AMERICAN TECHNOLOGY CORPORATION
2005 EQUITY INCENTIVE PLAN

1.   Purpose of the Plan.

The purpose of this Plan is to encourage ownership in the Company by key
personnel whose long-term service is considered essential to the Company's
continued progress and, thereby, encourage recipients to act in the
stockholders' interest and share in the Company's success.

2.   Definitions.

As used herein, the following definitions shall apply:

          "Administrator" shall mean the Board, any Committees or such delegates
as shall be administering the Plan in accordance with Section 4 of the Plan.

           "Affiliate" shall mean any entity that is directly or indirectly
controlled by the Company or any entity in which the Company has a significant
ownership interest as determined by the Administrator.

           "Applicable Laws" shall mean the requirements relating to the
administration of stock plans under federal and state laws, any stock exchange
or quotation system on which the Company has listed or submitted for quotation
the Common Stock to the extent provided under the terms of the Company's
agreement with such exchange or quotation system and, with respect to Awards
subject to the laws of any foreign jurisdiction where Awards are, or will be,
granted under the Plan, the laws of such jurisdiction.

           "Award" shall mean, individually or collectively, a grant under the
Plan of Options, Stock Awards, SARs, or Cash Awards.

          

"Awardee" shall mean a Service Provider who has been granted an Award under the
Plan.

           "Award Agreement" shall mean an Option Agreement, Stock Award
Agreement, SAR Award Agreement, and/or Cash Award Agreement, which may be in
written or electronic format, in such form and with such terms as may be
specified by the Administrator, evidencing the terms and conditions of an
individual Award. Each Award Agreement is subject to the terms and conditions of
the Plan.

           "Award Transfer Program" shall mean any program instituted by the
Administrator which would permit Participants the opportunity to transfer any
outstanding Awards to a financial institution or other person or entity selected
by the Administrator.

          

"Board" shall mean the Board of Directors of the Company.

           "Cash Award" shall mean a bonus opportunity awarded under Section 13
pursuant to which a Participant may become entitled to receive an amount based
on the satisfaction of such performance criteria as are specified in the
agreement or other documents evidencing the Award (the "Cash Award Agreement").

          

"Change in Control" shall mean any of the following, unless the Administrator
provides otherwise:

           i. any merger or consolidation in which the Company shall not be the
surviving entity (or survives only as a subsidiary of another entity whose
stockholders did not own all or substantially all of the Common Stock in
substantially the same proportions as immediately prior to such transaction);

           ii. the sale of all or substantially all of the Company's assets to
any other person or entity (other than a wholly-owned subsidiary);

           iii. the acquisition of beneficial ownership of a controlling
interest (including, without limitation, power to vote) in the outstanding
shares of Common Stock by any person or entity (including a "group" as defined
by or under Section 13(d)(3) of the Exchange Act); or

          

iv. the dissolution or liquidation of the Company.

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          Notwithstanding the foregoing, the term "Change in Control" shall not
include any under written public offering of Shares registered under the
Securities Act of 1933, as amended.

          

"Code" shall mean the Internal Revenue Code of 1986, as amended.

          "Committee" shall mean a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.

          

"Common Stock" shall mean the common stock of the Company.

          

"Company" shall mean American Technology Corporation, a Delaware corporation, or
its successor.

          "Consultant" shall mean any person engaged by the Company or any
Affiliate to render services to such entity as an advisor or consultant.

          

"Conversion Award" has the meaning set forth in Section 4(b)(xii) of the Plan.

          

"Director" shall mean a member of the Board.

          "Dividend Equivalent" shall mean a credit, made at the discretion of
the Administrator, to the account of a Participant in an amount equal to the
cash dividends paid on one Share for each Share represented by an Award held by
such Participant.

          "Employee" shall mean a regular, active employee of the Company or any
Affiliate, including an Officer and/or Director. Within the limitations of
Applicable Law, the Administrator shall have the discretion to determine the
effect upon an Award and upon an individual's status as an Employee in the case
of (i) any individual who is classified by the Company or its Affiliate as
leased from or otherwise employed by a third party or as intermittent or
temporary, even if any such classification is changed retroactively as a result
of an audit, litigation or otherwise, (ii) any leave of absence approved by the
Company or an Affiliate, (iii) any transfer between locations of employment with
the Company or an Affiliate or between the Company and any Affiliate or between
any Affiliates, (iv) any change in the Awardee's status from an employee to a
Consultant or Director, and (v) at the request of the Company or an Affiliate an
employee becomes employed by any partnership, joint venture or corporation not
meeting the requirements of an Affiliate in which the Company or an Affiliate is
a party.

          

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

          "Exchange Program" shall mean a program under which (i) outstanding
Awards are surrendered or cancelled in exchange for Awards of the same type
(which may have lower exercise prices and different terms), Awards of a
different type, and/or cash, and/or (ii) the exercise price of an outstanding
Award is reduced. The terms and conditions of any Exchange Program will be
determined by the Administrator in its sole discretion.

          "Fair Market Value" shall mean, unless the Administrator determines
otherwise, as of any date, the closing price for such Common Stock as of such
date (or if no sales were reported on such date, the closing price on the last
preceding day for which a sale was reported), as reported in such source as the
Administrator shall determine.

          "Grant Date" shall mean the date upon which an Award is granted to an
Awardee pursuant to this Plan.

          "Incentive Stock Option" shall mean an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

          "Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.

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          "Officer" shall mean a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

          "Option" shall mean a right granted under Section 8 of the Plan to
purchase a certain number of Shares at such exercise price, at such times, and
on such other terms and conditions as are specified in the agreement or other
documents evidencing the Award (the "Option Agreement"). Both Options intended
to qualify as Incentive Stock Options and Nonstatutory Stock Options may be
granted under the Plan.

          "Participant" shall mean the Awardee or any person (including any
estate) to whom an Award has been assigned or transferred as permitted
hereunder.

          "Plan" shall mean this American Technology Corporation 2005 Equity
Incentive Plan, as amended from time to time.

          "Prior Plan" shall mean the Company's 2002 Stock Option Plan
authorizing up to 2,350,000 Shares for issuance pursuant to stock options.

          

"Qualifying Performance Criteria" shall have the meaning set forth in Section
14(b) of the Plan.

          "Related Corporation" shall mean any parent or subsidiary (as defined
in Sections 424(e) and (f) of the Code) of the Company.

          

"Rule 701" shall mean Rule 701 promulgated under the Securities Act of 1933, as
amended.

          

"Service Provider" shall mean an Employee, Director, or Consultant.

          "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 15 of the Plan.

          "Stock Award" shall mean an award or issuance of Shares or Stock Units
made under Section 11 of the Plan, the grant, issuance, retention, vesting
and/or transferability of which is subject during specified periods of time to
such conditions (including continued service or performance conditions) and
terms as are expressed in the agreement or other documents evidencing the Award
(the "Stock Award Agreement").

          "Stock Appreciation Right" or "SAR" shall mean an Award, granted alone
or in connection with an Option, that pursuant to Section 12 of the Plan is
designated as a SAR. The terms of the SAR are expressed in the agreement or
other documents evidencing the Award (the "SAR Agreement").

          "Stock Unit" shall mean a bookkeeping entry representing an amount
equivalent to the fair market value of one Share, payable in cash, property or
Shares. Stock Units represent an unfunded and unsecured obligation of the
Company, except as otherwise provided for by the Administrator.

          "10% Stockholder" shall mean the owner of stock (as determined under
Section 424(d) of the Code) possessing more than 10% of the total combined
voting power of all classes of stock of the Company (or any Related
Corporation).

          "Termination of Service" shall mean ceasing to be a Service Provider.
However, for Incentive Stock Option purposes, Termination of Service will occur
when the Awardee ceases to be an employee (as determined in accordance with
Section 3401(c) of the Code and the regulations promulgated thereunder) of the
Company or one of its Related Corporations. The Administrator shall determine
whether any corporate transaction, such as a sale or spin-off of a division or
business unit, or a joint venture, shall be deemed to result in a Termination of
Service.

          

"Total and Permanent Disability" shall have the meaning set forth in Section
22(e)(3) of the Code.

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3.   Stock Subject to the Plan.

     

(a) Aggregate Limits.

    (i) The number of Shares reserved for issuance under the Plan through Awards
is a maximum of 5,062,501 Shares. Such reserve shall consist of (A) the number
of Shares available for issuance, as of the effective date of the Plan, under
the Prior Plan; plus (B) those Shares that are issuable upon exercise of (x)
options granted pursuant to the Prior Plan, or (y) "Prior Plan Options" as such
term is defined in the Prior Plan, in either case which expire or become
unexercisable for any reason without having been exercised in full after the
effective date of the Plan; plus (C) an additional increase of 1,500,000 Shares
to be approved by the Company's shareholders on the effective date of the Plan;
plus (D) an additional increase of 1,750,000 Shares to be approved by the
Company's stockholders at the 2007 Annual Meeting of Stockholders.
Notwithstanding the foregoing, the maximum aggregate number of Shares that may
be issued under the Plan through Incentive Stock Options is 5,062,501. The
limitations of this Section 3(a)(i) shall be subject to the adjustments provided
for in Section 15 of the Plan.

    (ii) Upon payment in Shares pursuant to the exercise of an Award, the number
of Shares available for issuance under the Plan shall be reduced only by the
number of Shares actually issued in such payment. If any outstanding Award
expires or is terminated or canceled without having been exercised or settled in
full, or if Shares acquired pursuant to an Award subject to forfeiture or
repurchase are forfeited or repurchased by the Company, the Shares allocable to
the terminated portion of such Award or such forfeited or repurchased Shares
shall again be available to grant under the Plan. Notwithstanding the foregoing,
the aggregate number of shares of Common Stock that may be issued under the Plan
upon the exercise of Incentive Stock Options shall not be increased for
restricted Shares that are forfeited or repurchased. Notwithstanding anything in
the Plan, or any Award Agreement to the contrary, Shares attributable to Awards
transferred under any Award Transfer Program shall not be again available for
grant under the Plan. The Shares subject to the Plan may be either Shares
reacquired by the Company, including Shares purchased in the open market, or
authorized but unissued Shares.

    (iii) Notwithstanding this Section 3(a) to the contrary, at no time shall
the total number of Shares issuable upon exercise of all outstanding Options and
the total number of Shares provided for under any other options, warrants, stock
bonus or similar plan of the Company exceed 30% of the total outstanding Shares
as calculated in accordance with the conditions and exclusions of Section
260.140.45 of Title 10 of the California Code of Regulations, based on the
Shares which are outstanding at the time the calculation is made. This Section
3(a)(iii) of the Plan shall apply only so long as the issuance and sale of
securities under this Plan require qualification under the California Corporate
Securities Law of 1968.

     (b) Code Section 162(m) Limit. Subject to the provisions of Section 15 of
the Plan, the aggregate number of Shares subject to Awards granted under this
Plan during any calendar year to any one Awardee shall not exceed 1,000,000.
Notwithstanding anything to the contrary in the Plan, the limitation set forth
in this Section 3(b) shall be subject to adjustment under Section 15 of the Plan
only to the extent that such adjustment will not affect the status of any Award
intended to qualify as "performance based compensation" under Code Section
162(m).

4.   Administration of the Plan.

     

(a) Procedure.

    (i) Multiple Administrative Bodies. The Plan shall be administered by the
Board, a Committee and/or their delegates.

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     (ii) Section 162. To the extent that the Administrator determines it to be
desirable to qualify Awards granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Code, Awards to
"covered employees" within the meaning of Section 162(m) of the Code or
Employees that the Committee determines may be "covered employees" in the future
shall be made by a Committee of two or more "outside directors" within the
meaning of Section 162(m) of the Code.

     (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder
as exempt under Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3"),
Awards to Officers and Directors shall be made in such a manner to satisfy the
requirement for exemption under Rule 16b-3.

     (iv) Other Administration. The Board or a Committee may delegate to an
authorized Officer or Officers of the Company the power to approve Awards to
persons eligible to receive Awards under the Plan who are not (A) subject to
Section 16 of the Exchange Act or (B) at the time of such approval, "covered
employees" under Section 162(m) of the Code.

     (v) Delegation of Authority for the Day-to-Day Administration of the Plan.
Except to the extent prohibited by Applicable Law, the Administrator may
delegate to one or more individuals the day-to-day administration of the Plan
and any of the functions assigned to it in this Plan. Such delegation may be
revoked at any time.

     (b) Powers of the Administrator. Subject to the provisions of the Plan and,
in the case of a Committee or delegates acting as the Administrator, subject to
the specific duties delegated to such Committee or delegates, the Administrator
shall have the authority, in its discretion:

     (i) to select the Service Providers of the Company or its Affiliates to
whom Awards are to be granted hereunder;

     (ii) to determine the number of shares of Common Stock to be covered by
each Award granted hereunder;

     

(iii) to determine the type of Award to be granted to the selected Service
Provider;

     

(iv) to approve the forms of Award Agreements for use under the Plan;

     (v) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any Award granted hereunder. Such terms and conditions include,
but are not limited to, the exercise and/or purchase price, the time or times
when an Award may be exercised (which may or may not be based on performance
criteria), the vesting schedule, any vesting and/or exercisability, acceleration
or waiver of forfeiture restrictions, the acceptable forms of consideration, the
term, and any restriction or limitation regarding any Award or the Shares
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine and may be established at the time an Award
is granted or thereafter;

     

(vi) to correct administrative errors;

     (vii) to construe and interpret the terms of the Plan (including sub-plans
and Plan addenda) and Awards granted pursuant to the Plan;

     (viii) to adopt rules and procedures relating to the operation and
administration of the Plan to accommodate the specific requirements of local
laws and procedures. Without limiting the generality of the foregoing, the
Administrator is specifically authorized (A) to adopt the rules and procedures
regarding the conversion of local currency, withholding procedures and handling
of stock certificates which vary with local requirements and (B) to adopt
sub-plans and Plan addenda as the Administrator deems desirable, to accommodate
foreign laws, regulations and practice;

     

(ix) to prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans and Plan addenda;

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     (x) to modify or amend each Award, including, but not limited to, the
acceleration of vesting and/or exercisability, provided, however, that any such
amendment is subject to Section 16 of the Plan and may not materially impair any
outstanding Award unless agreed to in writing by the Participant; provided,
however, that an amendment or modification that may cause an Incentive Stock
Option to become a Nonstatutory Stock Option shall not be treated as materially
impairing the rights of the Participant;

     (xi) to allow Participants to satisfy withholding tax amounts by electing
to have the Company withhold from the Shares to be issued pursuant to an Award
that number of Shares having a Fair Market Value equal to the amount required to
be withheld. The Fair Market Value of the Shares to be withheld shall be
determined in such manner and on such date that the Administrator shall
determine or, in the absence of provision otherwise, on the date that the amount
of tax to be withheld is to be determined. All elections by a Participant to
have Shares withheld for this purpose shall be made in such form and under such
conditions as the Administrator may provide;

     (xii) to authorize conversion or substitution under the Plan of any or all
stock options, stock appreciation rights or other stock awards held by service
providers of an entity acquired by the Company (the "Conversion Awards"). Any
conversion or substitution shall be effective as of the close of the merger or
acquisition. The Conversion Awards may be Nonstatutory Stock Options or
Incentive Stock Options, as determined by the Administrator, with respect to
options granted by the acquired entity. Unless otherwise determined by the
Administrator at the time of conversion or substitution, all Conversion Awards
shall have the same terms and conditions as Awards generally granted by the
Company under the Plan;

     (xiii) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Award previously granted by the
Administrator;

     

(xiv) to implement an Award Transfer Program;

     

(xv) to determine whether Awards will be settled in Shares, cash or in any
combination thereof;

     

(xvi) to determine whether Awards will be adjusted for Dividend Equivalents;

     (xvii) to establish a program whereby Service Providers designated by the
Administrator can reduce compensation otherwise payable in cash in exchange for
Awards under the Plan;

     (xviii) to impose such restrictions, conditions or limitations as it
determines appropriate as to the timing and manner of any resales by a
Participant or other subsequent transfers by the Participant of any Shares
issued as a result of or under an Award, including, without limitation, (A)
restrictions under an insider trading policy and (B) restrictions as to the use
of a specified brokerage firm for such resales or other transfers;

     (xix) to provide, either at the time an Award is granted or by subsequent
action, that an Award shall contain as a term thereof, a right, either in tandem
with the other rights under the Award or as an alternative thereto, of the
Participant to receive, without payment to the Company, a number of Shares, cash
or a combination thereof, the amount of which is determined by reference to the
value of the Award;

     

(xx) to institute an Exchange Program; and

     (xxi) to make all other determinations deemed necessary or advisable for
administering the Plan and any Award granted hereunder.

The express grant in the Plan of any specific power to the Administrator shall
not be construed as limiting any power or authority of the Administrator;
provided that the Administrator may not exercise any right or power reserved to
the Board.

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     (c) Effect of Administrator's Decision. All decisions, determinations and
interpretations by the Administrator regarding the Plan, any rules and
regulations under the Plan and the terms and conditions of any Award granted
hereunder, shall be final and binding on all Participants. The Administrator
shall consider such factors as it deems relevant, in its sole and absolute
discretion, to making such decisions, determinations and interpretations,
including, without limitation, the recommendations or advice of any officer or
other employee of the Company and such attorneys, consultants and accountants as
it may select.

     (d) Deferral of Award Program. The Administrator may establish one or more
programs under the Plan to permit selected Awardees the opportunity to elect to
defer receipt of consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would entitle the
Awardee to payment or receipt of Shares or other consideration under an Award.
The Administrator may establish the election procedures, the timing of such
elections, the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, Shares or other consideration so deferred, and
such other terms, conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.

5.

    

Eligibility

. Awards may be granted to Service Providers of the Company or any of its
Affiliates.

 

6.

 

Term of Plan

. The Plan shall become effective on the effective date of its approval by
stockholders of the Company. It shall continue in effect for a term of ten years
from the date the Plan is approved by stockholders of the Company unless
terminated earlier under Section 16 of the Plan.

 

7.

 

Term of Award

. The term of each Award shall be determined by the Administrator and stated in
the Award Agreement. In the case of an Option, the term shall be ten years from
the Grant Date or such shorter term as may be provided in the Award Agreement.

 

8.

 

Options

. The Administrator may grant an Option or provide for the grant of an Option,
either from time to time in the discretion of the Administrator or automatically
upon the occurrence of specified events, including, without limitation, the
achievement of performance goals, the satisfaction of an event or condition
within the control of the Awardee or within the control of others.

     (a) Option Agreement. Each Option Agreement shall contain provisions
regarding (i) the number of Shares that may be issued upon exercise of the
Option, (ii) the type of Option, (iii) the exercise price of the Shares and the
means of payment for the Shares, (iv) the term of the Option, (v) such terms and
conditions on the vesting and/or exercisability of an Option as may be
determined from time to time by the Administrator, (vi) restrictions on the
transfer of the Option and forfeiture provisions, and (vii) such further terms
and conditions, in each case not inconsistent with this Plan, as may be
determined from time to time by the Administrator.

     (b) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

     (i) In the case of an Incentive Stock Option, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the Grant Date.
Notwithstanding the foregoing, if any Employee to whom an Incentive Stock Option
is granted is a 10% Stockholder, then the exercise price shall not be less than
110% of the Fair Market Value of a share of Common Stock on the Grant Date.

     (ii) In the case of a Nonstatutory Stock Option, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the Grant
Date. The per Share exercise price may also vary according to a predetermined
formula; provided, that the exercise price never falls below 100% of the Fair
Market Value per Share on the Grant Date. In the case of a Nonstatutory Stock
Option intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the Grant Date.

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     (iii) Notwithstanding the foregoing, so long as the issuance and sale of
securities under this Plan require qualification under the California Corporate
Securities Law of 1968, the per Share exercise price of an Option shall be
determined by the Administrator but shall comply with the requirements of
Section 260.140.41 of Title 10 of the California Code of Regulations as in
effect on the date of grant of the Option.

     (iv) Notwithstanding the foregoing, at the Administrator's discretion,
Conversion Awards may be granted in substitution and/or conversion of options of
an acquired entity, with a per Share exercise price of less than 100% of the
Fair Market Value per Share on the date of such substitution and/or conversion.
The terms of the Conversion Awards shall be determined by the Administrator in
accordance with the rules provided for in Code Section 424(a).

     (c) Vesting Period and Exercise Dates. Options granted under this Plan
shall vest and/or be exercisable at such time and in such installments during
the period prior to the expiration of the Option's term as determined by the
Administrator. The Administrator shall have the right to make the timing of the
ability to exercise any Option granted under this Plan subject to continued
service, the passage of time and/or such performance requirements as deemed
appropriate by the Administrator. At any time after the grant of an Option, the
Administrator may reduce or eliminate any restrictions surrounding any
Participant's right to exercise all or part of the Option. Notwithstanding the
foregoing, so long as the issuance and sale of securities under this Plan
require qualification under the California Corporate Securities Law of 1968, an
Option awarded to anyone other than an Officer, Director or Consultant of the
Company shall vest in accordance with the requirements of Section 260.140.41 of
Title 10 of the California Code of Regulations as in effect on the date of grant
of the Option.

     (d) Form of Consideration. The Administrator shall determine the acceptable
form of consideration for exercising an Option, including the method of payment,
either through the terms of the Option Agreement or at the time of exercise of
an Option. Acceptable forms of consideration may include:

     

(i) cash;

     

(ii) check or wire transfer;

     (iii) subject to any conditions or limitations established by the
Administrator, other Shares which (A) in the case of Shares acquired upon the
exercise of an Option, have been owned by the Participant for more than six
months (or such other period of time, as required by the applicable accounting
requirements) on the date of surrender or attestation and (B) have a Fair Market
Value on the date of surrender or attestation equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised;

     (iv) consideration received by the Company under a broker-assisted sale and
remittance program acceptable to the Administrator;

     (v) such other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Laws; or

     

(vi) any combination of the foregoing methods of payment.

     (e) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in Shares an Option previously granted based on such terms and
conditions as the Administrator shall establish and communicate to the
Participant at the time that such offer is made.

9.   Incentive Stock Option Limitations.

     (a) Eligibility. Only employees (as determined in accordance with Section
3401(c) of the Code and the regulations promulgated thereunder) of the Company
or any of its Related Corporations may be granted Incentive Stock Options.

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     (b) $100,000 Limitation. Notwithstanding the designation "Incentive Stock
Option" in an Option Agreement, if and to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Awardee during any calendar year (under
all plans of the Company and any of its Related Corporations) exceeds $100,000,
such Options shall be treated as Nonstatutory Stock Options. An Incentive Stock
Option is considered to be first exercisable during a calendar year if the
Incentive Stock Option will become exercisable at any time during the year,
assuming that any condition on the Awardee's ability to exercise the Incentive
Stock Option related to the performance of services is satisfied. If the
Awardee's ability to exercise the Incentive Stock Option in the year is subject
to an acceleration provision, then the Incentive Stock Option is considered
first exercisable in the calendar year in which the acceleration provision is
triggered. For purposes of this Section 9(b), Incentive Stock Options shall be
taken into account in the order in which they were granted. However, because an
acceleration provision is not taken into account prior to its triggering, an
Incentive Stock Option that becomes exercisable for the first time during a
calendar year by operation of such provision does not affect the application of
the $100,000 limitation with respect to any Incentive Stock Option (or portion
thereof) exercised prior to such acceleration. The Fair Market Value of the
Shares shall be determined as of the Grant Date.

     (c) Leave of Absence. For purposes of Incentive Stock Options, no leave of
absence may exceed three months, unless reemployment upon expiration of such
leave is provided by statute or contract. If reemployment upon expiration of a
leave of absence approved by the Company or a Related Corporation is not so
provided by statute or contract, an Awardee's employment with the Company shall
be deemed terminated on the first day immediately following such three month
period of leave for Incentive Stock Option purposes and any Incentive Stock
Option granted to the Awardee shall cease to be treated as an Incentive Stock
Option upon the expiration of the three month period following the date the
employment relationship is deemed terminated.

     (d) Transferability. The Option Agreement must provide that an Incentive
Stock Option cannot be transferable by the Awardee otherwise than by will or the
laws of descent and distribution, and, during the lifetime of such Awardee, must
not be exercisable by any other person. Notwithstanding the foregoing, the
Administrator, in its sole discretion, may allow the Awardee to transfer his or
her Incentive Stock Option to a trust where under Section 671 of the Code and
other Applicable Law, the Awardee is considered the sole beneficial owner of the
Option while it is held in the trust. If the terms of an Incentive Stock Option
are amended to permit transferability, the Option will be treated for tax
purposes as a Nonstatutory Stock Option.

     (e) Exercise Price. The per Share exercise price of an Incentive Stock
Option shall be determined by the Administrator in accordance with Section
8(b)(i) of the Plan.

     (f) 10% Stockholder. If any Employee to whom an Incentive Stock Option is
granted is a 10% Stockholder, then the Option term shall not exceed five years
measured from the date of grant of such Option.

     (g) Other Terms. Option Agreements evidencing Incentive Stock Options shall
contain such other terms and conditions as may be necessary to qualify, to the
extent determined desirable by the Administrator, with the applicable provisions
of Section 422 of the Code.

10. Exercise of Option.

     

(a) Procedure for Exercise; Rights as a Stockholder.

     (i) Any Option granted hereunder shall be exercisable according to the
terms of the Plan and at such times and under such conditions as determined by
the Administrator and set forth in the respective Award Agreement.

     (ii) An Option shall be deemed exercised when the Company receives (A)
written or electronic notice of exercise (in accordance with the Award
Agreement) from the person entitled to exercise the Option; (B) full payment for
the Shares with respect to which the related Option is exercised; and (C) with
respect to Nonstatutory Stock Options, payment of all applicable withholding
taxes.

9

 

     (iii) Shares issued upon exercise of an Option shall be issued in the name
of the Participant or, if requested by the Participant, in the name of the
Participant and his or her spouse. Unless provided otherwise by the
Administrator or pursuant to this Plan, until the Shares are issued (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect to the Shares
subject to an Option, notwithstanding the exercise of the Option.

     (iv) The Company shall issue (or cause to be issued) such Shares as soon as
administratively practicable after the Option is exercised. An Option may not be
exercised for a fraction of a Share.

     

(b) Effect of Termination of Service on Options.

     (i) Generally. Unless otherwise provided for by the Administrator, if a
Participant ceases to be a Service Provider, other than upon the Participant's
death or Total and Permanent Disability, the Participant may exercise his or her
Option within such period of time as is specified in the Award Agreement to the
extent that the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Award
Agreement). Notwithstanding the foregoing, so long as the issuance and sale of
securities under this Plan require qualification under the California Corporate
Securities Law of 1968, upon Participant's Termination of Service, other than
due to death, Total and Permanent Disability, or cause, the Participant may
exercise his or her Option (i) at any time on or prior to the date determined by
the Administrator, which date shall be in compliance with the requirements set
forth in Section 260.140.41 of Title 10 of the California Code of Regulations as
in effect on the date of grant of the Option, and (ii) only to the extent that
the Participant was entitled to exercise such Option on the termination date. In
the absence of a specified time in the Award Agreement, the vested portion of
the Option will remain exercisable for three months following the Participant's
termination. Unless otherwise provided by the Administrator, if on the date of
termination the Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option will revert to the Plan. If
after termination the Participant does not exercise his or her Option within the
time specified by the Administrator, the Option will terminate, and the Shares
covered by such Option will revert to the Plan.

     (ii) Disability of Awardee. Unless otherwise provided for by the
Administrator, if a Participant ceases to be a Service Provider as a result of
the Participant's Total and Permanent Disability, the Participant may exercise
his or her Option within such period of time as is specified in the Award
Agreement to the extent the Option is vested on the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the Award Agreement). Notwithstanding the foregoing, so long as the issuance and
sale of securities under this Plan require qualification under the California
Corporate Securities Law of 1968, in the event of Participant's Termination of
Service due to his or her Total and Permanent Disability, the Participant may
exercise his or her Option (i) at any time on or prior to the date determined by
the Administrator, which date shall be in accordance with Section 260.140.41 of
Title 10 of the California Code of Regulations as in effect on the date of grant
of the Option (but which date determined by the Administrator shall in no event
be later than the expiration date of the term of his or her Option), and (ii)
only to the extent that the Participant was entitled to exercise such Option on
the termination date. In the absence of a specified time in the Award Agreement,
the Option will remain exercisable for twelve months following the Participant's
termination. Unless otherwise provided by the Administrator, if at the time of
disability the Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option will immediately revert to
the Plan on the date of the Participant's disability. If the Option is not so
exercised within the time specified herein, the Option will terminate, and the
Shares covered by such Option will revert to the Plan.

     (iii) Death of Awardee. Unless otherwise provided for by the Administrator,
if a Participant dies while a Service Provider, the Option may be exercised
following the Participant's death within such period of time as is specified in
the Award Agreement to the extent that the Option is vested on the date of death
(but in no event may the Option be exercised later than the expiration of the
term of such

10

 

Option as set forth in the Award Agreement), by the Participant's designated
beneficiary, provided such beneficiary has been designated prior to
Participant's death in a form acceptable to the Administrator. Notwithstanding
the foregoing, so long as the issuance and sale of securities under this Plan
require qualification under the California Corporate Securities Law of 1968, in
the event that the Participant dies prior to a Termination of Service, the
Participant's Option may be exercised by the Participant's designated
beneficiary (i) at any time on or prior to the date determined by the
Administrator, which date shall be in accordance with Section 260.140.41 of
Title 10 of the California Code of Regulations as in effect on the date of grant
of the Option (but which date determined by the Administrator shall in no event
be later than the expiration date of the term of his or her Option), and (ii)
only to the extent that the Participant was entitled to exercise the Option at
the date of death. If no such beneficiary has been designated by the
Participant, then such Option may be exercised by the personal representative of
the Participant's estate or by the person(s) to whom the Option is transferred
pursuant to the Participant's will or in accordance with the laws of descent and
distribution. In the absence of a specified time in the Award Agreement, the
Option will remain exercisable for twelve months following Participant's death.
Unless otherwise provided by the Administrator, if at the time of death
Participant is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option will immediately revert to the Plan on the
date of the Participant's death. If the Option is not so exercised within the
time specified herein, the Option will terminate, and the Shares covered by such
Option will revert to the Plan.

11. Stock Awards.

     (a) Stock Award Agreement. Each Stock Award Agreement shall contain
provisions regarding (i) the number of Shares subject to such Stock Award or a
formula for determining such number, (ii) the purchase price of the Shares, if
any, and the means of payment for the Shares, (iii) the performance criteria, if
any, and level of achievement versus these criteria that shall determine the
number of Shares granted, issued, retained and/or vested, (iv) such terms and
conditions on the grant, issuance, vesting and/or forfeiture of the Shares as
may be determined from time to time by the Administrator, (v) restrictions on
the transferability of the Stock Award and (vi) such further terms and
conditions in each case not inconsistent with this Plan as may be determined
from time to time by the Administrator.

     Notwithstanding the foregoing, so long as the issuance and sale of
securities under this Plan require qualification under the California Corporate
Securities Law of 1968, the purchase price for restricted Shares shall be
determined by the Administrator and in accordance with Section 260.140.42 of
Title 10 of the California Code of Regulations as in effect on the date of grant
of the Award.

     (b) Restrictions and Performance Criteria. The grant, issuance, retention
and/or vesting of each Stock Award may be subject to such performance criteria
and level of achievement versus these criteria as the Administrator shall
determine, which criteria may be based on financial performance, personal
performance evaluations and/or completion of service by the Awardee.
Notwithstanding the foregoing, so long as the issuance and sale of securities
under this Plan require qualification under the California Corporate Securities
Law of 1968, restricted stock awarded to anyone other than an Officer, Director
or Consultant of the Company shall vest in accordance with Section 260.140.42 of
Title 10 of the California Code of Regulations as in effect on the date of grant
of the Award.

     Notwithstanding anything to the contrary herein, the performance criteria
for any Stock Award that is intended to satisfy the requirements for
"performance-based compensation" under Section 162(m) of the Code shall be
established by the Administrator based on one or more Qualifying Performance
Criteria selected by the Administrator and specified in writing.

     (c) Forfeiture. Unless otherwise provided for by the Administrator, upon
the Awardee's Termination of Service, the Stock Award and the Shares subject
thereto shall be forfeited, provided that to the extent that the Participant
purchased any Shares, the Company shall have a right to repurchase the unvested
Shares at the original price paid by the Participant, provided that for so long
as the issuance and sale of securities under this

11

 

Plan require qualification under the California Corporate Securities Law of
1968, the Company must exercise such right to repurchase in accordance with the
conditions set forth in Sections 260.140.42 and 260.140.8 of Title 10 of the
California Code of Regulations as in effect on the date of grant of the Award.

     (d) Rights as a Stockholder. Unless otherwise provided by the
Administrator, the Participant shall have the rights equivalent to those of a
stockholder and shall be a stockholder only after Shares are issued (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) to the Participant. Unless otherwise
provided by the Administrator, a Participant holding Stock Units shall be
entitled to receive dividend payments as if he or she was an actual stockholder.

12.

Stock Appreciation Rights. Subject to the terms and conditions of the Plan, a
SAR may be granted to a Service Provider at any time and from time to time as
determined by the Administrator in its sole discretion.

     (a) Number of SARs. The Administrator shall have complete discretion to
determine the number of SARs granted to any Service Provider.

     (b) Exercise Price and Other Terms. The per SAR exercise price shall be no
less than 100% of the Fair Market Value per Share on the Grant Date. The
Administrator, subject to the provisions of the Plan, shall have complete
discretion to determine the other terms and conditions of SARs granted under the
Plan.

     (c) Exercise of SARs. SARs shall be exercisable on such terms and
conditions as the Administrator, in its sole discretion, shall determine.

     (d) SAR Agreement. Each SAR grant shall be evidenced by a SAR Agreement
that will specify the exercise price, the term of the SAR, the conditions of
exercise, and such other terms and conditions as the Administrator, in its sole
discretion, shall determine.

     (e) Expiration of SARs. A SAR granted under the Plan shall expire upon the
date determined by the Administrator, in its sole discretion, and set forth in
the SAR Agreement. Notwithstanding the foregoing, the rules of Section 10(b)
will also apply to SARs.

     (f) Payment of SAR Amount. Upon exercise of a SAR, the Participant shall be
entitled to receive a payment from the Company in an amount equal to the
difference between the Fair Market Value of a Share on the date of exercise over
the exercise price of the SAR. This amount shall be paid in Shares of equivalent
value.

13. Cash Awards.

Each Cash Award will confer upon the Participant the opportunity to earn a
future payment tied to the level of achievement with respect to one or more
performance criteria established for a performance period.

     (a) Cash Award. Each Cash Award shall contain provisions regarding (i) the
performance goal(s) and maximum amount payable to the Participant as a Cash
Award, (ii) the performance criteria and level of achievement versus these
criteria which shall determine the amount of such payment, (iii) the period as
to which performance shall be measured for establishing the amount of any
payment, (iv) the timing of any payment earned by virtue of performance, (v)
restrictions on the alienation or transfer of the Cash Award prior to actual
payment, (vi) forfeiture provisions, and (vii) such further terms and
conditions, in each case not inconsistent with the Plan, as may be determined
from time to time by the Administrator. The maximum amount payable as a Cash
Award that is settled for cash may be a multiple of the target amount payable,
but the maximum amount payable pursuant to that portion of a Cash Award granted
under this Plan for any fiscal year to any Awardee that is intended to satisfy
the requirements for "performance based compensation" under Section 162(m) of
the Code shall not exceed $1,000,000.

     (b) Performance Criteria. The Administrator shall establish the performance
criteria and level of achievement versus these criteria which shall determine
the target and the minimum and maximum amount payable under a Cash Award, which
criteria may be based on financial performance and/or personal performance
evaluations. The Administrator may specify the percentage of the target Cash
Award that is intended to satisfy

12

 

the requirements for "performance-based compensation" under Section 162(m) of
the Code. Notwithstanding anything to the contrary herein, the performance
criteria for any portion of a Cash Award that is intended to satisfy the
requirements for "performance-based compensation" under Section 162(m) of the
Code shall be a measure established by the Administrator based on one or more
Qualifying Performance Criteria selected by the Administrator and specified in
writing.

     (c) Timing and Form of Payment. The Administrator shall determine the
timing of payment of any Cash Award. The Administrator may specify the form of
payment of Cash Awards, which may be cash or other property, or may provide for
an Awardee to have the option for his or her Cash Award, or such portion thereof
as the Administrator may specify, to be paid in whole or in part in cash or
other property.

     (d) Termination of Service. The Administrator shall have the discretion to
determine the effect of a Termination of Service on any Cash Award due to (i)
disability, (ii) retirement, (iii) death, (iv) participation in a voluntary
severance program, or (v) participation in a work force restructuring.

14. Other Provisions Applicable to Awards.

     (a) Non-Transferability of Awards. An Award may be exercised, during the
lifetime of the Participant, only by the Participant, and may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will, by the laws of descent and distribution, to a revocable trust or
as permitted by Rule 701; provided that so long as the issuance and sale of
securities under this Plan does not require qualification under the California
Corporate Securities Law of 1968, the Administrator may in each case determine
otherwise. If the Administrator makes an Award transferable, either at the time
of grant or thereafter, such Award shall contain such additional terms and
conditions as the Administrator deems appropriate, and any transferee shall be
deemed to be bound by such terms upon acceptance of such transfer.

     (b) Qualifying Performance Criteria. For purposes of this Plan, the term
"Qualifying Performance Criteria" shall mean any one or more of the following
performance criteria, either individually, alternatively or in any combination,
applied to either the Company as a whole or to a business unit, Affiliate or
business segment, either individually, alternatively or in any combination, and
measured either annually or cumulatively over a period of years, on an absolute
basis or relative to a pre-established target, to previous years' results or to
a designated comparison group, in each case as specified by the Committee in the
Award: (i) cash flow; (ii) earnings (including gross margin, earnings before
interest and taxes, earnings before taxes, and net earnings); (iii) earnings per
share; (iv) growth in earnings or earnings per share; (v) stock price; (vi)
return on equity or average stockholders' equity; (vii) total stockholder
return; (viii) return on capital; (ix) return on assets or net assets; (x)
return on investment; (xi) revenue; (xii) income or net income; (xiii) operating
income or net operating income; (xiv) operating profit or net operating profit;
(xv) operating margin; (xvi) return on operating revenue; (xvii) market share;
(xviii) contract awards or backlog; (xix) overhead or other expense reduction;
(xx) growth in stockholder value relative to the moving average of the S&P 500
Index or a peer group index; (xxi) credit rating; (xxii) strategic plan
development and implementation; (xxiii) improvement in workforce diversity,
(xxiv) EBITDA, and (xxv) any other similar criteria. The Committee may
appropriately adjust any evaluation of performance under a Qualifying
Performance Criteria to exclude any of the following events that occurs during a
performance period: (A) asset write-downs; (B) litigation or claim judgments or
settlements; (C) the effect of changes in tax law, accounting principles or
other such laws or provisions affecting reported results; (D) accruals for
reorganization and restructuring programs; and (E) any extraordinary
non-recurring items as described in Accounting Principles Board Opinion No. 30
and/or in management's discussion and analysis of financial condition and
results of operations appearing in the Company's annual report to stockholders
for the applicable year.

     (c) Certification. Prior to the payment of any compensation under an Award
intended to qualify as "performance-based compensation" under Section 162(m) of
the Code, the Committee shall certify the extent to which any Qualifying
Performance Criteria and any other material terms under such Award have been
satisfied (other than in cases where such relate solely to the increase in the
value of the Common Stock).

13

 

     (d) Discretionary Adjustments Pursuant to Section 162(m). Notwithstanding
satisfaction of any completion of any Qualifying Performance Criteria, to the
extent specified at the time of grant of an Award to "covered employees" within
the meaning of Section 162(m) of the Code, the number of Shares, Options or
other benefits granted, issued, retained and/or vested under an Award on account
of satisfaction of such Qualifying Performance Criteria may be reduced by the
Committee on the basis of such further considerations as the Committee in its
sole discretion shall determine.

     (e) Section 409A. Notwithstanding anything in the Plan to the contrary, it
is the intent of the Company that all Awards granted under this Plan shall not
cause an imposition of the additional taxes provided for in Section
409A(a)(1)(B) of the Code.

     (f) Financial Information. For so long as the issuance and sale of
securities under this Plan require qualification under the California Corporate
Securities Law of 1968, and to the extent required by Section 260.140.46 of
Title 10 of the California Code of Regulations, the Company shall at least
annually provide financial statements to Participants.

15. Adjustments upon Changes in Capitalization, Dissolution, Merger or Asset
Sale.

     (a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, (i) the number and kind of Shares covered by each
outstanding Award, and the number and kind of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Awards have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Award, (ii) the price per Share subject to each such
outstanding Award, and (iii) the Share limitation set forth in Section 3 of the
Plan, shall be proportionately adjusted for any increase or decrease in the
number or kind of issued shares resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock, or
any other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Administrator, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no issuance
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an Award.

     (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Participant as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for an Option to be fully vested
and exercisable until ten days prior to such transaction. In addition, the
Administrator may provide that any restrictions on any Award shall lapse prior
to the transaction, provided the proposed dissolution or liquidation takes place
at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Award will terminate immediately prior to the
consummation of such proposed transaction.

     (c) Change in Control. In the event there is a Change in Control of the
Company, as determined by the Board or a Committee, the Board or Committee may,
in its discretion, (i) provide for the assumption or substitution of, or
adjustment to, each outstanding Award; (ii) accelerate the vesting of Options
and SARs and terminate any restrictions on Stock Awards or Cash Awards; and
(iii) provide for the cancellation of Awards for a cash payment to the
Participant.

16. Amendment and Termination of the Plan.

     (a) Amendment and Termination. The Administrator may amend, alter or
discontinue the Plan or any Award Agreement, but any such amendment shall be
subject to approval of the stockholders of the Company in the manner and to the
extent required by Applicable Law.

14

 

     (b) Effect of Amendment or Termination. No amendment, suspension or
termination of the Plan shall impair the rights of any Award, unless mutually
agreed otherwise between the Participant and the Administrator, which agreement
must be in writing and signed by the Participant and the Company. Termination of
the Plan shall not affect the Administrator's ability to exercise the powers
granted to it hereunder with respect to Awards granted under the Plan prior to
the date of such termination.

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

17. Designation of Beneficiary.

     (i) An Awardee may file a written designation of a beneficiary who is to
receive the Awardee's rights pursuant to Awardee's Award or the Awardee may
include his or her Awards in an omnibus beneficiary designation for all benefits
under the Plan. To the extent that Awardee has completed a designation of
beneficiary such beneficiary designation shall remain in effect with respect to
any Award hereunder until changed by the Awardee to the extent enforceable under
Applicable Law.

     (ii) Such designation of beneficiary may be changed by the Awardee at any
time by written notice. In the event of the death of an Awardee and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such Awardee's death, the Company shall allow the executor or
administrator of the estate of the Awardee to exercise the Award, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may allow the spouse or one or more dependents
or relatives of the Awardee to exercise the Award to the extent permissible
under Applicable Law.

18. No Right to Awards or to Service.

No person shall have any claim or right to be granted an Award and the grant of
any Award shall not be construed as giving an Awardee the right to continue in
the service of the Company or its Affiliates. Further, the Company and its
Affiliates expressly reserve the right, at any time, to dismiss any Service
Provider or Awardee at any time without liability or any claim under the Plan,
except as provided herein or in any Award Agreement entered into hereunder.

19. Legal Compliance.

Shares shall not be issued pursuant to the exercise of an Award unless the
exercise of such Award and the issuance and delivery of such Shares shall comply
with Applicable Laws and shall be further subject to the approval of counsel for
the Company with respect to such compliance. Notwithstanding anything in the
Plan to the contrary, it is the intent of the Company that the Plan shall be
administered so that the additional taxes provided for in Section 409A(a)(1)(B)
of the Code are not imposed.

20. Inability to Obtain Authority.

To the extent the Company is unable to or the Administrator deems that it is not
feasible to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, the Company shall be relieved of any
liability with respect to the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

21. Reservation of Shares.

The Company, during the term of this Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

22. Notice.

Any written notice to the Company required by any provisions of this Plan shall
be addressed to the Secretary of the Company and shall be effective when
received.

15

 

23. Governing Law; Interpretation of Plan and Awards.

     

(a)

     

This Plan and all determinations made and actions taken pursuant hereto shall be
governed by the substantive laws, but not the choice of law rules, of the state
of Delaware.

 

 

 

(b)

 

In the event that any provision of the Plan or any Award granted under the Plan
is declared to be illegal, invalid or otherwise unenforceable by a court of
competent jurisdiction, such provision shall be reformed, if possible, to the
extent necessary to render it legal, valid and enforceable, or otherwise
deleted, and the remainder of the terms of the Plan and/or Award shall not be
affected except to the extent necessary to reform or delete such illegal,
invalid or unenforceable provision.

 

 

 

(c)

 

The headings preceding the text of the sections hereof are inserted solely for
convenience of reference, and shall not constitute a part of the Plan, nor shall
they affect its meaning, construction or effect.

 

 

 

(d)

 

The terms of the Plan and any Award shall inure to the benefit of and be binding
upon the parties hereto and their respective permitted heirs, beneficiaries,
successors and assigns.

 

 

 

(e)

 

All questions arising under the Plan or under any Award shall be decided by the
Administrator in its total and absolute discretion. In the event the Participant
believes that a decision by the Administrator with respect to such person was
arbitrary or capricious, the Participant may request arbitration with respect to
such decision. The review by the arbitrator shall be limited to determining
whether the Administrator's decision was arbitrary or capricious. This
arbitration shall be the sole and exclusive review permitted of the
Administrator's decision, and the Awardee shall as a condition to the receipt of
an Award be deemed to explicitly waive any right to judicial review.

24. Limitation on Liability.

The Company and any Affiliate which is in existence or hereafter comes into
existence shall not be liable to a Participant, an Employee, an Awardee or any
other persons as to:

     

(a) The Non-Issuance of Shares. The non-issuance or sale of Shares as to which
the Company has been unable to obtain from any regulatory body having
jurisdiction the authority deemed by the Company's counsel to be necessary to
the lawful issuance and sale of any shares hereunder; and

     (a) Tax Consequences. Any tax consequence expected, but not realized, by
any Participant, Employee, Awardee or other person due to the receipt, exercise
or settlement of any Option or other Award granted hereunder.

25. Unfunded Plan.

Insofar as it provides for Awards, the Plan shall be unfunded. Although
bookkeeping accounts may be established with respect to Awardees who are granted
Stock Awards under this Plan, any such accounts will be used merely as a
bookkeeping convenience. The Company shall not be required to segregate any
assets which may at any time be represented by Awards, nor shall this Plan be
construed as providing for such segregation, nor shall the Company nor the
Administrator be deemed to be a trustee of stock or cash to be awarded under the
Plan. Any liability of the Company to any Participant with respect to an Award
shall be based solely upon any contractual obligations which may be created by
the Plan; no such obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company. Neither the Company
nor the Administrator shall be required to give any security or bond for the
performance of any obligation which may be created by this Plan.