Exhibit 10.1

PDL BIOPHARMA, INC.

2005 EQUITY INCENTIVE PLAN

(AMENDED AND RESTATED EFFECTIVE JUNE 4, 2009)

--------------------------------------------------------------------------------

PDL BIOPHARMA, INC.

2005 EQUITY INCENTIVE PLAN

(AMENDED AND RESTATED EFFECTIVE JUNE 4, 2009)

TABLE OF CONTENTS

 

     Page

1.     Establishment, Purpose and Term of Plan

   1

1.1    Establishment

   1

1.2    Purpose

   1

1.3    Term of Plan

   1

2.     Definitions and Construction

   1

2.1    Definitions

   1

2.2    Construction

   7

3.     Administration

   7

3.1    Administration by the Committee

   7

3.2    Authority of Officers

   7

3.3    Administration with Respect to Insiders

   7

3.4    Committee Complying with Section 162(m)

   7

3.5    Powers of the Committee

   7

3.6    Option or SAR Repricing

   8

3.7    Indemnification

   8

4.     Shares Subject to Plan

   9

4.1    Maximum Number of Shares Issuable

   9

4.2    Share Accounting

   9

4.3    Adjustments for Changes in Capital Structure

   9

5.     Eligibility, Participation and Award Limitations

   10

5.1    Persons Eligible for Awards

   10

5.2    Participation in Plan

   10

5.3    Award Limitations

   10

6.     Stock Options

   12

6.1    Exercise Price

   12

6.2    Exercisability and Term of Options

   12

6.3    Payment of Exercise Price

   12

6.4    Effect of Termination of Service

   13

6.5    Transferability of Options

   13

7.     Stock Appreciation Rights

   14

7.1    Types of SARs Authorized

   14

7.2    Exercise Price

   14

7.3    Exercisability and Term of SARs

   14

7.4    Exercise of SARs

   14

7.5    Deemed Exercise of SARs

   15

7.6    Effect of Termination of Service

   15

7.7    Nontransferability of SARs

   15

8.     Restricted Stock Awards

   15

8.1    Types of Restricted Stock Awards Authorized

   15

8.2    Purchase Price

   15

8.3    Purchase Period

   15

8.4    Payment of Purchase Price

   15

8.5    Vesting and Restrictions on Transfer

   16

8.6    Voting Rights; Dividends and Distributions

   16

8.7    Effect of Termination of Service

   16

8.8    Nontransferability of Restricted Stock Award Rights

   16

 

i

--------------------------------------------------------------------------------

     Page

9.     Restricted Stock Unit Awards

   17

9.1    Grant of Restricted Stock Unit Awards

   17

9.2    Purchase Price

   17

9.3    Vesting

   17

9.4    Voting Rights, Dividend Equivalent Rights and Distributions

   17

9.5    Effect of Termination of Service

   18

9.6    Settlement of Restricted Stock Unit Awards

   18

9.7    Nontransferability of Restricted Stock Unit Awards

   18

10.   Performance Awards

   18

10.1    Types of Performance Awards Authorized

   18

10.2    Initial Value of Performance Shares and Performance Units

   18

10.3    Establishment of Performance Period, Performance Goals and Performance
Award Formula

   19

10.4    Measurement of Performance Goals

   19

10.5    Settlement of Performance Awards

   20

10.6    Voting Rights; Dividend Equivalent Rights and Distributions

   21

10.7    Effect of Termination of Service

   22

10.8    Nontransferability of Performance Awards

   22

11.   Cash-Based Awards and Other Stock-Based Awards

   22

11.1    Grant of Cash-Based Awards

   22

11.2    Grant of Other Stock-Based Awards

   23

11.3    Value of Cash-Based and Other Stock-Based Awards

   23

11.4    Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards

   23

11.5    Voting Rights; Dividend Equivalent Rights and Distributions

   23

11.6    Effect of Termination of Service

   23

11.7    Nontransferability of Cash-Based Awards and Other Stock-Based Awards

   23

12.   Standard Forms of Award Agreement

   24

12.1    Award Agreements

   24

12.2    Authority to Vary Terms

   24

13.   Change in Control

   24

13.1    Effect of Change in Control on Awards

   24

13.2    Federal Excise Tax Under Section 4999 of the Code

   25

14.   Compliance with Securities Law

   25

15.   Tax Withholding

   26

15.1    Tax Withholding in General

   26

15.2    Withholding in Shares

   26

16.   Amendment or Termination of Plan

   26

17.   Compliance with Section 409A

   26

17.1    Awards Subject to Section 409A

   26

17.2    Deferral and/or Distribution Elections

   27

17.3    Subsequent Elections

   27

17.4    Distributions Pursuant to Deferral Elections

   27

17.5    Unforeseeable Emergency

   28

17.6    Disabled

   28

17.7    Death

   28

17.8    No Acceleration of Distributions

   29

 

ii

--------------------------------------------------------------------------------

     Page

18.   Miscellaneous Provisions

   29

18.1    Repurchase Rights

   29

18.2    Forfeiture Events

   29

18.3    Provision of Information

   29

18.4    Rights as Employee, Consultant or Director

   29

18.5    Rights as a Stockholder

   29

18.6    Delivery of Title to Shares

   30

18.7    Fractional Shares

   30

18.8    Retirement and Welfare Plans

   30

18.9    Beneficiary Designation

   30

18.10  Severability

   30

18.11  No Constraint on Corporate Action

   30

18.12  Unfunded Obligation

   30

18.13  Choice of Law

   31

 

iii

--------------------------------------------------------------------------------

PDL BIOPHARMA, INC.

2005 EQUITY INCENTIVE PLAN

(AMENDED AND RESTATED EFFECTIVE JUNE 4, 2009)

1.     Establishment, Purpose and Term of Plan.

1.1    Establishment. The PDL BioPharma, Inc. 2005 Equity Incentive Plan (the
“Plan”) is hereby established effective as of June 8, 2005, the date of its
approval by the stockholders of the Company (the “Effective Date”).

1.2    Purpose. The purpose of the Plan is to advance the interests of the
Participating Company Group and its stockholders by providing an incentive to
attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group. The Plan seeks to achieve this
purpose by providing for Awards in the form of Options, Stock Appreciation
Rights, Restricted Stock Purchase Rights, Restricted Stock Bonuses, Restricted
Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other
Stock-Based Awards.

1.3    Term of Plan. The Plan shall continue in effect until its termination by
the Committee; provided, however, that all Awards shall be granted, if at all,
within ten (10) years from the Effective Date.

2.    Definitions and Construction.

2.1    Definitions. Whenever used herein, the following terms shall have their
respective meanings set forth below:

(a)    “Affiliate” means (i) an entity, other than a Parent Corporation, that
directly, or indirectly through one or more intermediary entities, controls the
Company or (ii) an entity, other than a Subsidiary Corporation, that is
controlled by the Company directly, or indirectly through one or more
intermediary entities. For this purpose, the term “control” (including the term
“controlled by”) means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of the relevant
entity, whether through the ownership of voting securities, by contract or
otherwise; or shall have such other meaning assigned such term for the purposes
of registration on Form S-8 under the Securities Act.

(b)    “Award” means any Option, Stock Appreciation Right, Restricted Stock
Purchase Right, Restricted Stock Bonus, Restricted Stock Unit, Performance
Share, Performance Unit, Cash-Based Award or Other Stock-Based Award granted
under the Plan.

(c)    “Award Agreement” means a written or electronic agreement between the
Company and a Participant setting forth the terms, conditions and restrictions
of the Award granted to the Participant.

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

(e)    “Cash-Based Award” means an Award denominated in cash and granted
pursuant to Section 11.

(f)    “Cause” means, unless such term or an equivalent term is otherwise
defined with respect to an Award by the Participant’s Award Agreement or by a
written contract of employment or service, any of the following: (i) the
Participant’s theft, dishonesty, willful misconduct, breach of fiduciary duty
for personal profit, or falsification of any Participating Company documents or
records; (ii) the Participant’s material failure to abide by a Participating
Company’s code of conduct or other policies (including, without limitation,
policies relating to confidentiality and reasonable workplace conduct);
(iii) the Participant’s unauthorized use, misappropriation, destruction or
diversion of any tangible or intangible asset or corporate opportunity of a
Participating Company (including, without limitation, the Participant’s improper
use or disclosure of a Participating Company’s

 

1

--------------------------------------------------------------------------------

confidential or proprietary information); (iv) any intentional act by the
Participant which has a material detrimental effect on a Participating Company’s
reputation or business; (v) the Participant’s repeated failure or inability to
perform any reasonable assigned duties after written notice from a Participating
Company of, and a reasonable opportunity to cure, such failure or inability;
(vi) any material breach by the Participant of any employment, service,
non-disclosure, non-competition, non-solicitation or other similar agreement
between the Participant and a Participating Company, which breach is not cured
pursuant to the terms of such agreement; or (vii) the Participant’s conviction
(including any plea of guilty or nolo contendere) of any criminal act involving
fraud, dishonesty, misappropriation or moral turpitude, or which impairs the
Participant’s ability to perform his or her duties with a Participating Company.

(g)    “Change in Control” means, unless such term or an equivalent term is
otherwise defined with respect to an Award by the Participant’s Award Agreement
or by a written contract of employment or service, the occurrence of any of the
following:

(i)    any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) acquires (or has acquired during the 12-month period ending on the
date of the most recent acquisition by such person) “beneficial ownership” (as
defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company possessing thirty-five percent (35%) or
more of the total combined voting power of the Company’s then-outstanding
securities entitled to vote generally in the election of Directors; provided,
however, that the following acquisitions shall not constitute a Change in
Control: (1) an acquisition by any such person who prior to such acquisition is
the beneficial owner of thirty-five percent (35%) or more of such voting power,
(2) any acquisition directly from the Company, including, without limitation, a
public offering of securities, (3) any acquisition by the Company, (4) any
acquisition by a trustee or other fiduciary under an employee benefit plan of a
Participating Company or (5) any acquisition by an entity owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of the voting securities of the Company; or

(ii)    an Ownership Change Event or series of related Ownership Change Events
(collectively, a “Transaction”) in which the stockholders of the Company
immediately before the Transaction do not retain immediately after the
Transaction direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding voting securities of
the Company or, in the case of an Ownership Change Event described in
Section 2.1(bb)(iii), the entity to which the assets of the Company were
transferred (the “Transferee”), as the case may be; or

(iii)    a liquidation or dissolution of the Company.

For purposes of the preceding sentence, indirect beneficial ownership shall
include, without limitation, an interest resulting from ownership of the voting
securities of one or more corporations or other business entities which own the
Company or the Transferee, as the case may be, either directly or through one or
more subsidiary corporations or other business entities. The Committee shall
have the right to determine whether multiple sales or exchanges of the voting
securities of the Company or multiple Ownership Change Events are related, and
its determination shall be final, binding and conclusive. Notwithstanding the
foregoing, to the extent that any amount constituting Section 409A Deferred
Compensation would become payable under this Plan by reason of a Change in
Control, such amount shall become payable only if the event constituting a
Change in Control would also constitute a change in ownership or effective
control of the Company or a change in the ownership of a substantial portion of
the assets of the Company within the meaning of Section 409A.

(h)    “Code” means the Internal Revenue Code of 1986, as amended, and any
applicable regulations or administrative guidelines promulgated thereunder.

(i)    “Committee” means the Compensation Committee and such other committee or
subcommittee of the Board, if any, duly appointed to administer the Plan and
having such powers in each

 

2

--------------------------------------------------------------------------------

instance as shall be specified by the Board. If, at any time, there is no
committee of the Board then authorized or properly constituted to administer the
Plan, the Board shall exercise all of the powers of the Committee granted
herein, and, in any event, the Board may in its discretion exercise any or all
of such powers.

(j)    “Company” means PDL BioPharma, Inc., a Delaware corporation, or any
successor corporation thereto.

(k)    “Consultant” means a person engaged to provide consulting or advisory
services (other than as an Employee or a member of the Board) to a Participating
Company, provided that the identity of such person, the nature of such services
or the entity to which such services are provided would not preclude the Company
from offering or selling securities to such person pursuant to the Plan in
reliance on registration on a Form S-8 Registration Statement under the
Securities Act.

(l)    “Covered Employee” means any Employee who is or may reasonably be
expected to become a “covered employee” as defined in Section 162(m), or any
successor statute, and who is designated, either as an individual Employee or a
member of a class of Employees, by the Committee no later than (i) the date
ninety (90) days after the beginning of the Performance Period, or (ii) the date
on which twenty-five percent (25%) of the Performance Period has elapsed, as a
“Covered Employee” under this Plan for such applicable Performance Period.

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

(n)    “Disability” means the permanent and total disability of the Participant,
within the meaning of Section 22(e)(3) of the Code.

(o)    “Dividend Equivalent” means a credit, made at the discretion of the
Committee or as otherwise provided by the Plan, to the account of a Participant
in an amount equal to the cash dividends paid on one share of Stock for each
share of Stock represented by an Award held by such Participant.

(p)    “Employee” means any person treated as an employee (including an Officer
or a member of the Board who is also treated as an employee) in the records of a
Participating Company and, with respect to any Incentive Stock Option granted to
such person, who is an employee for purposes of Section 422 of the Code;
provided, however, that neither service as a member of the Board nor payment of
a director’s fee shall be sufficient to constitute employment for purposes of
the Plan. The Company shall determine in good faith and in the exercise of its
discretion whether an individual has become or has ceased to be an Employee and
the effective date of such individual’s employment or termination of employment,
as the case may be. For purposes of an individual’s rights, if any, under the
terms of the Plan as of the time of the Company’s determination of whether or
not the individual is an Employee, all such determinations by the Company shall
be final, binding and conclusive as to such rights, if any, notwithstanding that
the Company or any court of law or governmental agency subsequently makes a
contrary determination as to such individual’s status as an Employee.

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

(r)    “Fair Market Value” means, as of any date, the value of a share of Stock
or other property as determined by the Committee, in its discretion, or by the
Company, in its discretion, if such determination is expressly allocated to the
Company herein, subject to the following:

(i)    Except as otherwise determined by the Committee, if, on such date, the
Stock is listed on a national or regional securities exchange or market system,
the Fair Market Value of a share of Stock shall be the closing price of a share
of Stock (or the mean of the closing bid and asked prices of a share of Stock if
the Stock is so quoted instead) as quoted on the NASDAQ Stock Market or such
other national or regional securities exchange or market system constituting the
primary market for the Stock, as reported in The Wall Street Journal

 

3

--------------------------------------------------------------------------------

or such other source as the Company deems reliable. If the relevant date does
not fall on a day on which the Stock has traded on such securities exchange or
market system, the date on which the Fair Market Value shall be established
shall be the last day on which the Stock was so traded prior to the relevant
date, or such other appropriate day as shall be determined by the Committee, in
its discretion.

(ii)    Notwithstanding the foregoing, the Committee may, in its discretion,
determine the Fair Market Value on the basis of the opening, closing, or average
of the high and low sale prices of a share of Stock on such date or the
preceding trading day, the actual sale price of a share of Stock received by a
Participant, any other reasonable basis using actual transactions in the Stock
as reported on a national or regional securities exchange or market system and
consistently applied, or on any other basis consistent with the requirements of
Section 409A. The Committee may also determine the Fair Market Value upon the
average selling price of the Stock during a specified period that is within
thirty (30) days before or thirty (30) days after such date, provided that, with
respect to the grant of an Option or SAR, the commitment to grant such Award
based on such valuation method must be irrevocable before the beginning of the
specified period and such valuation method must be used consistently for grants
of Options and SARs under the same and substantially similar programs. The
Committee may vary its method of determination of the Fair Market Value as
provided in this Section for different purposes under the Plan to the extent
consistent with the requirements of Section 409A.

(iii)    If, on such date, the Stock is not listed on a national or regional
securities exchange or market system, the Fair Market Value of a share of Stock
shall be as determined by the Committee in good faith without regard to any
restriction other than a restriction which, by its terms, will never lapse.

(s)    “Full Value Award” means any Award settled in Stock, other than (i) an
Option, (ii) a Stock Appreciation Right, (iii) a Restricted Stock Purchase Right
or an Other Stock-Based Award under which the Company will receive monetary
consideration equal to the Fair Market Value (determined as of the date of
grant) of the shares subject to such Award or (iv) an Other Stock-Based award
based on appreciation in the Fair Market Value of the Stock.

(t)    “Incentive Stock Option” means an Option intended to be (as set forth in
the Award Agreement) and which qualifies as an incentive stock option within the
meaning of Section 422(b) of the Code.

(u)    “Insider” means an Officer, Director or any other person whose
transactions in Stock are subject to Section 16 of the Exchange Act.

(v)    “Net-Exercise” means a procedure by which the Participant will be issued
a number of shares of Stock upon the exercise of an Option determined in
accordance with the following formula:

 

  N = X(A-B)/A, where

     “N” = the number of shares of Stock to be issued to the Participant upon
exercise of the Option;

     “X” = the total number of shares with respect to which the Participant has
elected to exercise the Option;

     “A” = the Fair Market Value of one (1) share of Stock determined on the
exercise date; and

     “B” = the exercise price per share (as defined in the Participant’s Award
Agreement)

(w)    “Nonstatutory Stock Option” means an Option not intended to be (as set
forth in the Award Agreement) an incentive stock option within the meaning of
Section 422(b) of the Code.

(x)    “Officer” means any person designated by the Board as an officer of the
Company.

(y)    “Option” means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to Section 6.

 

4

--------------------------------------------------------------------------------

(z)    “Other Stock-Based Award” means an Award denominated in shares of Stock
and granted pursuant to Section 11.

(aa)    “Outside Director” means a Director who is neither an Employee nor a
Consultant,

(bb)    “Ownership Change Event” means the occurrence of any of the following
with respect to the Company: (i) the direct or indirect sale or exchange in a
single or series of related transactions by the stockholders of the Company of
more than fifty percent (50%) of the voting stock of the Company; (ii) a merger
or consolidation in which the Company is a party; or (iii) the sale, exchange or
transfer of all or substantially all of the assets of the Company (other than a
sale, exchange or transfer to one or more subsidiaries of the Company).

(cc)    “Parent Corporation” means any present or future “parent corporation” of
the Company, as defined in Section 424(e) of the Code.

(dd)    “Participant” means any eligible person who has been granted one or more
Awards.

(ee)    “Participating Company” means the Company or any Parent Corporation,
Subsidiary Corporation or Affiliate.

(ff)    “Participating Company Group” means, at any point in time, all entities
collectively which are then Participating Companies.

(gg)    “Performance Award” means an Award of Performance Shares or Performance
Units.

(hh)    “Performance Award Formula” means, for any Performance Award, a formula
or table established by the Committee pursuant to Section 10.3 which provides
the basis for computing the value of a Performance Award at one or more
threshold levels of attainment of the applicable Performance Goal(s) measured as
of the end of the applicable Performance Period.

(ii)    “Performance-Based Compensation” means compensation under an Award that
satisfies the requirements of Section 162(m) for certain performance-based
compensation paid to Covered Employees.

(jj)    “Performance Goal” means a performance goal established by the Committee
pursuant to Section 10.3.

(kk)    “Performance Period” means a period established by the Committee
pursuant to Section 10.3 at the end of which one or more Performance Goals are
to be measured.

(ll)    “Performance Share” means a right granted to a Participant pursuant to
Section 10 to receive a payment equal to the value of a Performance Share, as
determined by the Committee, based on performance.

(mm)    “Performance Unit” means a right granted to a Participant pursuant to
Section 10 to receive a payment equal to the value of a Performance Unit, as
determined by the Committee, based upon performance.

(nn)    “Restricted Stock Award” means an Award of a Restricted Stock Bonus or a
Restricted Stock Purchase Right.

(oo)    “Restricted Stock Bonus” means Stock granted to a Participant pursuant
to Section 8.

 

5

--------------------------------------------------------------------------------

(pp)    “Restricted Stock Purchase Right” means a right to purchase Stock
granted to a Participant pursuant to Section 8.

(qq)    “Restricted Stock Unit” or “Stock Unit” means a right granted to a
Participant pursuant to Section 9, respectively, to receive a share of Stock on
a date determined in accordance with the provisions of Section 9, as applicable,
and the Participant’s Award Agreement.

(rr)    “Restriction Period” means the period established in accordance with
Section 8.5 during which shares subject to a Restricted Stock Award are subject
to Vesting Conditions.

(ss)    “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from
time to time, or any successor rule or regulation.

(tt)    “SAR” or “Stock Appreciation Right” means a right granted to a
Participant pursuant to Section 7 to receive payment of an amount equal to the
excess, if any, of the Fair Market Value of a share of Stock on the date of
exercise of the SAR over the exercise price.

(uu)    “Section 162(m)” means Section 162(m) of the Code.

(vv)    “Section 409A” means Section 409A of the Code.

(ww)    “Section 409A Deferred Compensation” means compensation provided
pursuant to the Plan that constitutes deferred compensation subject to and not
exempted from the requirements of Section 409A.

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

(yy)    “Service” means a Participant’s employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. Unless otherwise provided by the Committee, a Participant’s
Service shall not be deemed to have terminated merely because of a change in the
capacity in which the Participant renders such Service or a change in the
Participating Company for which the Participant renders such Service, provided
that there is no interruption or termination of the Participant’s Service.
Furthermore, a Participant’s Service shall not be deemed to have terminated if
the Participant takes any military leave, sick leave, or other bona fide leave
of absence approved by the Company. However, unless otherwise provided by the
Committee, if any such leave taken by a Participant exceeds ninety (90) days,
then on the ninety-first (91st) day following the commencement of such leave the
Participant’s Service shall be deemed to have terminated, unless the
Participant’s right to return to Service is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or
required by law, an unpaid leave of absence shall not be treated as Service for
purposes of determining vesting under the Participant’s Award Agreement. A
Participant’s Service shall be deemed to have terminated either upon an actual
termination of Service or upon the entity for which the Participant performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its discretion, shall determine whether the Participant’s Service
has terminated and the effective date of such termination.

(zz)    “Stock” means the common stock of the Company, as adjusted from time to
time in accordance with Section 4.3.

(aaa)    “Subsidiary Corporation” means any present or future “subsidiary
corporation” of the Company, as defined in Section 424(f) of the Code.

(bbb)    “Ten Percent Owner” means a Participant who, at the time an Option is
granted to the Participant, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of a Participating
Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the
Code.

 

6

--------------------------------------------------------------------------------

(ccc)    “Trading Compliance Policy” means the written policy of the Company
pertaining to the purchase, sale, transfer or other disposition of the Company’s
equity securities by Directors, Officers, Employees or other service providers
who may possess material, nonpublic information regarding the Company or its
securities.

(ddd)    “Vesting Conditions” mean those conditions established in accordance
with the Plan prior to the satisfaction of which shares subject to an Award
remain subject to forfeiture or a repurchase option in favor of the Company
exercisable for the Participant’s purchase price for such shares upon the
Participant’s termination of Service.

2.2    Construction. Captions and titles contained herein are for convenience
only and shall not affect the meaning or interpretation of any provision of the
Plan. Except when otherwise indicated by the context, the singular shall include
the plural and the plural shall include the singular. Use of the term “or” is
not intended to be exclusive, unless the context clearly requires otherwise.

3.    Administration.

3.1    Administration by the Committee. The Plan shall be administered by the
Committee. All questions of interpretation of the Plan or of any Award shall be
determined by the Committee, and such determinations shall be final and binding
upon all persons having an interest in the Plan or such Award. In addition, any
and all actions, decisions and determinations taken or made by the Committee in
the exercise of its discretion pursuant to the Plan, including, without
limitation, pursuant to Section 3.5 below, or Award Agreement or other agreement
thereunder shall be final, binding and conclusive upon all persons having an
interest therein.

3.2    Authority of Officers. The Chief Executive Officer shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election which is the responsibility of or which is
allocated to the Company herein.

3.3    Administration with Respect to Insider. With respect to participation by
Insiders in the Plan, at any time that any class of equity security of the
Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall
be administered in compliance with the requirements, if any, of Rule 16b-3.

3.4    Committee Complying with Section 162(m). If the Company is a “publicly
held corporation” within the meaning of Section 162(m), the Board may establish
a Committee of “outside directors” within the meaning of Section 162(m) to
approve the grant of any Award intended to result in the payment of
Performance-Based Compensation.

3.5    Powers of the Committee. In addition to any other powers set forth in the
Plan and subject to the provisions of the Plan, the Committee shall have the
full and final power and authority, in its discretion:

(a)    to determine the persons to whom, and the time or times at which, Awards
shall be granted and the number of shares of Stock, units or monetary value to
be subject to each Award;

(b)    to determine the type of Award granted;

(c)    to determine the Fair Market Value of shares of Stock or other property;

(d)    to determine the terms, conditions and restrictions applicable to each
Award (which need not be identical) and any shares acquired pursuant thereto,
including, without limitation, (i) the exercise or purchase price of shares
pursuant to any Award, (ii) the method of payment for shares purchased pursuant
to any Award, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with any Award,

 

7

--------------------------------------------------------------------------------

including by the withholding or delivery of shares of Stock, (iv) the timing,
terms and conditions of the exercisability or vesting of any Award or any shares
acquired pursuant thereto, (v) the Performance Measures, Performance Period,
Performance Award Formula and Performance Goals applicable to any Award and the
extent to which such Performance Goals have been attained, (vi) the time of the
expiration of any Award, (vii) the effect of the Participant’s termination of
Service on any of the foregoing, and (viii) all other terms, conditions and
restrictions applicable to any Award or shares acquired pursuant thereto not
inconsistent with the terms of the Plan;

(e)    to determine whether an Award will be settled in shares of Stock, cash,
or in any combination thereof;

(f)    to approve one or more forms of Award Agreement;

(g)    to amend, modify, extend, cancel or renew any Award or to waive any
restrictions or conditions applicable to any Award or any shares acquired
pursuant thereto;

(h)    to accelerate, continue, extend or defer the exercisability or vesting of
any Award or any shares acquired pursuant thereto, including with respect to the
period following a Participant’s termination of Service;

(i)    without the consent of the affected Participant and notwithstanding the
provisions of any Award Agreement to the contrary, to unilaterally substitute at
any time a Stock Appreciation Right providing for settlement solely in shares of
Stock in place of any outstanding Option, provided that such Stock Appreciation
Right covers the same number of shares of Stock and provides for the same
exercise price (subject in each case to adjustment in accordance with
Section 4.3) as the replaced Option and otherwise provides substantially
equivalent terms and conditions as the replaced Option, as determined by the
Committee;

(j)    to prescribe, amend or rescind rules, guidelines and policies relating to
the Plan, or to adopt sub-plans or supplements to, or alternative versions of,
the Plan, including, without limitation, as the Committee deems necessary or
desirable to comply with the laws or regulations of, or to accommodate the tax
policy, accounting principles or custom of, foreign jurisdictions whose citizens
may be granted Awards; and

(k)    to correct any defect, supply any omission or reconcile any inconsistency
in the Plan or any Award Agreement and to make all other determinations and take
such other actions with respect to the Plan or any Award as the Committee may
deem advisable to the extent not inconsistent with the provisions of the Plan or
applicable law.

3.6    Option or SAR Repricing. Without the affirmative vote of holders of a
majority of the shares of Stock cast in person or by proxy at a meeting of the
stockholders of the Company at which a quorum representing a majority of all
outstanding shares of Stock is present or represented by proxy, the Board shall
not approve either (a) the cancellation of outstanding Options or SARs and the
grant in substitution therefor of new Options or SARs having a lower exercise
price or (b) the amendment of outstanding Options or SARs to reduce the exercise
price thereof. This paragraph shall not be construed to apply to “issuing or
assuming a stock option in a transaction to which Section 424(a) applies,”
within the meaning of Section 424 of the Code.

3.7    Indemnification. In addition to such other rights of indemnification as
they may have as members of the Board or the Committee or as officers or
employees of the Participating Company Group, members of the Board or the
Committee and any officers or employees of the Participating Company Group to
whom authority to act for the Board, the Committee or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including
attorneys’ fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the

 

8

--------------------------------------------------------------------------------

Plan, or any right granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such person
is liable for gross negligence, bad faith or intentional misconduct in duties;
provided, however, that within sixty (60) days after the institution of such
action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same.

4.    Shares Subject to Plan.

4.1    Maximum Number of Shares Issuable. Subject to adjustment as provided in
Sections 4.2 and 4.3, the maximum aggregate number of shares of Stock that may
be issued under the Plan shall be equal to five million two hundred thousand
(5,200,000) shares, and shall consist of authorized but unissued or reacquired
shares of Stock or any combination thereof.

4.2    Share Accounting. If an outstanding Award for any reason expires or is
terminated or canceled without having been exercised or settled in full, or if
shares of Stock acquired pursuant to an Award subject to forfeiture or
repurchase are forfeited or repurchased by the Company for an amount not greater
than the Participant’s original purchase price, the shares of Stock allocable to
the terminated portion of such Award or such forfeited or repurchased shares of
Stock shall not again be available for issuance under the Plan. In addition,
Shares withheld or reacquired by the Company in satisfaction of tax withholding
obligations pursuant to Section 15.3 shall not again be available for issuance
under the Plan. Shares of Stock shall not be deemed to have been issued pursuant
to the Plan with respect to any portion of an Award, other than an Option or
SAR, that is settled in cash. Upon payment in shares of Stock pursuant to the
exercise of an SAR, the number of shares available for issuance under the Plan
shall be reduced by the gross number of shares for which the SAR is exercised.
If the exercise price of an Option is paid by tender to the Company, or
attestation to the ownership, of shares of Stock owned by the Participant, or by
means of a Net-Exercise, the number of shares available for issuance under the
Plan shall be reduced by the gross number of shares for which the Option is
exercised.

4.3    Adjustments for Changes in Capital Structure. Subject to any required
action by the stockholders of the Company and the requirements of Section 409A
to the extent applicable, in the event of any change in the Stock effected
without receipt of consideration by the Company, whether through merger,
consolidation, reorganization, reincorporation, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, split-up,
split-off, spin-off, combination of shares, exchange of shares, or similar
change in the capital structure of the Company, or in the event of payment of a
dividend or distribution to the stockholders of the Company in a form other than
Stock (excepting normal cash dividends) that has a material effect on the Fair
Market Value of shares of Stock, appropriate and proportionate adjustments shall
be made in the number and kind of shares subject to the Plan and to any
outstanding Awards, in the Award limits set forth in Section 5.3 and in the
exercise or purchase price per share under any outstanding Award in order to
prevent dilution or enlargement of Participants’ rights under the Plan. For
purposes of the foregoing, conversion of any convertible securities of the
Company shall not be treated as “effected without receipt of consideration by
the Company.” If a majority of the shares which are of the same class as the
shares that are subject to outstanding Awards are exchanged for, converted into,
or otherwise become (whether or not pursuant to an Ownership Change Event)
shares of another corporation (the “New Shares”), the Committee may unilaterally
amend the outstanding Awards to provide that such Awards are for New Shares. In
the event of any such amendment, the number of shares subject to, and the
exercise or purchase price per share of, the outstanding Awards shall be
adjusted in a fair and equitable manner as determined by the Committee, in its
discretion. Any fractional share resulting from an adjustment pursuant to this
Section shall be rounded down to the nearest whole number, and in no event may
the exercise or purchase price under any Award be decreased to an amount less
than the par value, if any, of the stock subject to such Award. The Committee,
in its sole discretion, may also make such adjustments in the terms of any Award
to reflect, or related to, such changes in the capital structure of the Company
or distributions as it deems appropriate, including modification of Performance
Goals, Performance Award Formulas and

 

9

--------------------------------------------------------------------------------

Performance Periods. The adjustments determined by the Committee pursuant to
this Section shall be final, binding and conclusive.

The Committee may, without affecting the number of Shares reserved or available
hereunder, authorize the issuance or assumption of benefits under this Plan in
connection with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate,
subject to compliance with Sections 409A and 422 and any related guidance issued
by the U.S. Treasury Department, where applicable.

5.    Eligibility, Participation and Award Limitations.

5.1    Persons Eligible for Awards. Awards may be granted only to Employees,
Consultants and Outside Directors.

5.2    Participation in Plan. Awards are granted solely at the discretion of the
Committee. Eligible persons may be granted more than one Award. However,
eligibility in accordance with this Section shall not entitle any person to be
granted an Award, or, having been granted an Award, to be granted an additional
Award.

5.3    Award Limitations.

(a)    Incentive Stock Option Limitations.

(i)    Maximum Number of Shares Issuable Pursuant to Incentive Stock Options.
Subject to adjustment as provided in Section 4.3, the maximum aggregate number
of shares of Stock that may be issued under the Plan pursuant to the exercise of
Incentive Stock Options shall not exceed five million two hundred thousand
(5,200,000) shares. The maximum aggregate number of shares of Stock that may be
issued under the Plan pursuant to all Awards other than Incentive Stock Options
shall be the number of shares determined in accordance with Section 4.1, subject
to adjustment as provided in Section 4.2 and Section 4.3.

(ii)    Persons Eligible. An Incentive Stock Option may be granted only to a
person who, on the effective date of grant, is an Employee of the Company, a
Parent Corporation or a Subsidiary Corporation (each being an “ISO-Qualifying
Corporation”). Any person who is not an Employee of an ISO-Qualifying
Corporation on the effective date of the grant of an Option to such person may
be granted only a Nonstatutory Stock Option. An Incentive Stock Option granted
to a prospective Employee upon the condition that such person become an Employee
of an ISO-Qualifying Corporation shall be deemed granted effective on the date
such person commences Service as an Employee of an ISO-Qualifying Corporation,
with an exercise price determined as of such date in accordance with
Section 6.1.

(iii)    Fair Market Value Limitation. To the extent that options designated as
Incentive Stock Options (granted under all stock option plans of the
Participating Company Group, including the Plan) become exercisable by a
Participant for the first time during any calendar year for stock having a Fair
Market Value greater than one hundred thousand dollars ($100,000), the portion
of such options which exceeds such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section, options designated as Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of stock shall be determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide for a
limitation different from that set forth in this Section, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the Code.
If an Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section, the Participant may designate which portion of such Option the
Participant is exercising. In the absence of such designation, the Participant
shall be deemed to have exercised the Incentive Stock Option portion of the
Option first. Upon exercise, shares issued pursuant to each such portion shall
be separately identified.

 

10

--------------------------------------------------------------------------------

(b)    Aggregate Limit on Full Value Awards. In no event shall more than fifty
percent (50%) of the maximum aggregate number of shares of Stock that may be
issued under the Plan, determined in accordance with Sections 4.1, 4.2 and 4.3,
be issued pursuant to Full Value Awards.

(c)    Aggregate Limit on Full Value Awards Without Minimum Vesting.
Notwithstanding any provision of the Plan to the contrary, no more than ten
percent (10%) of the maximum aggregate number of shares of Stock that may be
issued under the Plan, determined in accordance with Sections 4.1, 4.2 and 4.3,
shall be issued pursuant to Full Value Awards having Vesting Conditions which
(i) if based upon a Service requirement, provide for vesting more rapid than
annual pro rata vesting over a period of three (3) years or (ii) if based upon
the attainment of one or more Performance Goals, provide for a Performance
Period of less than twelve (12) months; provided, however, that such limitations
shall not preclude the acceleration of vesting of any such Award upon the death,
disability, retirement or involuntary termination of Service of the Participant
or upon or following a Change in Control, as determined by the Committee in its
discretion.

(d)    Maximum Annual Aggregate Award Limits. Subject to adjustment as provided
in Section 4.3, no Participant shall be granted within any fiscal year of the
Company, other than the fiscal year in which such Participant’s Service with the
Company commences, one or more Awards that may be settled in Stock which in the
aggregate are for more than a number of shares equal to nine percent (9%) of the
maximum aggregate number of shares of Stock that may be issued under the Plan as
set forth in Section 4.1.

(e)    Section 162(m) Award Limits. The following limits shall apply to the
grant of any Award intended to qualify for treatment as Performance-Based
Compensation:

(i)    Options and SARs. Subject to adjustment as provided in Section 4.3, no
Employee shall be granted within any fiscal year of the Company one or more
Options or Freestanding SARs which in the aggregate are for more than one
million six hundred thousand (1,600,000) shares.

(ii)    Restricted Stock Awards and Restricted Stock Unit Awards. Subject to
adjustment as provided in Section 4.3, no Employee shall be granted within any
fiscal year of the Company one or more Restricted Stock Awards or Restricted
Stock Unit Awards for more than seven hundred and fifty thousand
(750,000) shares.

(iii)    Performance Awards. Subject to adjustment as provided in Section 4.3,
no Employee shall be granted (1) Performance Shares which could result in such
Employee receiving more than one hundred thousand (100,000) shares for each full
fiscal year of the Company contained in the Performance Period for such Award,
or (2) Performance Units which could result in such Employee receiving more than
two million dollars ($2,000,000) for each full fiscal year of the Company
contained in the Performance Period for such Award.

(iv)    Cash-Based Awards and Other Stock-Based Awards. Subject to adjustment as
provided in Section 4.3, no Employee shall be granted (1) Cash-Based Awards in
any fiscal year of the Company which could result in such Employee receiving
more than two million dollars ($2,000,000) for each full fiscal year of the
Company contained in the Performance Period for such Award, or (2) Other
Stock-Based Awards in any fiscal year of the Company which could result in such
Employee receiving more than one hundred thousand (100,000) shares for each full
fiscal year of the Company contained in the Performance Period for such Award.

 

11

--------------------------------------------------------------------------------

6.    Stock Options.

Options shall be evidenced by Award Agreements specifying the number of shares
of Stock covered thereby, in such form as the Committee shall from time to time
establish. Award Agreements evidencing Options may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:

6.1    Exercise Price. The exercise price for each Option shall be established
in the discretion of the Committee; provided, however, that (a) the exercise
price per share shall be not less than the Fair Market Value of a share of Stock
on the effective date of grant of the Option and (b) no Incentive Stock Option
granted to a Ten Percent Owner shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of Section 424(a) of
the Code.

6.2    Exercisability and Term of Options. Options shall be exercisable at such
time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Committee and set forth in the Award Agreement evidencing such Option; provided,
however, that (a) no Option shall be exercisable after the expiration of seven
(7) years after the effective date of grant of such Option and (b) no Incentive
Stock Option granted to a Ten Percent Owner shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option.
Subject to the foregoing, unless otherwise specified by the Committee in the
grant of an Option, each Option shall terminate seven (7) years after the
effective date of grant of the Option, unless earlier terminated in accordance
with its provisions.

6.3    Payment of Exercise Price.

(a)    Forms of Consideration Authorized. Except as otherwise provided below,
payment of the exercise price for the number of shares of Stock being purchased
pursuant to any Option shall be made (i) in cash or by check or cash equivalent,
(ii) by tender to the Company, or attestation to the ownership, of shares of
Stock owned by the Participant having a Fair Market Value not less than the
exercise price, (iii) by delivery of a properly executed notice of exercise
together with irrevocable instructions to a broker providing for the assignment
to the Company of the proceeds of a sale or loan with respect to some or all of
the shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a “Cashless Exercise”), (iv) by delivery of a properly executed notice
electing a Net-Exercise, (v) by such other consideration as may be approved by
the Committee from time to time to the extent permitted by applicable law, or
(vi) by any combination thereof. The Committee may at any time or from time to
time grant Options which do not permit all of the foregoing forms of
consideration to be used in payment of the exercise price or which otherwise
restrict one or more forms of consideration.

(b)    Limitations on Forms of Consideration.

(i)    Tender of Stock. Notwithstanding the foregoing, an Option may not be
exercised by tender to the Company, or attestation to the ownership, of shares
of Stock to the extent such tender or attestation would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption
of the Company’s stock. Unless otherwise provided by the Committee, an Option
may not be exercised by tender to the Company, or attestation to the ownership,
of shares of Stock unless such shares either have been owned by the Participant
for more than six (6) months (or such other period, if any, as the Committee may
permit) and not used for another Option exercise by attestation during such
period, or were not acquired, directly or indirectly, from the Company.

 

12

--------------------------------------------------------------------------------

(ii)    Cashless Exercise. The Company reserves, at any and all times, the
right, in the Company’s sole and absolute discretion, to establish, decline to
approve or terminate any program or procedures for the exercise of Options by
means of a Cashless Exercise, including with respect to one or more Participants
specified by the Company notwithstanding that such program or procedures may be
available to other Participants.

6.4    Effect of Termination of Service.

(a)    Option Exercisability. Subject to earlier termination of the Option as
otherwise provided herein and unless otherwise provided by the Committee in the
grant of an Option and set forth in the Award Agreement, an Option shall
terminate immediately upon the Participant’s termination of Service to the
extent that it is then unvested and shall be exercisable after the Participant’s
termination of Service to the extent it is then vested only during the
applicable time period determined in accordance with this Section and thereafter
shall terminate:

(i)    Disability. If the Participant’s Service terminates because of the
Disability of the Participant, the Option, to the extent unexercised and
exercisable on the date on which the Participant’s Service terminated, may be
exercised by the Participant (or the Participant’s guardian or legal
representative) at any time prior to the expiration of twelve (12) months after
the date on which the Participant’s Service terminated, but in any event no
later than the date of expiration of the Option’s term as set forth in the Award
Agreement evidencing such Option (the “Option Expiration Date”).

(ii)    Death. If the Participant’s Service terminates because of the death of
the Participant, the Option, to the extent unexercised and exercisable on the
date on which the Participant’s Service terminated, may be exercised by the
Participant’s legal representative or other person who acquired the right to
exercise the Option by reason of the Participant’s death at any time prior to
the expiration of twelve (12) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration Date.
The Participant’s Service shall be deemed to have terminated on account of death
if the Participant dies within three (3) months after the Participant’s
termination of Service.

(iii)    Other Termination of Service. If the Participant’s Service terminates
for any reason, except Disability or death, the Option, to the extent
unexercised and exercisable by the Participant on the date on which the
Participant’s Service terminated, may be exercised by the Participant at any
time prior to the expiration of three (3) months after the date on which the
Participant’s Service terminated, but in any event no later than the Option
Expiration Date.

(b)    Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if
the exercise of an Option within the applicable time periods set forth in
Section 6.4(a) is prevented by the provisions of Section 14 below, the Option
shall remain exercisable until thirty (30) days after the date such exercise
would no longer be prevented by such provisions, but in any event no later than
the Option Expiration Date.

6.5    Transferability of Options. During the lifetime of the Participant, an
Option shall be exercisable only by the Participant or the Participant’s
guardian or legal representative. An Option shall not be subject in any manner
to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s
beneficiary, except transfer by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Committee, in its
discretion, and set forth in the Award Agreement evidencing such Option, a
Nonstatutory Stock Option shall be assignable or transferable subject to the
applicable limitations, if any, described in the General Instructions to
Form S-8 under the Securities Act.

 

13

--------------------------------------------------------------------------------

7.    Stock Appreciation Rights.

Stock Appreciation Rights shall be evidenced by Award Agreements specifying the
number of shares of Stock subject to the Award, in such form as the Committee
shall from time to time establish. Award Agreements evidencing SARs may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:

7.1    Types of SARs Authorized. SARs may be granted in tandem with all or any
portion of a related Option (a “Tandem SAR”) or may be granted independently of
any Option (a “Freestanding SAR”). A Tandem SAR may only be granted concurrently
with the grant of the related Option.

7.2    Exercise Price. The exercise price for each SAR shall be established in
the discretion of the Committee; provided, however, that (a) the exercise price
per share subject to a Tandem SAR shall be the exercise price per share under
the related Option and (b) the exercise price per share subject to a
Freestanding SAR shall be not less than the Fair Market Value of a share of
Stock on the effective date of grant of the SAR.

7.3    Exercisability and Term of SARs.

(a)    Tandem SARs. Tandem SARs shall be exercisable only at the time and to the
extent, and only to the extent, that the related Option is exercisable, subject
to such provisions as the Committee may specify where the Tandem SAR is granted
with respect to less than the full number of shares of Stock subject to the
related Option. The Committee may, in its discretion, provide in any Award
Agreement evidencing a Tandem SAR that such SAR may not be exercised without the
advance approval of the Company and, if such approval is not given, then the
Option shall nevertheless remain exercisable in accordance with its terms. A
Tandem SAR shall terminate and cease to be exercisable no later than the date on
which the related Option expires or is terminated or canceled. Upon the exercise
of a Tandem SAR with respect to some or all of the shares subject to such SAR,
the related Option shall be canceled automatically as to the number of shares
with respect to which the Tandem SAR was exercised. Upon the exercise of an
Option related to a Tandem SAR as to some or all of the shares subject to such
Option, the related Tandem SAR shall be canceled automatically as to the number
of shares with respect to which the related Option was exercised.

(b)    Freestanding SARs. Freestanding SARs shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Committee
and set forth in the Award Agreement evidencing such SAR; provided, however,
that no Freestanding SAR shall be exercisable after the expiration of seven
(7) years after the effective date of grant of such SAR.

7.4    Exercise of SARs. Upon the exercise (or deemed exercise pursuant to
Section 7.7) of an SAR, the Participant (or the Participant’s legal
representative or other person who acquired the right to exercise the SAR by
reason of the Participant’s death) shall be entitled to receive payment of an
amount for each share with respect to which the SAR is exercised equal to the
excess, if any, of the Fair Market Value of a share of Stock on the date of
exercise of the SAR over the exercise price. Payment of such amount shall be
made (a) in the case of a Tandem SAR, solely in shares of Stock in a lump sum as
soon as practicable following the date of exercise of the SAR and (b) in the
case of a Freestanding SAR, in cash, shares of Stock, or any combination thereof
as determined by the Committee in compliance with Section 409A. Unless otherwise
provided in the Award Agreement evidencing a Freestanding SAR, payment shall be
made in a lump sum as soon as practicable following the date of exercise of the
SAR. The Award Agreement evidencing any Freestanding SAR may provide for
deferred payment in a lump sum or in installments in compliance with
Section 409A. When payment is to be made in shares of Stock, the number of
shares to be issued shall be determined on the basis of the Fair Market Value of
a share of Stock on the date of exercise of the SAR. For purposes of this
Section 7, an SAR shall be deemed exercised on the date on which the Company
receives notice of exercise from the Participant or as otherwise provided in
Section 7.7.

 

14

--------------------------------------------------------------------------------

7.5    Deemed Exercise of SARs. If, on the date on which an SAR would otherwise
terminate or expire, the SAR by its terms remains exercisable immediately prior
to such termination or expiration and, if so exercised, would result in a
payment to the holder of such SAR, then any portion of such SAR which has not
previously been exercised shall automatically be deemed to be exercised as of
such date with respect to such portion.

7.6    Effect of Termination of Service. Subject to earlier termination of the
SAR as otherwise provided herein and unless otherwise provided by the Committee
in the grant of an SAR and set forth in the Award Agreement, an SAR shall be
exercisable after a Participant’s termination of Service only to the extent and
during the applicable time period determined in accordance with Section 6.4
(treating the SAR as if it were an Option) and thereafter shall terminate.

7.7    Nontransferability of SARs. During the lifetime of the Participant, an
SAR shall be exercisable only by the Participant or the Participants guardian or
legal representative. An SAR shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participants beneficiary,
except transfer by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Committee, in its
discretion, and set forth in the Award Agreement evidencing such Award, a Tandem
SAR related to a Nonstatutory Stock Option or a Freestanding SAR shall be
assignable or transferable subject to the applicable limitations, if any,
described in the General Instructions to FormS8 under the Securities Act.

8.    Restricted Stock Awards.

Restricted Stock Awards shall be evidenced by Award Agreements specifying
whether the Award is a Restricted Stock Bonus or a Restricted Stock Purchase
Right and the number of shares of Stock subject to the Award, in such form as
the Committee shall from time to time establish. Award Agreements evidencing
Restricted Stock Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:

8.1    Types of Restricted Stock Awards Authorized. Restricted Stock Awards may
be granted in the form of either a Restricted Stock Bonus or a Restricted Stock
Purchase Right; provided that Outside Directors shall be eligible for Restricted
Stock Awards only in the form of Restricted Stock Bonus. Restricted Stock Awards
may be granted upon such conditions as the Committee shall determine, including,
without limitation, upon the attainment of one or more Performance Goals
described in Section 10.4. If either the grant of a Restricted Stock Award or
the lapsing of the Restriction Period is to be contingent upon the attainment of
one or more Performance Goals, the Committee shall follow procedures
substantially equivalent to those set forth in Sections 10.3 through 10.5(a).

8.2    Purchase Price. The purchase price for shares of Stock issuable under
each Restricted Stock Purchase Right shall be established by the Committee in
its discretion. No monetary payment (other than applicable tax withholding)
shall be required as a condition of receiving shares of Stock pursuant to a
Restricted Stock Bonus, the consideration for which shall be services actually
rendered to a Participating Company or for its benefit. Notwithstanding the
foregoing, if required by applicable state corporate law, the Participant shall
furnish consideration in the form of cash or past services rendered to a
Participating Company or for its benefit having a value not less than the par
value of the shares of Stock subject to a Restricted Stock Award.

8.3    Purchase Period. A Restricted Stock Purchase Right shall be exercisable
within a period established by the Committee, which shall in no event exceed
thirty (30) days from the effective date of the grant of the Restricted Stock
Purchase Right.

8.4    Payment of Purchase Price. Except as otherwise provided below, payment of
the purchase price for the number of shares of Stock being purchased pursuant to
any Restricted Stock Purchase Right shall be made (a) in cash or by check or
cash equivalent, (b) by such other consideration as may be approved by the
Committee

 

15

--------------------------------------------------------------------------------

from time to time to the extent permitted by applicable law, or (c) by any
combination thereof. The Committee may at any time or from time to time grant
Restricted Stock Purchase Rights which do not permit all of the foregoing forms
of consideration to be used in payment of the purchase price or which otherwise
restrict one or more forms of consideration.

8.5    Vesting and Restrictions on Transfer. Subject to Section 5.4(c), Shares
issued pursuant to any Restricted Stock Award may (but need not) be made subject
to Vesting Conditions based upon the satisfaction of such Service requirements,
conditions, restrictions or performance criteria, including, without limitation,
Performance Goals as described in Section 10.4, as shall be established by the
Committee and set forth in the Award Agreement evidencing such Award. During any
Restriction Period in which shares acquired pursuant to a Restricted Stock Award
remain subject to Vesting Conditions, such shares may not be sold, exchanged,
transferred, pledged, assigned or otherwise disposed of other than pursuant to
an Ownership Change Event or as provided in Section 8.8. The Committee, in its
discretion, may provide in any Award Agreement evidencing a Restricted Stock
Award that, if the satisfaction of Vesting Conditions with respect to any shares
subject to such Restricted Stock Award would otherwise occur on a day on which
the sale of such shares would violate the Company’s Trading Compliance Policy,
then satisfaction of the Vesting Conditions automatically shall be determined on
the next trading day on which the sale of such shares would not violate the
Trading Compliance Policy. Upon request by the Company, each Participant shall
execute any agreement evidencing such transfer restrictions prior to the receipt
of shares of Stock hereunder and shall promptly present to the Company any and
all certificates representing shares of Stock acquired hereunder for the
placement on such certificates of appropriate legends evidencing any such
transfer restrictions.

8.6    Voting Rights; Dividends and Distributions. Except as provided in this
Section, Section 8.5 and any Award Agreement, during any Restriction Period
applicable to shares subject to a Restricted Stock Award, the Participant shall
have all of the rights of a stockholder of the Company holding shares of Stock,
including the right to vote such shares and to receive all dividends and other
distributions paid with respect to such shares. However, in the event of a
dividend or distribution paid in shares of Stock or other property or any other
adjustment made upon a change in the capital structure of the Company as
described in Section 4.3, any and all new, substituted or additional securities
or other property (other than normal cash dividends) to which the Participant is
entitled by reason of the Participant’s Restricted Stock Award shall be
immediately subject to the same Vesting Conditions as the shares subject to the
Restricted Stock Award with respect to which such dividends or distributions
were paid or adjustments were made. Notwithstanding the foregoing, and except as
may be provided in the applicable Award Agreement, any cash dividends and
distributions paid with respect to the shares subject to the Restricted Stock
Award of an Outside Director shall be accumulated and paid to the Outside
Director on the earlier of (i) the satisfaction of the Vesting Conditions for
the shares subject to the Restricted Stock Award and (ii) March 15th following
the year in which the dividend or distribution was paid to stockholders
generally.

8.7    Effect of Termination of Service. Unless otherwise provided by the
Committee in the Award Agreement evidencing a Restricted Stock Award, if a
Participant’s Service terminates for any reason, whether voluntary or
involuntary (including the Participant’s death or disability), then (a) the
Company shall have the option to repurchase for the purchase price paid by the
Participant any shares acquired by the Participant pursuant to a Restricted
Stock Purchase Right which remain subject to Vesting Conditions as of the date
of the Participant’s termination of Service and (b) the Participant shall
forfeit to the Company any shares acquired by the Participant pursuant to a
Restricted Stock Bonus which remain subject to Vesting Conditions as of the date
of the Participant’s termination of Service. The Company shall have the right to
assign at any time any repurchase right it may have, whether or not such right
is then exercisable, to one or more persons as may be selected by the Company.

8.8    Nontransferability of Restricted Stock Award Rights. Rights to acquire
shares of Stock pursuant to a Restricted Stock Award shall not be subject in any
manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance or garnishment by creditors of the Participant or the

 

16

--------------------------------------------------------------------------------

Participant’s beneficiary, except transfer by will or the laws of descent and
distribution. All rights with respect to a Restricted Stock Award granted to a
Participant hereunder shall be exercisable during his or her lifetime only by
such Participant or the Participant’s guardian or legal representative.

9.    Restricted Stock Unit Awards.

Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying
the number of Restricted Stock Units subject to the Award, in such form as the
Committee shall from time to time establish. Award Agreements evidencing
Restricted Stock Units may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:

9.1    Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may
be granted upon such conditions as the Committee shall determine, including,
without limitation, upon the attainment of one or more Performance Goals
described in Section 10.4. If either the grant of a Restricted Stock Unit Award
or the Vesting Conditions with respect to such Award is to be contingent upon
the attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 10.3
through 10.5(a).

9.2    Purchase Price. No monetary payment (other than applicable tax
withholding, if any) shall be required as a condition of receiving a Restricted
Stock Unit Award, the consideration for which shall be services actually
rendered to a Participating Company or for its benefit. Notwithstanding the
foregoing, if required by applicable state corporate law, the Participant shall
furnish consideration in the form of cash or past services rendered to a
Participating Company or for its benefit having a value not less than the par
value of the shares of Stock issued upon settlement of the Restricted Stock Unit
Award.

9.3    Vesting. Subject to Section 5.4(c), Restricted Stock Unit Awards may (but
need not) be made subject to Vesting Conditions based upon the satisfaction of
such Service requirements, conditions, restrictions or performance criteria,
including, without limitation, Performance Goals as described in Section 10.4,
as shall be established by the Committee and set forth in the Award Agreement
evidencing such Award. The Committee, in its discretion, may provide in any
Award Agreement evidencing a Restricted Stock Unit Award that, if the
satisfaction of Vesting Conditions with respect to any shares subject to the
Award would otherwise occur on a day on which the sale of such shares would
violate the provisions of the Trading Compliance Policy, then the satisfaction
of the Vesting Conditions automatically shall be determined on the first to
occur of (a) the next trading day on which the sale of such shares would not
violate the Trading Compliance Policy or (b) the later of (i) the last day of
the calendar year in which the original vesting date occurred or (ii) the last
day of the Company’s taxable year in which the original vesting date occurred.

9.4    Voting Rights, Dividend Equivalent Rights and Distributions. Participants
shall have no voting rights with respect to shares of Stock represented by
Restricted Stock Units until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Restricted Stock
Unit Award that the Participant shall be entitled to receive Dividend
Equivalents with respect to the payment of cash dividends on Stock during the
period beginning on the date such Award is granted and ending, with respect to
the particular shares subject to the Award, on the earlier of the date the Award
is settled or the date on which it is terminated. Such Dividend Equivalents, if
any, shall be paid by crediting the Participant with additional whole Restricted
Stock Units as of the date of payment of such cash dividends on Stock. The
number of additional Restricted Stock Units (rounded to the nearest whole
number) to be so credited shall be determined by dividing (a) the amount of cash
dividends paid on such date with respect to the number of shares of Stock
represented by the Restricted Stock Units previously credited to the Participant
by (b) the Fair Market Value per share of Stock on such date. Such additional
Restricted Stock Units shall be subject to the same terms and conditions and
shall be settled in the same manner and at the same time (or as soon thereafter
as practicable) as the Restricted Stock Units originally subject to the
Restricted Stock Unit Award. In

 

17

--------------------------------------------------------------------------------

the event of a dividend or distribution paid in shares of Stock or other
property or any other adjustment made upon a change in the capital structure of
the Company as described in Section 4.3, appropriate adjustments shall be made
in the Participant’s Restricted Stock Unit Award so that it represents the right
to receive upon settlement any and all new, substituted or additional securities
or other property (other than normal cash dividends) to which the Participant
would entitled by reason of the shares of Stock issuable upon settlement of the
Award, and all such new, substituted or additional securities or other property
shall be immediately subject to the same Vesting Conditions as are applicable to
the Award.

9.5    Effect of Termination of Service. Unless otherwise provided by the
Committee and set forth in the Award Agreement evidencing a Restricted Stock
Unit Award, if a Participant’s Service terminates for any reason, whether
voluntary or involuntary (including the Participant’s death or disability), then
the Participant shall forfeit to the Company any Restricted Stock Units pursuant
to the Award which remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service.

9.6    Settlement of Restricted Stock Unit Awards. The Company shall issue to a
Participant on the date on which Restricted Stock Units subject to the
Participant’s Restricted Stock Unit Award vest or on such other date determined
by the Committee, in its discretion, and set forth in the Award Agreement one
(1) share of Stock (and/or any other new, substituted or additional securities
or other property pursuant to an adjustment described in Section 9.4) for each
Restricted Stock Unit then becoming vested or otherwise to be settled on such
date, subject to the withholding of applicable taxes. If permitted by the
Committee, subject to the provisions of Section 17 with respect to Section 409A,
the Participant may elect in accordance with terms specified in the Award
Agreement to defer receipt of all or any portion of the shares of Stock or other
property otherwise issuable to the Participant pursuant to this Section, and
such deferred issuance date(s) elected by the Participant shall be set forth in
the Award Agreement. Notwithstanding the foregoing, the Committee, in its
discretion, may provide for settlement of any Restricted Stock Unit Award by
payment to the Participant in cash of an amount equal to the Fair Market Value
on the payment date of the shares of Stock or other property otherwise issuable
to the Participant pursuant to this Section.

9.7    Nontransferability of Restricted Stock Unit Awards. The right to receive
shares pursuant to a Restricted Stock Unit Award shall not be subject in any
manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent and
distribution. All rights with respect to a Restricted Stock Unit Award granted
to a Participant hereunder shall be exercisable during his or her lifetime only
by such Participant or the Participant’s guardian or legal representative.

10.    Performance Awards.

Performance Awards shall be evidenced by Award Agreements in such form as the
Committee shall from time to time establish. Award Agreements evidencing
Performance Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:

10.1    Types of Performance Awards Authorized. Performance Awards may be
granted in the form of either Performance Shares or Performance Units. Each
Award Agreement evidencing a Performance Award shall specify the number of
Performance Shares or Performance Units subject thereto, the Performance Award
Formula, the Performance Goal(s) and Performance Period applicable to the Award,
and the other terms, conditions and restrictions of the Award.

10.2    Initial Value of Performance Shares and Performance Units. Unless
otherwise provided by the Committee in granting a Performance Award, each
Performance Share shall have an initial monetary value equal to the Fair Market
Value of one (1) share of Stock, subject to adjustment as provided in
Section 4.3, on the effective date of grant of the Performance Share, and each
Performance Unit shall have an initial monetary value established by the
Committee at the time of grant. The final value payable to the Participant in
settlement of a

 

18

--------------------------------------------------------------------------------

Performance Award determined on the basis of the applicable Performance Award
Formula will depend on the extent to which Performance Goals established by the
Committee are attained within the applicable Performance Period established by
the Committee.

10.3    Establishment of Performance Period, Performance Goals and Performance
Award Formula. In granting each Performance Award, the Committee shall establish
in writing the applicable Performance Period, Performance Award Formula and one
or more Performance Goals which, when measured at the end of the Performance
Period, shall determine on the basis of the Performance Award Formula the final
value of the Performance Award to be paid to the Participant. Unless otherwise
permitted in compliance with the requirements under Section 162(m) with respect
to each Performance Award intended to result in the payment of Performance-Based
Compensation, the Committee shall establish the Performance Goal(s) and
Performance Award Formula applicable to each Performance Award no later than the
earlier of (a) the date ninety (90) days after the commencement of the
applicable Performance Period or (b) the date on which twenty-five percent
(25%) of the Performance Period has elapsed, and, in any event, at a time when
the outcome of the Performance Goals remains substantially uncertain. Once
established, the Performance Goals and Performance Award Formula applicable to a
Covered Employee shall not be changed during the Performance Period. The Company
shall notify each Participant granted a Performance Award of the terms of such
Award, including the Performance Period, Performance Goal(s) and Performance
Award Formula.

10.4    Measurement of Performance Goals. Performance Goals shall be established
by the Committee on the basis of targets to be attained (“Performance Targets”)
with respect to one or more measures of business or financial performance (each,
a “Performance Measure”), subject to the following:

  (a)    Performance Measures. Performance Measures shall have the same meanings
as used in the Company’s financial statements, or, if such terms are not used in
the Company’s financial statements, they shall have the meaning applied pursuant
to generally accepted accounting principles, or as used generally in the
Company’s industry. Performance Measures shall be calculated with respect to the
Company and each Subsidiary Corporation consolidated therewith for financial
reporting purposes or such division or other business unit as may be selected by
the Committee. For purposes of the Plan, the Performance Measures applicable to
a Performance Award shall be calculated in accordance with generally accepted
accounting principles, if applicable, but prior to the accrual or payment of any
Performance Award for the same Performance Period and excluding the effect
(whether positive or negative) of any change in accounting standards or any
extraordinary, unusual or nonrecurring item, as determined by the Committee,
occurring after the establishment of the Performance Goals applicable to the
Performance Award. Each such adjustment, if any, shall be made solely for the
purpose of providing a consistent basis from period to period for the
calculation of Performance Measures in order to prevent the dilution or
enlargement of the Participant’s rights with respect to a Performance Award.
Performance Measures may be one or more of the following, as determined by the
Committee:

  (i) revenue;

  (ii) sales;

  (iii) expenses;

  (iv) operating income;

  (v) gross margin;

  (vi) operating margin;

  (vii) earnings before any one or more of: stock-based compensation expense,
interest, taxes, depreciation and amortization;

 

19

--------------------------------------------------------------------------------

  (viii) pre-tax profit;

  (ix) net operating income;

  (x) net income;

  (xi) economic value added;

  (xii) free cash flow;

  (xiii) operating cash flow;

  (xiv) stock price;

  (xv) earnings per share;

  (xvi) return on stockholder equity;

  (xvii) return on capital;

  (xviii) return on assets;

  (xix) return on investment;

  (xx) employee satisfaction;

  (xxi) employee retention;

  (xxii) balance of cash, cash equivalents and marketable securities;

  (xxiii) market share;

  (xxiv) product regulatory approvals;

  (xxv) projects in development;

  (xxvi) regulatory filings;

  (xxvii) research and development expenses; and

  (xxviii) completion of a joint venture or other corporate transaction.

  (b)    Performance Targets. Performance Targets may include a minimum,
maximum, target level and intermediate levels of performance, with the final
value of a Performance Award determined under the applicable Performance Award
Formula by the level attained during the applicable Performance Period. A
Performance Target may be stated as an absolute value or as a value determined
relative to an index, budget or other standard selected by the Committee.

10.5    Settlement of Performance Awards.

  (a) Determination of Final Value. As soon as practicable following the
completion of the Performance Period applicable to a Performance Award, the
Committee shall certify in writing the extent to

 

20

--------------------------------------------------------------------------------

which the applicable Performance Goals have been attained and the resulting
final value of the Award earned by the Participant and to be paid upon its
settlement in accordance with the applicable Performance Award Formula.

  (b)    Discretionary Adjustment of Award Formula. In its discretion, the
Committee may, either at the time it grants a Performance Award or at any time
thereafter, provide for the positive or negative adjustment of the Performance
Award Formula applicable to a Performance Award granted to any Participant who
is not a Covered Employee to reflect such Participant’s individual performance
in his or her position with the Company or such other factors as the Committee
may determine. If permitted under a Covered Employee’s Award Agreement, the
Committee shall have the discretion, on the basis of such criteria as may be
established by the Committee, to reduce some or all of the value of the
Performance Award that would otherwise be paid to the Covered Employee upon its
settlement notwithstanding the attainment of any Performance Goal and the
resulting value of the Performance Award determined in accordance with the
Performance Award Formula. No such reduction may result in an increase in the
amount payable upon settlement of another Participant’s Performance Award that
is intended to result in Performance-Based Compensation.

  (c)    Effect of Leaves of Absence. Unless otherwise required by law or a
Participant’s Award Agreement, payment of the final value, if any, of a
Performance Award held by a Participant who has taken in excess of thirty
(30) days in unpaid leaves of absence during a Performance Period shall be
prorated on the basis of the number of days of the Participant’s Service during
the Performance Period during which the Participant was not on a leave of
absence.

  (d)    Notice to Participants. As soon as practicable following the
Committee’s determination and certification in accordance with Sections 10.5(a)
and (b), the Company shall notify each Participant of the determination of the
Committee.

  (e)    Payment in Settlement of Performance Awards. As soon as practicable
following the Committee’s determination and certification in accordance with
Sections 10.5(a) and (b), but in any event within the Short-Term Deferral Period
described in Section 17.1 (except as otherwise provided below or consistent with
the requirements of Section 409A), payment shall be made to each eligible
Participant (or such Participant’s legal representative or other person who
acquired the right to receive such payment by reason of the Participant’s death)
of the final value of the Participant’s Performance Award. Payment of such
amount shall be made in cash, shares of Stock, or a combination thereof as
determined by the Committee. Unless otherwise provided in the Award Agreement
evidencing a Performance Award, payment shall be made in a lump sum. If
permitted by the Committee, the Participant may elect, consistent with the
requirements of Section 409A, to defer receipt of all or any portion of the
payment to be made to Participant pursuant to this Section, and such deferred
payment date(s) elected by the Participant shall be set forth in the Award
Agreement. If any payment is to be made on a deferred basis, the Committee may,
but shall not be obligated to, provide for the payment during the deferral
period of Dividend Equivalents or interest.

  (f)    Provisions Applicable to Payment in Shares. If payment is to be made in
shares of Stock, the number of such shares shall be determined by dividing the
final value of the Performance Award by the value of a share of Stock determined
by the method specified in the Award Agreement. Such methods may include,
without limitation, the closing market price on a specified date (such as the
settlement date) or an average of market prices over a series of trading days.
Shares of Stock issued in payment of any Performance Award may be fully vested
and freely transferable shares or may be shares of Stock subject to Vesting
Conditions as provided in Section 8.5. Any shares subject to Vesting Conditions
shall be evidenced by an appropriate Award Agreement and shall be subject to the
provisions of Sections 8.5 through 8.8 above.

10.6    Voting Rights; Dividend Equivalent Rights and Distributions.
Participants shall have no voting rights with respect to shares of Stock
represented by Performance Share Awards until the date of the issuance of such
shares, if any (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company). However, the
Committee, in its discretion, may provide in the Award

 

21

--------------------------------------------------------------------------------

Agreement evidencing any Performance Share Award that the Participant shall be
entitled to receive Dividend Equivalents with respect to the payment of cash
dividends on Stock during the period beginning on the date the Award is granted
and ending, with respect to the particular shares subject to the Award, on the
earlier of the date on which the Performance Shares are settled or the date on
which they are forfeited. Such Dividend Equivalents, if any, shall be credited
to the Participant in the form of additional whole Performance Shares as of the
date of payment of such cash dividends on Stock. The number of additional
Performance Shares (rounded to the nearest whole number) to be so credited shall
be determined by dividing (a) the amount of cash dividends paid on the dividend
payment date with respect to the number of shares of Stock represented by the
Performance Shares previously credited to the Participant by (b) the Fair Market
Value per share of Stock on such date. Dividend Equivalents may be paid
currently or may be accumulated and paid to the extent that Performance Shares
become nonforfeitable, as determined by the Committee. Settlement of Dividend
Equivalents may be made in cash, shares of Stock, or a combination thereof as
determined by the Committee, and may be paid on the same basis as settlement of
the related Performance Share as provided in Section 10.5. Dividend Equivalents
shall not be paid with respect to Performance Units. In the event of a dividend
or distribution paid in shares of Stock or other property or any other
adjustment made upon a change in the capital structure of the Company as
described in Section 4.3, appropriate adjustments shall be made in the
Participant’s Performance Share Award so that it represents the right to receive
upon settlement any and all new, substituted or additional securities or other
property (other than normal cash dividends) to which the Participant would
entitled by reason of the shares of Stock issuable upon settlement of the
Performance Share Award, and all such new, substituted or additional securities
or other property shall be immediately subject to the same Performance Goals as
are applicable to the Award.

10.7    Effect of Termination of Service. Unless otherwise provided by the
Committee and set forth in the Award Agreement evidencing a Performance Award,
the effect of a Participant’s termination of Service on the Performance Award
shall be as follows:

  (a)    Death or Disability. If the Participants Service terminates because of
the death or Disability of the Participant before the completion of the
Performance Period applicable to the Performance Award, the final value of the
Participants Performance Award shall be determined by the extent to which the
applicable Performance Goals have been attained with respect to the entire
Performance Period and shall be prorated based on the number of days of the
Participants Service during the Performance Period. Payment shall be made
following the end of the Performance Period in any manner permitted by Section
10.5.

  (b)    Other Termination of Service. If the Participant’s Service terminates
for any reason except death or Disability before the completion of the
Performance Period applicable to the Performance Award, such Award shall be
forfeited in its entirety.

10.8    Nontransferability of Performance Awards. Prior to settlement in
accordance with the provisions of the Plan, no Performance Award shall be
subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Performance Award granted
to a Participant hereunder shall be exercisable during his or her lifetime only
by such Participant or the Participant’s guardian or legal representative.

11.    Cash-Based Awards and Other Stock-Based Awards.

Cash-Based Awards and Other Stock-Based Awards shall be evidenced by Award
Agreements in such form as the Committee shall from time to time establish.
Award Agreements evidencing Cash-Based Awards and Other Stock-Based Awards may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:

11.1    Grant of Cash-Based Awards. Subject to the provisions of the Plan, the
Committee, at any time and from time to time, may grant Cash-Based Awards to
Participants in such amounts and upon such terms and conditions, including the
achievement of performance criteria, as the Committee may determine.

 

22

--------------------------------------------------------------------------------

11.2    Grant of Other Stock-Based Awards. The Committee may grant other types
of equity-based or equity-related Awards not otherwise described by the terms of
this Plan (including the grant or offer for sale of unrestricted securities,
stock-equivalent units, stock appreciation units, securities or debentures
convertible into common stock or other forms determined by the Committee) in
such amounts and subject to such terms and conditions as the Committee shall
determine. Such Awards may involve the transfer of actual shares of Stock to
Participants, or payment in cash or otherwise of amounts based on the value of
Stock and may include, without limitation, Awards designed to comply with or
take advantage of the applicable local laws of jurisdictions other than the
United States.

11.3    Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award
shall specify a monetary payment amount or payment range as determined by the
Committee. Each Other Stock-Based Award shall be expressed in terms of shares of
Stock or units based on such shares of Stock, as determined by the Committee.
Subject to Section 5.4(c), the Committee may require the satisfaction of such
Service requirements, conditions, restrictions or performance criteria,
including, without limitation, Performance Goals as described in Section 10.4,
as shall be established by the Committee and set forth in the Award Agreement
evidencing such Award. If the Committee exercises its discretion to establish
performance criteria, the final value of Cash-Based Awards or Other Stock-Based
Awards that will be paid to the Participant will depend on the extent to which
the performance criteria are met. The establishment of performance criteria with
respect to the grant or vesting of any Cash-Based Award or Other Stock-Based
Award intended to result in Performance-Based Compensation shall follow
procedures substantially equivalent to those applicable to Performance Awards
set forth in Section 10.

11.4    Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards.
Payment or settlement, if any, with respect to a Cash-Based Award or an Other
Stock-Based Award shall be made in accordance with the terms of the Award, in
cash, shares of Stock or other securities or any combination thereof as the
Committee determines. The determination and certification of the final value
with respect to any Cash-Based Award or Other Stock-Based Award intended to
result in Performance-Based Compensation shall comply with the requirements
applicable to Performance Awards set forth in Section 10. To the extent
applicable, payment or settlement with respect to each Cash-Based Award and
Other Stock-Based Award shall be made in compliance with requirements of
Section 409A.

11.5    Voting Rights; Dividend Equivalent Rights and Distributions.
Participants shall have no voting rights with respect to shares of Stock
represented by Other Stock-Based Awards until the date of the issuance of such
shares of Stock (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), if any, in
settlement of such Award. However, the Committee, in its discretion, may provide
in the Award Agreement evidencing any Other Stock-Based Award that the
Participant shall be entitled to receive Dividend Equivalents with respect to
the payment of cash dividends on Stock during the period beginning on the date
such Award is granted and ending, with respect to the particular shares subject
to the Award, on the earlier of the date the Award is settled or the date on
which it is terminated. Such Dividend Equivalents, if any, shall be paid in
accordance with the provisions set forth in Section 9.4. Dividend Equivalent
rights shall not be granted with respect to Cash-Based Awards.

11.6    Effect of Termination of Service. Each Award Agreement evidencing a
Cash-Based Award or Other Stock-Based Award shall set forth the extent to which
the Participant shall have the right to retain such Award following termination
of the Participant’s Service. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all Cash-Based Awards or
Other Stock-Based Awards, and may reflect distinctions based on the reasons for
termination.

11.7    Nontransferability of Cash-Based Awards and Other Stock-Based Awards.
Prior to the payment or settlement of a Cash-Based Award or Other Stock-Based
Award, the Award shall not be subject in any manner to anticipation, alienation,
sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by
creditors of the Participant or the Participants beneficiary, except transfer by
will or by the laws

 

23

--------------------------------------------------------------------------------

of descent and distribution. The Committee may impose such additional
restrictions on any shares of Stock issued in settlement of Cash-Based Awards
and Other Stock-Based Awards as it may deem advisable, including, without
limitation, minimum holding period requirements, restrictions under applicable
federal securities laws, under the requirements of any stock exchange or market
upon which such shares of Stock are then listed and/or traded, or under any
state securities laws applicable to such shares of Stock.

12.    Standard Forms of Award Agreement.

12.1    Award Agreements. Each Award shall comply with and be subject to the
terms and conditions set forth in the appropriate form of Award Agreement
approved by the Committee and as amended from time to time. No Award or
purported Award shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement, which execution may be evidenced
by electronic means or transmission. Any Award Agreement may consist of an
appropriate form of Notice of Grant and a form of Agreement incorporated therein
by reference, or such other form or forms, including electronic media, as the
Committee may approve from time to time.

12.2    Authority to Vary Terms. The Committee shall have the authority from
time to time to vary the terms of any standard form of Award Agreement either in
connection with the grant or amendment of an individual Award or in connection
with the authorization of a new standard form or forms; provided, however, that
the terms and conditions of any such new, revised or amended standard form or
forms of Award Agreement are not inconsistent with the terms of the Plan.

13.    Change in Control.

13.1    Effect of Change in Control on Awards. Subject to the requirements and
limitations of Section 409A if applicable, the Committee may provide for any one
or more of the following:

  (a)    Accelerated Vesting. The Committee may, in its discretion, provide in
any Award Agreement or, in the event of a Change in Control, may take such
actions as it deems appropriate to provide for the acceleration of the
exercisability, vesting and/or settlement in connection with such Change in
Control of each or any outstanding Award or portion thereof and shares acquired
pursuant thereto upon such conditions, including termination of the
Participant’s Service prior to, upon, or following such Change in Control, to
such extent as the Committee shall determine.

  (b)    Assumption, Continuation or Substitution. In the event of a Change in
Control, the surviving, continuing, successor, or purchasing corporation or
other business entity or parent thereof, as the case may be (the “Acquiror”),
may, without the consent of any Participant, either assume or continue the
Company’s rights and obligations under each or any Award or portion thereof
outstanding immediately prior to the Change in Control or substitute for each or
any such outstanding Award or portion thereof a substantially equivalent award
with respect to the Acquiror’s stock, as applicable. For purposes of this
Section, if so determined by the Committee, in its discretion, an Award
denominated in shares of Stock shall be deemed assumed if, following the Change
in Control, the Award confers the right to receive, subject to the terms and
conditions of the Plan and the applicable Award Agreement, for each share of
Stock subject to the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, other securities or property or a
combination thereof) to which a holder of a share of Stock on the effective date
of the Change in Control was entitled; provided, however, that if such
consideration is not solely common stock of the Acquiror, the Committee may,
with the consent of the Acquiror, provide for the consideration to be received
upon the exercise or settlement of the Award, for each share of Stock subject to
the Award, to consist solely of common stock of the Acquiror equal in Fair
Market Value to the per share consideration received by holders of Stock
pursuant to the Change in Control. Any Award or portion thereof which is neither
assumed or continued by the Acquiror in connection with the Change in Control
nor exercised or settled as of the time of consummation of the Change in Control
shall terminate and cease to be outstanding effective as of the time of
consummation of the Change in Control.

 

24

--------------------------------------------------------------------------------

  (c)    Cash-Out of Outstanding Stock-Based Awards. The Committee may, in its
discretion and without the consent of any Participant, determine that, upon the
occurrence of a Change in Control, each or any Award denominated in shares of
Stock or portion thereof outstanding immediately prior to the Change in Control
and not previously exercised or settled shall be canceled in exchange for a
payment with respect to each vested share (and each unvested share, if so
determined by the Committee) of Stock subject to such canceled Award in
(i) cash, (ii) stock of the Company or of a corporation or other business entity
a party to the Change in Control, or (iii) other property which, in any such
case, shall be in an amount having a Fair Market Value equal to the Fair Market
Value of the consideration to be paid per share of Stock in the Change in
Control, reduced by the exercise or purchase price per share, if any, under such
Award. In the event such determination is made by the Committee, the amount of
such payment (reduced by applicable withholding taxes, if any) shall be paid to
Participants in respect of the vested portions of their canceled Awards as soon
as practicable following the date of the Change in Control and in respect of the
unvested portions of their canceled Awards in accordance with the vesting
schedules applicable to such Awards.

13.2    Federal Excise Tax Under Section 4999 of the Code.

  (a)    Excess Parachute Payment. In the event that any acceleration of vesting
pursuant to an Award and any other payment or benefit received or to be received
by a Participant would subject the Participant to any excise tax pursuant to
Section 4999 of the Code due to the characterization of such acceleration of
vesting, payment or benefit as an “excess parachute payment” under Section 280G
of the Code, the Participant may elect, in his or her sole discretion and in
compliance with the requirements of Section 409A, to reduce the amount of any
acceleration of vesting called for under the Award in order to avoid such
characterization.

  (b)    Determination by Independent Accountants. To aid the Participant in
making any election called for under Section 13.2(a), no later than the date of
the occurrence of any event that might reasonably be anticipated to result in an
“excess parachute payment” to the Participant as described in Section 13.2(a),
the Company shall request a determination in writing by independent public
accountants selected by the Company (the “Accountants”). As soon as practicable
thereafter, the Accountants shall determine and report to the Company and the
Participant the amount of such acceleration of vesting, payments and benefits
which would produce the greatest after-tax benefit to the Participant. For the
purposes of such determination, the Accountants may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999 of
the Code. The Company and the Participant shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make their required determination. The Company shall bear all fees and expenses
the Accountants may reasonably charge in connection with their services
contemplated by this Section.

14.    Compliance with Securities Law.

The grant of Awards and the issuance of shares of Stock pursuant to any Award
shall be subject to compliance with all applicable requirements of federal,
state and foreign law with respect to such securities and the requirements of
any stock exchange or market system upon which the Stock may then be listed. In
addition, no Award may be exercised or shares issued pursuant to an Award unless
(a) a registration statement under the Securities Act shall at the time of such
exercise or issuance be in effect with respect to the shares issuable pursuant
to the Award or (b) in the opinion of legal counsel to the Company, the shares
issuable pursuant to the Award may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be
necessary to the lawful issuance and sale of any shares hereunder shall relieve
the Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained. As a
condition to issuance of any Stock, the Company may require the Participant to
satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.

 

25

--------------------------------------------------------------------------------

15.    Tax Withholding.

15.1    Tax Withholding in General. The Company shall have the right to deduct
from any and all payments made under the Plan, or to require the Participant,
through payroll withholding, cash payment or otherwise, to make adequate
provision for, the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to an Award
or the shares acquired pursuant thereto. The Company shall have no obligation to
deliver shares of Stock, to release shares of Stock from an escrow established
pursuant to an Award Agreement, or to make any payment in cash under the Plan
until the Participating Company Group’s tax withholding obligations have been
satisfied by the Participant.

15.2    Withholding in Shares. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable to a Participant upon
the exercise or settlement of an Award, or to accept from the Participant the
tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group. The Fair Market Value of any
shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates.

16.    Amendment or Termination of Plan.

The Committee may amend, suspend or terminate the Plan at any time. However,
without the approval of the Company’s stockholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Section 4.3), (b) no
change in the class of persons eligible to receive Incentive Stock Options, and
(c) no other amendment of the Plan that would require approval of the Company’s
stockholders under any applicable law, regulation or rule, including the rules
of any stock exchange or market system upon which the Stock may then be listed.
No amendment, suspension or termination of the Plan shall affect any then
outstanding Award unless expressly provided by the Committee. Except as provided
by the next sentence, no amendment, suspension or termination of the Plan may
adversely affect any then outstanding Award without the consent of the
Participant. Notwithstanding any other provision of the Plan to the contrary,
the Committee may, in its sole and absolute discretion and without the consent
of any Participant, amend the Plan or any Award Agreement, to take effect
retroactively or otherwise, as it deems necessary or advisable for the purpose
of conforming the Plan or such Award Agreement to any present or future law,
regulation or rule applicable to the Plan, including, but not limited to,
Section 409A.

17.    Compliance with Section 409A.

17.1    Awards Subject to Section 409A. The provisions of this Section 17 shall
apply to any Award or portion thereof that is or becomes subject to
Section 409A, notwithstanding any provision to the contrary contained in the
Plan or the Award Agreement applicable to such Award. Awards subject to
Section 409A include, without limitation:

  (a)    Any Nonstatutory Stock Option or SAR that permits the deferral of
compensation other than the deferral of recognition of income until the exercise
of the Award.

  (b)    Any Restricted Stock Unit Award, Performance Award, Cash-Based Award or
Other Stock-Based Award if either (i) the Award provides by its terms for
settlement of all or any portion of the Award on one or more dates following the
Short-Term Deferral Period (as defined below) or (ii) the Committee permits or
requires the Participant to elect one or more dates on which the Award will be
settled.

Subject to any applicable U.S. Treasury Regulations promulgated pursuant to
Section 409A or other applicable guidance, the term “Short-Term Deferral Period”
means the period ending on the later of (i) the fifteenth (15th) day of the
third (3rd) month following the end of the Company’s fiscal year in which the
applicable portion of the Award is no longer subject to a substantial risk of
forfeiture or (ii) the fifteenth

 

26

--------------------------------------------------------------------------------

(15th) day of the third (3rd) month following the end of the Participant’s
taxable year in which the applicable portion of the Award is no longer subject
to a substantial risk of forfeiture. For this purpose, the term “substantial
risk of forfeiture” shall have the meaning set forth in any applicable U.S.
Treasury Regulations promulgated pursuant to Section 409A or other applicable
guidance.

17.2    Deferral and/or Distribution Elections. Except as otherwise permitted or
required by Section 409A or any applicable U.S. Treasury Regulations promulgated
pursuant to Section 409A or other applicable guidance, the following rules shall
apply to any deferral and/or distribution elections (each, an “Election”) that
may be permitted or required by the Committee pursuant to an Award subject to
Section 409A:

  (a)    All Elections must be in writing and specify the amount of the
distribution in settlement of an Award being deferred, as well as the time and
form of distribution as permitted by this Plan.

  (b)    All Elections shall be made by the end of the Participant’s taxable
year prior to the year in which services commence for which an Award may be
granted to such Participant; provided, however, that if the Award qualifies as
“performance-based compensation” for purposes of Section 409A and is based on
services performed over a period of at least twelve (12) months, then the
Election may be made no later than six (6) months prior to the end of such
period.

  (c)    Elections shall continue in effect until a written election to revoke
or change such Election is received by the Company, except that a written
election to revoke or change such Election must be made prior to the last day
for making an Election determined in accordance with paragraph (b) above or as
permitted by Section 17.3.

17.3    Subsequent Elections. Except as otherwise permitted or required by
Section 409A or any applicable U.S. Treasury Regulations promulgated pursuant to
Section 409A or other applicable guidance, any Award subject to Section 409A
which permits a subsequent Election to delay the distribution or change the form
of distribution in settlement of such Award shall comply with the following
requirements:

  (a)    No subsequent Election may take effect until at least twelve
(12) months after the date on which the subsequent Election is made;

  (b)    Each subsequent Election related to a distribution in settlement of an
Award not described in this Section 17.3(b), 17.4(b), or 17.4(f) must result in
a delay of the distribution for a period of not less than five (5) years from
the date such distribution would otherwise have been made; and

  (c)    No subsequent Election related to a distribution pursuant to
Section 17.4(d) shall be made less than twelve (12) months prior to the date of
the first scheduled payment under such distribution.

17.4    Distributions Pursuant to Deferral Elections. Except as otherwise
permitted or required by Section 409A or any applicable U.S. Treasury
Regulations promulgated pursuant to Section 409A or other applicable guidance,
no distribution in settlement of an Award subject to Section 409A may commence
earlier than:

  (a)    Separation from service (as determined by the Secretary of the United
States Treasury);

  (b)    The date the Participant becomes Disabled (as defined below);

  (c)    Death;

  (d)    A specified time (or pursuant to a fixed schedule) that is either
(i) specified by the Committee upon the grant of an Award and set forth in the
Award Agreement evidencing such Award or (ii) specified by the Participant in an
Election complying with the requirements of Section 17.2 and/or 17.3, as
applicable;

 

27

--------------------------------------------------------------------------------

  (e)    To the extent provided by the Secretary of the U.S. Treasury, a change
in the ownership or effective control or the Company or in the ownership of a
substantial portion of the assets of the Company; or

  (f)    The occurrence of an “Unforeseeable Emergency” (as defined by
applicable U.S. Treasury Regulations promulgated pursuant to Section 409A).

Notwithstanding anything else herein to the contrary, to the extent that a
Participant is a “Specified Employee” (as defined in Section 409A(a)(2)(B)(i) of
the Code) of the Company, no distribution pursuant to Section 17.4(a) in
settlement of an Award subject to Section 409A may be made before the date (the
“Delayed Payment Date”) which is six (6) months after such Participant’s date of
separation from service, or, if earlier, the date of the Participant’s death.
All such amounts that would, but for this paragraph, become payable prior to the
Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.

17.5    Unforeseeable Emergency. The Committee shall have the authority to
provide in the Award Agreement evidencing any Award subject to Section 409A for
distribution in settlement of all or a portion of such Award in the event that a
Participant establishes, to the satisfaction of the Committee, the occurrence of
an Unforeseeable Emergency. In such event, the amount(s) distributed with
respect to such Unforeseeable Emergency cannot exceed the amounts necessary to
satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes
reasonably anticipated as a result of such distribution(s), after taking into
account the extent to which such hardship is or may be relieved through
reimbursement or compensation by insurance or otherwise, by liquidation of the
Participant’s assets (to the extent the liquidation of such assets would not
itself cause severe financial hardship) or by cessation of deferrals under the
Award. All distributions with respect to an Unforeseeable Emergency shall be
made in a lump sum as soon as practicable following the Committee’s
determination that an Unforeseeable Emergency has occurred.

The occurrence of an Unforeseeable Emergency shall be judged and determined by
the Committee. The Committee’s decision with respect to whether an Unforeseeable
Emergency has occurred and the manner in which, if at all, the distribution in
settlement of an Award shall be altered or modified, shall be final, conclusive,
and not subject to approval or appeal.

17.6    Disabled. The Committee shall have the authority to provide in any Award
subject to Section 409A for distribution in settlement of such Award in the
event that the Participant becomes Disabled. A Participant shall be considered
“Disabled” if either:

  (a)    the Participant is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months, or

  (b)    the Participant is, by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than twelve (12) months, receiving
income replacement benefits for a period of not less than three (3) months under
an accident and health plan covering employees of the Participant’s employer.

All distributions payable by reason of a Participant becoming Disabled shall be
paid in a lump sum or in periodic installments as established by the
Participant’s Election, commencing as soon as practicable following the date the
Participant becomes Disabled. If the Participant has made no Election with
respect to distributions upon becoming Disabled, all such distributions shall be
paid in a lump sum as soon as practicable following the date the Participant
becomes Disabled.

17.7    Death. If a Participant dies before complete distribution of amounts
payable upon settlement of an Award subject to Section 409A, such undistributed
amounts shall be distributed to his or her beneficiary under the distribution
method for death established by the Participant’s Election as soon as
administratively possible

 

28

--------------------------------------------------------------------------------

following receipt by the Committee of satisfactory notice and confirmation of
the Participant’s death. If the Participant has made no Election with respect to
distributions upon death, all such distributions shall be paid in a lump sum as
soon as practicable following the date of the Participant’s death.

17.8    No Acceleration of Distributions. Notwithstanding anything to the
contrary herein, this Plan does not permit the acceleration of the time or
schedule of any distribution under an Award subject to Section 409A, except as
provided by Section 409A and/or the Secretary of the U.S. Treasury.

18.    Miscellaneous Provisions.

18.1    Repurchase Rights. Shares issued under the Plan may be subject to one or
more repurchase options, or other conditions and restrictions as determined by
the Committee in its discretion at the time the Award is granted. The Company
shall have the right to assign at any time any repurchase right it may have,
whether or not such right is then exercisable, to one or more persons as may be
selected by the Company. Upon request by the Company, each Participant shall
execute any agreement evidencing such transfer restrictions prior to the receipt
of shares of Stock hereunder and shall promptly present to the Company any and
all certificates representing shares of Stock acquired hereunder for the
placement on such certificates of appropriate legends evidencing any such
transfer restrictions.

18.2    Forfeiture Events.

  (a)    The Committee may specify in an Award Agreement that the Participant’s
rights, payments, and benefits with respect to an Award shall be subject to
reduction, cancellation, forfeiture, or recoupment upon the occurrence of
specified events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events may include, but shall not be limited to,
termination of Service for Cause or any act by a Participant, whether before or
after termination of Service, that would constitute Cause for termination of
Service.

  (b)    If the Company is required to prepare an accounting restatement due to
the material noncompliance of the Company, as a result of misconduct, with any
financial reporting requirement under the securities laws, any Participant who
knowingly or through gross negligence engaged in the misconduct, or who
knowingly or through gross negligence failed to prevent the misconduct, and any
Participant who is one of the individuals subject to automatic forfeiture under
Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company the
amount of any payment in settlement of an Award earned or accrued during the
twelve- (12-) month period following the first public issuance or filing with
the United States Securities and Exchange Commission (whichever first occurred)
of the financial document embodying such financial reporting requirement.

18.3    Provision of Information. Each Participant shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company’s common stockholders.

18.4    Rights as Employee, Consultant or Director. No person, even though
eligible pursuant to Section 5, shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a Participant.
Nothing in the Plan or any Award granted under the Plan shall confer on any
Participant a right to remain an Employee, Consultant or Director or interfere
with or limit in any way any right of a Participating Company to terminate the
Participant’s Service at any time. To the extent that an Employee of a
Participating Company other than the Company receives an Award under the Plan,
that Award shall in no event be understood or interpreted to mean that the
Company is the Employee’s employer or that the Employee has an employment
relationship with the Company.

18.5    Rights as a Stockholder. A Participant shall have no rights as a
stockholder with respect to any shares covered by an Award until the date of the
issuance of such shares (as evidenced by the appropriate entry

 

29

--------------------------------------------------------------------------------

on the books of the Company or of a duly authorized transfer agent of the
Company). No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such shares are issued,
except as provided in Section 4.3 or another provision of the Plan.

18.6    Delivery of Title to Shares. Subject to any governing rules or
regulations, the Company shall issue or cause to be issued the shares of Stock
acquired pursuant to an Award and shall deliver such shares to or for the
benefit of the Participant by means of one or more of the following: (a) by
delivering to the Participant evidence of book entry shares of Stock credited to
the account of the Participant, (b) by depositing such shares of Stock for the
benefit of the Participant with any broker with which the Participant has an
account relationship, or (c) by delivering such shares of Stock to the
Participant in certificate form.

18.7    Fractional Shares. The Company shall not be required to issue fractional
shares upon the exercise or settlement of any Award.

18.8    Retirement and Welfare Plans. Neither Awards made under this Plan nor
shares of Stock or cash paid pursuant to such Awards may be included as
“compensation” for purposes of computing the benefits payable to any Participant
under any Participating Company’s retirement plans (both qualified and
non-qualified) or welfare benefit plans unless such other plan expressly
provides that such compensation shall be taken into account in computing a
Participant’s benefit.

18.9    Beneficiary Designation. Subject to local laws and procedures, each
Participant may file with the Company a written designation of a beneficiary who
is to receive any benefit under the Plan to which the Participant is entitled in
the event of such Participant’s death before he or she receives any or all of
such benefit. Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company, and will be effective
only when filed by the Participant in writing with the Company during the
Participant’s lifetime. If a married Participant designates a beneficiary other
than the Participant’s spouse, the effectiveness of such designation may be
subject to the consent of the Participant’s spouse. If a Participant dies
without an effective designation of a beneficiary who is living at the time of
the Participant’s death, the Company will pay any remaining unpaid benefits to
the Participant’s legal representative.

18.10    Severability. If any one or more of the provisions (or any part
thereof) of this Plan shall be held invalid, illegal or unenforceable in any
respect, such provision shall be modified so as to make it valid, legal and
enforceable, and the validity, legality and enforceability of the remaining
provisions (or any part thereof) of the Plan shall not in any way be affected or
impaired thereby.

18.11    No Constraint on Corporate Action. Nothing in this Plan shall be
construed to: (a) limit, impair, or otherwise affect the Company’s or another
Participating Company’s right or power to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any part of its
business or assets; or (b) limit the right or power of the Company or another
Participating Company to take any action which such entity deems to be necessary
or appropriate.

18.12    Unfunded Obligation. Participants shall have the status of general
unsecured creditors of the Company. Any amounts payable to Participants pursuant
to the Plan shall be unfunded and unsecured obligations for all purposes,
including, without limitation, Title I of the Employee Retirement Income
Security Act of 1974. No Participating Company shall be required to segregate
any monies from its general funds, or to create any trusts, or establish any
special accounts with respect to such obligations. The Company shall retain at
all times beneficial ownership of any investments, including trust investments,
which the Company may make to fulfill its payment obligations hereunder. Any
investments or the creation or maintenance of any trust or any Participant
account shall not create or constitute a trust or fiduciary relationship between
the Committee or any Participating Company and a Participant, or otherwise
create any vested or beneficial interest in any Participant or the Participant’s
creditors in any assets of any Participating Company. The Participants shall
have no claim against

 

30

--------------------------------------------------------------------------------

any Participating Company for any changes in the value of any assets which may
be invested or reinvested by the Company with respect to the Plan.

18.13    Choice of Law. Except to the extent governed by applicable federal law,
the validity, interpretation, construction and performance of the Plan and each
Award Agreement shall be governed by the laws of the State of California,
without regard to its conflict of law rules.

 

31