, such new member
shall, for purposes of this Plan, be considered as a member of the Incumbent
Board.

 

For avoidance of doubt, the term Change in Control shall not include a sale of
assets, merger or other transaction effected exclusively for the purpose of
changing the domicile of the Company.

 

Notwithstanding the foregoing or any other provision of this Plan, the
definition of Change in Control (or any analogous term) in an individual written
agreement between the Company or any Affiliate and the Participant shall
supersede the foregoing definition with respect to Stock Awards subject to such
agreement; provided, however, that if no definition of Change in Control or any
analogous term is set forth in such an individual written agreement, the
foregoing definition shall apply.

 

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

 

(h)                                 “Committee” means a committee of one (1) or
more members of the Board to whom authority has been delegated by the Board in
accordance with Section 3(c).

 

(i)                                    “Common Stock” means the common stock of
the Company.

 

(j)                                    “Company” means Synopsys, Inc., a
Delaware corporation.

 

(k)                                “Consultant” means any person, including an
advisor, who is (i) engaged by the Company or an Affiliate to render consulting
or advisory services and is compensated for such services, or (ii) serving as a
member of the Board of Directors of an Affiliate and is compensated for such
services.  However, service solely as a Director, or payment of a fee for such
service, shall not cause a Director to be considered a “Consultant” for purposes
of the Plan. 

 

(l)                                    “Continuous Service” means that the
Participant’s service with the Company or an Affiliate, whether as an Employee,
Director or Consultant, is not interrupted or terminated.  A change in the
capacity in which the Participant renders service to the Company or an Affiliate
from a Consultant to Employee shall not terminate a Participant’s Continuous
Service. Furthermore, a change in the entity for which the Participant renders
such service, provided that there is no interruption or termination of the
Participant’s service with the Company or an Affiliate, shall not terminate a
Participant’s Continuous Service. However, if the corporation for which a
Participant is rendering service ceases to qualify as an Affiliate, as
determined by the Board in its sole discretion, such Participant’s Continuous
Service shall be considered to have terminated on the date such corporation
ceases to qualify as an Affiliate.  A leave of absence shall be treated as
Continuous Service for purposes of vesting in an Award to such extent as may be
provided in the Company’s leave of absence policy or in the written terms of the
Participant’s leave of absence.

 

(m)                              “Corporate Transaction” means the occurrence,
in a single transaction or in a series of related transactions, of any one or
more of the following events:

 

(i)                                    a sale or other disposition of all or
substantially all, as determined by the Board in its sole discretion, of the
consolidated assets of the Company and its Subsidiaries;

 

(ii)                                a sale or other disposition of at least
ninety percent (90%) of the outstanding securities of the Company;

 

(iii)                            the consummation of a merger, consolidation or
similar transaction following which the Company is not the surviving
corporation; or

 

(iv)                               the consummation of a merger, consolidation
or similar transaction following which the Company is the surviving corporation
but the shares of Common Stock outstanding immediately preceding the merger,
consolidation or similar transaction are converted or exchanged by virtue of the
merger, consolidation or similar transaction into other property, whether in the
form of securities, cash or otherwise.

 

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(n)                                 “Covered Employee” means the chief executive
officer and the four (4) other highest compensated officers of the Company for
whom total compensation is required to be reported to stockholders under the
Exchange Act, as determined for purposes of Section 162(m) of the Code.

 

(o)                                  “Director” means a member of the Board.

 

(p)                                  “Disability” means the permanent and total
disability of a person within the meaning of Section 22(e)(3) of the Code.

 

(q)                                  “Effective Date” means the effective date
of the Plan as specified in Section 12.

 

(r)                                  “Employee” means any person employed by the
Company or an Affiliate.  However, service solely as a Director, or payment of a
fee for such services, shall not cause a Director to be considered an “Employee”
for purposes of the Plan.

 

(s)                                  “Entity” means a corporation, partnership
or other entity.

 

(t)                                    “Exchange Act” means the Securities
Exchange Act of 1934, as amended.

 

(u)                                 “Exchange Act Person” means any natural
person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the
Exchange Act), except that “Exchange Act Person” shall not include (i) the
Company or any Subsidiary of the Company, (ii) any employee benefit plan of the
Company or any Subsidiary of the Company or any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
Subsidiary of the Company, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, (iv) an Entity Owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their Ownership of stock of the Company; or (v) any natural
person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the
Exchange Act) that, as of the effective date of the Plan as set forth in
Section 12, is the Owner, directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power of the
Company’s then outstanding securities.

 

(v)                                   “Fair Market Value” means, as of any date,
the value of the Common Stock determined as follows:

 

(i)                                    If the Common Stock is listed on any
established stock exchange or traded on any market system, the Fair Market Value
of a share of Common Stock shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or market
(or the exchange or market with the greatest volume of trading in the Common
Stock) on the date in question, as reported in The Wall Street Journal or such
other source as the Board deems reliable.  Unless otherwise provided by the
Board, if there is no closing sales price (or closing bid if no sales were
reported) for the Common Stock on the date in question, then the Fair Market
Value shall be the closing sales price (or closing bid if no sales were
reported) on the last preceding date for which such quotation exists. 

 

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(ii)                                In the absence of such markets for the
Common Stock, the Fair Market Value shall be determined by the Board in a manner
that complies with Section 409A of the Code.

 

(w)                                “Incentive Stock Option” means an Option
which qualifies as an incentive stock option within the meaning of Section 422
of the Code and the regulations promulgated thereunder.

 

(x)                                  “Non-Employee Director” means a Director
who either (i) is not a current employee or officer of the Company or an
Affiliate, does not receive compensation, either directly or indirectly, from
the Company or an Affiliate for services rendered as a consultant or in any
capacity other than as a Director (except for an amount as to which disclosure
would not be required under Item 404(a) of Regulation S-K promulgated pursuant
to the Securities Act (“Regulation S-K”)), does not possess an interest in any
other transaction for which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship for which
disclosure would be required pursuant to Item 404(b) of Regulation S-K; or
(ii) is otherwise considered a “non-employee director” for purposes of
Rule 16b-3.

 

(y)                                  “Nonstatutory Stock Option” means an Option
which does not qualify as an Incentive Stock Option.

 

(z)                                  “Officer” means a person who is an officer
of the Company within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.

 

(aa)                            “Option” means an Incentive Stock Option or a
Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to
the Plan.

 

(bb)                            “Option Agreement” means a written agreement
between the Company and an Optionholder evidencing the terms and conditions of
an Option grant.  Each Option Agreement shall be subject to the terms and
conditions of the Plan.

 

(cc)                            “Optionholder” means a person to whom an Option
is granted pursuant to the Plan or, if applicable, such other person who holds
an outstanding Option.

 

(dd)                            “Other Stock Award” means an award based in
whole or in part by reference to the Common Stock which is granted pursuant to
the terms and conditions of Section 7(e).

 

(ee)                            “Other Stock Award Agreement” means a written
agreement between the Company and a holder of an Other Stock Award evidencing
the terms and conditions of an Other Stock Award grant.  Each Other Stock Award
Agreement shall be subject to the terms and conditions of the Plan.

 

(ff)                                “Outside Director” means a Director who
either (i) is not a current employee of the Company or an “affiliated
corporation” (within the meaning of Treasury Regulations promulgated under
Section 162(m) of the Code), is not a former employee of the Company or an
“affiliated corporation” who receives compensation for prior services (other
than benefits under a tax-qualified retirement plan) during the taxable year,
has not been an officer of the Company or an “affiliated corporation,” and does
not receive remuneration from the Company or an

 

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“affiliated corporation,” either directly or indirectly, in any capacity other
than as a Director, or (ii) is otherwise considered an “outside director” for
purposes of Section 162(m) of the Code.

 

(gg)                          “Own,” “Owned,” “Owner,” “Ownership”  A person or
Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to
have acquired “Ownership” of securities if such person or Entity, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to
direct the voting, with respect to such securities.

 

(hh)                          “Participant” means a person to whom an Award is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Award.

 

(ii)                                “Performance Cash Award” means an award of
cash granted pursuant to the terms and conditions of Section 7(d)(ii).

 

(jj)                                “Performance Criteria” means the one or more
criteria that the Board shall select for purposes of establishing the
Performance Goals for a Performance Period.  The Performance Criteria that shall
be used to establish such Performance Goals may be based on any one of, or
combination of, the following: (i) earnings per share; (ii) earnings before
interest, taxes and depreciation; (iii) earnings before interest, taxes,
depreciation and amortization (EBITDA); (iv) net earnings; (v) return on equity;
(vi) return on assets, investment, or capital employed; (vii) operating margin;
(viii) gross margin; (ix) operating income; (x) net income (before or after
taxes); (xi) net operating income; (xii) net operating income after tax; (xiii)
pre- and after-tax income; (xiv) pre-tax profit; (xv) operating cash flow; (xvi)
orders and revenue; (xvii) orders quality metrics; (xviii) increases in revenue
or product revenue; (xix) expenses and cost reduction goals; (xx) improvement in
or attainment of expense levels; (xxi) improvement in or attainment of working
capital levels; (xxii) market share; (xxiii) cash flow; (xxiv) cash flow per
share; (xxv) share price performance; (xxvi) debt reduction; (xxvii)
implementation or completion of projects or processes; (xxviii) customer
satisfaction; (xxix) stockholders’ equity; (xxx) quality measures; and (xxxi)
any other measures of performance selected by the Board.  Partial achievement of
the specified criteria may result in the payment or vesting corresponding to the
degree of achievement as specified in the Stock Award Agreement or the written
terms of a Performance Cash Award.  The Board shall, in its sole discretion,
define the manner of calculating the Performance Criteria it selects to use for
such Performance Period.

 

(kk)                        “Performance Goals” means, for a Performance Period,
the one or more goals established by the Board for the Performance Period based
upon the Performance Criteria.  Performance Goals may be set on a Company-wide
basis, with respect to one or more business units, divisions, Affiliates, or
business segments, and in either absolute terms or relative to internally
generated business plans, approved by the Board, the performance of one or more
comparable companies or the performance of one or more relevant indices.  To the
extent consistent with Section 162(m) of the Code and the regulations
thereunder, the Board is authorized to make adjustments in the method of
calculating the attainment of Performance Goals for a Performance Period as
follows: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to
exclude exchange rate effects, as applicable, for non-U.S. dollar denominated
net sales and operating earnings; (iii) to exclude the effects of changes to
generally accepted accounting standards required by the Financial Accounting
Standards Board; (iv) to exclude the

 

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effects of any statutory adjustments to corporate tax rates; (v) to exclude
stock-based compensation expense determined under generally accepted accounting
principles; (vi) to exclude any other unusual, non-recurring gain or loss or
extraordinary item; (vii) to respond to, or in anticipation of, any unusual or
extraordinary corporate item, transaction, event or development; (viii) to
respond to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions; (ix) to exclude the dilutive
effects of acquisitions or joint ventures; (x) to assume that any business
divested by the Company achieved performance objectives at targeted levels
during the balance of a Performance Period following such divestiture; (xi) to
exclude the effect of any change in the outstanding shares of common stock of
the Company by reason of any stock dividend or split, stock repurchase,
reorganization, recapitalization, merger, consolidation, spin-off, combination
or exchange of shares or other similar corporate change, or any distributions to
common shareholders other than regular cash dividends; (xii) to reflect a
corporate transaction, such as a merger, consolidation, separation (including a
spinoff or other distribution of stock or property by a corporation), or
reorganization (whether or not such reorganization comes within the definition
of such term in Section 368 of the Code); and (xiii) to reflect any partial or
complete corporate liquidation.  The Board also retains the discretion to reduce
or eliminate the compensation or economic benefit due upon attainment of
Performance Goals.

 

(ll)                                “Performance Period” means the one or more
periods of time, which may be of varying and overlapping durations, as the
Committee may select, over which the attainment of one or more Performance Goals
will be measured for the purpose of determining a Participant’s right to and the
payment of a Performance Stock Award or a Performance Cash Award. 

 

(mm)                    “Performance Stock Award” means either a Restricted
Stock Award or a Restricted Stock Unit Award granted pursuant to the terms and
conditions of Section 7(d)(i).

 

(nn)                          “Plan” means this Synopsys, Inc. 2006 Employee
Equity Incentive Plan.

 

(oo)                            “Prior Plans” means the Company’s 1992 Stock
Option Plan, 1998 Nonstatutory Stock Option Plan, and 2005 Assumed Stock Option
Plan as in effect immediately prior to the effective date of the Plan.

 

(pp)                            “Restricted Stock Award” means an award of
shares of Common Stock which is granted pursuant to the terms and conditions of
Section 7(a).

 

(qq)                            “Restricted Stock Award Agreement” means a
written agreement between the Company and a holder of a Restricted Stock Award
evidencing the terms and conditions of a Restricted Stock Award grant.  Each
Restricted Stock Award Agreement shall be subject to the terms and conditions of
the Plan.

 

(rr)                            “Restricted Stock Unit Award” means a right to
receive shares of Common Stock which is granted pursuant to the terms and
conditions of Section 7(b).

 

(ss)                            “Restricted Stock Unit Award Agreement” means a
written agreement between the Company and a holder of a Restricted Stock Unit
Award evidencing the terms and conditions of a Restricted Stock Unit Award
grant.  Each Restricted Stock Unit Award Agreement shall be subject to the terms
and conditions of the Plan.

 

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(tt)                                “Rule 16b-3” means Rule 16b-3 promulgated
under the Exchange Act or any successor to Rule 16b-3, as in effect from time to
time.

 

(uu)                          “Securities Act” means the Securities Act of 1933,
as amended.

 

(vv)                              “Stock Appreciation Right” means a right to
receive the appreciation on Common Stock that is granted pursuant to the terms
and conditions of Section 7(c).

 

(ww)                        “Stock Appreciation Right Agreement” means a written
agreement between the Company and a holder of a Stock Appreciation Right
evidencing the terms and conditions of a Stock Appreciation Right grant.  Each
Stock Appreciation Right Agreement shall be subject to the terms and conditions
of the Plan.

 

(xx)                            “Stock Award” means any right granted under the
Plan, including an Option, a Stock Appreciation Right, a Restricted Stock Award,
a Restricted Stock Unit Award, a Performance Stock Award, or an Other Stock
Award.

 

(yy)                            “Stock Award Agreement” means a written
agreement between the Company and a Participant evidencing the terms and
conditions of a Stock Award grant.  Each Stock Award Agreement shall be subject
to the terms and conditions of the Plan.

 

(zz)                            “Subsidiary” means, with respect to the Company,
(i) any corporation of which more than fifty percent (50%) of the outstanding
capital stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time, stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or
indirectly, Owned by the Company, and (ii) any partnership in which the Company
has a direct or indirect interest (whether in the form of voting or
participation in profits or capital contribution) of more than fifty percent
(50%).

 

(aaa)                      “Ten Percent Stockholder” means a person who Owns (or
is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Affiliate.

 

3.                                      ADMINISTRATION.

 

(a)                                  Administration by Board.  The Board shall
administer the Plan unless and until the Board delegates administration of the
Plan to a Committee, as provided in Section 3(c).

 

(b)                                  Powers of Board.  The Board shall have the
power, subject to, and within the limitations of, the express provisions of the
Plan:

 

(i)                                    To construe and interpret the Plan and
Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration.  The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Stock
Award Agreement or in the written terms of a Performance Cash Award, in a manner
and to the extent it shall deem necessary or expedient to make the Plan fully
effective.

 

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(ii)                                To determine from time to time (1) which of
the persons eligible under the Plan shall be granted Awards; (2) when and how
each Award shall be granted; (3) what type or combination of types of Award
shall be granted; (4) the provisions of each Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive cash or Common Stock pursuant to a Award; and (5) the number of shares
of Common Stock with respect to which a Stock Award shall be granted to each
such person.

 

(iii)                            To accelerate the time at which an Award may
first be exercised or the time during which an Award or any part thereof will
vest in accordance with the Plan, notwithstanding the provisions in the Award
stating the time at which it may first be exercised or the time during which it
will vest.

 

(iv)                               To amend the Plan or an Award as provided in
Section 10.

 

(v)                                   To terminate or suspend the Plan as
provided in Section 11.

 

(vi)                               Generally, to exercise such powers and to
perform such acts as the Board deems necessary or expedient to promote the best
interests of the Company and that are not in conflict with the provisions of the
Plan.

 

(vii)                           To adopt such procedures and sub-plans as are
necessary or appropriate to permit participation in the Plan by individuals who
are foreign nationals or employed outside the United States.

 

(c)                                  Delegation to Committee.

 

(i)                                    General.  The Board may delegate some or
all of the administration of the Plan to a Committee or Committees.  If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board that have been delegated to the Committee, including the power to
delegate to a subcommittee any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or subcommittee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board.  The Board may retain the authority to
concurrently administer the Plan with the Committee and may, at any time, revest
in the Board some or all of the powers previously delegated.

 

(ii)                                Section 162(m) and Rule 16b-3 Compliance. 
In the sole discretion of the Board, the Committee may consist solely of two or
more Outside Directors, in accordance with Section 162(m) of the Code, and/or
solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.  In
addition, the Board or the Committee, in its sole discretion, may (1) delegate
to a committee of one or more members of the Board who need not be Outside
Directors the authority to grant Awards to eligible persons who are either
(a) not then Covered Employees and are not expected to be Covered Employees at
the time of recognition of income resulting from such Award, or (b) not persons
with respect to whom the Company wishes to comply with Section 162(m) of the
Code, and/or (2) delegate to a committee of one or more members of the Board who
need not be Non-Employee Directors the authority to grant Stock Awards to
eligible persons who are not then subject to Section 16 of the Exchange Act.

 

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(d)                                  Delegation to an Officer.  The Board may
delegate to one or more Officers of the Company the authority to do one or both
of the following (i) designate Employees of the Company or any of its
Subsidiaries to be recipients of Options and the terms thereof, and
(ii) determine the number of shares of Common Stock to be subject to such
Options granted to such Employees; provided, however, that the Board resolutions
regarding such delegation shall specify the total number of shares of Common
Stock that may be subject to the Options granted by such Officer. 
Notwithstanding anything to the contrary in this Section 3(d), the Board may not
delegate to an Officer authority to determine the Fair Market Value of the
Common Stock pursuant to Section 2(v)(ii) above. 

 

(e)                                  Effect of Board’s Decision. All
determinations, interpretations and constructions made by the Board in good
faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.

 

(f)                                    Cancellation and Re-Grant of Stock
Awards.  Neither the Board nor any Committee shall have the authority to:
(i) reprice any outstanding Stock Awards under the Plan, or (ii) cancel and
re-grant any outstanding Stock Awards under the Plan, unless the stockholders of
the Company have approved such an action within twelve (12) months prior to such
an event, provided, however, that this provision shall not prevent cancellations
of Stock Awards upon expiration or termination of such Stock Awards and the
return of the underlying shares of Common Stock to the Plan for future issuance
pursuant to Section 4(b) hereof.

 

4.                                      SHARES SUBJECT TO THE PLAN.

 

(a)                                  Share Reserve.  Subject to the provisions
of Section 9(a) relating to Capitalization Adjustments, the number of shares of
Common Stock that may be issued pursuant to Stock Awards shall not exceed
Forty-Seven Million Four Hundred Ninety-Seven Thousand Two Hundred Forty-Eight
(47,497,248) shares of Common Stock in the aggregate.  Such maximum number of
shares reserved for issuance is approximately equal to the number of shares
remaining available for issuance under the Prior Plans, including shares subject
to outstanding stock awards under the Prior Plans as of the Effective Date. 
Subject to Section 4(b), the number of shares available for issuance under the
Plan shall be reduced by: (i) one (1) share for each share of stock issued
pursuant to (A) an Option granted under Section 6, or (B) a Stock Appreciation
Right granted under Section 7(c), and (ii) one and thirty-six hundredths (1.36)
shares for each share of Common Stock issued pursuant to a Restricted Stock
Award, Restricted Stock Unit Award, or Other Stock Award granted under
Section 7.  Shares may be issued in connection with a merger or acquisition as
permitted by NASD Rule 4350(i)(1)(A)(iii) or, if applicable, NYSE Listed Company
Manual Section 303A(8) and such issuance shall not reduce the number of shares
available for issuance under the Plan. 

 

(b)                                  Reversion of Shares to the Share Reserve. 

 

(i)                                    Shares Available For Subsequent
Issuance.  If any (i) Stock Award shall for any reason expire or otherwise
terminate, in whole or in part, without having been exercised in full,
(ii) shares of Common Stock issued to a Participant pursuant to a Stock Award
are forfeited to or repurchased by the Company at their original exercise or
purchase price pursuant to the Company’s reacquisition or repurchase rights
under the Plan, including any

 

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forfeiture or repurchase caused by the failure to meet a contingency or
condition required for the vesting of such shares, or (iii) Stock Award is
settled in cash, then the shares of Common Stock not issued under such Stock
Award, or forfeited to or repurchased by the Company, shall revert to and again
become available for issuance under the Plan.  To the extent there is issued a
share of Common Stock pursuant to a Stock Award that counted as one and
thirty-six hundredths (1.36) shares against the number of shares available for
issuance under the Plan pursuant to Section 4(a) and such share of Common Stock
again becomes available for issuance under the Plan pursuant to this
Section 4(b)(i), then the number of shares of Common Stock available for
issuance under the Plan shall increase by one and thirty-six hundredths (1.36)
shares. 

 

(ii)                                Shares Not Available for Subsequent
Issuance.  If any shares subject to a Stock Award are not delivered to a
Participant because the Stock Award is exercised through a reduction of shares
subject to the Stock Award (i.e., “net exercised”) or an appreciation
distribution in respect of a Stock Appreciation Right is paid in shares of
Common Stock, the number of shares subject to the Stock Award that are not
delivered to the Participant shall not remain available for subsequent issuance
under the Plan.  If any shares subject to a Stock Award are not delivered to a
Participant because such shares are withheld in satisfaction of the withholding
of taxes incurred in connection with the exercise of an Option, Stock
Appreciation Right, or the issuance of shares under a Restricted Stock Award or
Restricted Stock Unit Award, the number of shares that are not delivered to the
Participant shall not remain available for subsequent issuance under the Plan. 
If the exercise price of any Stock Award is satisfied by tendering shares of
Common Stock held by the Participant (either by actual delivery or attestation),
then the number of shares so tendered shall not remain available for subsequent
issuance under the Plan. 

 

(c)                                  Incentive Stock Option Limit. 
Notwithstanding anything to the contrary in this Section 4, subject to the
provisions of Section 9(a) relating to Capitalization Adjustments the aggregate
maximum number of shares of Common Stock that may be issued pursuant to the
exercise of Incentive Stock Options shall be Forty-Seven Million Four Hundred
Ninety-Seven Thousand Two Hundred Forty-Eight (47,497,248) shares of Common
Stock.

 

(d)                                  Source of Shares.  The stock issuable under
the Plan shall be shares of authorized but unissued or reacquired Common Stock,
including shares repurchased by the Company on the open market.

 

5.                                      ELIGIBILITY.

 

(a)                                  Eligibility for Specific Stock Awards. 
Incentive Stock Options may be granted only to Employees.  Stock Awards other
than Incentive Stock Options may be granted to Employees and Consultants.  Stock
Awards under this Plan may not be granted to non-employee Directors. 

 

(b)                                  Ten Percent Stockholders.  An Employee who
is also a Ten Percent Stockholder shall not be granted an Incentive Stock Option
unless the exercise price of such Option is at least one hundred ten percent
(110%) of the Fair Market Value of the Common Stock on the date of grant and the
Option has a term of no more than five (5) years from the date of grant and is
not exercisable after the expiration of five (5) years from the date of grant.

 

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(c)                                  Section 162(m) Limitation on Annual
Awards.  Subject to the provisions of Section 9(a) relating to Capitalization
Adjustments no Employee shall be eligible to be granted Stock Awards whose value
is determined by reference to an increase over an exercise or strike price of at
least one hundred percent (100%) of the Fair Market Value of the Common Stock on
the date the Stock Award is granted covering more than one million (1,000,000)
shares of Common Stock during any calendar year.

 

6.                                      OPTION PROVISIONS.

 

Each Option shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate.  All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and,
if certificates are issued, a separate certificate or certificates shall be
issued for shares of Common Stock purchased on exercise of each type of Option. 
The provisions of separate Options need not be identical; provided, however,
that each Option Agreement shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:

 

(a)                                  Term.  No Option shall be exercisable after
the expiration of ten (10) years from the date of grant, or such shorter period
specified in the Option Agreement; provided, however, that an Incentive Stock
Option granted to a Ten Percent Stockholder shall be subject to the provisions
of Section 5(b).

 

(b)                                  Exercise Price of an Incentive Stock
Option.  Subject to the provisions of Section 5(b) regarding Ten Percent
Stockholders, the exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the Common
Stock subject to the Option on the date the Option is granted.  Notwithstanding
the foregoing, an Incentive Stock Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
consistent with the provisions of Section 424(a) of the Code.

 

(c)                                  Exercise Price of a Nonstatutory Stock
Option.  The exercise price of each Nonstatutory Stock Option shall be not less
than one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Option on the date the Option is granted.  Notwithstanding the
foregoing, a Nonstatutory Stock Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
consistent with the provisions of Section 424(a) of the Code.

 

(d)                                  Consideration.  The purchase price of
Common Stock acquired pursuant to the exercise of an Option shall be paid, to
the extent permitted by applicable law and as determined by the Board in its
sole discretion, by any combination of the methods of payment set forth below. 
The Board shall have the authority to grant Options that do not permit all of
the following methods of payment (or otherwise restrict the ability to use
certain methods) and to grant Options that require the consent of the Company to
utilize a particular method of payment.  The methods of payment permitted by
this Section 6(d) are:

 

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(i)                                    by cash or check;

 

(ii)                                pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board that, prior to the
issuance of Common Stock, results in either the receipt of cash (or check) by
the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;

 

(iii)                            by delivery to the Company (either by actual
delivery or attestation) of shares of Common Stock;

 

(iv)                               by a “net exercise” arrangement pursuant to
which the Company will reduce the number of shares of Common Stock issued upon
exercise by the largest whole number of shares with a Fair Market Value that
does not exceed the aggregate exercise price; provided, however, the Company
shall accept a cash or other payment from the Participant to the extent of any
remaining balance of the aggregate exercise price not satisfied by such
reduction in the number of whole shares to be issued; provided, however, that
shares of Common Stock will no longer be outstanding under an Option and will
not be exercisable thereafter to the extent that (i) shares are used to pay the
exercise price pursuant to the “net exercise,” (ii) shares are delivered to the
Participant as a result of such exercise, and (iii) shares are withheld to
satisfy tax withholding obligations; or

 

(v)                                   in any other form of legal consideration
that may be acceptable to the Board. 

 

(e)                                  Transferability of Options.  The Board may,
in its sole discretion, impose such limitations on the transferability of
Options as the Board shall determine.  In the absence of such a determination by
the Board to the contrary, the following restrictions on the transferability of
Options shall apply:

 

(i)                                    Restrictions on Transfer.  An Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. 

 

(ii)                                Domestic Relations Orders.  Notwithstanding
the foregoing, an Option may be transferred pursuant to a domestic relations
order; provided, however, that if an Option is an Incentive Stock Option, such
Option may be deemed to be a Nonstatutory Stock Option as a result of such
transfer. 

 

(iii)                            Beneficiary Designation.  Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company, in
a form provided by or otherwise satisfactory to the Company and any broker
designated by the Company to effect Option exercises, designate a third party
who, in the event of the death of the Optionholder, shall thereafter be entitled
to exercise the Option.  In the absence of such a designation, the executor or
administrator of the Optionholder’s estate shall be entitled to exercise the
Option.

 

(f)                                    Vesting of Options Generally.  The total
number of shares of Common Stock subject to an Option may vest and therefore
become exercisable in periodic installments that may or may not be equal.  The
Option may be subject to such other terms and conditions on the time

 

14

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or times when it may or may not be exercised (which may be based on performance
or other criteria) as the Board may deem appropriate.  The vesting provisions of
individual Options may vary.  The provisions of this Section 6(f) are subject to
any Option provisions governing the minimum number of shares of Common Stock as
to which an Option may be exercised.

 

(g)                                 Termination of Continuous Service.  In the
event that an Optionholder’s Continuous Service terminates (other than for Cause
or upon the Optionholder’s death or Disability), the Optionholder may exercise
his or her Option (to the extent that the Optionholder was entitled to exercise
such Option as of the date of termination of Continuous Service) but only within
such period of time ending on the earlier of (i) the date three (3) months
following the termination of the Optionholder’s Continuous Service (or such
longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement.  If,
after termination of Continuous Service, the Optionholder does not exercise his
or her Option within the time specified herein or in the Option Agreement (as
applicable), the Option shall terminate. 

 

(h)                                 Extension of Termination Date.  An
Optionholder’s Option Agreement may provide that if the exercise of the Option
following the termination of the Optionholder’s Continuous Service (other than
upon the Optionholder’s death or Disability) would be prohibited at any time
solely because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of a period of three (3) months
after the termination of the Optionholder’s Continuous Service during which the
exercise of the Option would not be in violation of such registration
requirements, or (ii) the expiration of the term of the Option as set forth in
the Option Agreement.

 

(i)                                    Disability of Optionholder.  In the event
that an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s Disability, the Optionholder may exercise his or her Option (to
the extent that the Optionholder was entitled to exercise such Option as of the
date of termination of Continuous Service), but only within such period of time
ending on the earlier of (i) the date twelve (12) months following such
termination of Continuous Service (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement.  If, after termination of Continuous Service, the
Optionholder does not exercise his or her Option within the time specified
herein or in the Option Agreement (as applicable), the Option shall terminate.

 

(j)                                    Death of Optionholder.  In the event that
(i) an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s death, or (ii) the Optionholder dies within the period (if any)
specified in the Option Agreement after the termination of the Optionholder’s
Continuous Service for a reason other than death, then the Option may be
exercised (to the extent the Optionholder was entitled to exercise such Option
as of the date of death) by the Optionholder’s estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by a person
designated to exercise the option upon the Optionholder’s death, but only within
the period ending on the earlier of (i) the date twelve (12) months following
the date of death (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of such Option as set forth in
the Option Agreement.  If, after the

 

15

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Optionholder’s death, the Option is not exercised within the time specified
herein or in the Option Agreement (as applicable), the Option shall terminate.

 

(k)                                Termination for Cause.  In the event that an
Optionholder’s Continuous Service is terminated for Cause, the Option shall
terminate immediately and cease to remain outstanding and the Option shall cease
to be exercisable with respect to any shares of Common Stock (whether vested or
unvested) at the time of such termination.

 

7.                                      PROVISIONS OF STOCK AWARDS OTHER THAN
OPTIONS.

 

(a)                                  Restricted Stock Awards.  Each Restricted
Stock Award Agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate.  To the extent consistent with
the Company’s Bylaws, at the Board’s election, shares of Common Stock may be
(i) held in book entry form subject to the Company’s instructions until any
restrictions relating to the Restricted Stock Award lapse; or (ii) evidenced by
a certificate, which certificate shall be held in such form and manner as
determined by the Board.  The terms and conditions of Restricted Stock Award
Agreements may change from time to time, and the terms and conditions of
separate Restricted Stock Award Agreements need not be identical; provided,
however, that each Restricted Stock Award Agreement shall include (through
incorporation of the provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

 

(i)                                    Consideration.  A Restricted Stock Award
may be awarded in consideration for (i) past or future services rendered to the
Company or an Affiliate, or (ii) any other form of legal consideration that may
be acceptable to the Board, in its sole discretion, and permissible under
applicable law.

 

(ii)                                Vesting.  Shares of Common Stock awarded
under a Restricted Stock Award Agreement may be subject to forfeiture to the
Company in accordance with a vesting schedule to be determined by the Board. 

 

(iii)                            Termination of Participant’s Continuous
Service.  In the event a Participant’s Continuous Service terminates, the
Company may receive via a forfeiture condition, any or all of the shares of
Common Stock held by the Participant which have not vested as of the date of
termination of Continuous Service under the terms of the Restricted Stock Award
Agreement.

 

(iv)                               Transferability.  Rights to acquire shares of
Common Stock under the Restricted Stock Award Agreement shall be transferable by
the Participant only upon such terms and conditions as are set forth in the
Restricted Stock Award Agreement, as the Board shall determine in its sole
discretion, so long as Common Stock awarded under the Restricted Stock Award
Agreement remains subject to the terms of the Restricted Stock Award Agreement.

 

(b)                                  Restricted Stock Unit Awards.  Each
Restricted Stock Unit Award Agreement shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate.  The terms and
conditions of Restricted Stock Unit Award Agreements may change from time to
time, and the terms and conditions of separate Restricted Stock Unit Award
Agreements need not be identical; provided, however, that each Restricted Stock
Unit Award

 

16

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Agreement shall include (through incorporation of the provisions hereof by
reference in the agreement or otherwise) the substance of each of the following
provisions:

 

(i)                                    Consideration.  A Restricted Stock Unit
Award may be awarded in consideration for (i) past or future services rendered
to the Company or an Affiliate, or (ii) any other form of legal consideration
that may be acceptable to the Board, in its sole discretion, and permissible
under applicable law.

 

(ii)                                Vesting.  At the time of the grant of a
Restricted Stock Unit Award, the Board may impose such restrictions or
conditions to the vesting of the Restricted Stock Unit Award as it, in its sole
discretion, deems appropriate. 

 

(iii)                            Payment.  A Restricted Stock Unit Award may be
settled by the delivery of shares of Common Stock, their cash equivalent, any
combination thereof or in any other form of consideration, as determined by the
Board and contained in the Restricted Stock Unit Award Agreement.

 

(iv)                               Termination of Participant’s Continuous
Service.  Except as otherwise provided in the applicable Restricted Stock Unit
Award Agreement, such portion of the Restricted Stock Unit Award that has not
vested will be forfeited upon the Participant’s termination of Continuous
Service.

 

(c)                                  Stock Appreciation Rights.  Each Stock
Appreciation Right Agreement shall be in such form and shall contain such terms
and conditions as the Board shall deem appropriate.  The terms and conditions of
Stock Appreciation Right Agreements may change from time to time, and the terms
and conditions of separate Stock Appreciation Right Agreements need not be
identical; provided, however, that each Stock Appreciation Right Agreement shall
include (through incorporation of the provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:

 

(i)                                    Term.  No Stock Appreciation Right shall
be exercisable after the expiration of ten (10) years from the date of grant, or
such shorter period specified in the Stock Appreciation Right Agreement. 

 

(ii)                                Strike Price.  Each Stock Appreciation Right
will be denominated in shares of Common Stock equivalents.  The strike price of
each Stock Appreciation Right shall not be less than one hundred percent (100%)
of the Fair Market Value of the Common Stock equivalents subject to the Stock
Appreciation Right on the date of grant.

 

(iii)                            Calculation of Appreciation.  The appreciation
distribution payable on the exercise of a Stock Appreciation Right will be not
greater than an amount equal to the excess of (i) the aggregate Fair Market
Value (on the date of the exercise of the Stock Appreciation Right) of a number
of shares of Common Stock equal to the number of share of Common Stock
equivalents in which the Participant is vested under such Stock Appreciation
Right, and with respect to which the Participant is exercising the Stock
Appreciation Right on such date, over (ii) the strike price that is determined
by the Board on the date of grant of the Stock Appreciation Right. 

 

17

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(iv)                               Vesting.  At the time of the grant of a Stock
Appreciation Right, the Board may impose such restrictions or conditions to the
vesting of such Stock Appreciation Right as it, in its sole discretion, deems
appropriate. 

 

(v)                                   Exercise.  To exercise any outstanding
Stock Appreciation Right, the Participant must provide written notice of
exercise to the Company in compliance with the provisions of the Stock
Appreciation Right Agreement evidencing such Stock Appreciation Right. 

 

(vi)                               Payment.  The appreciation distribution in
respect of a Stock Appreciation Right may be paid in Common Stock, in cash, in
any combination of the two or in any other form of consideration, as determined
by the Board and set forth in the Stock Appreciation Right Agreement evidencing
such Stock Appreciation Right.

 

(vii)                           Termination of Continuous Service.  In the event
that a Participant’s Continuous Service terminates (other than for Cause or upon
the Participant’s death or Disability), the Participant may exercise his or her
Stock Appreciation Right (to the extent that the Participant was entitled to
exercise such Stock Appreciation Right as of the date of termination of
Continuous Service) but only within such period of time ending on the earlier of
(i) the date three (3) months following the termination of the Participant’s
Continuous Service (or such longer or shorter period specified in the Stock
Appreciation Right Agreement), or (ii) the expiration of the term of the Stock
Appreciation Right as set forth in the Stock Appreciation Right Agreement.  If,
after termination of Continuous Service, the Participant does not exercise his
or her Stock Appreciation Right within the time specified herein or in the Stock
Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall
terminate.

 

(viii)                       Extension of Termination Date.  A Participant’s
Stock Appreciation Right Agreement may provide that if the exercise of the Stock
Appreciation Right following the termination of the Participant’s Continuous
Service (other than upon the Participant’s death or Disability) would be
prohibited at any time solely because the issuance of shares of Common Stock
would violate the registration requirements under the Securities Act, then the
Stock Appreciation Right shall terminate on the earlier of (i) the expiration of
a period of three (3) months after the termination of the Participant’s
Continuous Service during which the exercise of the Stock Appreciation Right
would not be in violation of such registration requirements, or (ii) the
expiration of the term of the Stock Appreciation Right as set forth in the Stock
Appreciation Right Agreement.

 

(ix)                              Disability of Participant.  In the event that
a Participant’s Continuous Service terminates as a result of the Participant’s
Disability, the Participant may exercise his or her Stock Appreciation Right (to
the extent that the Participant was entitled to exercise such Stock Appreciation
Right as of the date of termination of Continuous Service), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination of Continuous Service (or such longer or shorter
period specified in the Stock Appreciation Right Agreement), or (ii) the
expiration of the term of the Stock Appreciation Right as set forth in the Stock
Appreciation Right Agreement.  If, after termination of Continuous Service, the
Participant does not exercise his or her Stock Appreciation Right within the
time

 

18

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specified herein or in the Stock Appreciation Right Agreement (as applicable),
the Stock Appreciation Right shall terminate.

 

(x)                                  Death of Participant.  In the event that
(i) a Participant’s Continuous Service terminates as a result of the
Participant’s death, or (ii) the Participant dies within the period (if any)
specified in the Stock Appreciation Right Agreement after the termination of the
Participant’s Continuous Service for a reason other than death, then the Stock
Appreciation Right may be exercised (to the extent the Participant was entitled
to exercise such Stock Appreciation Right as of the date of death) by the
Participant’s estate, by a person who acquired the right to exercise the Stock
Appreciation Right by bequest or inheritance or by a person designated to
exercise the Stock Appreciation Right upon the Participant’s death, but only
within the period ending on the earlier of (i) the date twelve (12) months
following the date of death (or such longer or shorter period specified in the
Stock Appreciation Right Agreement), or (ii) the expiration of the term of such
Stock Appreciation Right as set forth in the Stock Appreciation Right
Agreement.  If, after the Participant’s death, the Stock Appreciation Right is
not exercised within the time specified herein or in the Stock Appreciation
Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

 

(xi)                              Termination for Cause.  In the event that a
Participant’s Continuous Service is terminated for Cause, the Stock Appreciation
Right shall terminate immediately and cease to remain outstanding and the Stock
Appreciation Right shall cease to be exercisable with respect to any shares of
Common Stock (whether vested or unvested) at the time of such termination.

 

(d)                                  Performance Awards. 

 

(i)                                    Performance Stock Awards.  A Performance
Stock Award is either a Restricted Stock Award or Restricted Stock Unit Award
that may be granted, may vest, or may be exercised based upon the attainment
during a Performance Period of certain Performance Goals.  A Performance Stock
Award may, but need not, require the completion of a specified period of
Continuous Service. The length of any Performance Period, the Performance Goals
to be achieved during the Performance Period, and the measure of whether and to
what degree such Performance Goals have been attained shall be conclusively
determined by the Committee in its sole discretion.  The maximum benefit to be
received by any Participant in any calendar year attributable to Performance
Stock Awards described in this Section 7(d)(i) shall not exceed the value of one
million (1,000,000) shares of Common Stock. 

 

(ii)                                Performance Cash Awards.  A Performance Cash
Award is a cash award that may be granted upon the attainment during a
Performance Period of certain Performance Goals.  A Performance Cash Award may
also require the completion of a specified period of Continuous Service.  The
length of any Performance Period, the Performance Goals to be achieved during
the Performance Period, and the measure of whether and to what degree such
Performance Goals have been attained shall be conclusively determined by the
Committee in its sole discretion.  The maximum benefit to be received by any
Participant in any calendar year attributable to Performance Cash Awards
described in this Section 7(d)(ii) shall not exceed two million dollars
($2,000,000). 

 

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(e)                                  Other Stock Awards.  Other forms of Stock
Awards valued in whole or in part by reference to, or otherwise based on, Common
Stock may be granted either alone or in addition to Stock Awards provided for
under Section 6 and the preceding provisions of this Section 7.  Subject to the
provisions of the Plan, the Board shall have sole and complete authority to
determine the persons to whom and the time or times at which such Other Stock
Awards will be granted, the number of shares of Common Stock (or the cash
equivalent thereof) to be granted pursuant to such Other Stock Awards and all
other terms and conditions of such Other Stock Awards. 

 

8.                                      MISCELLANEOUS.

 

(a)                                  Use of Proceeds.  Proceeds from the sale of
shares of Common Stock pursuant to Stock Awards shall constitute general funds
of the Company.

 

(b)                                  Stockholder Rights.  No Participant shall
be deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Stock Award unless and
until such Participant has exercised the Stock Award pursuant to its terms and
the issuance of the Common Stock has been entered into the books and records of
the Company.

 

(c)                                  No Employment or Other Service Rights. 
Nothing in the Plan, any Stock Award Agreement or other instrument executed
thereunder or in connection with any Award granted pursuant thereto shall confer
upon any Participant any right to continue to serve the Company or an Affiliate
in the capacity in effect at the time the Award was granted or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant’s agreement with the Company
or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of
the Company or an Affiliate, and any applicable provisions of the corporate law
of the state in which the Company or the Affiliate is incorporated, as the case
may be.

 

(d)                                  Incentive Stock Option $100,000
Limitation.  To the extent that the aggregate Fair Market Value (determined at
the time of grant) of Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionholder during any calendar year
(under all plans of the Company and any Affiliates) exceeds one hundred thousand
dollars ($100,000), the Options or portions thereof that exceed such limit
(according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options, notwithstanding any contrary provision of the
applicable Option Agreement(s).

 

(e)                                  Investment Assurances.  The Company may
require a Participant, as a condition of exercising or acquiring Common Stock
under any Stock Award, (i) to give written assurances satisfactory to the
Company as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising
the Stock Award; and (ii) to give written assurances satisfactory to the Company
stating that the Participant is acquiring Common Stock subject to the Stock
Award for

 

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the Participant’s own account and not with any present intention of selling or
otherwise distributing the Common Stock.  The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise or acquisition of Common Stock under
the Stock Award has been registered under a then currently effective
registration statement under the Securities Act, or (ii) as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable
securities laws.  The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common
Stock.

 

(f)                                    Securities Law Compliance.  The Company
shall seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to grant Stock
Awards and to issue and sell shares of Common Stock upon exercise of the Stock
Awards; provided, however, that this undertaking shall not require the Company
to register under the Securities Act the Plan, any Stock Award or any Common
Stock issued or issuable pursuant to any such Stock Award.  If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or
agency the authority that counsel for the Company deems necessary for the lawful
issuance and sale of Common Stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell Common Stock upon exercise of
such Stock Awards unless and until such authority is obtained.  A Participant
shall not be eligible for the grant of a Stock Award or the subsequent issuance
of Common Stock pursuant to the Stock Award if such grant or issuance would be
in violation of any applicable securities laws. 

 

(g)                                 Withholding Obligations.  To the extent
provided by the terms of a Stock Award Agreement, the Company may, in its sole
discretion, satisfy any federal, state or local tax withholding obligation
relating to a Stock Award by any of the following means (in addition to the
Company’s right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) causing the Participant to
tender a cash payment; (ii) withholding shares of Common Stock from the shares
of Common Stock issued or otherwise issuable to the Participant in connection
with the Stock Award; provided, however, that no shares of Common Stock are
withheld with a value exceeding the minimum amount of tax required to be
withheld by law (or such lower amount as may be necessary to avoid
classification of the Stock Award as a liability for financial accounting
purposes); (iii) withholding payment from any amounts otherwise payable to the
Participant; or (iv) by such other method as may be set forth in the Stock Award
Agreement.

 

(h)                                 Electronic Delivery.  Any reference herein
to a “written” agreement or document shall include any agreement or document
delivered electronically or posted on the Company’s intranet.

 

9.                                      ADJUSTMENTS UPON CHANGES IN COMMON
STOCK; CORPORATE TRANSACTIONS.

 

(a)                                  Capitalization Adjustments.  If any change
is made in, or other events occur with respect to, the Common Stock subject to
the Plan or subject to any Stock Award after the effective date of the Plan set
forth in Section 12 without the receipt of consideration by the

 

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Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company (each a “Capitalization Adjustment”)), the Board
shall appropriately adjust: (i) the class(es) and maximum number of securities
subject to the Plan pursuant to Section 4(a), (ii) the class(es) and maximum
number of securities that may be issued pursuant to the exercise of Incentive
Stock Options pursuant to Section 4(c), (iii) the class(es) and maximum number
of securities that may be awarded to any person pursuant to Sections 5(c) and
7(d)(i), and (iv) the class(es) and number of securities and price per share of
stock subject to outstanding Stock Awards.  The Board shall make such
adjustments, and its determination shall be final, binding and conclusive. 
(Notwithstanding the foregoing, the conversion of any convertible securities of
the Company shall not be treated as a transaction “without receipt of
consideration” by the Company.) 

 

(b)                                  Dissolution or Liquidation.  In the event
of a dissolution or liquidation of the Company, all outstanding Stock Awards
(other than Stock Awards consisting of vested and outstanding shares of Common
Stock not subject to the Company’s right of repurchase) shall terminate
immediately prior to the completion of such dissolution or liquidation, and the
shares of Common Stock subject to the Company’s repurchase option may be
repurchased by the Company notwithstanding the fact that the holder of such
Stock Award is providing Continuous Service, provided, however, that the Board
may, in its sole discretion, cause some or all Stock Awards to become fully
vested, exercisable and/or no longer subject to repurchase or forfeiture (to the
extent such Stock Awards have not previously expired or terminated) before the
dissolution or liquidation is completed but contingent on its completion.

 

(c)                                  Corporate Transaction.  The following
provisions shall apply to Stock Awards in the event of a Corporate Transaction
unless otherwise provided in a written agreement between the Company or any
Affiliate and the holder of the Stock Award: 

 

(i)                                    Stock Awards May Be Assumed.  In the
event of a Corporate Transaction, any surviving corporation or acquiring
corporation (or the surviving or acquiring corporation’s parent company) may
assume or continue any or all Stock Awards outstanding under the Plan or may
substitute similar stock awards for Stock Awards outstanding under the Plan
(including, but not limited to, awards to acquire the same consideration paid to
the stockholders of the Company pursuant to the Corporate Transaction), and any
reacquisition or repurchase rights held by the Company in respect of Common
Stock issued pursuant to Stock Awards may be assigned by the Company to the
successor of the Company (or the successor’s parent company, if any), in
connection with such Corporate Transaction.  A surviving corporation or
acquiring corporation may choose to assume or continue only a portion of a Stock
Award or substitute a similar stock award for only a portion of a Stock Award. 
The terms of any assumption, continuation or substitution shall be set by the
Board in accordance with the provisions of Section 3(b). 

 

(ii)                                Stock Awards Held by Current Participants. 
In the event of a Corporate Transaction in which the surviving corporation or
acquiring corporation (or its parent company) does not assume or continue any or
all outstanding Stock Awards or substitute similar stock awards for such
outstanding Stock Awards, then with respect to Stock Awards that have

 

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not been assumed, continued or substituted and that are held by Participants
whose Continuous Service has not terminated prior to the effective time of the
Corporate Transaction (referred to as the “Current Participants”), the vesting
of such Stock Awards (and, if applicable, the time at which such Stock Awards
may be exercised) shall (contingent upon the effectiveness of the Corporate
Transaction) be accelerated in full to a date prior to the effective time of
such Corporate Transaction as the Board shall determine (or, if the Board shall
not determine such a date, to the date that is five (5) days prior to the
effective time of the Corporate Transaction), and such Stock Awards shall
terminate if not exercised (if applicable) at or prior to the effective time of
the Corporate Transaction, and any reacquisition or repurchase rights held by
the Company with respect to such Stock Awards shall lapse (contingent upon the
effectiveness of the Corporate Transaction).  No vested Restricted Stock Unit
Award shall terminate pursuant to this Section 9(c)(ii) without being settled by
delivery of shares of Common Stock, their cash equivalent, any combination
thereof, or in any other form of consideration, as determined by the Board,
prior to the effective time of the Corporate Transaction.

 

(iii)                            Stock Awards Held by Former Participants.  In
the event of a Corporate Transaction in which the surviving corporation or
acquiring corporation (or its parent company) does not assume or continue any or
all outstanding Stock Awards or substitute similar stock awards for such
outstanding Stock Awards, then with respect to Stock Awards that have not been
assumed, continued or substituted and that are held by persons other than
Current Participants, the vesting of such Stock Awards (and, if applicable, the
time at which such Stock Award may be exercised) shall not be accelerated and
such Stock Awards (other than a Stock Award consisting of vested and outstanding
shares of Common Stock not subject to the Company’s right of repurchase) shall
terminate if not exercised (if applicable) prior to the effective time of the
Corporate Transaction; provided, however, that any reacquisition or repurchase
rights held by the Company with respect to such Stock Awards shall not terminate
and may continue to be exercised notwithstanding the Corporate Transaction.  No
vested Restricted Stock Unit Award shall terminate pursuant to this
Section 9(c)(iii) without being settled by delivery of shares of Common Stock,
their cash equivalent, any combination thereof, or in any other form of
consideration, as determined by the Board, prior to the effective time of the
Corporate Transaction.

 

(iv)                               Payment for Stock Awards in Lieu of
Exercise.  Notwithstanding the foregoing, in the event a Stock Award will
terminate if not exercised prior to the effective time of a Corporate
Transaction, the Board may provide, in its sole discretion, that the holder of
such Stock Award may not exercise such Stock Award but will receive a payment,
in such form as may be determined by the Board, equal in value to the excess, if
any, of (i) the value of the property the holder of the Stock Award would have
received upon the exercise of the Stock Award, over (ii) any exercise price
payable by such holder in connection with such exercise. 

 

(d)                                  Change in Control.  A Stock Award may be
subject to additional acceleration of vesting and exercisability upon or after a
Change in Control as may be provided in the Stock Award Agreement for such Stock
Award or as may be provided in any other written agreement between the Company
or any Affiliate and the Participant.  A Stock Award may vest as to all or any
portion of the shares subject to the Stock Award (i) immediately upon the
occurrence of a Change in Control, whether or not such Stock Award is assumed,
continued, or substituted by a surviving or acquiring entity in the Change in
Control, or (ii) in the event a Participant’s

 

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Continuous Service is terminated, actually or constructively, within a
designated period following the occurrence of a Change in Control.  In the
absence of such provisions, no such acceleration shall occur. 

 

10.                               AMENDMENT OF THE PLAN AND STOCK AWARDS.

 

(a)                                  Amendment of Plan.  Subject to the
limitations of applicable law, the Board at any time, and from time to time, may
amend the Plan.  However, stockholder approval shall be required for any
amendment of the Plan that either (i) materially increases the number of shares
of Common Stock available for issuance under the Plan, (ii) materially expands
the class of individuals eligible to receive Awards under the Plan,
(iii) materially increases the benefits accruing to Participants under the Plan
or materially reduces the price at which shares of Common Stock may be issued or
purchased under the Plan, (iv) materially extends the term of the Plan, or
(v) expands the types of Awards available for issuance under the Plan, but only
to the extent required by applicable law or listing requirements.

 

(b)                                  Stockholder Approval.  The Board, in its
sole discretion, may submit any other amendment to the Plan for stockholder
approval, including, but not limited to, amendments to the Plan intended to
satisfy the requirements of Section 162(m) of the Code and the regulations
thereunder regarding the exclusion of performance-based compensation from the
limit on corporate deductibility of compensation paid to Covered Employees.

 

(c)                                  Contemplated Amendments.  It is expressly
contemplated that the Board may amend the Plan in any respect the Board deems
necessary or advisable to provide eligible Employees with the maximum benefits
provided or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options and/or to bring the
Plan and/or Incentive Stock Options granted under it into compliance therewith.

 

(d)                                  Amendment of Awards.  The Board, at any
time and from time to time, may amend the terms of any one or more Awards
(either directly or by amending the Plan), including, but not limited to,
amendments to provide terms more favorable than previously provided in the Stock
Award Agreement or the written terms of a Performance Cash Award, subject to any
specified limits in the Plan that are not subject to Board discretion; provided,
however, that the rights under any Award outstanding at the time of such
amendment shall not be impaired by any such amendment unless (i) the Company
requests the consent of the affected Participant, and (ii) such Participant
consents in writing.

 

11.                               TERMINATION OR SUSPENSION OF THE PLAN.

 

(a)                                  Plan Term.  The Board may suspend or
terminate the Plan at any time.  Unless sooner terminated, the Plan shall
terminate on the day before the tenth (10th) anniversary of the earlier of
(i) the date the Plan is adopted by the Board, or (ii) the date the Plan is
approved by the stockholders of the Company.  No Awards may be granted under the
Plan while the Plan is suspended or after it is terminated.

 

(b)                                  No Impairment of Rights.  Suspension or
termination of the Plan shall not impair rights and obligations under any Award
granted while the Plan is in effect except with the written consent of the
affected Participant.

 

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12.                               EFFECTIVE DATE OF PLAN.

 

The Plan shall become effective upon approval by the stockholders at the 2006
Annual Meeting as of the Effective Date. 

 

13.                               CHOICE OF LAW.

 

The law of the State of Delaware shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to that
state’s conflict of laws rules.

 

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