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Exhibits 10.2#

 

 
 
ALLIANCE FIBER OPTIC PRODUCTS, INC.
 
 
2000 STOCK INCENTIVE PLAN
 
 
(Adopted by the Board of Directors on September 7, 2000,
 
 
  and amended and restated by the Board of Directors on March 18, 2010)
 

 
 

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Table of Contents
 
 
Page
 
SECTION 1.
ESTABLISHMENT AND PURPOSE. 
1

 
SECTION 2.
DEFINITIONS. 
1

 
 
(a)
"Affiliate" 
1

 
 
(b)
"Award"
1

 
 
(c)
"Board of Directors"
1

 
 
(d)
"Change in Control"
1

 
 
(e)
"Code"
2

 
 
(f)
"Committee"
2

 
 
(g)
"Company"
3

 
 
(h)
"Consultant"
3

 
 
(i)
"Employee"
3

 
 
(j)
"Exchange Act"
3

 
 
(k)
"Exercise Price"
3

 
 
(l)
"Fair Market Value"
3

 
 
(m)
"ISO"
3

 
 
(n)
"Nonstatutory Option"or "NSO"
3

 
 
(o)
"Offeree"
4

 
 
(p)
"Option"
4

 
 
(q)
"Optionee"
4

 
 
(r)
"Outside Director"
4

 
 
(s)
"Parent"
4

 
 
(t)
"Participant"
4

 
 
(u)
"Plan"
4

 
 
(v)
"Purchase Price"
4

 
 
(w)
"Restricted Share"
4

 
 
(x)
"Restricted Share Agreement"
4

 
 
(y)
"SAR"
4

 
 
(z)
"SAR Agreement"
4

 
 
(aa)
"Service"
4

 
 
(bb)
"Share"
5

 
 
(cc)
"Stock"
5

 
 
(dd)
"Stock Option Agreement"
5

 
 
(ee)
"Stock Unit"
5

 
 
(ff)
"Stock Unit Agreement"
5

 
 
(gg)
"Subsidiary"
5

 
 
(hh)
"Total and Permanent Disability"
5

 
SECTION 3.
ADMINISTRATION. 
5

 
 
(a)
Committee Composition 
5

 
 
(b)
Committee for Non-Officer Grants 
5

 
 
(c)
Committee Procedures 
6

 
 
(d)
Committee Responsibilities 
6

 
SECTION 4.
ELIGIBILITY. 
7

 
 
(a)
General Rule 
7

 
 
(b)
Automatic Grants to Outside Directors 
7

 
 
(c)
Ten-Percent Stockholders 
8

 
 
(d)
Attribution Rules 
8

 
 
(e)
Outstanding Stock 
8

 
SECTION 5.
STOCK SUBJECT TO PLAN. 
8

 
 
(a)
Basic Limitation 
9

 
 
(b)
Section 162(m) Award Limitation 
9

 
 
(c)
Additional Shares 
9

 
SECTION 6.
RESTRICTED SHARES. 
9

 
 
(a)
Restricted Stock Agreement 
9

 
 
(b)
Payment for Awards 
9

 
 
(c)
Vesting 
9

 
 
(d)
Voting and Dividend Rights 
10

 
 
(e)
Restrictions on Transfer of Shares 
10

 
SECTION 7.
TERMS AND CONDITIONS OF OPTIONS. 
10

 
 
(a)
Stock Option Agreement 
10

 
 
(b)
Number of Shares 
10

 
 
(c)
Exercise Price 
10

 
 
(d)
Withholding Taxes 
10

 
 
(e)
Exercisability and Term 
10

 
 
(f)
Exercise of Options 
11

 
 
(g)
Effect of Change in Control 
11

 
 
(h)
No Rights as a Stockholder 
11

 
 
(i)
Modification, Extension and Renewal of Options 
11

 
 
(j)
Restrictions on Transfer of Shares 
11

 
 
(k)
Buyout Provisions 
11

 
SECTION 8.
PAYMENT FOR SHARES. 
11

 
 
(a)
General Rule 
12

 
 
(b)
Surrender of Stock 
12

 
 
(c)
Services Rendered 
12

 
 
(d)
Cashless Exercise 
12

 
 
(e)
Exercise/Pledge 
12

 
 
(f)
Promissory Note 
12

 
 
(g)
Other Forms of Payment 
12

 
 
(h)
Limitations under Applicable Law 
12

 
SECTION 9.
STOCK APPRECIATION RIGHTS. 
12

 
 
(a)
SAR Agreement 
12

 
 
(b)
Number of Shares 
13

 
 
(c)
Exercise Price 
13

 
 
(d)
Exercisability and Term 
13

 
 
(e)
Effect of Change in Control 
13

 
 
(f)
Exercise of SARs 
13

 
 
(g)
Modification or Assumption of SARs 
13

 
 
(h)
Buyout Provisions 
13

 
SECTION 10.
 STOCK UNITS.
14

 
 
(a)
Stock Unit Agreement 
14

 
 
(b)
Payment for Awards 
14

 
 
(c)
Vesting Conditions 
14

 
 
(d)
Voting and Dividend Rights 
14

 
 
(e)
Form and Time of Settlement of Stock Units 
14

 
 
(f)
Death of Recipient 
14

 
 
(g)
Creditors' Rights 
15

 
SECTION 11.
 ADJUSTMENT OF SHARES.
15

 
 
(a)
Adjustments 
15

 
 
(b)
Dissolution or Liquidation 
15

 
 
(c)
Reorganizations 
15

 
 
(d)
Reservation of Rights 
16

 
SECTION 12..
 DEFERRAL OF AWARDS
16

 
 
(a)
Committee Powers 
16

 
 
(b)
General Rules 
16

 
SECTION 13.
 AWARDS UNDER OTHER PLANS.
17

 
SECTION 14.
 PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
17

 
 
(a)
Effective Date 
17

 
 
(b)
Elections to Receive NSOs, Restricted Shares or Stock Units 
17

 
 
(c)
Number and Terms of NSOs, Restricted Shares or Stock Units 
17

 
SECTION 15.
 LEGAL AND REGULATORY REQUIREMENTS.
17

 
SECTION 16.
 WITHHOLDING TAXES.
18

 
 
(a)
General 
18

 
 
(b)
Share Withholding 
18

 
SECTION 17.
 OTHER PROVISIONS APPLICABLE TO AWARDS.
18

 
 
(a)
Transferability 
18

 
 
(b)
Substitution and Assumption of Awards 
18

 
 
(c)
Qualifying Performance Criteria 
18

 
SECTION 18.
 NO EMPLOYMENT RIGHTS.
19

 
SECTION 19.
 DURATION AND AMENDMENTS.
19

 
 
(a)
Term of the Plan 
20

 
 
(b)
Right to Amend or Terminate the Plan 
20

 
 
(c)
Effect of Termination 
20

 
SECTION 20.
 EXECUTION.
21

 

 
 

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ALLIANCE FIBER OPTIC PRODUCTS, INC.
 
 
2000 STOCK INCENTIVE PLAN
 
 
(As amended and restated on March 18, 2010)
 
SECTION 1.  
ESTABLISHMENT AND PURPOSE.

 
The Plan was adopted by the Board of Directors effective September 7, 2000 (the
"Effective Date").  The Plan was amended and restated on March 18, 2010, as
applicable to Awards granted on or after such date. The purpose of the Plan is
to promote the long-term success of the Company and the creation of stockholder
value by (a) encouraging Employees, Outside Directors and Consultants to focus
on critical long-range objectives, (b) encouraging the attraction and retention
of Employees, Outside Directors and Consultants with exceptional qualifications
and (c) linking Employees, Outside Directors and Consultants directly to
stockholder interests through increased stock ownership. The Plan seeks to
achieve this purpose by providing for Awards in the form of restricted shares,
stock units, options (which may constitute incentive stock options or
nonstatutory stock options) or stock appreciation rights.
 
SECTION 2.  
DEFINITIONS.

 
(a) "Affiliate" shall mean any entity other than a Subsidiary, if the Company
and/or one or more Subsidiaries own not less than 50% of such entity.
 
(b) "Award" shall mean any award of an Option, a SAR, a Restricted Share or a
Stock Unit under the Plan.
 
(c) "Board of Directors" shall mean the Board of Directors of the Company, as
constituted from time to time.
 
(d) "Change in Control" shall mean the occurrence of any of the following
events:
 
(i)  
A change in the composition of the Board of Directors occurs, as a result of
which fewer than one-half of the incumbent directors are directors who either:

 
 

 (A)    Had been directors of the Company on the "look-back date" (as defined
below) (the "original directors"); or      (B)    Were elected, or nominated for
election, to the Board of Directors with the affirmative votes of at least a
majority of the aggregate of the original directors who were still in office at
the time of the election or nomination and the directors whose election or
nomination was previously so approved (the "continuing directors"); or

 
 
(ii)  
Any "person" (as defined below) who by the acquisition or aggregation of
securities, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the "Base
Capital Stock"); except that any change in the relative beneficial ownership of
the Company's securities by any person resulting solely from a reduction in the
aggregate number of outstanding shares of Base Capital Stock, and any decrease
thereafter in such person's ownership of securities, shall be disregarded until
such person increases in any manner, directly or indirectly, such person's
beneficial ownership of any securities of the Company; or

 
1
 
 

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(iii)  
The consummation of a merger or consolidation of the Company with or into
another entity or any other corporate reorganization, if persons who were not
stockholders of the Company immediately prior to such merger, consolidation or
other reorganization own immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the outstanding securities of
each of (A) the continuing or surviving entity and (B) any direct or indirect
parent corporation of such continuing or surviving entity; or

 
(iv)  
The sale, transfer or other disposition of all or substantially all of the
Company's assets.

 

  For purposes of subsection (d)(i) above, the term "look-back" date shall mean
the later of (1) the Effective Date or (2) the date 24 months prior to the date
of the event that may constitute a Change in Control.  
 
  For purposes of subsection (d)(ii)) above, the term "person" shall have the
same meaning as when used in Sections 13(d) and 14(d) of the Exchange Act but
shall exclude (1) a trustee or other fiduciary holding securities under an
employee benefit plan maintained by the Company or a Parent or Subsidiary and
(2) a corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of the Stock.  
    Any other provision of this Section 2(d) notwithstanding, a transaction
shall not constitute a Change in Control if its sole purpose is to change the
state of the Company's incorporation or to create a holding company that will be
owned in substantially the same proportions by the persons who held the
Company's securities immediately before such transaction, and a Change in
Control shall not be deemed to occur if the Company files a registration
statement with the United States Securities and Exchange Commission for the
initial offering of Stock to the public.

 
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
 
(f) "Committee" shall mean the Compensation Committee as designated by the Board
of Directors, which is authorized to administer the Plan, as described in
Section 3 hereof.
 
2
 
 
 

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(g) "Company" shall mean Alliance Fiber Optic Products, Inc., a Delaware
corporation.
 

 (h)   "Consultant" shall mean a consultant or advisor who provides bona fide
services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor (not including service as a member of the Board of
Directors) or a member of the board of directors of a Parent or a Subsidiary, in
each case who is not an Employee.

 
(i) "Employee" shall mean any individual who is a common-law employee of the
Company, a Parent, a Subsidiary or an Affiliate.
 
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
 

 (k)   "Exercise Price" shall mean, in the case of an Option, the amount for
which one Share may be purchased upon exercise of such Option, as specified in
the applicable Stock Option Agreement. "Exercise Price," in the case of a SAR,
shall mean an amount, as specified in the applicable SAR Agreement, which is
subtracted from the Fair Market Value of one Share in determining the amount
payable upon exercise of such SAR.

 
(l) "Fair Market Value" with respect to a Share, shall mean the market price of
one Share, determined by the Committee as follows:
 
(i)  
If the Stock was traded over-the-counter on the date in question, then the Fair
Market Value shall be equal to the last transaction price quoted for such date
by the OTC Bulletin Board or, if not so quoted, shall be equal to the mean
between the last reported representative bid and asked prices quoted for such
date by the principal automated inter-dealer quotation system on which the Stock
is quoted or, if the Stock is not quoted on any such system, by the Pink Quote
system;

 
(ii)  
If the Stock was traded on any established stock exchange (such as the New York
Stock Exchange, The Nasdaq Global Market or The Nasdaq Global Select Market) or
national market system on the date in question, then the Fair Market Value shall
be equal to the closing price reported for such date by the applicable exchange
or system; and

 
(iii)  
If none of the foregoing provisions is applicable, then the Fair Market Value
shall be determined by the Committee in good faith on such basis as it deems
appropriate.

 
In all cases, the determination of Fair Market Value by the Committee shall be
conclusive and binding on all persons.
 
(m) "ISO" shall mean an employee incentive stock option described in Section 422
of the Code.
 
(n) "Nonstatutory Option" or "NSO" shall mean an employee stock option that is
not an ISO.
 
3
 
 
 

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(o) "Offeree" shall mean an individual to whom the Committee has offered the
right to acquire Shares under the Plan (other than upon exercise of an Option).
 
(p) "Option" shall mean an ISO or Nonstatutory Option granted under the Plan and
entitling the holder to purchase Shares.
 
(q) "Optionee" shall mean an individual or estate who holds an Option or SAR.
 
(r) "Outside Director" shall mean a member of the Board of Directors who is not
a common-law employee of, or paid consultant to, the Company, a Parent or a
Subsidiary.
 

 (s)    "Parent" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be a Parent commencing as of such
date.

 
(t) "Participant" shall mean an individual or estate who holds an Award.
 
(u) "Plan" shall mean this 2000 Stock Incentive Plan of Alliance Fiber Optic
Products, Inc., as amended from time to time.
 
(v) "Purchase Price" shall mean the consideration for which one Share may be
acquired under the Plan (other than upon exercise of an Option), as specified by
the Committee.
 
(w) "Restricted Share" shall mean a Share awarded under the Plan.
 

 (x)    "Restricted Share Agreement" shall mean the agreement between the
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Shares.

 
(y) "SAR" shall mean a stock appreciation right granted under the Plan.
 
(z) "SAR Agreement" shall mean the agreement between the Company and an Optionee
which contains the terms, conditions and restrictions pertaining to his or her
SAR.
 

 (aa)    "Service" shall mean service as an Employee, Consultant or Outside
Director, subject to such further limitations as may be set forth in the Plan or
the applicable Stock Option Agreement, SAR Agreement, Restricted Share Agreement
or Stock Unit Agreement.  Service does not terminate when an Employee goes on a
bona fide leave of absence, that was approved by the Company in writing, if the
terms of the leave provide for continued Service crediting, or when continued
Service crediting is required by applicable law.  However, for purposes of
determining whether an Option is entitled to ISO status, an Employee's
employment will be treated as terminating 90 days after such Employee went on
leave, unless such Employee's right to return to active work is guaranteed by
law or by a contract. Service terminates in any event when the approved leave
ends, unless such Employee immediately returns to active work.  The Company
determines which leaves of absence count toward Service, and when Service
terminates for all purposes under the Plan.

 
4
 
 
 

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(bb) "Share" shall mean one share of Stock, as adjusted in accordance with
Section 11 (if applicable).
 
(cc) "Stock" shall mean the Common Stock of the Company.
 
(dd) "Stock Option Agreement" shall mean the agreement between the Company and
an Optionee that contains the terms, conditions and restrictions pertaining to
such Option.
 

 (ee)    "Stock Unit" shall mean a bookkeeping entry representing the Company's
obligation to deliver one Share (or distribute cash) on a future date in
accordance with the provisions of a Stock Unit Agreement.

 

 (ff)    "Stock Unit Agreement" shall mean the agreement between the Company and
the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.

 

 (gg)    "Subsidiary" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50% of the total combined voting power
of all classes of outstanding stock of such corporation. A corporation that
attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.

 
(hh) "Total and Permanent Disability" shall mean any permanent and total
disability as defined by section 22(e)(3) of the Code.
 
SECTION 3.  
ADMINISTRATION.

 

 (a)    Committee Composition. The Plan shall be administered by the Board or a
Committee appointed by the Board. The Committee shall consist of two or more
directors of the Company. In addition, to the extent required by the Board, the
composition of the Committee shall satisfy (i) such requirements as the
Securities and Exchange Commission may establish for administrators acting under
plans intended to qualify for exemption under Rule 16b-3 (or its successor)
under the Exchange Act; and (ii) such requirements as the Internal Revenue
Service may establish for outside directors acting under plans intended to
qualify for exemption under Section 162(m)(4)(C) of the Code.

 

 (b)    Committee for Non-Officer Grants. The Board may also appoint one or more
separate committees of the Board, each composed of one or more directors of the
Company who need not satisfy the requirements of Section 3(a), who may
administer the Plan with respect to Employees who are not considered officers or
directors of the Company under Section 16 of the Exchange Act, may grant Awards
under the Plan to such Employees and may determine all terms of such grants.
Within the limitations of the preceding sentence, any reference in the Plan to
the Committee shall include such committee or committees appointed pursuant to
the preceding sentence. To the extent permitted by applicable laws, the Board of
Directors may also authorize one or more officers of the Company to designate
Employees, other than officers under Section 16 of the Exchange Act, to receive
Awards and/or to determine the number of such Awards to be received by such
persons; provided, however, that the Board of Directors shall specify the total
number of Awards that such officers may so award.

 
 
 
5
 
 
 

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 (c)   Committee Procedures. The Board of Directors shall designate one of the
members of the Committee as chairman. The Committee may hold meetings at such
times and places as it shall determine. The acts of a majority of the Committee
members present at meetings at which a quorum exists, or acts reduced to or
approved in writing (including via email) by all Committee members, shall be
valid acts of the Committee.

 
 (d) Committee Responsibilities. Subject to the provisions of the Plan, the
Committee shall have full authority and discretion to take the following
actions:
 
(i)  
To interpret the Plan and to apply its provisions;

 
(ii)  
To adopt, amend or rescind rules, procedures and forms relating to the Plan;

 
(iii)  
To adopt, amend or terminate sub-plans established for the purpose of satisfying
applicable foreign laws including qualifying for preferred tax treatment under
applicable foreign tax laws;

 
(iv)  
To authorize any person to execute, on behalf of the Company, any instrument
required to carry out the purposes of the Plan;

 
(v)  
To determine when Awards are to be granted under the Plan;

 
(vi)  
To select the Offerees and Optionees;

 
(vii)  
To determine the number of Shares to be made subject to each Award;

 
(viii)  
To prescribe the terms and conditions of each Award, including (without
limitation) the Exercise Price and Purchase Price, and the vesting or duration
of the Award (including accelerating the vesting of Awards, either at the time
of the Award or thereafter, without the consent of the Participant), to
determine whether an Option is to be classified as an ISO or as a Nonstatutory
Option, and to specify the provisions of the agreement relating to such Award;

 
(ix)  
To amend any outstanding Award agreement, subject to applicable legal
restrictions and to the consent of the Participant if the Participant's rights
or obligations would be materially impaired;

 
(x)  
To prescribe the consideration for the grant of each Award or other right under
the Plan and to determine the sufficiency of such consideration;

 
(xi)  
To determine the disposition of each Award or other right under the Plan in the
event of a Participant's divorce or dissolution of marriage;

 
(xii)  
To determine whether Awards under the Plan will be granted in replacement of
other grants under an incentive or other compensation plan of an acquired
business;

 
6
 
 
 

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(xiii)  
To correct any defect, supply any omission, or reconcile any inconsistency in
the Plan or any Award agreement;

 
(xiv)  
To establish or verify the extent of satisfaction of any performance goals or
other conditions applicable to the grant, issuance, exercisability, vesting
and/or ability to retain any Award; and

 
(xv)  
To take any other actions deemed necessary or advisable for the administration
of the Plan.

 
Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Options or other rights under
the Plan to persons subject to Section 16 of the Exchange Act. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Offerees, all Optionees, and all persons deriving their rights from an
Offeree or Optionee. No member of the Committee shall be liable for any action
that he has taken or has failed to take in good faith with respect to the Plan,
any Option, or any right to acquire Shares under the Plan.
 
SECTION 4.  
ELIGIBILITY.

 
 

 (a)   General Rule. Only common-law employees of the Company, a Parent or a
Subsidiary shall be eligible for the grant of ISOs. Only Employees, Consultants
and Outside Directors shall be eligible for the grant of Restricted Shares,
Stock Units, Nonstatutory Options or SARs.

 
(b) Automatic Grants to Outside Directors.
 
(i)  
Each Outside Director who first joins the Board of Directors on or after the
Effective Date, and who was not previously an Employee, shall receive a
Nonstatutory Option, subject to approval of the Plan by the Company's
stockholders, to purchase 30,000 Shares (subject to adjustment under Section 11)
on the date of his or her election to the Board of Directors. Each Option
granted under this Section 4(b)(i) shall become exercisable in thirty-six (36)
equal monthly installments on each of the first thirty-six (36) months after the
date of grant. Notwithstanding the foregoing, each Option shall become
exercisable in full in the event that a Change in Control occurs with respect to
the Company.

 
(ii)  
On the first business day following the third anniversary of  the Outside
Director's election to the Board of Directors, each Outside Director who will
continue serving as a member of the Board of Directors thereafter shall receive
an Option to purchase 30,000 Shares (subject to adjustment under Section 11).
Each Option granted under this Section 4(b)(ii) shall become exercisable in
thirty-six (36) equal monthly installments on each of the first thirty-six (36)
months after the date of grant. Notwithstanding the foregoing, each Option shall
become exercisable in full in the event that a Change in Control occurs with
respect to the Company.

 
7
 
 
 

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(iii)  
The Exercise Price of all Nonstatutory Options granted to an Outside Director
under this Section 4(b) shall be equal to 100% of the Fair Market Value of a
Share on the date of grant, payable in one of the forms described in Section
8(a), (b) or (d).

 
(iv)  
All Nonstatutory Options granted to an Outside Director under this Section 4(b)
shall terminate on the earlier of (A) the day before the tenth anniversary of
the date of grant of such Options or (B) the date twelve months after the
termination of such Outside Director's Service for any reason; provided,
however, that any such Options that are not vested upon the termination of the
Outside Director's Service as a member of the Board of Directors for any reason
shall terminate immediately and may not be exercised.

 

 (c)   Ten-Percent Stockholders. An Employee who owns more than 10% of the total
combined voting power of all classes of outstanding stock of the Company, a
Parent or Subsidiary shall not be eligible for the grant of an ISO unless such
grant satisfies the requirements of Section 422(c)(5) of the Code.

 

 (d)   Attribution Rules. For purposes of Section 4(c) above, in determining
stock ownership, an Employee shall be deemed to own the stock owned, directly or
indirectly, by or for such Employee's brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries.

 

 (e)   Outstanding Stock. For purposes of Section 4(c) above, "outstanding
stock" shall include all stock actually issued and outstanding immediately after
the grant. "Outstanding stock" shall not include shares authorized for issuance
under outstanding options held by the Employee or by any other person.

 
SECTION 5.  
STOCK SUBJECT TO PLAN.

 

 (a)   Basic Limitation . Shares offered under the Plan shall be authorized but
unissued Shares or treasury Shares. The aggregate number of Shares authorized
for issuance as Awards under the Plan shall not exceed 1,500,000 Shares, plus an
annual increase on January 1 of each year commencing in 2001, in an amount equal
to the lesser of (i) 1,700,000 Shares, (ii) 5% of the fully diluted outstanding
shares of Common Stock of the Corporation on such date or (iii) a lesser amount
determined by the Board. The limitations of this Section 5(a) shall be subject
to adjustment pursuant to Section 11. The number of Shares that are subject to
Options or other Awards outstanding at any time under the Plan shall not exceed
the number of Shares which then remain available for issuance under the Plan.
The Company, during the term of the Plan, shall at all times reserve and keep
available sufficient Shares to satisfy the requirements of the Plan.
 

 
8
 
 
 

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 (b)   Section 162(m) Award Limitation. Not withstanding any contrary provisions
of the Plan, and subject to the provisions of Section 11, no Participant may
receive Options, SARs, Restricted Shares or Stock Units under the Plan in any
calendar year that relate to an aggregate of more than 1,000,000 Shares, and no
more than two times this amount in the first year of employment, and the maximum
aggregate amount of cash that may be paid to any Participant during any calendar
year with respect to Awards payable in cash shall be $1,000,000.

 

 (c)   Additional Shares. If Restricted Shares or Shares issued upon the
exercise of Options are forfeited, then such Shares shall again become available
for Awards under the Plan. If Stock Units, Options or SARs are forfeited or
terminate for any reason before being exercised or settled, or an Award is
settled in cash without the delivery of Shares to the holder, then any Shares
subject to the Award shall again become available for Awards under the
Plan.  Only the number of Shares (if any) actually issued in settlement of
Awards shall reduce the number available in Section 5(a) and the balance shall
again become available for Awards under the Plan.  Any Shares tendered or
withheld to satisfy the grant or exercise price or tax withholding obligation
pursuant to any Award shall again become available for Awards under the
Plan.  Notwithstanding the foregoing and, subject to adjustment as provided in
Section 11, the maximum number of Shares that may be issued upon the exercise of
ISOs will equal the aggregate Share number stated in Section 5(a), plus, to the
extent allowable under Section 422 of the Code and the Treasury Regulations
promulgated thereunder, any Shares that become available for issuance under the
Plan pursuant this Section 5(c).

 
 
SECTION 6.  
RESTRICTED SHARES.

 

 (a)   Restricted Stock Agreement. Each grant of Restricted Shares under the
Plan shall be evidenced by a Restricted Stock Agreement between the recipient
and the Company. Such Restricted Shares shall be subject to all applicable terms
of the Plan and may be subject to any other terms that are not inconsistent with
the Plan. The provisions of the various Restricted Stock Agreements entered into
under the Plan need not be identical.

 

 (b)   Payment for Awards.  Restricted Shares may be sold or awarded under the
Plan for such consideration as the Committee may determine, including (without
limitation) cash, cash equivalents, full-recourse promissory notes, past
services and future services.

 

 (c)   Vesting. Each Award of Restricted Shares may or may not be subject to
vesting. Vesting shall occur, in full or in installments, upon satisfaction of
the conditions specified in the Restricted Stock Agreement. A Restricted Stock
Agreement may provide for accelerated vesting in the event of the Participant's
death, disability or retirement or other events. The Committee may determine, at
the time of granting Restricted Shares of thereafter, that all or part of such
Restricted Shares shall become vested in the event that a Change in Control
occurs with respect to the Company.

 

 (d)   Voting and Dividend Rights. The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders. A Restricted Stock Agreement, however, may require
that the holders of Restricted Shares invest any cash dividends received in
additional Restricted Shares. Such additional Restricted Shares shall be subject
to the same conditions and restrictions as the Award with respect to which the
dividends were paid.

 
 
9
 
 
 

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 (e)    Restrictions on Transfer of Shares. Restricted Shares shall be subject
to such rights of repurchase, rights of first refusal or other restrictions as
the Committee may determine. Such restrictions shall be set forth in the
applicable Restricted Stock Agreement and shall apply in addition to any general
restrictions that may apply to all holders of Shares.

 
SECTION 7.  
TERMS AND CONDITIONS OF OPTIONS.

 

 (a)   Stock Option Agreement. Each grant of an Option under the Plan shall be
evidenced by a Stock Option Agreement between the Optionee and the Company. Such
Option shall be subject to all applicable terms and conditions of the Plan and
may be subject to any other terms and conditions which are not inconsistent with
the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The Stock Option Agreement shall specify whether the Option is
an ISO or an NSO. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical.

 

 (b)   Number of Shares. Each Stock Option Agreement shall specify the number of
Shares that are subject to the Option and shall provide for the adjustment of
such number in accordance with Section 11.

 

 (c)   Exercise Price. Each Stock Option Agreement shall specify the Exercise
Price. The Exercise Price of an ISO shall not be less than 100% of the Fair
Market Value of a Share on the date of grant, except as otherwise provided in
4(c), and the Exercise Price of an NSO shall not be less 100% of the Fair Market
Value of a Share on the date of grant.  Notwithstanding the foregoing, Options
may be granted with an Exercise Price of less than 100% of the Fair Market Value
per Share on the date of grant pursuant to a transaction described in, and in a
manner consistent with, Section 424(a) of the Code.  Subject to the foregoing in
this Section 7(c), the Exercise Price under any Option shall be determined by
the Committee in its sole discretion. The Exercise Price shall be payable in one
of the forms described in Section 8.

 

 (d)   Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with such exercise. The Optionee shall also make
such arrangements as the Committee may require for the satisfaction of any
federal, state, local or foreign withholding tax obligations that may arise in
connection with the disposition of Shares acquired by exercising an Option.

 

 (e)   Exercisability and Term. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option; provided that
the term of an ISO shall in no event exceed 10 years from the date of grant
(five years for ISOs granted to Employees described in Section 4(c)). A Stock
Option Agreement may provide for accelerated exercisability in the event of the
Optionee's death, disability, or retirement or other events and may provide for
expiration prior to the end of its term in the event of the termination of the
Optionee's Service. Options may be awarded in combination with SARs, and such an
Award may provide that the Options will not be exercisable unless the related
SARs are forfeited. Subject to the foregoing in this Section 7(e), the Committee
at its sole discretion shall determine when all or any installment of an Option
is to become exercisable and when an Option is to expire.

 
 
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 (f)   Exercise of Options. Each Stock Option Agreement shall set forth the
extent to which the Optionee shall have the right to exercise the Option
following termination of the Optionee's Service with the Company and its
Subsidiaries, and the right to exercise the Option of any executors or
administrators of the Optionee's estate or any person who has acquired such
Option(s) directly from the Optionee by bequest or inheritance. Such provisions
shall be determined in the sole discretion of the Committee, need not be uniform
among all Options issued pursuant to the Plan, and may reflect distinctions
based on the reasons for termination of Service.

 

 (g)   Effect of Change in Control. The Committee may determine, at the time of
granting an Option or thereafter, that such Option shall become exercisable as
to all or part of the Shares subject to such Option in the event that a Change
in Control occurs with respect to the Company.

 

 (h)   No Rights as a Stockholder. An Optionee, or a transferee of an Optionee,
shall have no rights as a stockholder with respect to any Shares covered by his
Option until the date of the issuance of a stock certificate for such Shares. No
adjustments shall be made, except as provided in Section 11.

 

 (i)   Modification, Extension and Renewal of Options. Within the limitations of
the Plan, the Committee may modify, extend or renew outstanding options or may
accept the cancellation of outstanding options (to the extent not previously
exercised), whether or not granted hereunder, in return for the grant of new
Options for the same or a different number of Shares and at the same or a
different Exercise Price, or in return for the grant of the same or a different
number of Shares. The foregoing notwithstanding, no modification of an Option
shall, without the consent of the Optionee, materially impair his or her rights
or obligations under such Option.

 

 (j)   Restrictions on Transfer of Shares. Any Shares issued upon exercise of an
Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Option Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.

 

 (k)   Buyout Provisions. The Committee may at any time (a) offer to buy out for
a payment in cash or cash equivalents an Option previously granted or (b)
authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.

 
 
SECTION 8.  
PAYMENT FOR SHARES.

 
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 (a)   General Rule. The entire Exercise Price or Purchase Price of Shares
issued under the Plan shall be payable in lawful money of the United States of
America at the time when such Shares are purchased, except as provided in
Section 8(b) through Section 8(g) below.

 

 (b)   Surrender of Stock. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by surrendering, or attesting to
the ownership of, Shares which have already been owned by the Optionee or his
representative. Such Shares shall be valued at their Fair Market Value on the
date when the new Shares are purchased under the Plan. The Optionee shall not
surrender, or attest to the ownership of, Shares in payment of the Exercise
Price if such action would cause the Company to recognize compensation expense
(or additional compensation expense) with respect to the Option for financial
reporting purposes.

 

 (c)   Services Rendered. At the discretion of the Committee, Shares may be
awarded under the Plan in consideration of services rendered to the Company or a
Subsidiary. If Shares are awarded without the payment of a Purchase Price in
cash, the Committee shall make a determination (at the time of the Award) of the
value of the services rendered by the Offeree and the sufficiency of the
consideration to meet the requirements of Section 6(b).

 

 (d)   Cashless Exercise. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker to sell
Shares and to deliver all or part of the sale proceeds to the Company in payment
of the aggregate Exercise Price.

 

 (e)   Exercise/Pledge. To the extent that a Stock Option Agreement so provides,
payment may be made all or in part by delivery (on a form prescribed by the
Committee) of an irrevocable direction to a securities broker or lender to
pledge Shares, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of the aggregate Exercise Price.

 

 (f)   Promissory Note. To the extent that a Stock Option Agreement or
Restricted Stock Agreement so provides, payment may be made all or in part by
delivering (on a form prescribed by the Company) a full-recourse promissory
note.

 

 (g)   Other Forms of Payment. To the extent that a Stock Option Agreement or
Restricted Stock Agreement so provides, payment may be made in any other form
that is consistent with applicable laws, regulations and rules.

 

 (h)   Limitations under Applicable Law. Notwithstanding anything herein or in a
Stock Option Agreement or Restricted Stock Agreement to the contrary, payment
may not be made in any form that is unlawful, as determined by the Committee in
its sole discretion.

 
 
SECTION 9.  
STOCK APPRECIATION RIGHTS.

 
 

 (a)   SAR Agreement. Each grant of a SAR under the Plan shall be evidenced by a
SAR Agreement between the Optionee and the Company. Such SAR shall be subject to
all applicable terms of the Plan and may be subject to any other terms that are
not inconsistent with the Plan. The provisions of the various SAR Agreements
entered into under the Plan need not be identical.

 
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 (b)   Number of Shares. Each SAR Agreement shall specify the number of Shares
to which the SAR pertains and shall provide for the adjustment of such number in
accordance with Section 11.

 

 (c)   Exercise Price. Each SAR Agreement shall specify the Exercise Price.  The
Exercise Price of a SAR shall not be less than 100% of the Fair Market Value of
a Share on the date of grant.  Notwithstanding the foregoing, SARs may be
granted with an Exercise Price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a transaction described in, and in a
manner consistent with, Section 424(a) of the Code.  Subject to the foregoing in
this Section 9(c), the Exercise Price under any SAR shall be determined by the
Committee in its sole discretion.

 

 (d)   Exercisability and Term. Each SAR Agreement shall specify the date when
all or any installment of the SAR is to become exercisable. The SAR Agreement
shall also specify the term of the SAR. A SAR Agreement may provide for
accelerated exercisability in the event of the Optionee's death, disability or
retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may be
awarded in combination with Options, and such an Award may provide that the SARs
will not be exercisable unless the related Options are forfeited. A SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. A SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.

 

 (e)   Effect of Change in Control. The Committee may determine, at the time of
granting a SAR or thereafter, that such SAR shall become fully exercisable as to
all Common Shares subject to such SAR in the event that a Change in Control
occurs with respect to the Company.

 

 (f)   Exercise of SARs. Upon exercise of a SAR, the Optionee (or any person
having the right to exercise the SAR after his or her death) shall receive from
the Company (a) Shares, (b) cash or (c) a combination of Shares and cash, as the
Committee shall determine. The amount of cash and/or the Fair Market Value of
Shares received upon exercise of SARs shall, in the aggregate, be equal to the
amount by which the Fair Market Value (on the date of surrender) of the Shares
subject to the SARs exceeds the Exercise Price.

 

 (g)   Modification or Assumption of SARs. Within the limitations of the Plan,
the Committee may modify, extend or assume outstanding SARs or may accept the
cancellation of outstanding SARs (whether granted by the Company or by another
issuer) in return for the grant of new SARs for the same or a different number
of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of a SAR shall, without the consent of the
holder, materially impair his or her rights or obligations under such SAR.

 

 (h)   Buyout Provisions. The Committee may at any time (a) offer to buy out for
a payment in cash or cash equivalents a SAR previously granted, or (b) authorize
an Optionee to elect to cash out a SAR previously granted, in either case at
such time and based upon such terms and conditions as the Committee shall
establish.

 
 
 
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SECTION 10.  
STOCK UNITS.

 

 (a)   Stock Unit Agreement. Each grant of Stock Units under the Plan shall be
evidenced by a Stock Unit Agreement between the recipient and the Company. Such
Stock Units shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Stock Unit Agreements entered into under the Plan need
not be identical.

 

 (b)   Payment for Awards. To the extent that an Award is granted in the form of
Stock Units, no cash consideration shall be required of the Award recipients.

 

 (c)   Vesting Conditions. Each Award of Stock Units may or may not be subject
to vesting. Vesting shall occur, in full or in installments, upon satisfaction
of the conditions specified in the Stock Unit Agreement. A Stock Unit Agreement
may provide for accelerated vesting in the event of the Participant's death,
disability or retirement or other events. The Committee may determine, at the
time of granting Stock Units or thereafter, that all or part of such Stock Units
shall become vested in the event that a Change in Control occurs with respect to
the Company.

 

 (d)   Voting and Dividend Rights. The holders of Stock Units shall have no
voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under
the Plan may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount equal
to all cash dividends paid on one Share while the Stock Unit is outstanding.
Dividend equivalents may be converted into additional Stock Units. Settlement of
dividend equivalents may be made in the form of cash, in the form of Shares, or
in a combination of both. Prior to distribution, any dividend equivalents which
are not paid shall be subject to the same conditions and restrictions (including
without limitation, any forfeiture conditions) as the Stock Units to which they
attach.

 

 (e)   Form and Time of Settlement of Stock Units. Settlement of vested Stock
Units may be made in the form of (a) cash, (b) Shares or (c) any combination of
both, as determined by the Committee. The actual number of Stock Units eligible
for settlement may be larger or smaller than the number included in the original
Award, based on predetermined performance factors. Methods of converting Stock
Units into cash may include (without limitation) a method based on the average
Fair Market Value of Shares over a series of trading days. A Stock Unit
Agreement may provide that vested Stock Units may be settled in a lump sum or in
installments. A Stock Unit Agreement may provide that the distribution may occur
or commence when all vesting conditions applicable to the Stock Units have been
satisfied or have lapsed, or it may be deferred to any later date. The amount of
a deferred distribution may be increased by an interest factor or by dividend
equivalents. Until an Award of Stock Units is settled, the number of such Stock
Units shall be subject to adjustment pursuant to Section 11.

 

 (f)   Death of Recipient. Any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's beneficiary or
beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.

 
 
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 (g)   Creditors' Rights. A holder of Stock Units shall have no rights other
than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.

 
 
SECTION 11.  
ADJUSTMENT OF SHARES.

 

 (a)   Adjustments. In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the price
of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
appropriate and equitable adjustments in:

 
 
(i)  
The number of Options, SARs, Restricted Shares and Stock Units available for
future Awards under Section 5;

 
(ii)  
The limitations set forth in Sections 5(a) and (b);

 
(iii)  
The number of NSOs to be granted to Outside Directors under Section 4(b);

 
(iv)  
The number of Shares covered by each outstanding Option and SAR;

 
(v)  
The Exercise Price under each outstanding Option and SAR; and

 
(vi)  
The number of Stock Units included in any prior Award which has not yet been
settled.

 

 (b)   Dissolution or Liquidation. To the extent not previously exercised or
settled, Options, SARs and Stock Units shall terminate immediately prior to the
dissolution or liquidation of the Company.

 

 (c)   Reorganizations. In the event that the Company is a party to a merger or
other reorganization, outstanding Awards shall be subject to the agreement of
merger or reorganization. Subject to compliance with Section 409A of the Code,
such agreement shall provide for:

 
(i)  
The continuation of the outstanding Awards by the Company, if the Company is a
surviving corporation;

 
(ii)  
The assumption of the outstanding Awards by the surviving corporation or its
parent or subsidiary;

 
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(iii)  
The substitution by the surviving corporation or its parent or subsidiary of its
own awards for the outstanding Awards;

 
(iv)  
Full exercisability or vesting and accelerated expiration of the outstanding
Awards; or

 
(v)  
Settlement of the intrinsic value of the outstanding Awards in cash or cash
equivalents followed by cancellation of such Awards.

 

 (d)   Reservation of Rights. Except as provided in this Section 11, a
Participant shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class, the payment of any dividend or any other
increase or decrease in the number of shares of stock of any class.  Any issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or Exercise Price of Shares
subject to an Award. The grant of an Award pursuant to the Plan shall not affect
in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business or assets.  In the event of any change affecting
the Shares or the Exercise Price of Shares subject to an Award, including a
merger or other reorganization, for reasons of administrative convenience, the
Company in its sole discretion may refuse to permit the exercise of any Award
during a period of up to thirty (30) days prior to the occurrence of such event.

 
 
SECTION 12.  
DEFERRAL OF AWARDS.

 
(a) Committee Powers. Subject to compliance with Section 409A of the Code, the
Committee (in its sole discretion) may permit or require a Participant to:
 
(i)  
Have cash that otherwise would be paid to such Participant as a result of the
exercise of a SAR or the settlement of Stock Units credited to a deferred
compensation account established for such Participant by the Committee as an
entry on the Company's books;

 
(ii)  
Have Shares that otherwise would be delivered to such Participant as a result of
the exercise of an Option or SAR converted into an equal number of Stock Units;
or

 
(iii)  
Have Shares that otherwise would be delivered to such Participant as a result of
the exercise of an Option or SAR or the settlement of Stock Units converted into
amounts credited to a deferred compensation account established for such
Participant by the Committee as an entry on the Company's books. Such amounts
shall be determined by reference to the Fair Market Value of such Shares as of
the date when they otherwise would have been delivered to such Participant.

 

 (b)    General Rules. A deferred compensation account established under this
Section 12 may be credited with interest or other forms of investment return, as
determined by the Committee. A Participant for whom such an account is
established shall have no rights other than those of a general creditor of the
Company. Such an account shall represent an unfunded and unsecured obligation of
the Company and shall be subject to the terms and conditions of the applicable
agreement between such Participant and the Company. If the deferral or
conversion of Awards is permitted or required, the Committee (in its sole
discretion) may establish rules, procedures and forms pertaining to such Awards,
including (without limitation) the settlement of deferred compensation accounts
established under this Section 12.

 
16
 
 
 

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SECTION 13.  
AWARDS UNDER OTHER PLANS.

 
The Company may grant awards under other plans or programs. Such awards may be
settled in the form of Shares issued under this Plan. Such Shares shall be
treated for all purposes under the Plan like Shares issued in settlement of
Stock Units and shall, when issued, reduce the number of Shares available under
Section 5.
 
SECTION 14.  
PAYMENT OF DIRECTOR'S FEES IN SECURITIES.

 

 (a)   Effective Date. No provision of this Section 14 shall be effective unless
and until the Board has determined to implement such provision.

 

 (a)   Elections to Receive NSOs, Restricted Shares or Stock Units. An Outside
Director may elect to receive his or her annual retainer payments and/or meeting
fees from the Company in the form of cash, NSOs, Restricted Shares or Stock
Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan. An election
under this Section 14 shall be filed with the Company on the prescribed form.

 

 (a)   Number and Terms of NSOs, Restricted Shares or Stock Units. The number of
NSOs, Restricted Shares or Stock Units to be granted to Outside Directors in
lieu of annual retainers and meeting fees that would otherwise be paid in cash
shall be calculated in a manner determined by the Board. The terms of such NSOs,
Restricted Shares or Stock Units shall also be determined by the Board.

 
SECTION 15.  
LEGAL AND REGULATORY REQUIREMENTS.

 
Shares shall not be issued under the Plan unless the issuance and delivery of
such Shares complies with (or is exempt from) all applicable requirements of
law, including (without limitation) the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder, state securities laws and
regulations and the regulations of any stock exchange on which the Company's
securities may then be listed, and the Company has obtained the approval or
favorable ruling from any governmental agency which the Company determines is
necessary or advisable. The Company shall not be liable to a Participant or
other persons as to: (a) the non-issuance or sale of Shares as to which the
Company has not obtained from any regulatory body having jurisdiction the
authority deemed by the Company's counsel to be necessary to the lawful issuance
and sale of any Shares under the Plan; and (b) any tax consequences expected,
but not realized, by any Participant or other person due to the receipt,
exercise or settlement of any Award granted under the Plan.
 
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SECTION 16.  
WITHHOLDING TAXES.

 
 

 (a)   General. To the extent required by applicable federal, state, local or
foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.

 

 (b)   Share Withholding. The Committee may permit a Participant to satisfy all
or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Shares that otherwise would be issued
to him or her or by surrendering all or a portion of any Shares that he or she
previously acquired. Such Shares shall be valued at their Fair Market Value on
the date when taxes otherwise would be withheld in cash. In no event may a
Participant have Shares withheld that would otherwise be issued to him or her in
excess of the number necessary to satisfy the minimum legally required tax
withholding.

 
SECTION 17.  
OTHER PROVISIONS APPLICABLE TO AWARDS.

 

 (a)   Transferability. Unless the agreement evidencing an Award (or an
amendment thereto authorized by the Committee) expressly provides otherwise, no
Award granted under this Plan, nor any interest in such Award, may be sold,
assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred in
any manner (prior to the vesting and lapse of any and all restrictions
applicable to Shares issued under such Award), other than by will or the laws of
descent and distribution; provided, however, that an ISO may be transferred or
assigned only to the extent consistent with Section 422 of the Code. Any
purported assignment, transfer or encumbrance in violation of this Section 17(a)
shall be void and unenforceable against the Company.

 

 (b)   Substitution and Assumption of Awards. The Committee may make Awards
under the Plan by assumption, substitution or replacement of stock options,
stock appreciation rights, stock units or similar awards granted by another
entity (including a Parent or Subsidiary), if such assumption, substitution or
replacement is in connection with an asset acquisition, stock acquisition,
merger, consolidation or similar transaction involving the Company (and/or its
Parent or Subsidiary) and such other entity (and/or its
affiliate).  Notwithstanding any provision of the Plan (other than the maximum
number of Shares that may be issued under the Plan), the terms of such assumed,
substituted or replaced Awards shall be as the Committee, in its discretion,
determines is appropriate.

 

 (c)   Qualifying Performance Criteria. The number of Shares or other benefits
granted, issued, retainable and/or vested under an Award may be made subject to
the attainment of performance goals.  The Committee may utilize any performance
criteria selected by it in its sole discretion to establish performance goals;
provided, however, that where any Award is intended to qualify for exemption
from the deduction limitation of Section 162(m) of the Code as "qualified
performance-based compensation," the following conditions shall apply:

 

 (i)   The amount potentially available under an Award shall be subject to the
attainment of pre-established, objective performance goals relating to a
specified period of service based on one or more of the following performance
criteria: (a) cash flow, (b) earnings per share, (c) earnings before interest,
taxes and amortization, (d) return on equity, (e) total stockholder return, (f)
share price performance, (g) return on capital, (h) return on assets or net
assets, (i) revenue, (j) income or net income, (k) operating income or net
operating income, (l) operating profit or net operating profit, (m) operating
margin or profit margin, (n) return on operating revenue, (o) return on invested
capital, (p) market segment shares, (q) costs, (r) expenses, (s) regulatory body
approval for commercialization of a product, or (t) implementation or completion
of critical projects ("Qualifying Performance Criteria"), any of which may be
measured either individually, alternatively or in any combination, applied to
either the Company as a whole or to a business unit or Subsidiary, either
individually, alternatively or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years' results or to a designated comparison
group or index, in each case as specified by the Committee in the Award;

 
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 (ii)   The Committee may appropriately adjust any evaluation of performance
under a Qualifying Performance Criteria to exclude any of the following events
that occurs during a performance period: (i) asset write-downs, (ii) litigation
or claim judgments or settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reported
results, (iv) accruals for reorganization and restructuring programs and (v) any
extraordinary nonrecurring items as described in Accounting Principles Board
Opinion No. 30 and/or in managements' discussion and analysis of financial
condition and results of operations appearing in the Company's annual report to
stockholders for the applicable year, in each case within the time prescribed
by, and otherwise in compliance with, Section 162(m) of the Code;

 

 (iii)   The Committee shall establish the applicable performance goals in
writing and an objective method for determining the Award earned by a
Participant if the goals are attained, while the outcome is substantially
uncertain and not later than the 90th day of the performance period (but in no
event after 25% of the period of service with respect to which the performance
goals relate has elapsed), and shall determine and certify in writing, for each
Participant, the extent to which the performance goals have been met prior to
payment or vesting of the Award; and

 

 (iv)   The Committee may not in any event increase the amount of compensation
payable under the Plan upon the attainment of the pre-established performance
goals to a Participant who is a "covered employee" within the meaning of Section
162(m) of the Code.

 
 
SECTION 18.  
NO EMPLOYMENT RIGHTS.

 
No provision of the Plan, nor any Award granted under the Plan, shall be
construed to give any person any right to become, to be treated as, or to remain
an Employee or Consultant. The Company and its Subsidiaries reserve the right to
terminate any person's Service at any time and for any reason, with or without
notice.
 
SECTION 19.  
DURATION AND AMENDMENTS.

 
 
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 (a)   Term of the Plan. The Plan, as set forth herein, shall terminate
automatically on March 17, 2020 and may be terminated on any earlier date
pursuant to Subsection (b) below.

 

 (b)   Right to Amend or Terminate the Plan. The Board of Directors may amend or
terminate the Plan at any time and from time to time. Rights and obligations
under any Award granted before amendment of the Plan shall not be materially
impaired by such amendment, except with consent of the Participant. An amendment
of the Plan shall be subject to the approval of the Company's stockholders only
to the extent required by applicable laws, regulations or rules.

 

 (c)   Effect of Termination. No Awards shall be granted under the Plan after
the termination thereof. The termination of the Plan shall not affect Awards
previously granted under the Plan.

 
 
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SECTION 20.  
EXECUTION.

 
To record the adoption of the Plan, as amended and restated, by the Board of
Directors, the Company has caused its authorized officer to execute the same.
 
ALLIANCE FIBER OPTIC PRODUCTS, INC.
   
By
  /s/ Peter Chang  
Name
Peter Chang   
Title
CEO 

 
 
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