EXHIBIT 10.16

 

 

 

 

POLYCOM, INC.

 

2004 EQUITY INCENTIVE PLAN

 

(February 4, 2009 Restatement)

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TABLE OF CONTENTS

 

             Page

SECTION 1 BACKGROUND AND PURPOSE

   1

1.1

     Background and Effective Date    1

1.2

     Purpose of the Plan    1

SECTION 2 DEFINITIONS

   1

2.1

     “1934 Act”    1

2.2

     “Award”    1

2.3

     “Award Agreement”    1

2.4

     “Board” or “Board of Directors”    1

2.5

     “Code”    1

2.6

     “Committee”    2

2.7

     “Company”    2

2.8

     “Consultant”    2

2.9

     “Director”    2

2.10

     “Disability”    2

2.11

     “Earnings Per Share”    2

2.12

     “Employee”    2

2.13

     “Exchange Program”    2

2.14

     “Exercise Price”    2

2.15

     “Fair Market Value”    2

2.16

     “Fiscal Year”    3

2.17

     “Grant Date”    3

2.18

     “Incentive Stock Option”    3

2.19

     “Nonemployee Director”    3

2.20

     “Nonqualified Stock Option”    3

2.21

     “Option”    3

2.22

     “Participant”    3

2.23

     “Performance Goals”    3

2.24

     “Performance Period”    3

2.25

     “Performance Share”    3

2.26

     “Performance Unit”    3

2.27

     “Period of Restriction”    3

2.28

     “Plan”    4

2.29

     “Profit After Tax”    4

2.30

     “Restricted Stock”    4

2.31

     “Restricted Stock Unit or RSU”    4

2.32

     “Retirement”    4

2.33

     “Return on Equity”    4

2.34

     “Revenue”    4

2.35

     “Rule 16b-3”    4

2.36

     “Section 16 Person”    4

2.37

     “Shares”    4

 

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TABLE OF CONTENTS

(continued)

 

             Page

2.38

     “Stock Appreciation Right” or “SAR”    4

2.39

     “Subsidiary”    4

2.40

     “Termination of Service”    5

2.41

     “Total Shareholder Return”    5

SECTION 3 ADMINISTRATION

   5

3.1

     The Committee    5

3.2

     Authority of the Committee    5

3.3

     Delegation by the Committee    5

3.4

     Decisions Binding    6

SECTION 4 SHARES SUBJECT TO THE PLAN

   6

4.1

     Number of Shares    6

4.2

     Lapsed Awards    6

4.3

     Adjustments in Awards and Authorized Shares    6

SECTION 5 STOCK OPTIONS

   6

5.1

     Grant of Options    6

5.2

     Award Agreement    7

5.3

     Exercise Price    7

5.4

     Expiration of Options    7

5.5

     Exercisability of Options    8

5.6

     Payment    8

5.7

     Restrictions on Share Transferability    8

5.8

     Certain Additional Provisions for Incentive Stock Options    9

SECTION 6 STOCK APPRECIATION RIGHTS

   9

6.1

     Grant of SARs    9

6.2

     SAR Agreement    10

6.3

     Expiration of SARs    10

6.4

     Payment of SAR Amount    10

SECTION 7 RESTRICTED STOCK

   10

7.1

     Grant of Restricted Stock    10

7.2

     Restricted Stock Agreement    10

7.3

     Transferability    10

7.4

     Other Restrictions    11

7.5

     Removal of Restrictions    11

7.6

     Voting Rights    11

7.7

     Dividends and Other Distributions    11

7.8

     Return of Restricted Stock to Company    12

SECTION 8 PERFORMANCE UNITS

   12

8.1

     Grant of Performance Units    12

 

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TABLE OF CONTENTS

(continued)

 

             Page

8.2

     Value of Performance Units    12

8.3

     Performance Objectives and Other Terms    12

8.4

     Earning of Performance Units    12

8.5

     Form and Timing of Payment of Performance Units    13

8.6

     Cancellation of Performance Units    13

SECTION 9 PERFORMANCE SHARES

   13

9.1

     Grant of Performance Shares    13

9.2

     Value of Performance Shares    13

9.3

     Performance Share Agreement    13

9.4

     Performance Objectives and Other Terms    13

9.5

     Earning of Performance Shares    14

9.6

     Form and Timing of Payment of Performance Shares    14

9.7

     Cancellation of Performance Shares    14

SECTION 10 RESTRICTED STOCK UNITS

   14

10.1

     Grant of RSUs    14

10.2

     Value of RSUs    14

10.3

     RSU Agreement    15

10.4

     Earning of RSUs    15

10.5

     Form and Timing of Payment of RSUs    15

10.6

     Cancellation of RSUs    15

SECTION 11 NONEMPLOYEE DIRECTOR AWARDS

   15

11.1

     General    15

11.2

     Awards    15

11.3

     Terms of Restricted Stock Awards    16

11.4

     Elections by Nonemployee Directors    16

SECTION 12 MISCELLANEOUS

   17

12.1

     Deferrals    17

12.2

     No Effect on Employment or Service    17

12.3

     Participation    17

12.4

     Indemnification    17

12.5

     Successors    17

12.6

     Beneficiary Designations    17

12.7

     Limited Transferability of Awards    18

12.8

     No Rights as Stockholder    18

SECTION 13 AMENDMENT, TERMINATION, AND DURATION

   18

13.1

     Amendment, Suspension, or Termination    18

13.2

     Duration of the Plan    18

 

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TABLE OF CONTENTS

(continued)

 

             Page

SECTION 14 TAX WITHHOLDING

   18

14.1

     Withholding Requirements    18

14.2

     Withholding Arrangements    18

SECTION 15 LEGAL CONSTRUCTION

   19

15.1

     Gender and Number    19

15.2

     Severability    19

15.3

     Requirements of Law    19

15.4

     Securities Law Compliance    19

15.5

     Governing Law    19

15.6

     Captions    19

EXECUTION

        19

 

iv

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POLYCOM, INC.

2004 EQUITY INCENTIVE PLAN

(February 4, 2009 Restatement)

 

SECTION 1

BACKGROUND AND PURPOSE

 

1.1 Background and Effective Date. The Plan permits the grant of Nonqualified
Stock Options, Incentive Stock Options, SARs, Restricted Stock, Performance
Units, and Performance Shares. The Plan was effective as of June 2, 2004 upon
approval by an affirmative vote of the holders of a majority of the Shares that
are present in person or by proxy and entitled to vote at the 2004 Annual
Meeting of Stockholders of the Company. This amended and restated Plan is
effective as of February 4, 2009.

 

1.2 Purpose of the Plan. The Plan is intended to attract, motivate, and retain
(a) employees of the Company and its Subsidiaries, (b) consultants who provide
significant services to the Company and its Subsidiaries, and (c) directors of
the Company who are employees of neither the Company nor any Subsidiary. The
Plan also is designed to encourage stock ownership by Participants, thereby
aligning their interests with those of the Company’s shareholders and to permit
the payment of compensation that qualifies as performance-based compensation
under Section 162(m) of the Code.

 

SECTION 2

DEFINITIONS

 

The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:

 

2.1 “1934 Act” means the Securities Exchange Act of 1934, as amended. Reference
to a specific section of the 1934 Act or regulation thereunder shall include
such section or regulation, any valid regulation promulgated under such section,
and any comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.

 

2.2 “Award” means, individually or collectively, a grant under the Plan of
Incentive Stock Options, Nonqualified Stock Options, SARs, Restricted Stock,
Restricted Stock Units, Performance Units, or Performance Shares.

 

2.3 “Award Agreement” means the written agreement setting forth the terms and
conditions applicable to each Award granted under the Plan.

 

2.4 “Board” or “Board of Directors” means the Board of Directors of the Company.

 

2.5 “Code” means the Internal Revenue Code of 1986, as amended. Reference to a
specific section of the Code or regulation thereunder shall include such section
or regulation, any

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valid regulation promulgated under such section, and any comparable provision of
any future legislation or regulation amending, supplementing or superseding such
section or regulation.

 

2.6 “Committee” means the committee appointed by the Board (pursuant to
Section 3.1) to administer the Plan.

 

2.7 “Company” means Polycom, Inc., a Delaware corporation, or any successor
thereto.

 

2.8 “Consultant” means any consultant, independent contractor, or other person
who provides significant services to the Company or its Subsidiaries, but who is
neither an Employee nor a Director.

 

2.9 “Director” means any individual who is a member of the Board of Directors of
the Company.

 

2.10 “Disability” means a permanent disability in accordance with a policy or
policies established by the Committee (in its discretion) from time to time.

 

2.11 “Earnings Per Share” means as to any Performance Period, the Company’s
Profit After Tax, divided by a weighted average number of common shares
outstanding and dilutive common equivalent shares deemed outstanding, determined
in accordance with generally accepted accounting principles.

 

2.12 “Employee” means any employee of the Company or of a Subsidiary, whether
such employee is so employed at the time the Plan is adopted or becomes so
employed subsequent to the adoption of the Plan.

 

2.13 “Exchange Program” means a program established by the Committee under which
outstanding Awards are amended to provide for a lower Exercise Price or
surrendered or cancelled in exchange for (a) Awards with a lower Exercise Price,
(b) a different type of Award, (c) cash, or (d) a combination of (a), (b) and/or
(c). Notwithstanding the preceding, the term Exchange Program does not include
any (i) program under which an outstanding Award is surrendered or cancelled in
exchange for a different type of Award and/or cash having a total value equal to
or less than the value of the surrendered or cancelled Award, (ii) action
described in Section 4.3, nor (iii) transfer or other disposition permitted
under Section 12.7.

 

2.14 “Exercise Price” means the price at which a Share may be purchased by a
Participant pursuant to the exercise of an Option.

 

2.15 “Fair Market Value” means the closing per share selling price for Shares on
Nasdaq on the relevant date, or if there were no sales on such date, average of
the closing sales prices on the immediately following and preceding trading
dates, in either case as reported by The Wall Street Journal or such other
source selected in the discretion of the Committee (or its delegate).
Notwithstanding the preceding, for federal, state, and local income tax
reporting purposes, fair

 

2

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market value shall be determined by the Committee (or its delegate) in
accordance with uniform and nondiscriminatory standards adopted by it from time
to time.

 

2.16 “Fiscal Year” means the fiscal year of the Company.

 

2.17 “Grant Date” means, with respect to an Award, the date that the Award was
granted. The Grant Date of an Award shall not be earlier than the date the Award
is approved by the Committee.

 

2.18 “Incentive Stock Option” means an Option to purchase Shares that is
designated as an Incentive Stock Option and is intended to meet the requirements
of Section 422 of the Code.

 

2.19 “Nonemployee Director” means a Director who is an employee of neither the
Company nor of any Subsidiary.

 

2.20 “Nonqualified Stock Option” means an option to purchase Shares that is not
intended to be an Incentive Stock Option.

 

2.21 “Option” means an Incentive Stock Option or a Nonqualified Stock Option.

 

2.22 “Participant” means an Employee, Consultant, or Nonemployee Director who
has an outstanding Award.

 

2.23 “Performance Goals” means the goal(s) (or combined goal(s)) determined by
the Committee (in its discretion) to be applicable to a Participant with respect
to an Award. As determined by the Committee, the Performance Goals applicable to
an Award may provide for a targeted level or levels of achievement using one or
more of the following measures: (a) Earnings Per Share, (b) Profit After Tax,
(c) Return on Equity, (d) Revenue, and (e) Total Shareholder Return. The
Performance Goals may differ from Participant to Participant and from Award to
Award. Any criteria used may be measured, as applicable, (i) in absolute terms,
(ii) in relative terms (including, but not limited to, passage of time and/or
against another company or companies), (iii) on a per-share basis, (iv) against
the performance of the Company as a whole or a business unit of the Company
and/or (v) on a pre-tax or after-tax basis. Prior to the Determination Date, the
Committee shall determine whether any element(s) or item(s) shall be included in
or excluded from the calculation of any Performance Goal with respect to any
Participants.

 

2.24 “Performance Period” means any Fiscal Year or such longer period as
determined by the Committee in its sole discretion.

 

2.25 “Performance Share” means an Award granted to a Participant pursuant to
Section 9.

 

2.26 “Performance Unit” means an Award granted to a Participant pursuant to
Section 8.

 

2.27 “Period of Restriction” means the period during which the transfer of
Shares of Restricted Stock are subject to restrictions and therefore, the Shares
are subject to a substantial risk

 

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of forfeiture. As provided in Section 7, such restrictions may be based on the
passage of time, the achievement of target levels of performance, or the
occurrence of other events as determined by the Committee, in its discretion.

 

2.28 “Plan” means the Polycom, Inc. 2004 Equity Incentive Plan, as set forth in
this instrument and as hereafter amended from time to time.

 

2.29 “Profit After Tax” means as to any Performance Period, the Company’s income
after taxes, determined in accordance with generally accepted accounting
principles.

 

2.30 “Restricted Stock” means an Award granted to a Participant pursuant to
Section 7.

 

2.31 “Restricted Stock Unit or RSU” means an Award granted to a Participant
pursuant to Section 10.

 

2.32 “Retirement” means, in the case of an Employee or a Nonemployee Director a
Termination of Service occurring in accordance with a policy or policies
established by the Committee (in its discretion) from time to time. With respect
to a Consultant, no Termination of Service shall be deemed to be on account of
“Retirement.”

 

2.33 “Return on Equity” means as to any Performance Period, the percentage equal
to the Company’s Profit After Tax divided by average stockholder’s equity,
determined in accordance with generally accepted accounting principles.

 

2.34 “Revenue” means as to any Performance Period, the Company’s net revenues
generated from third parties, determined in accordance with generally accepted
accounting principles.

 

2.35 “Rule 16b-3” means Rule 16b-3 promulgated under the 1934 Act, and any
future regulation amending, supplementing or superseding such regulation.

 

2.36 “Section 16 Person” means a person who, with respect to the Shares, is
subject to Section 16 of the 1934 Act.

 

2.37 “Shares” means the shares of common stock of the Company.

 

2.38 “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with a related Option, that pursuant to Section 6 is designated as an
SAR.

 

2.39 “Subsidiary” means any corporation in an unbroken chain of corporations
beginning with the Company as the corporation at the top of the chain, but only
if each of the corporations below the Company (other than the last corporation
in the unbroken chain) then owns 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.

 

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2.40 “Termination of Service” means (a) in the case of an Employee, a cessation
of the employee-employer relationship between the Employee and the Company or a
Subsidiary for any reason, including, but not by way of limitation, a
termination by resignation, discharge, death, Disability, Retirement, or the
disaffiliation of a Subsidiary, but excluding any such termination where there
is a simultaneous reemployment by the Company or a Subsidiary; (b) in the case
of a Consultant, a cessation of the service relationship between the Consultant
and the Company or a Subsidiary for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, or the
disaffiliation of a Subsidiary, but excluding any such termination where there
is a simultaneous re-engagement of the consultant by the Company or a
Subsidiary; and (c) in the case of a Nonemployee Director, a cessation of the
Director’s service on the Board for any reason, including, but not by way of
limitation, a termination by resignation, death, Disability, Retirement or
non-reelection to the Board.

 

2.41 “Total Shareholder Return” means as to any Performance Period, the total
return (change in share price plus reinvestment of any dividends) of a Share.

 

SECTION 3

ADMINISTRATION

 

3.1 The Committee. The Plan shall be administered by the Committee. The
Committee shall consist of not less than two (2) Directors who shall be
appointed from time to time by, and shall serve at the pleasure of, the Board of
Directors. The Committee shall be comprised solely of Directors who are
(a) “outside directors” under Section 162(m), and (b) “non-employee directors”
under Rule 16b-3.

 

3.2 Authority of the Committee. It shall be the duty of the Committee to
administer the Plan in accordance with the Plan’s provisions. The Committee
shall have all powers and discretion necessary or appropriate to administer the
Plan and to control its operation, including, but not limited to, the power to
(a) determine which Employees, Consultants and directors shall be granted
Awards, (b) prescribe the terms and conditions of the Awards, (c) interpret the
Plan and the Awards, (d) adopt such procedures and subplans as are necessary or
appropriate to permit participation in the Plan by Employees, Consultants and
Directors who are foreign nationals or employed outside of the United States,
(e) adopt rules for the administration, interpretation and application of the
Plan as are consistent therewith, and (f) interpret, amend or revoke any such
rules. Notwithstanding the preceding, the Committee shall not implement an
Exchange Program without the approval of the holders of a majority of the Shares
that are present in person or by proxy and entitled to vote at any Annual or
Special Meeting of Stockholders of the Company.

 

3.3 Delegation by the Committee. The Committee, in its sole discretion and on
such terms and conditions as it may provide, may delegate all or any part of its
authority and powers under the Plan to one or more Directors or officers of the
Company. Notwithstanding the foregoing, with respect to Awards that are intended
to qualify as performance-based compensation under Section 162(m) of the Code,
the Committee may not delegate its authority and powers with respect to such
Awards if such delegation would cause the Awards to fail to so qualify.

 

5

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3.4 Decisions Binding. All determinations and decisions made by the Committee,
the Board, and any delegate of the Committee pursuant to the provisions of the
Plan shall be final, conclusive, and binding on all persons, and shall be given
the maximum deference permitted by law.

 

SECTION 4

SHARES SUBJECT TO THE PLAN

 

4.1 Number of Shares. Subject to adjustment as provided in Section 4.3, the
total number of Shares available issuance under the Plan shall equal the sum of
(a) 12,500,000, (b) the number of Shares (not to exceed 2,700,000) that remain
available for grant under the Company’s 1996 Stock Incentive Plan as of June 2,
2004, and (c) any Shares (not to exceed 11,991,366) that otherwise would have
been returned to the 1996 Stock Incentive Plan after June 1, 2004 on account of
the expiration, cancellation or forfeiture of awards granted under the 1996
Stock Incentive Plan. No more than fifty percent (50%) of the Shares available
under the Plan may be issued pursuant to Awards that are not Options or SARs.
Shares granted under the Plan may be either authorized but unissued Shares or
treasury Shares.

 

4.2 Lapsed Awards. If an Award is settled in cash, or is cancelled, terminates,
expires, or lapses for any reason, any Shares subject to such Award again shall
be available to be the subject of an Award, except as determined by the
Committee.

 

4.3 Adjustments in Awards and Authorized Shares. In the event that any dividend
or other distribution (whether in the form of cash, Shares, other securities, or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other
change in the corporate structure of the Company affecting the Shares such that
an adjustment is determined by the Committee (in its sole discretion) to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust the number and
class of Shares which may be delivered under the Plan, the number and class of
Shares which may be added annually to the Shares reserved under the Plan, the
number, class, and price of Shares subject to outstanding Awards, and the
numerical limits of Sections 5.1, 6.1, 7.1, 8.1, 9.1, 10.1 and 11.2.
Notwithstanding the preceding, the number of Shares subject to any Award always
shall be a whole number.

 

SECTION 5

STOCK OPTIONS

 

5.1 Grant of Options. Subject to the terms and provisions of the Plan, Options
may be granted to Employees, Directors and Consultants at any time and from time
to time as determined by the Committee in its sole discretion. The Committee, in
its sole discretion, shall determine the number of Shares subject to each
Option, provided that during any Fiscal Year, no Participant shall be granted
Options (and/or SARs) covering more than a total of 750,000 Shares.
Notwithstanding the foregoing, during the Fiscal Year in which a Participant
first becomes an Employee, he or she

 

6

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may be granted Options (and/or SARs) to purchase up to a total of an additional
750,000 Shares. The Committee may grant Incentive Stock Options, Nonqualified
Stock Options, or a combination thereof.

 

5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement that
shall specify the Exercise Price, the expiration date of the Option, the number
of Shares covered by the Option, any conditions to exercise the Option, and such
other terms and conditions as the Committee, in its discretion, shall determine.
The Award Agreement shall also specify whether the Option is intended to be an
Incentive Stock Option or a Nonqualified Stock Option.

 

5.3 Exercise Price. Subject to the provisions of this Section 5.3, the Exercise
Price for each Option shall be determined by the Committee in its sole
discretion.

 

5.3.1 Nonqualified Stock Options. The Exercise Price of each Nonqualified Stock
option shall be determined by the Committee in its discretion but shall be not
less than one hundred percent (100%) of the Fair Market Value of a Share on the
Grant Date.

 

5.3.2 Incentive Stock Options. In the case of an Incentive Stock Option, the
Exercise Price shall be not less than one hundred percent (100%) of the Fair
Market Value of a Share on the Grant Date; provided, however, that if on the
Grant Date, the Employee (together with persons whose stock ownership is
attributed to the Employee pursuant to Section 424(d) of the Code) owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its Subsidiaries, the Exercise Price shall be not
less than one hundred and ten percent (110%) of the Fair Market Value of a Share
on the Grant Date.

 

5.3.3 Substitute Options. Notwithstanding the provisions of Section 5.3.2, in
the event that the Company or a Subsidiary consummates a transaction described
in Section 424(a) of the Code (e.g., the acquisition of property or stock from
an unrelated corporation), persons who become Employees, Nonemployee Directors
or Consultants on account of such transaction may be granted Options in
substitution for options granted by their former employer. If such substitute
Options are granted, the Committee, in its sole discretion and consistent with
Section 424(a) of the Code, may determine that such substitute Options shall
have an exercise price less than one hundred percent (100%) of the Fair Market
Value of the Shares on the Grant Date.

 

5.4 Expiration of Options.

 

5.4.1 Expiration Dates. Each Option shall terminate no later than the first to
occur of the following events:

 

(a) The date for termination of the Option set forth in the written Award
Agreement; or

 

(b) The expiration of ten (10) years from the Grant Date.

 

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5.4.2 Death of Participant. Notwithstanding Section 5.4.1, if a Participant dies
prior to the expiration of his or her Options, the Committee, in its discretion,
may provide that his or her Options shall be exercisable for up to three
(3) years after the date of death. With respect to extensions that were not
included in the original terms of the Option but were provided by the Committee
after the date of grant, if at the time of any such extension, the exercise
price per Share of the Option is less than the Fair Market Value of a Share, the
extension shall, unless otherwise determined by the Committee, be limited to the
earlier of (1) the maximum term of the Option as set by its originals terms, or
(2) ten (10) years from the Grant Date.

 

5.4.3 Committee Discretion. Subject to the ten and thirteen-year limits of
Sections 5.4.1 and 5.4.2, the Committee, in its sole discretion, (a) shall
provide in each Award Agreement when each Option expires and becomes
unexercisable, and (b) may, after an Option is granted, extend the maximum term
of the Option (subject to Section 5.8.4 regarding Incentive Stock Options). With
respect to the Committee’s authority in Section 5.4.3(b), if, at the time of any
such extension, the exercise price per Share of the Option is less than the Fair
Market Value of a Share, the extension shall, unless otherwise determined by the
Committee, be limited to the earlier of (1) the maximum term of the Option as
set by its originals terms, or (2) ten (10) years from the Grant Date. Unless
otherwise determined by the Committee, any extension of the term of an Option
pursuant to this Section 5.4.3 shall comply with Section 409A of the Code to the
extent applicable.

 

5.5 Exercisability of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall determine in its sole discretion. After an Option is
granted, the Committee, in its sole discretion, may accelerate the
exercisability of the Option.

 

5.6 Payment. Options shall be exercised by the Participant giving notice and
following such procedures as the Company (or its designee) may specify from time
to time. Exercise of an Option also requires that the Participant make
arrangements satisfactory to the Company for full payment of the Exercise Price
for the Shares. All exercise notices shall be given in the form and manner
specified by the Company from time to time.

 

The Exercise Price shall be payable to the Company in full in cash or its
equivalent. The Committee, in its sole discretion, also may permit exercise
(a) by tendering previously acquired Shares having an aggregate Fair Market
Value at the time of exercise equal to the total Exercise Price, or (b) by any
other means which the Committee, in its sole discretion, determines to both
provide legal consideration for the Shares, and to be consistent with the
purposes of the Plan. As soon as practicable after receipt of a notification of
exercise satisfactory to the Company and full payment for the Shares purchased,
the Company shall deliver to the Participant (or the Participant’s designated
broker), Share certificates (which may be in book entry form) representing such
Shares.

 

5.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option as it
may deem advisable, including, but not limited to, restrictions related to
applicable federal securities laws, the requirements of any national securities
exchange or system upon which Shares are then listed or traded, or any blue sky
or state securities laws.

 

8

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5.8 Certain Additional Provisions for Incentive Stock Options.

 

5.8.1 Exercisability. The aggregate Fair Market Value (determined on the Grant
Date(s)) of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by any Employee during any calendar year (under
all plans of the Company and its Subsidiaries) shall not exceed $100,000.

 

5.8.2 Termination of Service. No Incentive Stock Option may be exercised more
than three (3) months after the Participant’s Termination of Service for any
reason other than Disability or death, unless (a) the Participant dies during
such three-month period, and/or (b) the Award Agreement or the Committee permits
later exercise (in which case the Option instead may be deemed to be a
Nonqualified Stock Option). No Incentive Stock Option may be exercised more than
one (1) year after the Participant’s Termination of Service on account of
Disability, unless (a) the Participant dies during such one-year period, and/or
(b) the Award Agreement or the Committee permit later exercise (in which case
the option instead may be deemed to be a Nonqualified Stock Option).

 

5.8.3 Employees Only. Incentive Stock Options may be granted only to persons who
are Employees on the Grant Date.

 

5.8.4 Expiration. No Incentive Stock Option may be exercised after the
expiration of ten (10) years from the Grant Date; provided, however, that if the
Option is granted to an Employee who, together with persons whose stock
ownership is attributed to the Employee pursuant to Section 424(d) of the Code,
owns stock possessing more than 10% of the total combined voting power of all
classes of the stock of the Company or any of its Subsidiaries, the Option may
not be exercised after the expiration of five (5) years from the Grant Date.

 

SECTION 6

STOCK APPRECIATION RIGHTS

 

6.1 Grant of SARs. Subject to the terms and conditions of the Plan, a SAR may be
granted to Employees, Directors and Consultants at any time and from time to
time as shall be determined by the Committee, in its sole discretion.

 

6.1.1 Number of Shares. The Committee shall have complete discretion to
determine the number of SARs granted to any Participant, provided that during
any Fiscal Year, no Participant shall be granted SARs (and/or Options) covering
more than a total of 750,000 Shares. Notwithstanding the foregoing, during the
Fiscal Year in which a Participant first becomes an Employee, he or she may be
granted SARs (and/or Options) covering up to a total of an additional 750,000
Shares.

 

6.1.2 Exercise Price and Other Terms. The Committee, subject to the provisions
of the Plan, shall have complete discretion to determine the terms and
conditions of SARs granted under the Plan. The Exercise Price of each SAR shall
be determined by the Committee in its

 

9

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discretion but shall not be less than one hundred percent (100%) of the Fair
Market Value of a Share on the Grant Date.

 

6.2 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that
shall specify the exercise price, the term of the SAR, the conditions of
exercise, and such other terms and conditions as the Committee, in its sole
discretion, shall determine.

 

6.3 Expiration of SARs. An SAR granted under the Plan shall expire upon the date
determined by the Committee, in its sole discretion, and set forth in the Award
Agreement. Notwithstanding the foregoing, the rules of Section 5.4 also shall
apply to SARs.

 

6.4 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:

 

(a) The difference between the Fair Market Value of a Share on the date of
exercise over the exercise price; times

 

(b) The number of Shares with respect to which the SAR is exercised. At the
discretion of the Committee, the payment upon SAR exercise may be in cash, in
Shares of equivalent value, or in some combination thereof.

 

SECTION 7

RESTRICTED STOCK

 

7.1 Grant of Restricted Stock. Subject to the terms and provisions of the Plan,
the Committee, at any time and from time to time, may grant Shares of Restricted
Stock to Employees, Directors and Consultants as the Committee, in its sole
discretion, shall determine. The Committee, in its sole discretion, shall
determine the number of Shares to be granted to each Participant, provided that
during any Fiscal Year, no Participant shall receive more than a total of
375,000 Shares of Restricted Stock (and/or Performance Shares or Restricted
Stock Units). Notwithstanding the foregoing, during the Fiscal Year in which a
Participant first becomes an Employee, he or she may be granted up to a total of
an additional 375,000 Shares of Restricted Stock (and/or Performance Shares or
Restricted Stock Units).

 

7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be
evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the
Committee, in its sole discretion, shall determine. Unless the Committee
determines otherwise, Shares of Restricted Stock shall be held by the Company as
escrow agent until the restrictions on such Shares have lapsed.

 

7.3 Transferability. Except as provided in this Section 7, Shares of Restricted
Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable Period of Restriction.

 

10

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7.4 Other Restrictions. The Committee, in its sole discretion, may impose such
other restrictions on Shares of Restricted Stock as it may deem advisable or
appropriate, in accordance with this Section 7.4.

 

7.4.1 General Restrictions. The Committee may set restrictions based upon
continued employment or service with the Company and its affiliates, the
achievement of specific performance objectives (Company-wide, departmental, or
individual), applicable federal or state securities laws, or any other basis
determined by the Committee in its discretion.

 

7.4.2 Section 162(m) Performance Restrictions. For purposes of qualifying grants
of Restricted Stock as “performance-based compensation” under Section 162(m) of
the Code, the Committee, in its discretion, may set restrictions based upon the
achievement of Performance Goals. The Performance Goals shall be set by the
Committee on or before the latest date permissible to enable the Restricted
Stock to qualify as “performance-based compensation” under Section 162(m) of the
Code. In granting Restricted Stock which is intended to qualify under
Section 162(m) of the Code, the Committee shall follow any procedures determined
by it from time to time to be necessary or appropriate to ensure qualification
of the Restricted Stock under Section 162(m) of the Code (e.g., in determining
the Performance Goals).

 

7.4.3 Legend on Certificates. The Committee, in its discretion, may legend the
certificates representing Restricted Stock to give appropriate notice of such
restrictions.

 

7.5 Removal of Restrictions. Except as otherwise provided in this Section 7,
Shares of Restricted Stock covered by each Restricted Stock grant made under the
Plan shall be released from escrow as soon as practicable after the last day of
the Period of Restriction. The Committee, in its discretion, may accelerate the
time at which any restrictions shall lapse or be removed. After the restrictions
have lapsed, the Participant shall be entitled to have any legend or legends
under Section 7.4.3 removed from his or her Share certificate, and the Shares
shall be freely transferable by the Participant. The Committee (in its
discretion) may establish procedures regarding the release of Shares from escrow
and the removal of legends, as necessary or appropriate to minimize
administrative burdens on the Company

 

7.6 Voting Rights. During the Period of Restriction, Participants holding Shares
of Restricted Stock granted hereunder may exercise full voting rights with
respect to those Shares, unless the Committee determines otherwise.

 

7.7 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement. Any such dividends or distribution
shall be subject to the same restrictions on transferability and forfeitability
as the Shares of Restricted Stock with respect to which they were paid, unless
otherwise provided in the Award Agreement.

 

11

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7.8 Return of Restricted Stock to Company. On the date set forth in the Award
Agreement, the Restricted Stock for which restrictions have not lapsed shall
revert to the Company and again shall become available for grant under the Plan.

 

SECTION 8

PERFORMANCE UNITS

 

8.1 Grant of Performance Units. Performance Units may be granted to Employees,
Directors and Consultants at any time and from time to time, as shall be
determined by the Committee, in its sole discretion. The Committee shall have
complete discretion in determining the number of Performance Units granted to
each Participant provided that during any Fiscal Year, no Participant shall
receive Performance Units having an initial value greater than $3,000,000.

 

8.2 Value of Performance Units. Each Performance Unit shall have an initial
value that is established by the Committee on or before the Grant Date.

 

8.3 Performance Objectives and Other Terms. The Committee, in its discretion,
shall set performance objectives or other vesting criteria which, depending on
the extent to which they are met, will determine the number or value of
Performance Units that will be paid out to the Participants. Each Award of
Performance Units shall be evidenced by an Award Agreement that shall specify
the Performance Period, and such other terms and conditions as the Committee, in
its sole discretion, shall determine.

 

8.3.1 General Performance Objectives or Vesting Criteria. The Committee may set
performance objectives or vesting criteria based upon the achievement of
Company-wide, departmental, or individual goals, applicable federal or state
securities laws, or any other basis determined by the Committee in its
discretion (for example, but not by way of limitation, continuous service as an
Employee, Director or Consultant).

 

8.3.2 Section 162(m) Performance Objectives. For purposes of qualifying grants
of Performance Units as “performance-based compensation” under Section 162(m) of
the Code, the Committee, in its discretion, may determine that the performance
objectives applicable to Performance Units shall be based on the achievement of
Performance Goals. The Performance Goals shall be set by the Committee on or
before the latest date permissible to enable the Performance Units to qualify as
“performance-based compensation” under Section 162(m) of the Code. In granting
Performance Units that are intended to qualify under Section 162(m) of the Code,
the Committee shall follow any procedures determined by it from time to time to
be necessary or appropriate to ensure qualification of the Performance Units
under Section 162(m) of the Code (e.g., in determining the Performance Goals).

 

8.4 Earning of Performance Units. After the applicable Performance Period has
ended, the holder of Performance Units shall be entitled to receive a payout of
the number of Performance Units earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance objectives have been achieved. After the grant of a

 

12

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Performance Unit, the Committee, in its sole discretion, may reduce or waive any
performance objectives for such Performance Unit.

 

8.5 Form and Timing of Payment of Performance Units. Payment of earned
Performance Units shall be made as soon as practicable after the expiration of
the applicable Performance Period. The Committee, in its sole discretion, may
pay earned Performance Units in the form of cash, in Shares (which have an
aggregate Fair Market Value equal to the value of the earned Performance Units
at the close of the applicable Performance Period) or in a combination thereof.

 

8.6 Cancellation of Performance Units. On the date set forth in the Award
Agreement, all unearned or unvested Performance Units shall be forfeited to the
Company, and again shall be available for grant under the Plan.

 

SECTION 9

PERFORMANCE SHARES

 

9.1 Grant of Performance Shares. Performance Shares may be granted to Employees,
Directors and Consultants at any time and from time to time, as shall be
determined by the Committee, in its sole discretion. The Committee shall have
complete discretion in determining the number of Performance Shares granted to
each Participant, provided that during any Fiscal Year, no Participant shall be
granted more than a total of 375,000 Performance Shares (and/or Shares of
Restricted Stock or Restricted Stock Units). Notwithstanding the foregoing,
during the Fiscal Year in which a Participant first becomes an Employee, he or
she may be granted up to a total of an additional 375,000 Performance Shares
(and/or Shares of Restricted Stock or Restricted Stock Units).

 

9.2 Value of Performance Shares. Each Performance Share shall have an initial
value equal to the Fair Market Value of a Share on the Grant Date.

 

9.3 Performance Share Agreement. Each Award of Performance Shares shall be
evidenced by an Award Agreement that shall specify any vesting conditions, the
number of Performance Shares granted, and such other terms and conditions as the
Committee, in its sole discretion, shall determine.

 

9.4 Performance Objectives and Other Terms. The Committee, in its discretion,
shall set performance objectives or other vesting criteria which, depending on
the extent to which they are met, will determine the number or value of
Performance Shares that will be paid out to the Participants. Each Award of
Performance Shares shall be evidenced by an Award Agreement that shall specify
the Performance Period, and such other terms and conditions as the Committee, in
its sole discretion, shall determine.

 

9.4.1 General Performance Objectives or Vesting Criteria. The Committee may set
performance objectives or vesting criteria based upon the achievement of
Company-wide, departmental, or individual goals, applicable federal or state
securities laws, or any other basis

 

13

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determined by the Committee in its discretion (for example, but not by way of
limitation, continuous service as an Employee, Director or Consultant).

 

9.4.2 Section 162(m) Performance Objectives. For purposes of qualifying grants
of Performance Shares as “performance-based compensation” under Section 162(m)
of the Code, the Committee, in its discretion, may determine that the
performance objectives applicable to Performance Shares shall be based on the
achievement of Performance Goals. The Performance Goals shall be set by the
Committee on or before the latest date permissible to enable the Performance
Shares to qualify as “performance-based compensation” under Section 162(m) of
the Code. In granting Performance Shares that are intended to qualify under
Section 162(m) of the Code, the Committee shall follow any procedures determined
by it from time to time to be necessary or appropriate to ensure qualification
of the Performance Shares under Section 162(m) of the Code (e.g., in determining
the Performance Goals).

 

9.5 Earning of Performance Shares. After the applicable Performance Period has
ended, the holder of Performance Shares shall be entitled to receive a payout of
the number of Performance Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance objectives have been achieved. After the grant of a Performance
Share, the Committee, in its sole discretion, may reduce or waive any
performance objectives for such Performance Share.

 

9.6 Form and Timing of Payment of Performance Shares. Payment of vested
Performance Shares shall be made as soon as practicable after vesting (subject
to any deferral permitted under Section 12.1). The Committee, in its sole
discretion, may pay Performance Shares in the form of cash, in Shares or in a
combination thereof.

 

9.7 Cancellation of Performance Shares. On the date set forth in the Award
Agreement, all unvested Performance Shares shall be forfeited to the Company,
and except as otherwise determined by the Committee, again shall be available
for grant under the Plan.

 

SECTION 10

RESTRICTED STOCK UNITS

 

10.1 Grant of RSUs. Restricted Stock Units may be granted to Employees,
Directors and Consultants at any time and from time to time, as shall be
determined by the Committee, in its sole discretion. The Committee shall have
complete discretion in determining the number of Restricted Stock Units granted
to each Participant, provided that during any Fiscal Year, no Participant shall
be granted more than a total of 375,000 Restricted Stock Units (and/or Shares of
Restricted Stock or Performance Shares). Notwithstanding the foregoing, during
the Fiscal Year in which a Participant first becomes an Employee, he or she may
be granted up to a total of an additional 375,000 Restricted Stock Units (and/or
Shares of Restricted Stock or Performance Shares).

 

10.2 Value of RSUs. Each Restricted Stock Unit shall have an initial value equal
to the Fair Market Value of a Share on the Grant Date.

 

14

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10.3 RSU Agreement. Each Award of Restricted Stock Units shall be evidenced by
an Award Agreement that shall specify any vesting conditions, the number of
Restricted Stock Units granted, and such other terms and conditions as the
Committee, in its sole discretion, shall determine.

 

10.4 Earning of RSUs. After the applicable vesting period has ended, the holder
of Restricted Stock Units shall be entitled to receive a payout of the number of
Restricted Stock Units earned by the Participant over the vesting period. After
the grant of a Restricted Stock Unit, the Committee, in its sole discretion, may
reduce or waive any vesting condition for such Restricted Stock Unit.

 

10.5 Form and Timing of Payment of RSUs. Payment of vested Restricted Stock
Units shall be made as soon as practicable after vesting (subject to any
deferral permitted under Section 12.1). The Committee, in its sole discretion,
may pay Restricted Stock Units in the form of cash, in Shares or in a
combination thereof.

 

10.6 Cancellation of RSUs. On the date set forth in the Award Agreement, all
unvested Restricted Stock Units shall be forfeited to the Company, and except as
otherwise determined by the Committee, again shall be available for grant under
the Plan.

 

SECTION 11

NONEMPLOYEE DIRECTOR AWARDS

 

11.1 General. Nonemployee Directors will be entitled to receive all types of
Awards under this Plan, including discretionary Awards not covered under this
Section 11. All grants of Restricted Stock Units to Nonemployee Directors
pursuant to this Section 11 will be automatic and nondiscretionary, except as
otherwise provided herein, and will be made in accordance with the following
provisions:

 

11.2 Awards.

 

11.2.1 Initial Grants.

 

(a) Each Nonemployee Director who first becomes a Nonemployee Director on or
after November 7, 2007, but prior to the 2009 Annual Meeting of the Company’s
Stockholders, automatically shall receive, as of the date that the individual
first is appointed or elected as a Nonemployee Director, the number of Shares of
Restricted Stock determined by multiplying (A) 10,000 by (B) the percentage
determined by dividing (i) the number of calendar months that remain in the
one-year period commencing on the date of the last Annual Meeting of the
Company’s Stockholders immediately preceding the date the individual is first
appointed or elected as a Nonemployee Director, including the month in which the
individual is so appointed or elected, by (ii) 12, rounded down to the nearest
whole Share.

 

(b) Each Nonemployee Director who first becomes a Nonemployee Director on or
after the 2009 Annual Meeting of the Company’s Stockholders, automatically shall

 

15

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receive, as of the date that the individual first is appointed or elected as a
Nonemployee Director, the number of Restricted Stock Units determined by
multiplying (A) 10,000 by (B) the percentage determined by dividing (i) the
number of calendar months that remain in the one-year period commencing on the
date of the last Annual Meeting of the Company’s Stockholders immediately
preceding the date the individual is first appointed or elected as a Nonemployee
Director, including the month in which the individual is so appointed or
elected, by (ii) 12, rounded down to the nearest whole Restricted Stock Unit.

 

11.2.2 Ongoing Grants. Each Nonemployee Director who is reelected as such at an
Annual Meeting of the Company’s Stockholders, automatically shall receive, as of
the date of such Annual Meeting, 10,000 Restricted Stock Units.

 

11.3 Terms of Restricted Stock and Restricted Stock Unit Awards.

 

11.3.1 Award Agreement. Each Award of Restricted Stock and Restricted Stock
Units granted pursuant to this Section 11 shall be evidenced by a written Award
Agreement between the Participant and the Company.

 

11.3.2 Vesting Schedule/Period of Restriction. Each Award of Restricted Stock
granted pursuant to Section 11.2.1(a) and each Award of Restricted Stock Units
granted pursuant to Sections 11.2.1(b) and 11.2.2 shall vest at such times and
be subject to such restrictions and conditions as the Committee shall determine
in its sole discretion. Except as otherwise determined by the Committee in its
sole discretion and set forth in the Award Agreement, once a Participant ceases
to be a Director, the Restricted Stock for which restrictions have not lapsed
and the Shares subject to Restricted Stock Units that have not vested shall
revert to the Company and again shall become available for grant under the Plan.

 

11.3.3 Other Terms. All provisions of the Plan not inconsistent with this
Section 11 shall apply to Awards of Restricted Stock and Restricted Stock Units
granted to Nonemployee Directors.

 

11.4 Elections by Nonemployee Directors. Pursuant to such procedures as the
Committee (in its discretion) may adopt from time to time, each Nonemployee
Director may elect to forego receipt of all or a portion of the annual retainer,
committee fees and meeting fees otherwise due to the Nonemployee Director in
exchange for Awards. The number of Shares subject to Awards received by any
Nonemployee Director shall equal the amount of foregone compensation divided by
the Fair Market Value of a Share on the date the compensation otherwise would
have been paid to the Nonemployee Director, rounded up to the nearest whole
number of Shares. The procedures adopted by the Committee for elections under
this Section 11.4 shall be designed to ensure that any such election by a
Nonemployee Director will not disqualify him or her as a “non-employee director”
under Rule 16b-3. Unless otherwise determined by the Committee, the elections
permitted under this Section 11.4 shall comply with Section 409A of the Code.

 

16

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SECTION 12

MISCELLANEOUS

 

12.1 Deferrals. The Committee, in its sole discretion, may permit a Participant
to defer receipt of the payment of cash or the delivery of Shares that would
otherwise be due to such Participant under an Award. Any such deferral elections
shall be subject to such rules and procedures as shall be determined by the
Committee in its sole discretion and, unless otherwise expressly determined by
the Committee, shall comply with the requirements of Section 409A of the Code.

 

12.2 No Effect on Employment or Service. Nothing in the Plan shall interfere
with or limit in any way the right of the Company to terminate any Participant’s
employment or service at any time, with or without cause. For purposes of the
Plan, transfer of employment of a Participant between the Company and any one of
its Subsidiaries (or between Subsidiaries) shall not be deemed a Termination of
Service. Employment with the Company and its Subsidiaries is on an at-will basis
only.

 

12.3 Participation. No Employee, Director or Consultant shall have the right to
be selected to receive an Award under this Plan, or, having been so selected, to
be selected to receive a future Award.

 

12.4 Indemnification. Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held harmless by the
Company against and from (a) any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action taken or
failure to act under the Plan or any Award Agreement, and (b) from any and all
amounts paid by him or her in settlement thereof, with the Company’s approval,
or paid by him or her in satisfaction of any judgment in any such claim, action,
suit, or proceeding against him or her, provided he or she shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he or she undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company’s
Certificate of Incorporation or Bylaws, by contract, as a matter of law, or
otherwise, or under any power that the Company may have to indemnify them or
hold them harmless.

 

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

 

12.6 Beneficiary Designations. If permitted by the Committee, a Participant
under the Plan may name a beneficiary or beneficiaries to whom any vested but
unpaid Award shall be paid in the event of the Participant’s death. Each such
designation shall revoke all prior designations by the Participant and shall be
effective only if given in a form and manner acceptable to the Committee. In the
absence of any such designation, any vested benefits remaining unpaid at the
Participant’s

 

17

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death shall be paid to the Participant’s estate and, subject to the terms of the
Plan and of the applicable Award Agreement, any unexercised vested Award may be
exercised by the administrator or executor of the Participant’s estate.

 

12.7 Limited Transferability of Awards. No Award granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will, by the laws of descent and distribution, or to the limited
extent provided in Section 12.6. All rights with respect to an Award granted to
a Participant shall be available during his or her lifetime only to the
Participant. Notwithstanding the foregoing, a Participant may, if the Committee
(in its discretion) so permits, transfer an Award to an individual or entity
other than the Company. Any such transfer shall be made in accordance with such
procedures as the Committee may specify from time to time.

 

12.8 No Rights as Stockholder. Except to the limited extent provided in
Sections 7.6, no Participant (nor any beneficiary) shall have any of the rights
or privileges of a stockholder of the Company with respect to any Shares
issuable pursuant to an Award (or exercise thereof), unless and until
certificates representing such Shares shall have been issued, recorded on the
records of the Company or its transfer agents or registrars, and delivered to
the Participant (or beneficiary).

 

SECTION 13

AMENDMENT, TERMINATION, AND DURATION

 

13.1 Amendment, Suspension, or Termination. The Board, in its sole discretion,
may amend, suspend or terminate the Plan, or any part thereof, at any time and
for any reason. The amendment, suspension, or termination of the Plan shall not,
without the consent of the Participant, alter or impair any rights or
obligations under any Award theretofore granted to such Participant. No Award
may be granted during any period of suspension or after termination of the Plan.

 

13.2 Duration of the Plan. The Plan shall be effective as of June 2, 2004, and
subject to Section 13.1 (regarding the Board’s right to amend or terminate the
Plan), shall remain in effect thereafter. However, without further stockholder
approval, no Incentive Stock Option may be granted under the Plan after June 2,
2014.

 

SECTION 14

TAX WITHHOLDING

 

14.1 Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company shall have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, and local taxes
(including the Participant’s FICA obligation) required to be withheld with
respect to such Award (or exercise thereof).

 

14.2 Withholding Arrangements. The Committee, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part by
(a) electing to have the Company withhold otherwise

 

18

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deliverable Shares, or (b) delivering to the Company already-owned Shares having
a Fair Market Value equal to the minimum amount required to be withheld.

 

SECTION 15

LEGAL CONSTRUCTION

 

15.1 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

 

15.2 Severability. In the event any provision of the Plan shall be held illegal
or invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.

 

15.3 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.

 

15.4 Securities Law Compliance. With respect to Section 16 Persons, transactions
under this Plan are intended to qualify for the exemption provided by Rule
16b-3. To the extent any provision of the Plan, Award Agreement or action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable or appropriate by the Committee.

 

15.5 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of California (with the
exception of its conflict of laws provisions).

 

15.6 Captions. Captions are provided herein for convenience only, and shall not
serve as a basis for interpretation or construction of the Plan.

 

EXECUTION

 

IN WITNESS WHEREOF, the Company, by its duly authorized officer, has executed
this Plan on the date indicated below.

 

   

POLYCOM, INC.

Dated: February 11, 2009     By  

/s/ Sayed M. Darwish

     

Title:

 

SVP, CAO, General Counsel and Secretary

 

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APPENDIX A

 

Terms and Conditions for French Option Grants

 

The following terms and conditions will apply in the case of Option grants to
French residents and to those individuals who are otherwise subject to the laws
of France who satisfy the eligibility requirements of Section 2 below.

 

SECTION 1

DEFINITIONS

 

As used in this Appendix A, the following definitions will apply:

 

1.1 “Applicable Laws” means the legal requirements relating to the
administration of equity compensation plans under U.S. state corporate laws,
U.S. federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and French
corporate, securities, labor and tax laws.

 

1.2 “Employee” means (i) any person employed by the Company or a Subsidiary in a
salaried position within the meaning Applicable Laws, who does not own more than
10% of the voting power of all classes of stock of the Company, or any Parent or
Subsidiary, and who is a resident of the Republic of France or (ii) any person
employed by the Company or a Subsidiary who is a resident of the Republic of
France for tax purposes or who performs his or her duties in France and is
subject to French income social security contributions on his or her
remuneration.

 

1.3 “Fair Market Value” means, as of any date, the dollar value of Common Stock
determined as follows:

 

1.3.1 If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market
of the Nasdaq Stock Market, its Fair Market Value will be the average quotation
price for the last 20 days preceding the date of determination for such Common
Stock (or the average closing bid for such 20 day period, if no sales were
reported) as quoted on such exchange or system and reported in The Wall Street
Journal or such other source as the Committee deems reliable;

 

1.3.2 If the Common Stock is quoted on the Nasdaq Stock market (but not on the
Nasdaq National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value will be the
mean between the high bid and low asked prices for the Common Stock for the last
20 days preceding the date of determination; or

 

1.3.3 In the absence of an established market for the Common Stock, the Fair
Market Value thereof will be determined in good faith by the Committee.

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1.4 “Subsidiary” means any participating subsidiary of the Company located in
the Republic of France and that falls within the definition of “subsidiary”
within the meaning of Section L. 225-180 paragraph 1 of the French commercial
code.

 

1.5 “Termination of Service” means if the Participant is an Employee, the last
day of any statutory or contractual notice period whether worked or not
(provided, only the employer, and not the Participant, may decide whether the
Participant works during the notice period) and irrespective of whether the
termination of the employment agreement is due to resignation or dismissal of
the Employee for any reason whatsoever; if the Participant is a corporate
officer as defined in Section 2 of this Appendix A, Termination of Service means
the date on which he or she effectively leaves his or her position as a
corporate officer for any reason whatsoever.

 

SECTION 2

ELIGIBILITY

 

2.1 Eligibility. Options granted pursuant to this Appendix A may be granted only
to Employees, the Président du conseil d’administration, the membres du
directoire, the Directeur général, the directeurs généraux délégués, the Gérant
of a company with capital divided by shares; provided, however, that the
administrateurs and the membres du conseil de surveillance who are also
Employees of the Subsidiary in accordance with a valid employment agreement
pursuant to Applicable Laws may be granted Options hereunder. For the purpose of
this Appendix A, when applicable, the rules set forth for an Employee will be
applicable to the aforementioned corporate officers.

 

SECTION 3

STOCK SUBJECT TO THE PLAN

 

3.1 Stock Subject to the Plan. The total number of Options outstanding which may
be exercised for newly issued Shares may at no time exceed that number equal to
one-third of the Company’s voting stock, whether preferred stock of the Company
or Common Stock. If any Optioned Stock is to consist of reacquired Shares, such
Optioned Stock must be purchased by the Company, in the limit of 10% of its
share capital, prior to the date of the grant of the corresponding new Option
and must be reserved and set aside for such purposes. In addition, the new
Option must be granted within one (1) year of the acquisition of the Shares
underlying such new Option.

 

SECTION 4

LIMITATIONS

 

4.1 Limitations Upon Granting of Options.

 

4.1.1 Declaration of Dividend; Capital Increase. To the extent applicable to the
Company, Options cannot be granted during the 20 trading days from (i) the date
the Common Stock is trading on an ex-dividend basis or (ii) a capital increase.

 

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4.1.2 Non-Public Information. To the extent applicable to the Company, the
Company will not grant Options during the closed periods required under
Section L 225-177 of the French Commercial Code. As a result, notwithstanding
any other provision of the Plan, Options cannot be granted:

 

(a) during the ten (10) trading days preceding and following the date on which
the consolidated accounts, or, if unavailable, the annual accounts, are made
public;

 

(b) during the period between the date on which the Company’s governing bodies
(i.e., the Committee) become aware of information which, if made public, could
have a material impact on the price of the Shares, and the date ten (10) trading
days after such information is made public.

 

4.1.3 Right to Employment. Neither the Plan nor any Option will confer upon any
Participant any right with respect to continuing the Participant’s employment
relationship with the Company or any Subsidiary.

 

SECTION 5

EXERCISE PRICE

 

5.1 Exercise Price. The exercise price for the Shares to be issued pursuant to
exercise of an Option will be determined by the Committee upon the date of grant
of the Option and stated in the Award Agreement, but in no event will be lower
than the higher of (i) eighty percent (80%) of the Fair Market Value on the date
the Option is granted or of the average purchase price of these Shares by the
Company, or (ii) the exercise price as determined under Section 5.3 of the Plan.
The exercise price cannot be modified while the Option is outstanding, except as
required by Applicable Laws.

 

SECTION 6

TERM OF OPTION

 

6.1 Term of Option. The term of each Option will be as stated in the Award
Agreement; provided, however, that the maximum term of an Option will not exceed
ten (10) years from the date of grant of the Option.

 

SECTION 7

EXERCISE OF OPTION; RESTRICTION ON SALE

 

7.1 Exercise of Option; Restriction on Sale.

 

7.1.1 Except as otherwise explicitly set forth in the Award Agreement, Options
granted hereunder may be not be exercised within one (1) year of the date the
Option is granted (the “Initial Exercise Date”) whether or not the Option has
vested prior to such time; provided, however, that the Initial Exercise Date
will be automatically adjusted to conform with any changes under Applicable Laws
so that the length of time from the date of grant to the Initial Exercise Date
when

 

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added to the length of time in which Shares may not be disposed of after the
Initial Exercise Date as provided in Section 7.1.2 below, will allow for
favorable tax and social security treatment under Applicable Laws. Thereafter,
Options may be exercised to the extent they have vested. Options granted
hereunder will vest as the Committee determines, subject to Section 5.5 of the
Plan.

 

7.1.2 The Shares subject to an Option may not be transferred, assigned or
hypothecated in any manner otherwise than by will or by the laws of descent or
distribution before the date three (3) years from the Initial Exercise Date,
except for any events provided for in Article 91 ter of Annex II to the French
tax code; provided, however, that the duration of this restriction on sale will
be automatically adjusted to conform with any changes to the holding period
required for favorable tax and social security treatment under Applicable Laws
to the extent permitted under Applicable Laws.

 

7.1.3 Death of Participant. In the event of the death of an Participant while an
Employee, the Option may be exercised at any time within six (6) months
following the date of death by the Participant’s estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent that the Participant was entitled to exercise the Option at the date
of death.

 

SECTION 8

NON-TRANSFERABILITY OF OPTIONS

 

8.1 Non-Transferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Participant, only by the Participant.

 

SECTION 9

CHANGES IN CAPITALIZATION

 

9.1 Changes in Capitalization. If any adjustment provided for in Section 4.3 of
the Plan to the exercise price and the number of shares of Common Stock covered
by outstanding Options would violate Applicable Laws in such a way to jeopardize
the favorable tax and social security treatment of this Plan together with this
Appendix A and the Options granted thereunder, then no such adjustment will be
made prior to the exercise of any such outstanding Option.

 

SECTION 10

INFORMATION STATEMENTS TO PARTICIPANTS

 

10.1 Information Statements to Participants. The Company or its French Parent or
Subsidiary, as required under Applicable Laws, will provide to each Participant,
with copies to the appropriate governmental entities, such statements of
information as required by the Applicable Laws.

 

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SECTION 11

AMENDMENT OR TERMINATION OF PLAN

 

11.1 Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan will impair the rights of any Participant, unless
mutually agreed otherwise between the Participant and the Committee, which
agreement must be in writing and signed by the Participant and the Company. Any
favorable amendments or alterations are automatically deemed to be approved by
Participant. Termination of the Plan will not affect the Committee’s ability to
exercise the powers granted to it hereunder with respect to Options granted
under the Plan prior to the date of such termination.

 

SECTION 12

REPORTS TO SHAREHOLDERS

 

12.1 Reporting to the Shareholders’ Meeting. The Subsidiary of the Company, if
required under Applicable Laws, will provide its shareholders with an annual
report with respect to Options granted and/or exercised by its Employees in the
financial year.

 

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