WORLDGATE COMMUNICATIONS, INC. 2003 EQUITY INCENTIVE PLAN, AS AMENDED BY
AMENDMENT 2009-1
 
1.
Establishment, Purpose and Term of Plan.

 
1.1          Establishment.  WorldGate Communications, Inc. (the “Company”), a
Delaware corporation, hereby establishes the WorldGate Communications, Inc. 2003
Equity Incentive Plan (the “Plan”). This Plan, having been adopted by the Board
November 13, 2003, shall become effective on that date (the “Effective Date”),
but subject to the approval of the stockholders of the Company, to the extent
required by prevailing law and/or exchange listing requirements. Awards may be
granted under the Plan prior to such stockholder approval (but after the Board’s
adoption of the Plan), subject to, and contingent upon, any such required
stockholder approval.
 
1.2          Purpose.  The purpose of the Plan is to advance the interests of
the Participating Company Group and its stockholders by providing an incentive
to attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group. The Plan seeks to achieve this
purpose by providing for Awards in the form of Options, Stock Appreciation
Rights, Stock Purchase Rights, Stock Bonuses, Stock Units, Performance Shares
and Performance Units.
 
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 Incentive Stock Options shall
be granted, if at all, within ten (10) years from the earlier of the date the
Plan is adopted by the Board or the date the Plan is duly approved by the
stockholders of the Company, if so required.
 
2.
Definitions and Construction.

 
2.1          Definitions.  Whenever used herein, the following terms shall have
their respective meanings set forth below:
 
(a)           “Award” means any Option, SAR, Stock Purchase Right, Stock Bonus,
Stock Unit, Performance Share or Performance Unit granted under the Plan.
 
(b)           “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. An Award Agreement may be an “Option
Agreement,” an “SAR Agreement,” a “Stock Purchase Agreement,” a “Stock Unit
Agreement”, a “Stock Bonus Agreement,” a “Performance Share Agreement” or a
“Performance Unit Agreement.”
 
(c)           “Board” means the Board of Directors of the Company.
 
(d)           “Code” means the Internal Revenue Code of 1986, as amended, and
any applicable regulations promulgated thereunder.
 
(e)           “Committee” means the committee of the Board duly appointed by the
Board to administer the Plan and having such powers as shall be specified by 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.
 
(f)           “Company” means WorldGate Communications, Inc., a Delaware
corporation, or any successor corporation thereto that adopts this Plan.
 
(g)           “Consultant” means a person engaged to provide bona fide
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.
 
(h)           “Disability” means the permanent and total disability of the
Participant, within the meaning of Section 22(e)(3) of the Code.
 

 
 

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(i)           “Dividend Equivalent” means a bookkeeping entry representing 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.
 
(j)           “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, and further 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.
 
(k)          “Exchange Act” means the Securities Exchange Act of 1934, as
amended.
 
(l)           “Fair Market Value” means, as of any date, the value of a share of
Stock 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:
 
(i)           if there are sales of shares on a national securities exchange or
in an over-the-counter market on the date of grant (or on such other date as
value must be determined), then the closing price on such date; or
 
(ii)          if there are no such sales of shares on the date of grant (or on
such other date as value must be determined) but there are such sales on dates
within a reasonable period both before and after such date, then the weighted
average of the closing price on the nearest date before and the nearest date
after such date on which there were such sales; or
 
(iii)         if actual sales are not available during a reasonable period
beginning before and ending after the date of grant (or on such other date as
value must be determined), then the mean between the bid and asked price on such
date as reported by the National Quotation Bureau; or
 
(iv)        if (i) through (iii) are not applicable, then such other method of
determining fair market value as shall be adopted by the Committee.
 
Where the Fair Market Value of Shares is determined under (ii) above, the
average of the quoted closing prices on the nearest date before and the nearest
date after the last business day prior to the specified date shall be weighted
inversely by the respective numbers of trading days between the dates of
reported sales and such date (i.e., the valuation date), in accordance with
Treas. Reg. §20.2031-2(b)(1) or any successor thereto.
 
(m)          “Incentive Stock Option” or “ISO” 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.
 
(n)          “Insider” means an officer (as defined in Rule 16a-1(f) of the
Exchange Act,) a member of the Board or any other person whose transactions in
Stock are subject to Section 16 of the Exchange Act.
 
(o)          “Non-Employee Director” means a person serving as a member of the
Board who is, at the time of receiving any Award hereunder, not an Employee.
 
(p)          “Nonstatutory Stock Option” or “NSO” 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.
 
(q)          “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 of the
Plan. An Option may be either an Incentive Stock Option or a Nonstatutory Stock
Option.
 
(r)          “Parent Corporation” means any present or future “parent
corporation” of the Company, as defined in Section 424(e) of the Code.
 
(s)          “Participant” means any eligible person who has been granted one or
more Awards.
 

 
 

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(t)          “Participating Company” means the Company or any Parent Corporation
or Subsidiary Corporation.
 
(u)         “Participating Company Group” means, at any point in time, all
corporations collectively which are then Participating Companies.
 
(v)         “Performance Award” means an Award of Performance Shares or
Performance Units.
 
(w)         “Performance Award Formula” means, for any Performance Award, a
formula or table established by the Committee pursuant to Section 9.3 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.
 
(x)          “Performance Goal” means a performance goal established by the
Committee pursuant to Section 9.3 of the Plan.
 
(y)         “Performance Period” means a period established by the Committee
pursuant to Section 9.3 of the Plan at the end of which one or more Performance
Goals are to be measured.
 
(z)          “Performance Share” means a bookkeeping entry representing a right
granted to a Participant pursuant to Section 9 of the Plan to receive a payment
equal to the value of one share of Stock, as determined by the Committee, based
on performance.
 
(aa)        “Performance Unit” means a bookkeeping entry representing a right
granted to a Participant pursuant to Section 9 of the Plan to receive a payment
equal to the value as determined by the Committee, based upon performance.
 
(bb)       “Predecessor Plan” means, the WorldGate Communications, Inc. 1996
Stock Option Plan.
 
(cc)        “Restriction Period” means the period established in accordance with
Section 8.5 of the Plan during which shares subject to a Stock Award are subject
to Vesting Conditions.
 
(dd)       “SAR” or “Stock Appreciation Right” means a right granted to a
Participant pursuant to Section 7 of the Plan to receive payment 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 value of a share of Stock on the date of
grant of the SAR.
 
(ee)        “Securities Act” means the Securities Act of 1933, as amended.
 
(ff)         “Service” means a Participant’s employment or service with the
Participating Company Group as an Employee, Consultant or a member of the Board,
whichever such capacity the Participant held on the date of grant of an Award
or, if later, the date on which the Participant commenced Service. Unless
otherwise determined by the Committee, a Participant’s Service shall be deemed
to have terminated if the Participant ceases to render service to the
Participating Company Group in such initial capacity. However, a Participant’s
Service shall not be deemed to have terminated merely because of a change in the
Participating Company for which the Participant renders such Service in such
initial capacity, 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 bona fide leave of absence
approved by the Company of ninety (90) days or less. In the event of a leave in
excess of ninety (90) days, the Participant’s Service shall be deemed to
terminate on the ninety-first (91st) day of the leave unless the Participant’s
right to return to Service 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 corporation 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.
 
(gg)       “Stock” means the common stock of the Company, as adjusted from time
to time in accordance with Section 4.2 of the Plan.
 
(hh)       “Stock Award” means an Award of a Stock Bonus, Stock Unit or a Stock
Purchase Right.
 
 
 

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(ii)          “Stock Bonus” means Stock granted to a Participant pursuant to
Section 8 of the Plan.
 
(jj)          “Stock Purchase Right” means a right to purchase Stock granted to
a Participant pursuant to Section 8 of the Plan.
 
(kk)        “Stock Unit” means the right to receive in cash or Stock the Fair
Market Value of a share of Stock granted pursuant to Section 8 of the Plan.
 
(ll)          “Subsidiary Corporation” means any present or future “subsidiary
corporation” of the Company, as defined in Section 424(f) of the Code.
 
(mm)      “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 within the meaning of Section 422(b)(6) of the Code.
 
(nn)        “Vesting Conditions” mean those conditions established in accordance
with Section 8.5 of the Plan prior to the satisfaction of which shares subject
to a Stock Award remain subject to forfeiture or a repurchase option in favor of
the Company.
 
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 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 Certain Officers.  The Committee may, in its
discretion, and subject to the prevailing and applicable rules and regulations
of any exchange upon which the Stock is traded, delegate to a sub-committee
comprised of one or more Officers the authority to grant one or more Options,
without further approval of the Board or the Committee, to any Employee, other
than to a person who, at the time of such grant, is an Insider; provided,
however, that (i) such Awards shall not be granted for shares in excess of the
maximum aggregate number of shares of Stock authorized for issuance pursuant to
Section 4.1, (ii) the exercise price per share of each Option shall be not less
than the Fair Market Value per share of the Stock on the effective date of grant
(or, if the Stock has not traded on such date, on the last day preceding the
effective date of grant on which the Stock was traded), and (iii) each such
Award shall be subject to the terms and conditions of the Plan and such other
guidelines as shall be established from time to time by the Board or the
Committee. Any such committee of Officers 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 committee of Officers has been duly
delegated the authority with respect to such matter, right, obligation,
determination or election.
 
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).  If the Company is a
“publicly held corporation” as defined in Section 162(m)(2) of the Code, the
Committee may, in its discretion, and subject to the prevailing and applicable
rules and regulations of any exchange upon which the Stock is traded, delegate
to a sub-committee comprised solely of two or more “outside directors” as
defined in Treas. Reg. §1.162-27(e)(3), both of which also comply with the
definition of independent directors as set forth in NASDAQ Rule 4200, each as
the same may be amended, the authority to grant one or more Options, without
further approval of the Board or the Committee, to any Employee, or to otherwise
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:

 
 

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(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;
 
(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;
 
(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 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 of SARs, Stock Units, Performance
Shares or Performance Units 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)           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 of or to accommodate the laws,
regulations, tax or accounting effectiveness, accounting principles or custom
of, foreign jurisdictions whose citizens may be granted Awards; and
 
(j)           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.
 
Such determinations and actions of the Committee, and all other determinations
and actions of the Committee made or taken under authority granted by any
provision of the Plan, shall be conclusive and shall bind all parties. Nothing
in this subsection 3.5 shall be construed as limiting the power of the Board or
the Committee to make the adjustments described in Section 4 hereof.
 
3.6          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.
 

 
 

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4.
Shares Subject to Plan.

 
4.1          Maximum Number of Shares Issuable.  Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be equivalent to 26,500,000 shares. Such
shares shall consist of authorized but unissued or reacquired shares (and the
Company may purchase shares reacquired for this purpose) 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 at the Participant’s
purchase price, 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 (i) with respect to any portion of an Award that is
settled in cash or (ii) to the extent such shares are withheld in satisfaction
of tax withholding obligations pursuant to Section 13.2. 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, the number of shares available for issuance under the Plan shall be
reduced by the gross number of shares for which the Option is exercised.
 
4.2          Adjustments for Changes in Capital Structure.  In the event of any
change in the Stock 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
stockholders 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 class of shares
subject to the Plan, in the ISO Share Limit set forth in Section 5.3(b), the
Award limits set forth in Section 5.4 and to any outstanding Awards, and in the
exercise or purchase price per share under any outstanding Award.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 4.2 shall be rounded down to the nearest whole number,
and in no event may the exercise or purchase price under any Award be decreased
to an amount less than the par value, if any, of the stock subject to such
Award. 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 Non-Employee Directors of Participating Companies.
For purposes of the foregoing sentence, “Employees,” “Consultants” and
“Non-Employee Directors” shall, to the extent allowed by prevailing laws, rules
and regulations, include prospective Employees, prospective Consultants and
prospect Non-Employee 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.
 
5.2          Participation.  Awards are granted solely at the discretion of the
Committee. Eligible persons may be granted more than one (1) Award. However,
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          Award Limits for Publicly Held Corporations. The following limits
shall apply to the grant of any Award hereunder if, at the time of the grant,
the Company is a “publicly held corporation” as defined in Section 162(m)(2) of
the Code:
 
(a)           Options.  Subject to adjustment as provided in Section 4.2, no
Participant shall be granted within any fiscal year of the Company one or more
Options which in the aggregate are for more than two million (2,000,000) shares
of Stock,
 
(b)           SARS.  Subject to adjustment as provided in Section 4.2, no
Participant shall be granted within any fiscal year of the Company one or more
SARS which in the aggregate are for more than one million (1,000,000) shares of
Stock,
 
(c)           Stock Awards.  Subject to adjustment as provided in Section 4.2,
no Participant shall be granted within any fiscal year of the Company one or
more Stock Awards, subject to Vesting Conditions based on the attainment of
Performance Goals, for more than one million (1,000,000) shares of Stock.

 
 

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(d)           Performance Awards.  Subject to adjustment as provided in
Section 4.2, no Employee shall be granted (i) Performance Shares which could
result in such Employee receiving more than one million (1,000,000) shares of
Stock for each full fiscal year of the Company contained in the Performance
Period for such Award, or (ii) Performance Units which could result in such
Employee receiving more than two million five hundred thousand dollars
($2,500,000) 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 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) no
Option shall have an exercise price per share less than one hundred percent
(100%) of 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.
 
6.2          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.
Notwithstanding the foregoing provisions, failure to exercise an Incentive Stock
Option within the periods of time prescribed under sections 421 and 422(a) of
the Code shall cause the Incentive Stock Option to cease to be treated as an
“incentive stock option” for purposes of sections 421 and 422 of the Code.
 
(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 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
different limitation 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, each portion shall be separately identified.

 
 

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6.3          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,
(c) no Option granted to a prospective Employee or prospective Consultant may
become exercisable prior to the date on which such person commences Service, and
(d) no option shall be exercisable during any period which the Committee has
designated in writing as a prohibited exercise period. 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. The Committee may at any time and from time to time accelerate the
time at which all or any part of the Option may be exercised. Any exercise of an
Option must be in writing, signed by the proper person, and delivered or mailed
to the Company, accompanied by (i) any other documents required by the Committee
and (ii) payment in full in accordance with subsection (6.4) below for the
number of shares for which the Option is exercised (except that, in the case of
an exercise arrangement approved by the Committee and described in subsection
(6.4)(a)(iii) below, payment may be made as soon as practicable after the
exercise). Only full shares shall be issued under the Plan, and any fractional
share that might otherwise be issuable upon exercise of an Option granted
hereunder shall be forfeited. All obligations of the Company hereunder shall be
subject to the rights of the Company as set forth in the Plan to withhold or
otherwise require the payment of amounts required to be withheld for any taxes.
If the Participant fails to accept delivery of, or to pay for, any of the shares
of Stock specified in the Participant’s notice of exercise upon tender or
delivery of the shares, the Participant’s right to purchase such shares may be
terminated at the sole discretion of the Committee. The date that the notice of
exercise, in compliance with the terms and conditions hereof, is received by the
Company shall be deemed the date of exercise hereunder.
 
6.4          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 cash
equivalent, (ii) by tender to the Company 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”), or (iv) 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. Unless otherwise provided by the Committee,
an Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock unless such shares either have been owned by the
Participant for more than six (6) months (and not used for another Option
exercise by attestation during such period) or were not acquired, directly or
indirectly, from the Company.
 
(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.
 
6.5          Effect of Termination of Service.  Except as otherwise determined
by the Committee or as expressly set forth in the Award Agreement, if there is a
termination of Service of a Participant for any reason the following shall apply
(in no event, however, shall an Option remain exercisable beyond the latest date
on which it could have been exercised without regard to this Section):
 
(a)           In the event of a termination of Service for any reason other than
death, Disability, voluntary termination by the Participant without the consent
of the applicable Participating Company, or termination for cause (as defined
below,) all Options held by the Participant that were not exercisable
immediately prior to the termination of Service shall terminate effective with
the termination of Service. Any Options that were exercisable immediately prior
to the termination of Service will continue to be exercisable for three months,
and shall thereupon terminate.

 
 

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(b)           In the event termination of Service on account of a “termination
for cause” by the applicable Participating Company, as determined in accordance
with the policies of such Participating Company in effect before any Change in
Control or as determined by a written contract between the Consultant and the
Company, or on account of a voluntary separation from the applicable
Participating Company without the consent of such Participating Company, all
Options held by the Participant shall terminate effective with the termination
of Service.
 
(c)           In the event of a termination of Service for (i) the death of the
Participant or (ii) due to Disability, any Option which is otherwise exercisable
by the Participant on the date immediately prior to the termination of Service,
shall terminate unless exercised by the Participant or the Participant’s
personal representative within one year of the date on which Service is
terminated.
 
6.6          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. No Option shall be assignable or
transferable by the Participant, except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by the
Committee, in its discretion, and as set forth in the Award Agreement evidencing
a Nonstatutory Stock Option, such 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.
 
6.7          Automatic Options for Non-Employee Directors.  Each Non-Employee
Director shall automatically be granted the following Nonstatutory Stock Options
hereunder, without further action by the Committee, but otherwise subject to the
terms and conditions of this Plan:
 
(a)           An initial grant upon being initially elected as a member of the
Board, an Option to purchase 30,000 shares of Stock, and
 
(b)           An annual grant on July 1 2004 and each anniversary thereof (if
there are no sales of Stock on July 1, then the nearest date before July 1 on
which there were such sales,) provided the Participant has been a Non-Employee
Director for at least one year, and is then a Non-Employee Director, an Option
to purchase 10,000 shares of Stock.
 
The numbers of shares subject to each Option awarded hereunder shall, however,
be reduced by the number of shares subject to options, if any, granted to such
Non-Employee Director, as a Non-Employee Director under any Predecessor plan,
with any initial grant offsetting the above initial grant and any annual grants
offsetting the corresponding annual grant, each as set forth above.
 
7.
Terms and Conditions of Stock Appreciation Rights.

 
SARs shall be evidenced by Award Agreements specifying the number of SARs
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:
 
7.1          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 SAR granted in tandem with
an NQSO may be granted either at or after the time the NQSO is granted. A SAR
granted in tandem with an ISO may be granted only at the time the ISO is
granted.
 
7.2          Exercise Price.  The exercise price for each SAR shall be
established in the discretion of the Committee.
 
7.3          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. The Committee may, in its discretion,
provide in any Award Agreement evidencing a Tandem SAR that such SAR may not be
exercised without the advance approval of the Company and, if such approval is
not given, then the Option shall nevertheless remain exercisable in accordance
with its terms. A Tandem SAR shall terminate and cease to be exercisable no
later than the date on which the related Option expires or is terminated or
canceled. Upon the exercise of a Tandem SAR with respect to some or all of the
shares subject to such SAR, the related Option shall be canceled automatically
as to the number of shares with respect to which the Tandem SAR was exercised.
Upon the exercise of an Option related to a Tandem SAR as to some or all of the
shares subject to such Option, the related Tandem SAR shall be canceled
automatically as to the number of shares with respect to which the related
Option was exercised.

 
 

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(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
eight (8) years after the effective date of grant of such SAR.
 
7.4          Exercise of SARs.  Upon the exercise (or deemed exercise pursuant
to Section 7.5) of an SAR, the Participant (or the Participant’s legal
representative or other person who acquired the right to exercise the SAR by
reason of the Participant’s death) shall be entitled to receive payment of an
amount for each share with respect to which the SAR is exercised 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 value of a share of Stock on the date of grant of
the SAR. Payment of such amount shall be made in cash, shares of Stock, or any
combination thereof as determined by the Committee. Unless otherwise provided in
the Award Agreement evidencing such SAR, payment shall be made in a lump sum as
soon as practicable following the date of exercise of the SAR. The Award
Agreement evidencing any SAR may provide for deferred payment in a lump sum or
in installments. When payment is to be made in shares of Stock, the number of
shares to be issued shall be determined on the basis of the Fair Market Value of
a share of Stock on the date of exercise of the SAR. For purposes of Section 7,
an SAR shall be deemed exercised on the date on which the Company receives
notice of exercise from the Participant.
 
7.5          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.
 
7.6          Effect of Termination of Service.  An SAR shall be exercisable
after a Participant’s termination of Service to such extent and during such
period as determined by the Committee, in its discretion, and set forth in the
Award Agreement evidencing such SAR.
 
7.7          Non-transferability of SARs.  SARs may not be assigned or
transferred in any manner except by will or the laws of descent and
distribution, and, during the lifetime of the Participant, shall be exercisable
only by the Participant or the Participant’s guardian or legal representative.
 
8.
Terms and Conditions of Stock Awards.

 
Stock Awards shall be evidenced by Award Agreements specifying whether the Award
is a Stock Bonus or a Stock Purchase Right or a Stock Unit, and the number of
shares of Stock subject to the Award, in such form as the Committee shall from
time to time establish. No Stock Award or purported Stock Award shall be a valid
and binding obligation of the Company unless evidenced by a fully executed Award
Agreement. Award Agreements evidencing 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:
 
8.1          Types of Stock Awards Authorized.  Stock Awards may be in the form
of either a Stock Bonus, Stock Purchase Right or a Stock Unit. 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 9.4. If either the grant of a 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 9.3 through 9.5(a).
 
8.2          Purchase Price.  The purchase price for shares of Stock issuable
under each Stock Purchase Right shall be established by the Committee in its
discretion. No monetary payment (other than applicable tax withholding) shall be
required as a condition of receiving shares of Stock pursuant to a Stock Bonus
or a Stock Unit, the consideration for which shall be services actually rendered
to a Participating Company or for its benefit. Notwithstanding the foregoing,
the Participant shall furnish consideration in the form of cash or past services
rendered to a Participating Company or for its benefit having a value not less
than the par value of the shares of Stock subject to such Stock Award.

 
 

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8.3          Purchase Period.  A Stock Purchase Right shall be exercisable
within a period established by the Committee, which shall in no event exceed
thirty (30) days from the effective date of the grant of the Stock Purchase
Right; provided, however, that no Stock Purchase Right granted to a prospective
Employee or prospective Consultant may become exercisable prior to the date on
which such person commences Service.
 
8.4          Payment of Purchase Price.  Except as otherwise provided below,
payment of the purchase price for the number of shares of Stock being purchased
pursuant to any Stock Purchase Right shall be made (i) in cash, by check, or
cash equivalent, (ii) by such other consideration as may be approved by the
Committee from time to time to the extent permitted by applicable law, or
(iii) by any combination thereof. The Committee may at any time or from time to
time grant Stock Purchase Rights which do not permit all of the foregoing forms
of consideration to be used in payment of the purchase price or which otherwise
restrict one or more forms of consideration. Stock Bonuses and Stock Units shall
be issued in consideration for past services actually rendered to a
Participating Company or for its benefit.
 
8.5          Vesting and Restrictions on Transfer.  Shares issued pursuant to
any Stock or Performance Award may or may not be made subject to vesting
conditioned upon the satisfaction of such Service requirements, conditions,
restrictions or performance criteria, including, without limitation, Performance
Goals as described in Section 9.4 (the “Vesting Conditions”), as shall be
established by the Committee and set forth in the Award Agreement evidencing
such Award. During any period (the “Restriction Period”) in which shares
acquired pursuant to a Stock Award remain subject to Vesting Conditions, such
shares may not be sold, exchanged, transferred, pledged, assigned or otherwise
disposed of other than pursuant to an Ownership Change Event, as defined in
Section 11.1, or as provided in Section 8.8. 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.
 
8.6          Voting Rights; Dividends and Distributions.  Except as provided in
this Section, Section 8.5 and any Award Agreement, during the Restriction Period
applicable to shares acquired pursuant to a Stock Award, the Participant shall
have all of the rights of a stockholder 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. Participants who have been
granted Stock Units shall possess no incidents of ownership with respect to
shares of Stock underlying such Stock Units; provided, however, that a Stock
Unit Agreement may provide for payments in lieu of dividends in a manner
identical to that specified in Section 10.6 of the Plan. 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, then 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 Stock Award shall be immediately subject to the
same Vesting Conditions as the shares subject to the Stock Award with respect to
which such dividends or distributions were paid or adjustments were made.
 
8.7          Effect of Termination of Service.  Unless otherwise provided by the
Committee in the grant of a 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 (i) the
Company shall have the option to repurchase for the purchase price paid by the
Participant any shares acquired by the Participant pursuant to a Stock Purchase
Right which remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service and (ii) the Participant shall forfeit to
the Company any shares acquired by the Participant pursuant to a Stock Bonus or
a Stock Unit which remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service.
 
8.8          Non-transferability of Stock Award Rights.  Rights to acquire
shares of Stock pursuant to a Stock Award may 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 by will or the laws of descent and distribution, and, during
the lifetime of the Participant, shall be exercisable only by the Participant or
the Participant’s guardian or legal representative.
 
 
 

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9.
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:
 
9.1          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.
 
9.2          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, and each Performance Unit
shall have an initial value of one hundred dollars ($100). 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.
 
9.3          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.
Unless otherwise permitted in compliance with the requirements under
Section 162(m) with respect to “performance-based compensation,” 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.
 
9.4          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. Performance Measures may be one or more of
the following, as determined by the Committee:
 
(i)           growth in revenue;
 
(ii)          growth in the market price of the Stock;
 
(iii)         operating margin;
 
(iv)         gross margin;
 
(v)          operating income;

 
 

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(vi)        pre-tax profit;
 
(vii)       earnings before interest, taxes and depreciation;
 
(viii)      net income;
 
(ix)         total return on shares of Stock relative to the increase in an
appropriate index as may be selected by the Committee;
 
(x)          earnings per share;
 
(xi)         return on stockholder equity;
 
(xii)        return on net assets;
 
(xiii)       expenses;
 
(xiv)       return on capital;
 
(xv)        economic value added;
 
(xvi)       market share; and
 
(xvii)      cash flow, as indicated by book earnings before interest, taxes,
depreciation and amortization.
 
(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.
 
9.5          Settlement of Performance Awards.
 
(a)          Determination of Final Value.  As soon as practicable 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 granted to any Participant who
is not 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.
If permitted under a Covered Employee’s Award Agreement, the Committee shall
have the discretion, on the basis of such criteria as may be established by the
Committee, 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. No such reduction may result in an increase in the amount payable upon
settlement of another Participant’s Performance Award.
 
(c)          Effect of Leaves of Absence.  Unless otherwise required by law,
payment of the final value, if any, of a Performance Award held by a Participant
who has taken in excess of thirty (30) days of leaves of absence during a
Performance Period shall be prorated on the basis of the number of days of the
Participant’s Service during the Performance Period during which the Participant
was not on a leave of absence.
 
(d)          Notice to Participants.  As soon as practicable following the
Committee’s determination and certification in accordance with Sections 9.5(a)
and (b), the Company shall notify each Participant of the determination of the
Committee.

 
 

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(e)          Payment in Settlement of Performance Awards.  As soon as
practicable following the Committee’s determination and certification in
accordance with Sections 9.5(a) and (b), 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. Unless otherwise provided in the Award Agreement
evidencing a Performance Award, payment shall be made in a lump sum. An Award
Agreement may provide for deferred payment in a lump sum or in installments. If
any payment is to be made on a deferred basis, the Committee may, but shall not
be obligated to, provide for the payment during the deferral period of Dividend
Equivalents or interest.
 
(f)           Provisions Applicable to Payment in Shares.  If payment is to be
made in shares of Stock, the number of such shares shall be determined by
dividing the final value of the Performance Award by the value of a share of
Stock determined by the method specified in the Award Agreement. Such methods
may include, without limitation, the closing market price on a specified date
(such as the settlement date) or an average of market prices over a series of
trading days. Shares of Stock issued in payment of any Performance Award may be
fully vested and freely transferable shares or may be shares of Stock subject to
Vesting Conditions as provided in Section 8.5. Any shares subject to Vesting
Conditions shall be evidenced by an appropriate Award Agreement and shall be
subject to the provisions of Sections 8.5 through 8.8 above.
 
9.6          Dividend Equivalents.  In its discretion, the Committee 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. Dividend Equivalents may
be paid currently or may be accumulated and paid to the extent that Performance
Shares become non-forfeitable, as determined by the Committee. 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 9.5. Dividend
Equivalents shall not be paid with respect to Performance Units.
 
9.7          Effect of Termination of Service.  The effect of a Participant’s
termination of Service on the Participant’s Performance Award shall be as
determined by the Committee, in its discretion, and set forth in the Award
Agreement evidencing such Performance Award.
 
9.8          Non-transferability of Performance Awards.  Prior to settlement in
accordance with the provisions of the Plan, no Performance Award may 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 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.
 
10.
Standard Forms of Award Agreement.

 
10.1         Award Agreements.  Each Award shall comply with and be subject to
the terms and conditions set forth in the appropriate form of Award Agreement
approved by the Committee and as amended from time to time. Any Award Agreement
may consist of an appropriate form of Notice of Grant and a form of Agreement
incorporated therein by reference, or such other form or forms as the Committee
may approve from time to time.
 
10.2         Authority to Vary Terms.  The Committee shall have the authority
from time to time to vary the terms of any standard form of Award Agreement
either in connection with the grant or amendment of an individual Award or in
connection with the authorization of a new standard form or forms; provided,
however, that the terms and conditions of any such new, revised or amended
standard form or forms of Award Agreement are not inconsistent with the terms of
the Plan.
 
 
 

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11.
Change in Control.

 
11.1         Definitions.
 
(a)           An “Ownership Change Event” shall be deemed to have occurred if
any of the following occurs with respect to the Company: (i) the direct or
indirect sale or exchange by the stockholders of the Company of all or
substantially all of the voting stock of the Company (but excluding for purposes
hereof sales and exchanges to family members or trusts for the benefit of or
controlled by family members or other like sales and exchanges in which a voting
right or other beneficial interest is maintained; (ii) a merger or consolidation
in which the Company is a party, but not the successor; (iii) the sale,
exchange, or transfer of all or substantially all of the assets of the Company
(other than a sale, exchange or transfer to one or more subsidiaries of the
Company); or (iv) a liquidation or dissolution of the Company.
 
(b)           “Change in Control” shall mean an Ownership Change Event or series
of related Ownership Change Events (collectively, a “Transaction”) following
which the stockholders of the Company immediately before the Transaction do not
retain immediately after the Transaction, direct or indirect beneficial
ownership of more than fifty percent (50%) of the total combined voting power of
the outstanding voting securities of the Company or, in the case of an Ownership
Change Event described in Section 11.1(a)(iii), the entity to which the assets
of the Company were transferred.
 
11.2        Effect of Change in Control on Options and SARs.  In the event of a
Change in Control, the surviving, continuing, successor, or purchasing entity or
parent thereof, as the case may be (the “Acquiror”), may, without the consent of
any Participant, either assume the Company’s rights and obligations under
outstanding Options and SARs or substitute for outstanding Options and SARs
substantially equivalent options and SARs (as the case may be) for the
Acquiror’s stock. In the event the Acquiror elects not to assume or substitute
for outstanding Options or SARs in connection with a Change in Control, the
Committee shall provide that any unvested portions of outstanding Options and
SARs shall be immediately exercisable and vested in full as of the date thirty
(30) days prior to the date of the Change in Control. The vesting of any Option
or SAR that was permissible solely by reason of this paragraph 11.2 shall be
conditioned upon the consummation of the Change in Control. Any Options or SARs
which are not assumed by the Acquiror in connection with the Change in Control
nor exercised as of the time of consummation of the Change in Control shall
terminate and cease to be outstanding effective as of the time of consummation
of the Change in Control.
 
11.3        Effect of Change in Control on Stock Awards.  The Committee may, in
its discretion, provide in any Award Agreement evidencing a Stock Award that, in
the event of a Change in Control, the lapsing of the Restriction Period
applicable to the shares subject to the Stock Award held by a Participant whose
Service has not terminated prior to such date shall be accelerated effective as
of the date of the Change in Control to such extent as specified in such Award
Agreement. Any acceleration of the lapsing of the Restriction Period that was
permissible solely by reason of this Section 11.3 and the provisions of such
Award Agreement shall be conditioned upon the consummation of the Change in
Control.
 
11.4        Effect of Change in Control on Performance Awards.  The Committee
may, in its discretion, provide in any Award Agreement evidencing a Performance
Award that, in the event of a Change in Control, the Performance Award held by a
Participant whose Service has not terminated prior to such date shall become
payable effective as of the date of the Change in Control to such extent as
specified in such Award Agreement.
 
12.
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, as well as all applicable
requirements of any stock exchange or market system upon which the Stock may
then be listed, and such approvals by governmental agencies, shareholders, etc.,
as may be deemed appropriate by the Committee, including, among other things,
such steps as the Company legal counsel shall deem necessary or appropriate to
comply with these requirements and approvals. Awards hereunder may be canceled
or amended by the Committee, in whole or in part, at any time if the Committee
determines, in its sole discretion, that cancellation or amendment is necessary
or advisable in light of any change after the Award was granted, in (a) the Code
or (b) any federal or state securities law or other law or regulation, which
change by its term is effective retroactively to a date on or before the grant
date; provided, however, that no such cancellation or amendment shall, without
the Participant’s consent, apply to or affect installments that vested on or
before the date on which the Committee makes such determination. In addition, no
Award may be exercised or shares issued pursuant to an Award unless (i) 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 (ii) 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.

 
 

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13.
Tax Withholding.

 
13.1       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 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.
 
13.2       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.
 
14.
Termination or Amendment of Plan.

 
The Committee may terminate or amend the Plan at any time. However, without the
approval of the Company’s stockholders, to the extent required by prevailing law
and/or exchange listing requirements, 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), (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 stockholders
under any applicable law, regulation or rule. No termination or amendment of the
Plan shall affect any then outstanding Award unless expressly provided by the
Committee. In any event, no termination or amendment of the Plan may adversely
affect any then outstanding Award without the consent of the Participant, unless
such termination or amendment is necessary to comply with any applicable law,
regulation or rule.
 
15.
Miscellaneous Provisions.

 
15.1       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.
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.
 
15.2       Rights as Employee or Consultant.  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 or Consultant, 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 can 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.
 
15.3       Rights as a Stockholder.  A Participant shall have no rights as a
stockholder 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.
 
15.4       Fractional Shares.  The Company shall not be required to issue
fractional shares upon the exercise or settlement of any Award.

 
 

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15.5       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 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.
 
15.6       Notice.  All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given upon delivery, if delivered
in person, or on the third business day after mailing, if mailed by registered
or certified mail, return receipt requested, addressed in the case of the
Company, to the board of directors, Attn.: Stock Options, at the last principal
address of record for the Company; to the Participant, at the Participant’s last
address as reflected on the books and records of the Company; or in each case,
to such other address as may be reasonably designated to the Company or the
Participant from time to time as provided above.
 
15.7       Governing Law.  The Plan shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, the laws of the
Commonwealth of Pennsylvania (without reference to principles of conflicts of
laws) shall govern the operation of, and the rights of Participants under the
Plan, and Awards granted thereunder.
 

 
 

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