Exhibit 10.2

 

INVESTORS FINANCIAL SERVICES CORP.

 

2005 EQUITY INCENTIVE PLAN

 

1.             Purpose

 

This Plan is intended to encourage ownership of Stock by employees, consultants
and directors of the Company and its Affiliates and to provide additional
incentive for them to promote the success of the Company’s business through the
grant of Awards of or pertaining to shares of the Company’s Stock. The Plan is
intended to be an incentive stock option plan within the meaning of Section 422
of the Code, but not all Awards are required to be Incentive Options.

 

2.             Definitions

 

As used in this Plan, the following terms shall have the following meanings:

 

2.1.  Accelerate, Accelerated, and Acceleration, means: (a) when used with
respect to an Option or Stock Appreciation Right, that as of the time of
reference the Option or Stock Appreciation Right will become exercisable with
respect to some or all of the shares of Stock for which it was not then
otherwise exercisable by its terms; (b) when used with respect to Restricted
Stock or Restricted Stock Units, that the Risk of Forfeiture otherwise
applicable to the Stock or Units shall expire with respect to some or all of the
shares of Restricted Stock or Units then still otherwise subject to the Risk of
Forfeiture; and (c) when used with respect to Performance Units, that the
applicable Performance Goals shall be deemed to have been met as to some or all
of the Units.

 

2.2.  Acquisition means a merger or consolidation of the Company into another
person (i.e., which merger or consolidation the Company does not survive) or the
sale, transfer, or other disposition of all or substantially all of the
Company’s assets to one or more other persons in a single transaction or series
of related transactions.

 

2.3.  Affiliate means any corporation, partnership, limited liability company,
business trust, or other entity controlling, controlled by or under common
control with the Company.

 

2.4.  Award means any grant or sale pursuant to the Plan of Options, Stock
Appreciation Rights, Performance Units, Restricted Stock, Restricted Stock
Units, or Stock Grants.

 

2.5.  Award Agreement means an agreement between the Company and the recipient
of an Award, setting forth the terms and conditions of the Award.

 

2.6.  Board means the Company’s Board of Directors.

 

2.7.  Change in Control means the occurrence of any of the following after the
date of the approval of the Plan by the Board:

 

(a)       an Acquisition, unless securities possessing more than 50% of the
total combined voting power of the survivor’s or acquiror’s outstanding
securities (or the securities of any parent thereof) are held by a person or
persons who held securities possessing more than 50% of the total combined
voting power of the Company’s outstanding securities immediately prior to that
transaction, or

 

(b)       any person or group of persons (within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended and in effect from time to
time) directly or indirectly acquires, including but not limited to by means of
a merger or consolidation, beneficial ownership (determined pursuant to
Securities and Exchange Commission Rule 13d-3 promulgated under the

 

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said Exchange Act) of securities possessing more than 20% of the total combined
voting power of the Company’s outstanding securities pursuant to a tender or
exchange offer made directly to the Company’s stockholders that the Board does
not recommend such stockholders accept, other than (i) the Company or an
Affiliate, (ii) an employee benefit plan of the Company or any of its
Affiliates, (iii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, or (iv) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or

 

(c)       over a period of 36 consecutive months or less, there is a change in
the composition of the Board such that a majority of the Board members (rounded
up to the next whole number, if a fraction) ceases, by reason of one or more
proxy contests for the election of Board members, to be composed of individuals
who either (i) have been Board members continuously since the beginning of that
period, or (ii) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described in the
preceding clause (i) who were still in office at the time that election or
nomination was approved by the Board; or

 

(d)       a majority of the Board votes in favor of a decision that a Change in
Control has occurred.

 

2.8.  Code means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto, and any regulations issued from time to
time thereunder.

 

2.9.  Committee means the Compensation Committee of the Board, which in general
is responsible for the administration of the Plan, as provided in Section 5 of
the Plan. For any period during which no such committee is in existence
“Committee” shall mean the Board and all authority and responsibility assigned
to the Committee under the Plan shall be exercised, if at all, by the Board.

 

2.10.  Company means Investors Financial Services Corp., a corporation organized
under the laws of the State of Delaware.

 

2.11.  Covered Employee means an employee who is a “covered employee” within the
meaning of Section 162(m) of the Code.

 

2.12.  Grant Date means the date as of which an Option is granted, as determined
under Section 7.1(a).

 

2.13.  Incentive Option means an Option which by its terms is to be treated as
an “incentive stock option” within the meaning of Section 422 of the Code.

 

2.14.  Market Value means the value of a share of Stock on a particular date
determined by such methods or procedures as may be established by the Committee.
Unless otherwise determined by the Committee, the Market Value of Stock as of
any date is the closing price for the Stock as reported on the NASDAQ Stock
market (or on any national securities exchange on which the Stock is then
listed) for that date or, if no closing price is reported for that date, the
closing price on the next preceding date for which a closing price was reported.
For purposes of Awards effective as of the effective date of the Company’s
initial public offering, Market Value of Stock shall be the price at which the
Company’s Stock is offered to the public in its initial public offering.

 

2.15.  Non-Employee Director means a director that is not an employee of the
Company.

 

2.16.  Nonstatutory Option means any Option that is not an Incentive Option.

 

2.17.  Option means an option to purchase shares of Stock.

 

2.18.  Optionee means a Participant to whom an Option shall have been granted
under the Plan.

 

2.19.  Participant means any holder of an outstanding Award under the Plan.

 

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2.20.  Performance Criteria means the criteria that the Committee selects for
purposes of establishing the Performance Goal or Performance Goals for a
Participant for a Performance Period. The Performance Criteria used to establish
Performance Goals are limited to: pre- or after-tax net earnings, sales growth,
operating earnings, operating cash flow, return on net assets, return on
stockholders’ equity, return on assets, return on capital, Stock price growth,
stockholder returns, gross or net profit margin, earnings per share, price per
share of Stock, and market share, any of which may be measured either in
absolute terms or as compared to any incremental increase or as compared to
results of a peer group. The Committee will, but within the time prescribed by
Section 162(m) of the Code in the case of Qualified Performance-Based Awards,
objectively define the manner of calculating the Performance Criteria it selects
to use for such Performance Period for such Participant.

 

2.21.  Performance Goals means, for a Performance Period, the written goals
established by the Committee for the Performance Period based upon the
Performance Criteria. Depending on the Performance Criteria used to establish
such Performance Goals, the Performance Goals may be expressed in terms of
overall Company performance or the performance of a division, business unit,
subsidiary, or an individual.

 

2.22.  Performance Period means the one or more periods of time, which may be of
varying and overlapping durations, selected by the Committee, over which the
attainment of one or more Performance Goals will be measured for purposes of
determining a Participant’s right to, and the payment of, a Performance Unit.

 

2.23.  Performance Unit means a right granted to a Participant under
Section 7.5, to receive cash, Stock or other Awards, the payment of which is
contingent on achieving Performance Goals established by the Committee.

 

2.24.  Plan means this 2005 Equity Incentive Plan of the Company, as amended
from time to time, and including any attachments or addenda hereto.

 

2.25.  Qualified Performance-Based Awards means Awards intended to qualify as
“performance-based compensation” under Section 162(m) of the Code.

 

2.26.  Restricted Stock means a grant or sale of shares of Stock to a
Participant subject to a Risk of Forfeiture.

 

2.27.  Restriction Period means the period of time, established by the Committee
in connection with an Award of Restricted Stock, during which the shares of
Restricted Stock are subject to a Risk of Forfeiture described in the applicable
Award Agreement.

 

2.28.  Risk of Forfeiture means a limitation on the right of the Participant to
retain Restricted Stock or Restricted Stock Units, including a right in the
Company to reacquire shares of Restricted Stock at less than their then Market
Value, arising because of the occurrence or non-occurrence of specified events
or conditions.

 

2.29.  Restricted Stock Units means rights to receive shares of Stock at the
close of a Restriction Period, subject to a Risk of Forfeiture.

 

2.30.  Stock means common stock, par value $.01 per share, of the Company, and
such other securities as may be substituted for Stock pursuant to Section 8.

 

2.31.  Stock Appreciation Right means a right to receive any excess in the
Market Value of shares of Stock (except as otherwise provided in Section 7.2(c))
over a specified exercise price.

 

2.32.  Stock Grant means the grant of shares of Stock not subject to
restrictions or other forfeiture conditions.

 

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2.33  Ten Percent Owner means a person who owns, or is deemed within the meaning
of Section 422(b)(6) of the Code to own, stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company (or any
parent or subsidiary corporations of the Company, as defined in Sections 424(e)
and (f), respectively, of the Code). Whether a person is a Ten Percent Owner
shall be determined with respect to an Option based on the facts existing
immediately prior to the Grant Date of the Option.

 

3.             Term of the Plan

 

Unless the Plan shall have been earlier terminated by the Board, Awards may be
granted under this Plan at any time in the period commencing on the date of
approval of the Plan by the Board and ending immediately prior to the tenth
anniversary of the earlier of the adoption of the Plan by the Board or approval
of the Plan by the Company’s stockholders. Awards granted pursuant to the Plan
within that period shall not expire solely by reason of the termination of the
Plan. Awards of Incentive Options granted prior to stockholder approval of the
Plan are expressly conditioned upon such approval, but in the event of the
failure of the stockholders to approve the Plan shall thereafter and for all
purposes be deemed to constitute Nonstatutory Options.

 

4.             Stock Subject to the Plan

 

At no time shall the number of shares of Stock issued pursuant to or subject to
outstanding Awards granted under the Plan exceed the excess of (i) 18,080,000
shares of stock over (ii) the number of shares of Stock issued pursuant to or
subject to outstanding awards granted under the Company’s Amended and Restated
1995 Stock Plan and 1995 Non-Employee Director Stock Option Plan; subject,
however, to the provisions of Section 8 of the Plan. At no time shall the number
of shares of Stock issued pursuant to or subject to the outstanding Incentive
Options granted under the Plan exceed 5,489,245 shares of Stock; subject,
however, to the provisions of Section 8 of the Plan. For purposes of applying
the foregoing limitation, (a) if any Option or Stock Appreciation Right expires,
terminates, or is cancelled for any reason without having been exercised in
full, or if any other Award is forfeited by the recipient, the shares not
purchased by the Optionee or which are forfeited by the recipient shall again be
available for Awards to be granted under the Plan and (b) if any Option is
exercised by delivering previously owned shares in payment of the exercise price
therefore, only the net number of shares, that is, the number of shares issued
minus the number received by the Company in payment of the exercise price, shall
be considered to have been issued pursuant to an Award granted under the Plan.
In addition, settlement of any Award shall not count against the foregoing
limitations except to the extent settled in the form of Stock. Shares of Stock
issued pursuant to the Plan may be either authorized but unissued shares or
shares held by the Company in its treasury.

 

5.             Administration

 

The Plan shall be administered by the Committee; provided, however, that at any
time and on any one or more occasions the Board may itself exercise any of the
powers and responsibilities assigned the Committee under the Plan and when so
acting shall have the benefit of all of the provisions of the Plan pertaining to
the Committee’s exercise of its authorities hereunder. Subject to the provisions
of the Plan, the Committee shall have complete authority, in its discretion, to
make or to select the manner of making all determinations with respect to each
Award to be granted by the Company under the Plan including the employee,
consultant or director to receive the Award and the form of Award. In making
such determinations, the Committee may take into account the nature of the
services rendered by the respective employees, consultants, and directors, their
present and potential contributions to the success of the Company and its
Affiliates, and such other factors as the Committee in its discretion shall deem
relevant. Subject to the provisions of the Plan, the Committee shall also have
complete authority to interpret the Plan, to prescribe, amend and rescind rules
and regulations relating to it, to determine the

 

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terms and provisions of the respective Award Agreements (which need not be
identical), and to make all other determinations necessary or advisable for the
administration of the Plan. The Committee’s determinations made in good faith on
matters referred to in the Plan shall be final, binding and conclusive on all
persons having or claiming any interest under the Plan or an Award made pursuant
hereto.

 

6.             Authorization of Grants

 

6.1.  Eligibility. The Committee may grant from time to time and at any time
prior to the termination of the Plan one or more Awards, either alone or in
combination with any other Awards, to any employee of or consultant to one or
more of the Company and its Affiliates or to non-employee members of the Board
or of any board of directors (or similar governing authority) of any Affiliate.
However, only employees of the Company, and of any parent or subsidiary
corporations of the Company, as defined in Sections 424(e) and (f),
respectively, of the Code, shall be eligible for the grant of an Incentive
Option. Further, in no event shall the number of shares of Stock covered by
Options or other Awards granted to any one person in any one calendar year
exceed 25% of the aggregate number of shares of Stock subject to the Plan.

 

6.2.  General Terms of Awards. Each grant of an Award shall be subject to all
applicable terms and conditions of the Plan (including but not limited to any
specific terms and conditions applicable to that type of Award set out in the
following Section), and such other terms and conditions, not inconsistent with
the terms of the Plan, as the Committee may prescribe. No prospective
Participant shall have any rights with respect to an Award, unless and until
such Participant has executed an agreement evidencing the Award, delivered a
fully executed copy thereof to the Company, and otherwise complied with the
applicable terms and conditions of such Award.

 

6.3.  Effect of Termination of Employment, Etc. Unless the Committee shall
provide otherwise with respect to any Award, if the Participant’s employment or
other association with the Company and its Affiliates ends for any reason,
including because of the Participant’s employer ceasing to be an Affiliate,
(a) any outstanding Option or SAR of the Participant shall cease to be
exercisable in any respect not later than 90 days following that event and, for
the period it remains exercisable following that event, shall be exercisable
only to the extent exercisable at the date of that event, and (b) any other
outstanding Award of the Participant shall be forfeited or otherwise subject to
return to or repurchase by the Company on the terms specified in the applicable
Award Agreement. Military or sick leave or other bona fide leave shall not be
deemed a termination of employment or other association, provided that it does
not exceed the longer of ninety (90) days or the period during which the absent
Participant’s reemployment rights, if any, are guaranteed by statute or by
contract.

 

6.4.  Non-Transferability of Awards. Except as otherwise provided in this
Section 6.4, Awards shall not be transferable, and no Award or interest therein
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution. All
of a Participant’s rights in any Award may be exercised during the life of the
Participant only by the Participant or the Participant’s legal representative.
However, the Committee may, at or after the grant of an Award of a Nonstatutory
Option, or shares of Restricted Stock, provide that such Award may be
transferred by the recipient to a family member; provided, however, that any
such transfer is without payment of any consideration whatsoever and that no
transfer shall be valid unless first approved by the Committee, acting in its
sole discretion. For this purpose, “family member” means any child, stepchild,
grandchild, parent, stepparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
employee’s household (other than a tenant or employee), a trust in which the
foregoing persons have more than fifty (50) percent of the beneficial interests,
a foundation in which the foregoing persons (or the Participant) control the
management of assets, and

 

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any other entity in which these persons (or the Participant) own more than fifty
(50) percent of the voting interests.

 

7.             Specific Terms of Awards

 

7.1.  Options.

 

(a)       Date of Grant. The granting of an Option shall take place at the time
specified in the Award Agreement. Only if expressly so provided in the
applicable Award Agreement shall the Grant Date be the date on which the Award
Agreement shall have been duly executed and delivered by the Company and the
Optionee.

 

(b)       Exercise Price. The price at which shares of Stock may be acquired
under each Incentive Option shall be not less than 100% of the Market Value of
Stock on the Grant Date, or not less than 110% of the Market Value of Stock on
the Grant Date if the Optionee is a Ten Percent Owner. The price at which shares
may be acquired under each Nonstatutory Option shall not be so limited solely by
reason of this Section.

 

(c)       Option Period. No Incentive Option may be exercised on or after the
tenth anniversary of the Grant Date, or on or after the fifth anniversary of the
Grant Date if the Optionee is a Ten Percent Owner. The Option period under each
Nonstatutory Option shall not be so limited solely by reason of this Section.

 

(d)       Exercisability. An Option may be immediately exercisable or become
exercisable in such installments, cumulative or non-cumulative, as the Committee
may determine. In the case of an Option not otherwise immediately exercisable in
full, the Committee may Accelerate such Option in whole or in part at any time;
provided, however, that in the case of an Incentive Option, any such
Acceleration of the Option would not cause the Option to fail to comply with the
provisions of Section 422 of the Code or the Optionee consents to the
Acceleration.

 

(e)       Method of Exercise. An Option may be exercised by the Optionee giving
written notice, in the manner provided in Section 16, specifying the number of
shares with respect to which the Option is then being exercised. Payment of the
purchase price may be made by one or more of the following methods to the extent
provided in the Award Agreement:

 

1.       In cash, by certified or bank check or other instrument acceptable to
the Administrator;

 

2.       Through the delivery (or attestation to the ownership) of shares of
Stock that have been purchased by the Optionee on the open market or that have
been beneficially owned by the Optionee for at least six months and are not then
subject to restrictions under any Company plan. Such surrendered shares shall be
valued at Market Value on the exercise date; or

 

3.       By the Optionee delivering to the Company a properly executed exercise
notice together with irrevocable instructions to a broker to promptly deliver to
the Company cash or a check payable and acceptable to the Company for the
purchase price; provided that in the event the Optionee chooses to pay the
purchase price as so provided, the Optionee and the broker shall comply with
such procedures and enter into such agreements of indemnity and other agreements
as the Committee shall prescribe as a condition of such payment procedure.

 

Within thirty (30) days thereafter but subject to the remaining provisions of
the Plan, the Company shall deliver or cause to be delivered to the Optionee or
his agent a certificate or certificates for the number of shares then being
purchased. Such shares shall be fully paid and nonassessable. In the event an
Optionee chooses to pay the purchase price by previously-owned shares of Stock
through the

 

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attestation method, the number of shares of Stock transferred to the Optionee
upon the exercise of the Stock Option shall be net of the number of shares
attested to.

 

(f)        Limit on Incentive Option Characterization. An Incentive Option shall
be considered to be an Incentive Option only to the extent that the number of
shares of Stock for which the Option first becomes exercisable in a calendar
year do not have an aggregate Market Value (as of the date of the grant of the
Option) in excess of the “current limit”. The current limit for any Optionee for
any calendar year shall be $100,000 minus the aggregate Market Value at the date
of grant of the number of shares of Stock available for purchase for the first
time in the same year under each other Incentive Option previously granted to
the Optionee under the Plan, and under each other incentive stock option
previously granted to the Optionee under any other incentive stock option plan
of the Company and its Affiliates, after December 31, 1986. Any shares of Stock
which would cause the foregoing limit to be violated shall be deemed to have
been granted under a separate Nonstatutory Option, otherwise identical in its
terms to those of the Incentive Option.

 

(g)       Notification of Disposition. Each person exercising any Incentive
Option granted under the Plan shall be deemed to have covenanted with the
Company to report to the Company any disposition of such shares prior to the
expiration of the holding periods specified by Section 422(a)(1) of the Code
and, if and to the extent that the realization of income in such a disposition
imposes upon the Company federal, state, local or other withholding tax
requirements, or any such withholding is required to secure for the Company an
otherwise available tax deduction, to remit to the Company an amount in cash
sufficient to satisfy those requirements.

 

7.2.  Stock Appreciation Rights.

 

(a)       Tandem or Stand-Alone. Stock Appreciation Rights may be granted in
tandem with an Option (at or, in the case of a Nonstatutory Option, after, the
award of the Option), or alone and unrelated to an Option. Stock Appreciation
Rights in tandem with an Option shall terminate to the extent that the related
Option is exercised, and the related Option shall terminate to the extent that
the tandem Stock Appreciation Rights are exercised.

 

(b)       Exercise Price. Stock Appreciation Rights shall have an exercise price
of not less than fifty percent (50%) of the Market Value of the Stock on the
date of award, or in the case of Stock Appreciation Rights in tandem with
Options, the exercise price of the related Option.

 

(c)       Other Terms. Except as the Committee may deem inappropriate or
inapplicable in the circumstances, Stock Appreciation Rights shall be subject to
terms and conditions substantially similar to those applicable to a Nonstatutory
Option. In addition, an SAR related to an Option which can only be exercised
during limited periods following a Change in Control may entitle the Participant
to receive an amount based upon the highest price paid or offered for Stock in
any transaction relating to the Change in Control or paid during the thirty
(30) day period immediately preceding the occurrence of the change in control in
any transaction reported in the stock market in which the Stock is normally
traded.

 

7.3.  Restricted Stock.

 

(a)       Purchase Price. Shares of Restricted Stock shall be issued under the
Plan for such consideration, in cash, other property or services, or any
combination thereof, as is determined by the Committee.

 

(b)       Issuance of Certificates. Each Participant receiving a Restricted
Stock Award, subject to subsection (c) below, shall be issued a stock
certificate in respect of such shares of Restricted Stock. Such certificate
shall be registered in the name of such Participant, and, if applicable, shall

 

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bear an appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award substantially in the following form:

 

The transferability of this certificate and the shares represented by this
certificate are subject to the terms and conditions of Investors Financial
Services Corp. 2005 Equity Incentive Plan and an Award Agreement entered into by
the registered owner and Investors Financial Services Corp. Copies of such Plan
and Agreement are on file in the offices of Investors Financial Services Corp.

 

(c)       Escrow of Shares. The Committee may require that the stock
certificates evidencing shares of Restricted Stock be held in custody by a
designated escrow agent (which may but need not be the Company) until the
restrictions thereon shall have lapsed, and that the Participant deliver a stock
power, endorsed in blank, relating to the Stock covered by such Award.

 

(d)       Restrictions and Restriction Period. During the Restriction Period
applicable to shares of Restricted Stock, such shares shall be subject to
limitations on transferability and a Risk of Forfeiture arising on the basis of
such conditions related to the performance of services, Company or Affiliate
performance or otherwise as the Committee may determine and provide for in the
applicable Award Agreement. Any such Risk of Forfeiture may be waived or
terminated, or the Restriction Period shortened, at any time by the Committee on
such basis as it deems appropriate.

 

(e)       Rights Pending Lapse of Risk of Forfeiture or Forfeiture of Award.
Except as otherwise provided in the Plan or the applicable Award Agreement, at
all times prior to lapse of any Risk of Forfeiture applicable to, or forfeiture
of, an Award of Restricted Stock, the Participant shall have all of the rights
of a stockholder of the Company, including the right to vote, and the right to
receive any dividends with respect to, the shares of Restricted Stock. The
Committee, as determined at the time of Award, may permit or require the payment
of cash dividends to be deferred and, if the Committee so determines, reinvested
in additional Restricted Stock to the extent shares are available under
Section 4.

 

(f)        Lapse of Restrictions. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock, the certificates for such
shares shall be delivered to the Participant promptly if not theretofore so
delivered.

 

7.4.  Restricted Stock Units.

 

(a)       Character. Each Restricted Stock Unit shall entitle the recipient to a
share of Stock at a close of such Restriction Period as the Committee may
establish and subject to a Risk of Forfeiture arising on the basis of such
conditions relating to the performance of services, Company or Affiliate
performance or otherwise as the Committee may determine and provide for in the
applicable Award Agreement. Any such Risk of Forfeiture may be waived or
terminated, or the Restriction Period shortened, at any time by the Committee on
such basis as it deems appropriate.

 

(b)       Form and Timing of Payment. Payment of earned Restricted Stock Units
shall be made in a single lump sum following the close of the applicable
Restriction Period. At the discretion of the Committee, Participants may be
entitled to receive payments equivalent to any dividends declared with respect
to Stock referenced in grants of Restricted Stock Units but only following the
close of the applicable Restriction Period and then only if the underlying Stock
shall have been earned. Unless the Committee shall provide otherwise, any such
dividend equivalents shall be paid, if at all, without interest or other
earnings.

 

7.5.  Performance Units.

 

(a)       Character. Each Performance Unit shall entitle the recipient to the
value of a specified number of shares of Stock, over the initial value for such
number of shares, if any, established by the Committee at the time of grant, at
the close of a specified Performance Period to the extent specified Performance
Goals shall have been achieved.

 

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(b)       Earning of Performance Units. The Committee shall set Performance
Goals in its discretion which, depending on the extent to which they are met
within the applicable Performance Period, will determine the number and value of
Performance Units that will be paid out to the Participant. After the applicable
Performance Period has ended, the holder of Performance Units shall be entitled
to receive payout on the number and value 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 Goals have been achieved.

 

(c)       Form and Timing of Payment. Payment of earned Performance Units shall
be made in a single lump sum following the close of the applicable Performance
Period. At the discretion of the Committee, Participants may be entitled to
receive any dividends declared with respect to Stock which have been earned in
connection with grants of Performance Units which have been earned, but not yet
distributed to Participants. The Committee may permit or, if it so provides at
grant require, a Participant to defer such Participant’s receipt of the payment
of cash or the delivery of Stock that would otherwise be due to such Participant
by virtue of the satisfaction of any requirements or goals with respect to
Performance Units. If any such deferral election is required or permitted, the
Committee shall establish rules and procedures for such payment deferrals.

 

7.6.  Stock Grants. Stock Grants shall be awarded solely in recognition of
significant contributions to the success of the Company or its Affiliates, in
lieu of compensation otherwise already due and in such other limited
circumstances as the Committee deems appropriate. Stock Grants shall be made
without forfeiture conditions of any kind.

 

7.7.  Qualified Performance-Based Awards.

 

(a)       Purpose. The purpose of this Section 7.7 is to provide the Committee
the ability to qualify Awards as “performance-based compensation” under
Section 162(m) of the Code. If the Committee, in its discretion, decides to
grant an Award as a Qualified Performance-Based Award, the provisions of this
Section 7.7 will control over any contrary provision contained in the Plan. In
the course of granting any Award, the Committee may specifically designate the
Award as intended to qualify as a Qualified Performance-Based Award. However, no
Award shall be considered to have failed to qualify as a Qualified
Performance-Based Award solely because the Award is not expressly designated as
a Qualified Performance-Based Award, if the Award otherwise satisfies the
provisions of this Section 7.7 and the requirements of Section 162(m) of the
Code and the regulations thereunder applicable to “performance-based
compensation.”

 

(b)       Authority. All grants of Awards intended to qualify as Qualified
Performance-Based Awards and determination of terms applicable thereto shall be
made by the Committee or, if not all of the members thereof qualify as “outside
directors” within the meaning of applicable IRS regulations under Section 162 of
the Code, a subcommittee of the Committee consisting of such of the members of
the Committee as do so qualify. Any action by such a subcommittee shall be
considered the action of the Committee for purposes of the Plan.

 

(b)       Applicability. This Section 7.7 will apply only to those Covered
Employees, or to those persons who the Committee determines are reasonably
likely to become Covered Employees in the period covered by an Award, selected
by the Committee to receive Qualified Performance-Based Awards. The Committee
may, in its discretion, grant Awards to Covered Employees that do not satisfy
the requirements of this Section 7.7.

 

(c)       Discretion of Committee with Respect to Qualified Performance-Based
Awards. Options may be granted as Qualified Performance-Based Awards in
accordance with Section 7.1, except that the exercise price of any Option
intended to qualify as a Qualified Performance-Based Award shall in no event be
less that the Market Value of the Stock on the date of grant. With regard to
other Awards intended to qualify as Qualified Performance-Based Awards, such as
Restricted Stock,

 

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Restricted Stock Units, or Performance Units, the Committee will have full
discretion to select the length of any applicable Restriction Period or
Performance Period, the kind and/or level of the applicable Performance Goal,
and whether the Performance Goal is to apply to the Company, a Subsidiary or any
division or business unit or to the individual. Any Performance Goal or Goals
applicable to Qualified Performance-Based Awards shall be objective, shall be
established not later than ninety (90) days after the beginning of any
applicable Performance Period (or at such other date as may be required or
permitted for “performance-based compensation” under Section 162(m) of the Code)
and shall otherwise meet the requirements of Section 162(m) of the Code,
including the requirement that the outcome of the Performance Goal or Goals be
substantially uncertain (as defined in the regulations under Section 162(m) of
the Code) at the time established.

 

(d)       Payment of Qualified Performance-Based Awards. A Participant will be
eligible to receive payment under a Qualified Performance-Based Award which is
subject to achievement of a Performance Goal or Goals only if the applicable
Performance Goal or Goals period are achieved within the applicable Performance
Period, as determined by the Committee. In determining the actual size of an
individual Qualified Performance-Based Award, the Committee may reduce or
eliminate the amount of the Qualified Performance-Based Award earned for the
Performance Period, if in its sole and absolute discretion, such reduction or
elimination is appropriate.

 

(e)       Maximum Award Payable. The maximum Qualified Performance-Based Award
payment to any one Participant under the Plan for a Performance Period is
5,489,245 shares of Stock (subject to the provisions of Section 8 of the Plan)
or, if the Qualified Performance-Based Award is paid in cash, that number of
shares multiplied by the Market Value of the Stock as of the date the Qualified
Performance-Based Award is granted.

 

(f)        Limitation on Adjustments for Certain Events. No adjustment of any
Qualified Performance-Based Award pursuant to Section 8 shall be made except on
such basis, if any, as will not cause such Award to provide other than
“performance-based compensation” within the meaning of Section 162(m) of the
Code.

 

7.8.  Awards to Participants Outside the United States. The Committee may modify
the terms of any Award under the Plan granted to a Participant who is, at the
time of grant or during the term of the Award, resident or primarily employed
outside of the United States in any manner deemed by the Committee to be
necessary or appropriate in order that the Award shall conform to laws,
regulations, and customs of the country in which the Participant is then
resident or primarily employed, or so that the value and other benefits of the
Award to the Participant, as affected by foreign tax laws and other restrictions
applicable as a result of the Participant’s residence or employment abroad,
shall be comparable to the value of such an Award to a Participant who is
resident or primarily employed in the United States. The Committee may establish
supplements to, or amendments, restatements, or alternative versions of the Plan
for the purpose of granting and administrating any such modified Award. No such
modification, supplement, amendment, restatement or alternative version may
increase the share limit of Section 4.

 

8.             Adjustment Provisions

 

8.1.  Adjustment for Corporate Actions. All of the share numbers set forth in
the Plan reflect the capital structure of the Company as of February 18, 2005.
Subject to Section 8.2, if subsequent to that date the outstanding shares of
Stock (or any other securities covered by the Plan by reason of the prior
application of this Section) are increased, decreased, or exchanged for a
different number or kind of shares or other securities, or if additional shares
or new or different shares or other securities are distributed with respect to
shares of Stock, through merger, consolidation, sale of all or substantially all
the property of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock

 

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split, reverse stock split, or other similar distribution with respect to such
shares of Stock, an appropriate and proportionate adjustment will be made in
(i) the maximum numbers and kinds of shares provided in Section 4, (ii) the
numbers and kinds of shares or other securities subject to the then outstanding
Awards, (iii) the exercise price for each share or other unit of any other
securities subject to then outstanding Options and Stock Appreciation Rights
(without change in the aggregate purchase price as to which such Options or
Rights remain exercisable), and (iv) the repurchase price of each share of
Restricted Stock then subject to a Risk of Forfeiture in the form of a Company
repurchase right.

 

8.2.  Change in Control. The Committee may, in the Award Agreement, provide for
the effect of a Change in Control on an Award. Such provisions may include but
are not limited to any one or more of the following with respect to any or all
Awards: (i) the specific consequences of a Change in Control on the Awards;
(ii) the acceleration or extension of time periods for purposes of exercising,
vesting in, or realizing gain from, the Awards; (iii) a reservation of the
Committee’s right to determine in its discretion at any time that there shall be
full acceleration or no acceleration of benefits under the Awards; (iv) that
only certain or limited benefits under the Awards shall be accelerated; (v) that
the Awards shall be accelerated for a limited time only; or (vi) that
acceleration of the Awards shall be subject to additional conditions precedent
(such as a termination of employment following a Change in Control).

 

In addition to any action required or authorized by the terms of an Award, the
Committee may take any other action it deems appropriate to ensure the equitable
treatment of Participants in the event of or in anticipation of a Change in
Control, including but not limited to any one or more of the following with
respect to any or all Awards: (i) the waiver of conditions on the Awards that
were imposed for the benefit of the Corporation; (ii) provision for the cash
settlement of the Awards for their equivalent cash value, as determined by the
Committee, as of the date of the Change in Control; (iii) provision for Awards
to be assumed or replaced by comparable Awards referencing shares of the capital
stock of the successor or acquiring entity or parent thereof; or (iv) such other
modification or adjustment to the Awards as the Committee deems appropriate to
maintain and protect the rights and interests of Participants upon or following
the Change in Control. The Committee also may accord any Participant a right to
refuse any acceleration of exercisability, vesting or benefits, whether pursuant
to the Award Agreement or otherwise, in such circumstances as the Committee may
approve.

 

Notwithstanding the foregoing provisions of this Section 7(b) or any provision
in an Award Agreement to the contrary, if any Award to any Insider is
accelerated to a date that is less than six months after the Date of Grant, the
Committee may prohibit a sale of the underlying Stock (other than a sale by
operation or law in exchange for or through conversion into other securities),
and the Corporation may impose legend and other restrictions on the Stock to
enforce this prohibition.

 

8.3.  Dissolution or Liquidation. Upon dissolution or liquidation of the
Company, other than as part of an Acquisition or similar transaction, each
outstanding Option and SAR shall terminate, but the Optionee or SAR holder shall
have the right, immediately prior to the dissolution or liquidation, to exercise
the Option or SAR to the extent exercisable on the date of dissolution or
liquidation.

 

8.4.  Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. In the event of any corporate action not specifically
covered by the preceding Sections, including but not limited to an extraordinary
cash distribution on Stock, a corporate separation or other reorganization or
liquidation, the Committee may make such adjustment of outstanding Awards and
their terms, if any, as it, in its sole discretion, may deem equitable and
appropriate in the circumstances. The Committee may make adjustments in the
terms and conditions of, and the criteria included in, Awards in recognition of
unusual or nonrecurring events (including, without limitation, the events
described in this Section) affecting the Company or the financial statements of
the Company or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such

 

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adjustments are appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan.

 

8.5.  Related Matters. Any adjustment in Awards made pursuant to this Section 8
shall be determined and made, if at all, by the Committee and shall include any
correlative modification of terms, including of Option exercise prices, rates of
vesting or exercisability, Risks of Forfeiture, applicable repurchase prices for
Restricted Stock, and Performance Goals and other financial objectives which the
Committee may deem necessary or appropriate so as to ensure the rights of the
Participants in their respective Awards are not substantially diminished nor
enlarged as a result of the adjustment and corporate action other than as
expressly contemplated in this Section 8. No fraction of a share shall be
purchasable or deliverable upon exercise, but in the event any adjustment
hereunder of the number of shares covered by an Award shall cause such number to
include a fraction of a share, such number of shares shall be adjusted to the
nearest smaller whole number of shares. No adjustment of an Option exercise
price per share pursuant to this Section 8 shall result in an exercise price
which is less than the par value of the Stock.

 

9.             Settlement of Awards

 

9.1.  In General. Options and Restricted Stock shall be settled in accordance
with their terms. All other Awards may be settled in cash, Stock, or other
Awards, or a combination thereof, as determined by the Committee at or after
grant and subject to any contrary Award Agreement. The Committee may not require
settlement of any Award in Stock pursuant to the immediately preceding sentence
to the extent issuance of such Stock would be prohibited or unreasonably delayed
by reason of any other provision of the Plan.

 

9.2.  Violation of Law. Notwithstanding any other provision of the Plan or the
relevant Award Agreement, if, at any time, in the reasonable opinion of the
Company, the issuance of shares of Stock covered by an Award may constitute a
violation of law, then the Company may delay such issuance and the delivery of a
certificate for such shares until (i) approval shall have been obtained from
such governmental agencies, other than the Securities and Exchange Commission,
as may be required under any applicable law, rule, or regulation and (ii) in the
case where such issuance would constitute a violation of a law administered by
or a regulation of the Securities and Exchange Commission, one of the following
conditions shall have been satisfied:

 

(a)       the shares are at the time of the issue of such shares effectively
registered under the Securities Act of 1933; or

 

(b)       the Company shall have determined, on such basis as it deems
appropriate (including an opinion of counsel in form and substance satisfactory
to the Company) that the sale, transfer, assignment, pledge, encumbrance or
other disposition of such shares or such beneficial interest, as the case may
be, does not require registration under the Securities Act of 1933, as amended
or any applicable State securities laws.

 

The Company shall make all reasonable efforts to bring about the occurrence of
said events.

 

9.3.  Corporate Restrictions on Rights in Stock. Any Stock to be issued pursuant
to Awards granted under the Plan shall be subject to all restrictions upon the
transfer thereof which may be now or hereafter imposed by the charter,
certificate or articles, and by-laws, of the Company.

 

9.4.  Registration. If the Company shall deem it necessary or desirable to
register under the Securities Act of 1933, as amended or other applicable
statutes any shares of Stock issued or to be issued pursuant to Awards granted
under the Plan, or to qualify any such shares of Stock for exemption from the
Securities Act of 1933, as amended or other applicable statutes, then the
Company shall take such action at its own expense. The Company may require from
each recipient of an Award, or each

 

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holder of shares of Stock acquired pursuant to the Plan, such information in
writing for use in any registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably necessary for that purpose and
may require reasonable indemnity to the Company and its officers and directors
from that holder against all losses, claims, damage and liabilities arising from
use of the information so furnished and caused by any untrue statement of any
material fact therein or caused by the omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made. In
addition, the Company may require of any such person that he or she agree that,
without the prior written consent of the Company or the managing underwriter in
any public offering of shares of Stock, he or she will not sell, make any short
sale of, loan, grant any option for the purchase of, pledge or otherwise
encumber, or otherwise dispose of, any shares of Stock during the 180 day period
commencing on the effective date of the registration statement relating to the
underwritten public offering of securities. Without limiting the generality of
the foregoing provisions of this Section 10.4, if in connection with any
underwritten public offering of securities of the Company the managing
underwriter of such offering requires that the Company’s directors and officers
enter into a lock-up agreement containing provisions that are more restrictive
than the provisions set forth in the preceding sentence, then (a) each holder of
shares of Stock acquired pursuant to the Plan (regardless of whether such person
has complied or complies with the provisions of clause (b) below) shall be bound
by, and shall be deemed to have agreed to, the same lock-up terms as those to
which the Company’s directors and officers are required to adhere; and (b) at
the request of the Company or such managing underwriter, each such person shall
execute and deliver a lock-up agreement in form and substance equivalent to that
which is required to be executed by the Company’s directors and officers.

 

9.5.  Placement of Legends; Stop Orders; etc. Each share of Stock to be issued
pursuant to Awards granted under the Plan may bear any applicable restriction
under the Plan, the terms of the Award or applicable law. All certificates for
shares of Stock or other securities delivered under the Plan shall be subject to
such stock transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of any stock
exchange upon which the Stock is then listed, and any applicable federal or
state securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.

 

9.6.  Tax Withholding. Whenever shares of Stock are issued or to be issued
pursuant to Awards granted under the Plan, the Company shall have the right to
require the recipient to remit to the Company an amount sufficient to satisfy
federal, state, local or other withholding tax requirements if, when, and to the
extent required by law (whether so required to secure for the Company an
otherwise available tax deduction or otherwise) prior to the delivery of any
certificate or certificates for such shares. The obligations of the Company
under the Plan shall be conditional on satisfaction of all such withholding
obligations and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
recipient of an Award. However, in such cases Participants may elect, subject to
the approval of the Committee, acting in its sole discretion, to satisfy an
applicable withholding requirement, in whole or in part, by having the Company
withhold shares to satisfy their tax obligations. Participants may only elect to
have Shares withheld having a Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could be imposed on
the transaction. All elections shall be irrevocable, made in writing, signed by
the Participant, and shall be subject to any restrictions or limitations that
the Committee deems appropriate.

 

10.    Reservation of Stock

 

The Company shall at all times during the term of the Plan and any outstanding
Awards granted hereunder reserve or otherwise keep available such number of
shares of Stock as will be sufficient to

 

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satisfy the requirements of the Plan (if then in effect) and the Awards and
shall pay all fees and expenses necessarily incurred by the Company in
connection therewith.

 

11.           Limitation of Rights in Stock; No Special Service Rights

 

A Participant shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the shares of Stock subject to an Award, unless
and until a certificate shall have been issued therefore and delivered to the
Participant or his agent. Any Stock to be issued pursuant to Awards granted
under the Plan shall be subject to all restrictions upon the transfer thereof
which may be now or hereafter imposed by the Certificate of Incorporation and
the By-laws of the Company. Nothing contained in the Plan or in any Award
Agreement shall confer upon any recipient of an Award any right with respect to
the continuation of his or her employment or other association with the Company
(or any Affiliate), or interfere in any way with the right of the Company (or
any Affiliate), subject to the terms of any separate employment or consulting
agreement or provision of law or corporate articles or by-laws to the contrary,
at any time to terminate such employment or consulting agreement or to increase
or decrease, or otherwise adjust, the other terms and conditions of the
recipient’s employment or other association with the Company and its Affiliates.

 

12.           Unfunded Status of Plan

 

The Plan is intended to constitute an “unfunded” plan for incentive
compensation, and the Plan is not intended to constitute a plan subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
With respect to any payments not yet made to a Participant by the Company,
nothing contained herein shall give any such Participant any rights that are
greater than those of a general creditor of the Company. In its sole discretion,
the Committee may authorize the creation of trusts or other arrangements to meet
the obligations created under the Plan to deliver Stock or payments with respect
to Options, Stock Appreciation Rights and other Awards hereunder, provided,
however, that the existence of such trusts or other arrangements is consistent
with the unfunded status of the Plan.

 

13.           Nonexclusivity of the Plan

 

Neither the adoption of the Plan by the Board nor the submission of the Plan to
the stockholders of the Company shall be construed as creating any limitations
on the power of the Board to adopt such other incentive arrangements as it may
deem desirable, including without limitation, the granting of stock options and
restricted stock other than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.

 

14.           Termination and Amendment of the Plan

 

The Board may at any time terminate, suspend or discontinue the Plan. The Board
of Directors may amend this Plan at any time, provided that any material
amendment to the Plan will not be effective unless approved by the Corporation’s
stockholders. For this purpose, a material amendment is any amendment that would
(i) materially increase the number of shares of Stock available under the Plan
or issuable to a Participant (other than a change in the number of shares made
pursuant to Section 8); (ii) change the types of awards that may be granted
under the Plan; (iii) expand the class of persons eligible to receive awards or
otherwise participate in the Plan; (iv) reduce the price at which an Option is
exercisable by amendment of an Award Agreement (other than as permitted in
Section 8); or (v) require stockholder approval pursuant to the requirements of
Nasdaq or any exchange on which the Company is then listed or applicable law.
Unless the Board otherwise expressly provides, no amendment of the Plan shall
affect the terms of any Award outstanding on the date of such amendment. In any
case, no termination or amendment of the Plan may, without the consent of any
recipient of an Award granted hereunder, adversely affect the rights of the
recipient under such Award.

 

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The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, provided that the Award as amended is consistent
with the terms of the Plan, but no such amendment shall impair the rights of the
recipient of such Award without his or her consent.

 

15.           Notices and Other Communications

 

Any notice, demand, request or other communication hereunder to any party shall
be deemed to be sufficient if contained in a written instrument delivered in
person or duly sent by first class registered, certified or overnight mail,
postage prepaid, or telecopied with a confirmation copy by regular, certified or
overnight mail, addressed or telecopied, as the case may be, (i) if to the
recipient of an Award, at his or her residence address last filed with the
Company and (ii) if to the Company, at its principal place of business,
addressed to the attention of its Treasurer, or to such other address or
telecopier number, as the case may be, as the addressee may have designated by
notice to the addressor. All such notices, requests, demands and other
communications shall be deemed to have been received: (i) in the case of
personal delivery, on the date of such delivery; (ii) in the case of mailing,
when received by the addressee; and (iii) in the case of facsimile transmission,
when confirmed by facsimile machine report.

 

16.           Governing Law

 

The Plan and all Award Agreements and actions taken thereunder shall be
governed, interpreted and enforced in accordance with the laws of the State of
Delaware, without regard to the conflict of laws principles thereof.

 

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