Exhibit 10.1
REALNETWORKS, INC.
2005 Stock Incentive Plan,
as amended and restated effective December 17, 2009
1. PURPOSE OF THE PLAN
     Purpose. The purpose of the RealNetworks, Inc 2005 Stock Incentive Plan
(the “Plan”), as amended and restated effective as of December 17, 2009 (the
“Restatement Effective Date”), is to assist RealNetworks, Inc., a Washington
corporation (the “Company”), and its subsidiaries in attracting and retaining
selected individuals to serve as employees, directors, consultants and/or
advisors of the Company who are expected to contribute to the Company’s success
and to achieve long-term objectives which will inure to the benefit of all
shareholders of the Company through the additional incentives inherent in the
Awards hereunder.
2. DEFINITIONS
     2.1. “Award” shall mean any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Award, Other Share-Based Award or any other right,
interest or option relating to Shares or other property (including cash) granted
pursuant to the provisions of the Plan.
     2.2. “Award Agreement” shall mean any agreement, contract or other
instrument or document, including through an electronic medium, evidencing any
Award granted by the Committee hereunder.
     2.3. “Board” shall mean the board of directors of the Company.
     2.4. “Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time.
     2.5. “Committee” shall mean the Compensation Committee of the Board or a
subcommittee thereof formed by the Compensation Committee to act as the
Committee hereunder. The Committee shall consist of no fewer than two Directors,
each of whom is (i) a “Non-Employee Director” within the meaning of Rule 16b-3
of the Exchange Act, (ii) an “outside director” within the meaning of Section
162(m) of the Code, and (iii) an “independent director” for purpose of the rules
and regulations of the NASDAQ Stock Market.
     2.6. “Covered Employee” shall mean a “covered employee” within the meaning
of Section 162(m) of the Code.
     2.7. “Director” shall mean a non-employee member of the Board.
     2.8. “Employee” shall mean any employee of the Company or any Subsidiary
and any prospective employee conditioned upon, and effective not earlier than,
such person’s becoming an employee of the Company or any Subsidiary. Solely for
purposes of the Plan, an Employee shall also mean any consultant or advisor who
provides services to the Company or any Subsidiary, so long as such person
(i) renders bona fide services that are not in connection with the offer and
sale of the Company’s securities in a capital-raising transaction and (ii) does
not directly or indirectly promote or maintain a market for the Company’s
securities.
     2.9. “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.

 

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     2.10. “Fair Market Value” shall mean, with respect to any property other
than Shares, the market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee. The Fair
Market Value of Shares as of any date shall be the per Share closing price of
the Shares as reported on the NASDAQ Stock Market on that date (or if there was
no reported price on such date, on the last preceding date on which the price
was reported); if the Company is not then listed on the NASDAQ Stock Market but
is listed on the New York Stock Exchange, the Fair Market Value of the Shares
shall be the per Share closing price of the Shares as reported on the New York
Stock Exchange on that date (or if there was no reported price on such date, on
the last preceding date on which the price was reported); or, if the Company is
not then listed on the NASDAQ Stock Market or the New York Stock Exchange, the
Fair Market Value of Shares shall be determined by the Committee in its sole
discretion using appropriate criteria.
     2.11. “Freestanding Stock Appreciation Right” shall have the meaning set
forth in Section 6.1.
     2.12. “Limitations” shall have the meaning set forth in Section 10.5.
     2.13. “Option” shall mean any right granted to a Participant under the Plan
allowing such Participant to purchase Shares at such price or prices and during
such period or periods as the Committee shall determine.
     2.14. “Other Share-Based Award” shall have the meaning set forth in
Section 8.1.
     2.15. “Participant” shall mean an Employee or Director who is selected by
the Committee to receive an Award under the Plan.
     2.16. “Payee” shall have the meaning set forth in Section 13.1.
     2.17. “Performance Award” shall mean any Award of Performance Shares or
Performance Units granted pursuant to Article 9.
     2.18. “Performance Period” shall mean that period established by the
Committee at the time any Performance Award is granted or at any time thereafter
during which any performance goals specified by the Committee with respect to
such Award are to be measured.
     2.19. “Performance Share” shall mean any grant pursuant to Article 9 of a
unit valued by reference to a designated number of Shares, which value may be
paid to the Participant by delivery of such property as the Committee shall
determine, including cash, Shares, other property, or any combination thereof,
upon achievement of such performance goals during the Performance Period as the
Committee shall establish at the time of such grant or thereafter.
     2.20. “Performance Unit” shall mean any grant pursuant to Section 9 of a
unit valued by reference to a designated amount of property (including cash)
other than Shares, which value may be paid to the Participant by delivery of
such property as the Committee shall determine, including cash, Shares, other
property, or any combination thereof, upon achievement of such performance goals
during the Performance Period as the Committee shall establish at the time of
such grant or thereafter.
     2.21. “Permitted Assignee” shall have the meaning set forth in
Section 12.3.

 

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     2.22. “Prior Plans” shall mean, collectively, the Company’s 1996 Stock
Option Plan, 2000 Stock Option Plan, 2002 Director Stock Option Plan, Director
Compensation Stock Plan, and the 2005 Stock Incentive Plan prior to the
Restatement Effective Date.
     2.23. “Restricted Stock” shall mean any Share issued with the restriction
that the holder may not sell, transfer, pledge or assign such Share and with
such other restrictions as the Committee, in its sole discretion, may impose
(including any restriction on the right to vote such Share and the right to
receive any dividends), which restrictions may lapse separately or in
combination at such time or times, in installments or otherwise, as the
Committee may deem appropriate.
     2.24. “Restricted Stock Award” shall have the meaning set forth in
Section 7.1.
     2.25. “Shares” shall mean the shares of common stock of the Company, par
value $0.001 per share.
     2.26. “Stock Appreciation Right” shall mean the right granted to a
Participant pursuant to Section 6.
     2.27. “Subsidiary” shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the granting of the Award, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in the chain.
     2.28. “Substitute Awards” shall mean Awards granted or Shares issued by the
Company in assumption of, or in substitution or exchange for, awards previously
granted, or the right or obligation to make future awards, by a company acquired
by the Company or any Subsidiary or with which the Company or any Subsidiary
combines.
     2.29. “Tandem Stock Appreciation Right” shall have the meaning set forth in
Section 6.1.
     2.30. “Vesting Period” shall mean the period of time specified by the
Committee during which vesting restrictions for an Award are applicable.
3. SHARES SUBJECT TO THE PLAN
     3.1. Number of Shares. (a) Subject to adjustment, as provided in
Section 12.2, the number of Shares authorized and available for grant under the
Plan effective as of the closing date of the Company’s one-time stock option
exchange program to exchange certain eligible outstanding stock options as
described in the Company’s 2009 proxy statement (the “Exchange Program”) shall
be equal to the sum of (i) 8,245,000 and (ii) the result of multiplying
seven-tenths (0.7) by the difference between (x) the number of Shares subject to
stock options that are cancelled in the Exchange Program and (y) the number of
Shares subject to stock options that are issued under the Exchange Program. For
example, if 29,000,000 Shares subject to stock options are tendered in the
Exchange Program and 11,565,000 Shares subject to stock options are issued under
the Exchange Program, for purposes of the prior sentence the difference between
the number of Shares subject to stock options that are cancelled and the number
of Shares subject to stock options that are issued would be 17,435,000
(29,000,000 minus 11,565,000 = 17,435,000). As a result, 12,204,500 Shares
(17,435,000 multiplied by 0.7) would be added to 8,245,000, for a total of

 

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20,449,500 Shares authorized and available for grant under the Plan following
the closing date of the Exchange Program (the “Exchange Program Closing Date”).
The total number of shares authorized for grant under the Plan shall be equal to
the sum of (a) the number of Shares authorized and available for grant under the
Plan effective as Exchange Program Closing Date, as calculated above, plus
(b) the number of Shares issued and outstanding under the Plan as of the
Exchange Program Closing Date, as calculated using the Share counting rules in
the next paragraph.
     Any Shares that are subject to Awards of Options, Stock Appreciation Rights
(other than Tandem Stock Appreciation Rights) granted on or after the Exchange
Program Closing Date, shall be counted against this limit as one (1) Share for
every one (1) Share granted. Any Shares that are subject to Awards other than
Options or Stock Appreciation Rights granted after the Exchange Program Closing
Date, shall be counted against this limit as one and six-tenths (1.6) Shares for
every one (1) Share granted.
     (b) If, after the Exchange Program Closing Date, any Shares subject to an
Award or to an award under the Prior Plans are forfeited or expire, or any Award
or award under the Prior Plans is settled for cash, the Shares subject to such
Award or to such award under the Prior Plans shall, to the extent of such
forfeiture, expiration or cash settlement, again be available for Awards under
the Plan, subject to Section 3.1(d) below. Notwithstanding anything to the
contrary contained herein, the following Shares shall not be added to the Shares
authorized for grant under paragraph (a) of this Section: (i) Shares tendered by
the Participant or withheld by the Company in payment of the purchase price of
an Option or an option granted under the Prior Plans, or to satisfy any tax
withholding obligation with respect to an Option or Stock Appreciation Right or
options or stock appreciation rights granted under the Prior Plans, and
(ii) Shares subject to a Stock Appreciation Right or a stock appreciation right
granted under the Prior Plans that are not issued in connection with its stock
settlement on exercise thereof and (iii) Shares reacquired by the Company on the
open market or otherwise using cash proceeds from the exercise of Options or
options granted under the Prior Plans.
     (c) Substitute Awards may be issued under the Plan and such Substitute
Awards shall not reduce the Shares authorized for grant under the Plan or the
Limitations applicable to a Participant under Section 10.5, nor shall Shares
subject to a Substitute Award again be available for Awards under the Plan to
the extent of any forfeiture, expiration or cash settlement as provided in
paragraph (b) above. Additionally, in the event that a company acquired by the
Company or any Subsidiary or with which the Company or any Subsidiary combines
has shares available under a pre-existing plan approved by shareholders and not
adopted in contemplation of such acquisition or combination, the shares
available for grant pursuant to the terms of such pre-existing plan (as
adjusted, to the extent appropriate, using the exchange ratio or other
adjustment or valuation ratio or formula used in such acquisition or combination
to determine the consideration payable to the holders of common stock of the
entities party to such acquisition or combination) may be used for Awards under
the Plan and shall not reduce the Shares authorized for grant under the Plan;
provided that Awards using such available shares shall not be made after the
date awards or grants could have been made under the terms of the pre-existing
plan, absent the acquisition or combination, and shall only be made to
individuals who were not Employees or Directors prior to such acquisition or
combination.
     (d) Any Shares that again become available for grant pursuant to this
Article on or after the Exchange Program Closing Date shall be added back as one
(1) Share if such Shares were subject to Options or Stock Appreciation Rights
granted under the Plan or options or stock appreciation rights granted under the
Prior Plans, and as one and six-tenths (1.6) if such Shares were subject to

 

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Awards other than Options or Stock Appreciation Rights granted under the Plan or
options or stock appreciation rights granted under the Prior Plans.
     3.2. Character of Shares. Any Shares issued hereunder may consist, in whole
or in part, of authorized and unissued shares or shares purchased in the open
market or otherwise.
4. ELIGIBILITY AND ADMINISTRATION
     4.1. Eligibility. Any Employee or Director shall be eligible to be selected
as a Participant.
     4.2. Administration. (a) The Plan shall be administered by the Committee.
The Committee shall have full power and authority, subject to the provisions of
the Plan and subject to such orders or resolutions not inconsistent with the
provisions of the Plan as may from time to time be adopted by the Board, to:
(i) select the Employees and Directors to whom Awards may from time to time be
granted hereunder; (ii) determine the type or types of Awards, not inconsistent
with the provisions of the Plan, to be granted to each Participant hereunder;
(iii) determine the number of Shares to be covered by each Award granted
hereunder; (iv) determine the terms and conditions, not inconsistent with the
provisions of the Plan, of any Award granted hereunder; (v) determine whether,
to what extent and under what circumstances Awards may be settled in cash,
Shares or other property, subject to Section 8.1; (vi) determine whether, to
what extent, and under what circumstances cash, Shares, other property and other
amounts payable with respect to an Award made under the Plan shall be deferred
either automatically or at the election of the Participant; (vii) determine
whether, to what extent and under what circumstances any Award shall be canceled
or suspended; (viii) interpret and administer the Plan and any instrument or
agreement entered into under or in connection with the Plan, including any Award
Agreement; (ix) correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent that the
Committee shall deem desirable to carry it into effect; (x) establish such rules
and regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and (xi) make any other determination and
take any other action that the Committee deems necessary or desirable for
administration of the Plan.
     (b) Decisions of the Committee shall be final, conclusive and binding on
all persons or entities, including the Company, any Participant, and any
Subsidiary. A majority of the members of the Committee may determine its actions
and fix the time and place of its meetings. Notwithstanding the foregoing or
anything else to the contrary in the Plan, any action or determination by the
Committee specifically affecting or relating to an Award to a Director shall
require the prior approval of the Board.
     (c) To the extent not inconsistent with applicable law, including Section
162(m) of the Code, or the rules and regulations of the NASDAQ Stock Market, the
Committee may delegate to (i) a committee of one or more directors of the
Company any of the authority of the Committee under the Plan, including the
right to grant, cancel or suspend Awards and (ii) to the extent permitted by
law, to one or more executive officers or a committee of executive officers the
right to grant Awards to Employees who are not Directors or executive officers
of the Company and the authority to take action on behalf of the Committee
pursuant to the Plan to cancel or suspend Awards to Employees who are not
Directors or executive officers of the Company.
5. OPTIONS
     5.1. Grant of Options. Options may be granted hereunder to Participants
either alone or in addition to other Awards granted under the Plan. Any Option
shall be subject to the terms and

 

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conditions of this Article and to such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall deem
desirable.
     5.2. Award Agreements. All Options granted pursuant to this Article shall
be evidenced by an Award Agreement in such form and containing such terms and
conditions as the Committee shall determine which are not inconsistent with the
provisions of the Plan. The terms of Options need not be the same with respect
to each Participant. Granting of an Option pursuant to the Plan shall impose no
obligation on the recipient to exercise such Option. Any individual who is
granted an Option pursuant to this Article may hold more than one Option granted
pursuant to the Plan at the same time.
     5.3. Option Price. Other than in connection with Substitute Awards, the
option price per each Share purchasable under any Option granted pursuant to
this Article shall not be less than 100% of the Fair Market Value of such Share
on the date of grant of such Option. Other than pursuant to Section 12.2, the
Committee shall not without the approval of the Company’s shareholders (a) lower
the option price per Share of an Option after it is granted, (b) cancel an
Option in exchange for cash or another Award (other than in connection with
Substitute Awards or a Change of Control (as that term may be defined in an
Award Agreement), and (c) take any other action with respect to an Option that
would be treated as a repricing under the rules and regulations of the NASDAQ
Stock Market.
     5.4. Option Term. The term of each Option shall be fixed by the Committee
in its sole discretion; provided that no Option shall be exercisable after the
expiration of seven (7) years from the date the Option is granted, except in the
event of death or disability.
     5.5. Exercise of Options. (a) Vested Options granted under the Plan shall
be exercised by the Participant or by a Permitted Assignee thereof (or by the
Participant’s executors, administrators, guardian or legal representative, as
may be provided in an Award Agreement) as to all or part of the Shares covered
thereby, by the giving of notice of exercise to the Company or its designated
agent, specifying the number of Shares to be purchased, accompanied by payment
of the full purchase price for the Shares being purchased. Unless otherwise
provided in an Award Agreement, full payment of such purchase price shall be
made at the time of exercise and shall be made (i) in cash or cash equivalents
(including certified check or bank check or wire transfer of immediately
available funds), (ii) by tendering previously acquired Shares (either actually
or by attestation), valued at their then Fair Market Value, (iii) with the
consent of the Committee, by delivery of other consideration (including, where
permitted by law and the Committee, other Awards) having a Fair Market Value on
the exercise date equal to the total purchase price, (iv) with the consent of
the Committee, by withholding Shares otherwise issuable in connection with the
exercise of the Option, (v) through any other method specified in an Award
Agreement, or (vi) any combination of any of the foregoing. The notice of
exercise, accompanied by such payment, shall be delivered to the Company at its
principal business office or such other office as the Committee may from time to
time direct, and shall be in such form, containing such further provisions
consistent with the provisions of the Plan, as the Committee may from time to
time prescribe. In no event may any Option granted hereunder be exercised for a
fraction of a Share. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date of such issuance.
     (b) Notwithstanding the foregoing, an Award Agreement may provide that if
on the last day of the term of an Option the Fair Market Value of one Share
exceeds the option price per Share, the Participant has not exercised the Option
or a Tandem Stock Appreciation Right (if applicable) and the Option has not
expired, the Option shall be deemed to have been exercised by the

 

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Participant on such day with payment made by withholding Shares otherwise
issuable in connection with the exercise of the Option. In such event, the
Company shall deliver to the Participant the number of Shares for which the
Option was deemed exercised, less the number of Shares required to be withheld
for the payment of the total purchase price and required withholding taxes;
provided, however, any fractional Share shall be settled in cash, rounded down
to the nearest $.01.
     5.6. Form of Settlement. In its sole discretion, the Committee may provide,
at the time of grant, that the Shares to be issued upon an Option’s exercise
shall be in the form of Restricted Stock or other similar securities, or may
reserve the right so to provide after the time of grant.
     5.7. Incentive Stock Options. The Committee may grant Options intended to
qualify as “incentive stock options” as defined in Section 422 of the Code, to
any employee of the Company or any Subsidiary, subject to the requirements of
Section 422 of the Code. Notwithstanding anything in Section 3.1 to the contrary
and solely for the purposes of determining whether Shares are available for the
grant of “incentive stock options” under the Plan, the maximum aggregate number
of Shares with respect to which “incentive stock options” may be granted under
the Plan shall be 3,000,000 Shares. In addition, and notwithstanding anything in
this Section 5 to the contrary, if an incentive stock option is granted to a
Participant who at the time such grant owns (within the meaning of Section 422
of the Code) stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or of its parent corporation or of any
Subsidiary (i) the option price per Share under the incentive stock option shall
be not less than 110% of the Fair Market Value of a Share on the date of grant
of the incentive stock option and (ii) such incentive stock option shall expire
and no longer be exercisable no later than 5 years from the date of grant.
6. STOCK APPRECIATION RIGHTS
     6.1. Grant and Exercise. The Committee may provide Stock Appreciation
Rights (a) in conjunction with all or part of any Option granted under the Plan
or at any subsequent time during the term of such Option (“Tandem Stock
Appreciation Right”), (b) in conjunction with all or part of any Award (other
than an Option) granted under the Plan or at any subsequent time during the term
of such Award, or (c) without regard to any Option or other Award (a
“Freestanding Stock Appreciation Right”), in each case upon such terms and
conditions as the Committee may establish in its sole discretion.
     6.2. Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
     (a) Upon the exercise of a Stock Appreciation Right, the holder shall have
the right to receive the excess of (i) the Fair Market Value of one Share on the
date of exercise (or such other amount less than such Fair Market Value as the
Committee shall so determine at any time during a specified period before the
date of exercise) over (ii) the grant price of the Stock Appreciation Right as
specified by the Committee in its sole discretion, which, except in the case of
Substitute Awards or in connection with an adjustment provided in Section 12.2,
shall not be less than the Fair Market Value of one Share on such date of grant
or, if applicable, the exercise price of the related Option with respect to a
Tandem Stock Appreciation Right granted subsequent to the related Option
(subject to the requirements of Section 409A of the Code).

 

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     (b) The Committee shall determine in its sole discretion whether payment
shall be made in cash, in whole Shares or other property, or any combination
thereof.
     (c) Any Tandem Stock Appreciation Right may be granted at the same time as
the related Option is granted or at any time thereafter before exercise or
expiration of such Option.
     (d) Any Tandem Stock Appreciation Right related to an Option may be
exercised only when the related Option would be exercisable and the Fair Market
Value of the Shares subject to the related Option exceeds the option price at
which Shares can be acquired pursuant to the Option. In addition, if a Tandem
Stock Appreciation Right exists with respect to less than the full number of
Shares covered by a related Option, then an exercise or termination of such
Option shall not reduce the number of Shares to which the Tandem Stock
Appreciation Right applies until the number of Shares then exercisable under
such Option equals the number of Shares to which the Tandem Stock Appreciation
Right applies.
     (e) Any Option related to a Tandem Stock Appreciation Right shall no longer
be exercisable to the extent the Tandem Stock Appreciation Right has been
exercised.
     (f) The provisions of Stock Appreciation Rights need not be the same with
respect to each recipient.
     (g) The Committee may impose such other conditions or restrictions on the
terms of exercise and the exercise price of any Stock Appreciation Right, as it
shall deem appropriate, including providing that the exercise price of a Tandem
Stock Appreciation Right may be less than the Fair Market Value on the date of
grant if the Tandem Stock Appreciation Right is added to an Option following the
date of the grant of the Option (subject to the requirements of Section 409A of
the Code). Notwithstanding the foregoing provisions of this Section 6.2(g), but
subject to Section 12.2, a Freestanding Stock Appreciation Right shall generally
have the same terms and conditions as Options, including (i) an exercise price
not less than Fair Market Value of one Share on the date of grant or, if
applicable, on the date of grant of an Option with respect to a Freestanding
Stock Appreciation Right granted in exchange for an Option (subject to the
requirements of Section 409A of the Code) except in the case of Substitute
Awards or in connection with an adjustment provided in Section 12.2, and (ii) a
term not greater than seven (7) years.
     (h) An Award Agreement may provide that if on the last day of the term of a
Stock Appreciation Right the Fair Market Value of one Share exceeds the exercise
price per Share of the Stock Appreciation Right, the Participant has not
exercised the Stock Appreciation Right or the tandem Option (if applicable), and
neither the Stock Appreciation Right nor the Option has expired, the Stock
Appreciation Right shall be deemed to have been exercised by the Participant on
such day. In such event, the Company shall make payment to the Participant in
accordance with this Section, reduced by the number of Shares (or cash) required
for withholding taxes; any fractional Share shall be settled in cash, rounded
down to the nearest $.01.
     (i) Without the approval of the Company’s shareholders, other than pursuant
to Section 12.2, the Committee shall not (i) reduce the grant price of any Stock
Appreciation Right after the date of grant (ii) cancel any Stock Appreciation
Right in exchange for cash or another Award (other than in connection with a
Change of Control, as defined in Section 11.3, or a Substitute Award), or
(iii) take any other action with respect to a Stock Appreciation Right that
would be treated as a repricing under the rules and regulations of the NASDAQ
Stock Market.

 

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     (j) The Committee may impose such terms and conditions on Stock
Appreciation Rights granted in conjunction with any Award (other than an Option)
as the Committee shall determine in its sole discretion.
7. RESTRICTED STOCK
     7.1. Grants. Awards of Restricted Stock may be issued hereunder to
Participants either alone or in addition to other Awards granted under the Plan
(a “Restricted Stock Award”), and such Restricted Stock Awards shall also be
available as a form of payment of Performance Awards and other earned cash-based
incentive compensation. A Restricted Stock Award shall be subject to vesting
restrictions during the Vesting Period as specified by the Committee. The
Committee has absolute discretion to determine whether any consideration (other
than services) is to be received by the Company or any Subsidiary as a condition
precedent to the issuance of Restricted Stock.
     7.2. Award Agreements. The terms of any Restricted Stock Award granted
under the Plan shall be set forth in an Award Agreement which shall contain
provisions determined by the Committee and not inconsistent with the Plan. The
terms of Restricted Stock Awards need not be the same with respect to each
Participant. The Committee may, in its sole discretion and subject to the
limitations imposed under Section 162(m) of the Code and the regulations
thereunder in the case of a Restricted Stock Award intended to comply with the
performance-based exception under Code Section 162(m), waive the forfeiture
period and any other conditions set forth in any Award Agreement subject to such
terms and conditions as the Committee shall deem appropriate.
     7.3. Rights of Holders of Restricted Stock. Unless otherwise provided in
the Award Agreement, beginning on the date of grant of the Restricted Stock
Award and subject to execution of the Award Agreement, the Participant shall
become a shareholder of the Company with respect to all Shares subject to the
Award Agreement and shall have all of the rights of a shareholder, including the
right to vote such Shares and the right to receive distributions made with
respect to such Shares. Except as otherwise provided in an Award Agreement, any
Shares or any other property (other than cash) distributed as a dividend or
otherwise with respect to any Restricted Stock Award as to which the
restrictions have not yet lapsed shall be subject to the same restrictions as
such Restricted Stock Award. Notwithstanding the provisions of this Section,
cash dividends with respect to any Restricted Stock Award and any other property
(other than cash) distributed as a dividend or otherwise with respect to any
Restricted Stock Award that vests based on achievement of performance goals
shall be subject to restrictions and risk of forfeiture to the same extent as
the Restricted Stock with respect to which such cash, Shares or other property
has been distributed.
     7.4. Issuance of Shares. Any Restricted Stock granted under the Plan may be
evidenced in such manner as the Board may deem appropriate, including book-entry
registration or issuance of a stock certificate or certificates, which
certificate or certificates shall be held by the Company. Such certificate or
certificates shall be registered in the name of the Participant and shall bear
an appropriate legend referring to the restrictions applicable to such
Restricted Stock.
8. OTHER SHARE-BASED AWARDS
     8.1. Grants. Other Awards of Shares and other Awards that are valued in
whole or in part by reference to, or are otherwise based on, Shares or other
property (collectively “Other Share-Based Awards”), including deferred stock
units, may be granted hereunder to Participants, in addition to other Awards
granted under the Plan. Other Share-Based Awards shall also be

 

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available as a form of payment of other Awards granted under the Plan and other
earned cash-based compensation (including Directors’ fees). Prior to granting
any Other Share-Based Awards to be settled upon a Change of Control (as that
term may be defined in an Award Agreement), the Committee shall consider the
implications of Section 409A of the Code on, and take any action or adopt any
provision with respect to, such Other Share-Based Award that it deems necessary
or appropriate in its sole discretion.
     8.2. Award Agreements. The terms of Other Share-Based Awards granted under
the Plan shall be set forth in an Award Agreement, or in a sub-plan forming part
of the Plan, which shall contain provisions determined by the Committee and not
inconsistent with the Plan. The terms of such Awards need not be the same with
respect to each Participant. Notwithstanding the provisions of this Section, any
property (other than cash) distributed as a dividend or otherwise with respect
to the number of Shares covered by an Other Share-Based Award that vests based
on achievement of performance goals shall be subject to restrictions and risk of
forfeiture to the same extent as the Shares covered by such Award with respect
to which such cash, Shares or other property has been distributed. Other
Share-Based Awards may be subject to vesting restrictions during the Vesting
Period as specified by the Committee.
     8.3. Payment. Except as provided in Article 10 or as may be provided in an
Award Agreement, Other Share-Based Awards may be paid in cash, Shares, other
property, or any combination thereof, in the sole discretion of the Committee at
the time of payment. Other Share-Based Awards may be paid in a lump sum or in
installments or, in accordance with procedures established by the Committee, on
a deferred basis subject to the requirements of Section 409A of the Code.
     8.4. Deferral of Director Fees and Other Compensation. Directors shall, if
determined by the Board, receive Other Share-Based Awards in the form of
deferred stock units in lieu of all or a portion of their annual retainer. In
addition, to the extent permitted by the Committee (i) Directors may elect to
receive Other Share-Based Awards in the form of deferred stock units in lieu of
all or a portion of their annual and committee retainers and annual meeting fees
and (ii) Employees may elect to receive Other Share-Based Awards in the form of
deferred stock units in lieu of all or a portion of their compensation for
services to the Company. The Committee shall, in its absolute discretion,
establish such rules and procedures as it deems appropriate for such elections
and for the payment the deferred stock units, including (but not limited to)
with respect to the requirements of Section 409A of the Code.
9. PERFORMANCE AWARDS
     9.1. Grants. Performance Awards in the form of Performance Shares or
Performance Units, as determined by the Committee in its sole discretion, may be
granted hereunder to Participants, for no consideration or for such minimum
consideration as may be required by applicable law, either alone or in addition
to other Awards granted under the Plan. The performance goals to be achieved for
each Performance Period shall be conclusively determined by the Committee and
may be based upon the criteria set forth in Section 10.2.
     9.2. Award Agreements. The terms of any Performance Award granted under the
Plan shall be set forth in an Award Agreement which shall contain provisions
determined by the Committee and not inconsistent with the Plan, including
whether such Awards shall have Dividend Equivalents (subject to the requirements
of Section 12.6). The terms of Performance Awards need not be the same with
respect to each Participant.

 

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     9.3. Terms and Conditions. The performance criteria to be achieved during
any Performance Period and the length of the Performance Period shall be
determined by the Committee upon the grant of each Performance Award. The amount
of the Award to be distributed shall be conclusively determined by the
Committee.
     9.4. Payment. Except as provided in Article 11 or as may be provided in an
Award Agreement, Performance Awards will be distributed only after the end of
the relevant Performance Period. Performance Awards may be paid in cash, Shares,
other property, or any combination thereof, in the sole discretion of the
Committee at the time of payment. Performance Awards may be paid in a lump sum
or in installments following the close of the Performance Period or, in
accordance with procedures established by the Committee, on a deferred basis
subject to the requirements of Section 409A of the Code.
10. CODE SECTION 162(m) PROVISIONS
     10.1. Covered Employees. Notwithstanding any other provision of the Plan,
if the Committee determines at the time a Restricted Stock Award, a Performance
Award or an Other Share-Based Award is granted to a Participant who is, or is
likely to be, as of the end of the tax year in which the Company would claim a
tax deduction in connection with such Award, a Covered Employee, then the
Committee may provide that this Article 10 is applicable to such Award.
     10.2. Performance Criteria. If the Committee determines that a Restricted
Stock Award, a Performance Award or an Other Share-Based Award is subject to
this Article 10, the lapsing of restrictions thereon and the distribution of
cash, Shares or other property pursuant thereto, as applicable, shall be subject
to the achievement of one or more objective performance goals established by the
Committee, which shall be based on the attainment of specified levels of one or
any combination of the following: net revenue; revenue growth; pre-tax income
before allocation of corporate overhead and bonus; earnings per share; net
income; division, group or corporate financial goals; return on shareholders’
equity; total shareholder return; return on assets; attainment of strategic and
operational initiatives; appreciation in and/or maintenance of the price of the
Shares or any other publicly-traded securities of the Company; market share;
gross profits; earnings before taxes, earnings before interest and taxes
earnings before interest, taxes, depreciation and amortization; economic
value-added models; comparisons with various stock market indices; reductions in
costs; cash flow, cash flow per share; return on invested capital; cash flow
return on investment; and improvement in or attainment of expense levels on
working capital levels of the Company or any Subsidiary, division, business
segment or business unit of the Company for or within which the Participant is
primarily employed. Such performance goals also may be based solely by reference
to the Company’s performance or the performance of a Subsidiary, division,
business segment or business unit of the Company, or based upon the relative
performance of other companies or upon comparisons of any of the indicators of
performance relative to other companies. The Committee may also exclude the
impact of an event or occurrence which the Committee determines should
appropriately be excluded, including (a) restructurings, discontinued
operations, extraordinary items, and other unusual or non-recurring charges,
(b) an event either not directly related to the operations of the Company or not
within the reasonable control of the Company’s management, or (c) the cumulative
effects of tax or accounting changes in accordance with generally accepted
accounting principles. Such performance goals shall be set by the Committee
within the time period prescribed by, and shall otherwise comply with the
requirements of, Section 162(m) of the Code, and the regulations thereunder.

 

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     10.3. Adjustments. Notwithstanding any provision of the Plan (other than
Article 11), with respect to any Restricted Stock Award, Performance Award or
Other Share-Based Award that is subject to this Section 10, the Committee may
adjust downwards, but not upwards, the amount payable pursuant to such Award,
and the Committee may not waive the achievement of the applicable performance
goals except in the case of the death or disability of the Participant or as
otherwise determined by the Committee in special circumstances.
     10.4. Restrictions. The Committee shall have the power to impose such other
restrictions on Awards subject to this Article as it may deem necessary or
appropriate to ensure that such Awards satisfy all requirements for
“performance-based compensation” within the meaning of Section 162(m) of the
Code.
     10.5. Limitations on Grants to Individual Participant. Subject, in each
case, to adjustment as provided in Section 12.2, the Company may grant
(i) Options or Stock Appreciation Rights during any 12-month period to a
Participant for up to a maximum of 2,000,000 Shares and (ii) up to a maximum of
an additional 900,000 Shares with respect to Restricted Stock Awards,
Performance Awards and/or Other Share-Based Awards during any 12-month period
that are intended to comply with the performance-based exception under Code
Section 162(m) and are denominated in Shares (collectively, the “Share-Based
Limitations”). In addition to the foregoing Share-Based Limitations, a
Participant may receive up to an additional $3,000,000 during any 12-month
period with respect to Performance Awards that are intended to comply with the
performance-based exception under Code Section 162(m) and are denominated in
cash (the “Cash-Based Limitation and collectively with the Share-Based
Limitations, the “Limitations”). If an Award is cancelled, the cancelled Award
shall continue to be counted toward the applicable Limitations.
11. CHANGE OF CONTROL PROVISIONS
     11.1. Impact on Certain Awards. Award Agreements may provide that in the
event of a Change of Control of the Company (as that term may be defined
therein), (a) Options and Stock Appreciation Rights outstanding as of the date
of the Change of Control immediately vest and become fully exercisable, (b) that
Options and Stock Appreciation Rights outstanding as of the date of the Change
of Control may be cancelled and terminated without payment therefor if the Fair
Market Value of one Share as of the date of the Change of Control is less than
the per Share Option exercise price or Stock Appreciation Right grant price,
(c) restrictions and deferral limitations on Restricted Stock lapse and the
Restricted Stock becomes free of all restrictions and limitations and becomes
fully vested, (d) all Performance Awards shall be considered to be earned and
payable (either in full or pro rata based on the portion of Performance Period
completed as of the date of the Change of Control), and any limitations or other
restrictions shall lapse and such Performance Awards shall be immediately
settled or distributed, and (e) the restrictions and deferral limitations and
other conditions applicable to any Other Share-Based Awards or any other Awards
shall lapse, and such Other Share-Based Awards or such other Awards shall become
free of all restrictions, limitations or conditions and become fully vested and
transferable to the full extent of the original grant.
     11.2. Assumption or Substitution of Certain Awards. (a) Unless otherwise
provided in an Award Agreement, in the event of a Change of Control of the
Company of which the successor company assumes or substitutes for an Option,
Stock Appreciation Right, Restricted Stock Award or Other Share-Based Award (or
in which the Company is the ultimate parent corporation and continues the
Award), then each outstanding Option, Stock Appreciation Right, Restricted Stock
Award or Other Share-Based Award shall not be accelerated as described in
Sections 11.1(a),

 

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(c) and (e). For the purposes of this Section 11.2, an Option, Stock
Appreciation Right, Restricted Stock Award or Other Share-Based Award shall be
considered assumed or substituted for if following the Change of Control the
Award confers the right to purchase or receive, for each Share subject to the
Option, Stock Appreciation Right, Restricted Stock Award or Other Share-Based
Award immediately prior to the Change of Control, the consideration (whether
stock, cash or other securities or property) received in the transaction
constituting a Change of Control by holders of Shares for each Share held on the
effective date of such transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the transaction constituting a Change of Control is not solely common stock
of the successor company, the Committee may, with the consent of the successor
company, provide that the consideration to be received upon the exercise or
vesting of an Option, Stock Appreciation Right, Restricted Stock Award or Other
Share-Based Award, for each Share subject thereto, will be solely common stock
of the successor company substantially equal in fair market value to the per
Share consideration received by holders of Shares in the transaction
constituting a Change of Control. The determination of such substantial equality
of value of consideration shall be made by the Committee in its sole discretion
and its determination shall be conclusive and binding. Notwithstanding the
foregoing, on such terms and conditions as may be set forth in an Award
Agreement, in the event of a termination of a Participant’s employment in such
successor company within a specified time period following such Change in
Control, each Award held by such Participant at the time of the Change in
Control shall be accelerated as described in Sections 11.1(a), (c) and (e).
     (b) The Committee, in its discretion, may determine that, upon the
occurrence of a Change of Control of the Company, each Option and Stock
Appreciation Right outstanding shall terminate within a specified number of days
after notice to the Participant, and/or that each Participant shall receive,
with respect to each Share subject to such Option or Stock Appreciation Right,
an amount equal to the excess of the Fair Market Value of such Share immediately
prior to the occurrence of such Change of Control over the exercise price per
Share of such Option and/or Stock Appreciation Right; such amount to be payable
in cash, in one or more kinds of stock or property (including the stock or
property, if any, payable in the transaction) or in a combination thereof, as
the Committee, in its discretion, shall determine; provided, however, that if
the Fair Market Value of one Share as of the date of the Change of Control is
less than the per Share Option exercise price or Stock Appreciation Right grant
price, the Committee may, in its discretion, cancel and terminate each such
outstanding Option and/or Stock Appreciation Right without payment.
12. GENERALLY APPLICABLE PROVISIONS
     12.1. Amendment and Termination of the Plan. The Board may, from time to
time, alter, amend, suspend or terminate the Plan as it shall deem advisable,
subject to any requirement for shareholder approval imposed by applicable law,
including the rules and regulations of the NASDAQ Stock Market provided that the
Board may not amend the Plan in any manner that would result in noncompliance
with Rule 16b-3 of the Exchange Act; and further provided that the Board may
not, without the approval of the Company’s shareholders, amend the Plan to
(a) increase the number of Shares that may be the subject of Awards under the
Plan (except for adjustments pursuant to Section 12.2), (b) expand the types of
awards available under the Plan, (c) materially expand the class of persons
eligible to participate in the Plan, (d) amend Section 5.3 or Section 6.2(g) to
eliminate the requirements relating to minimum exercise price and shareholder
approval, (e) increase the maximum permissible term of any Option specified by
Section 5.4 or the maximum permissible term of a Freestanding Stock Appreciation
Right

 

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specified in Section 6.2(g), or (f) increase the Limitations in Section 10.5.
The Board may not, without the approval of the Company’s shareholders, except as
set forth in Section 12.2, (a) lower, after it is granted, the option price per
Share of an Option or the grant price per Share of a Stock Appreciation Right,
(b) cancel an Option or Stock Appreciation Right in exchange for cash or another
Award (other than in connection with Substitute Awards or a Change of Control,
as defined in Section 11.3), or (c) take any other action with respect to an
Option or Stock Appreciation Right that would be treated as a repricing under
the rules and regulations of the NASDAQ Stock Market. In addition, no amendments
to, or termination of, the Plan shall in any way impair the rights of a
Participant under any Award previously granted without such Participant’s
consent.
     12.2. Adjustments. In the event of any merger, reorganization,
consolidation, recapitalization, dividend or distribution (whether in cash,
shares or other property, other than a regular cash dividend), stock split,
reverse stock split, spin-off or similar transaction or other change in
corporate structure affecting the Shares or the value thereof, such adjustments
and other substitutions shall be made to the Plan and to Awards as the Committee
deems equitable or appropriate taking into consideration the accounting and tax
consequences, including such adjustments in the aggregate number, class and kind
of securities that may be delivered under the Plan, the Limitations in
Section 10.5, the maximum number of Shares that may be issued pursuant to
Incentive Stock Options, and in the number, class, kind and option or exercise
price of securities subject to outstanding Awards granted under the Plan
(including, if the Committee deems appropriate, the substitution of similar
options to purchase the shares of, or other awards denominated in the shares of,
another company) as the Committee may determine to be appropriate in its sole
discretion; provided, however, that the number of Shares subject to any Award
shall always be a whole number.
     12.3. Transferability of Awards. Except as provided below, no Award and no
Shares subject to Awards described in Article 8 that have not been issued or as
to which any applicable restriction, performance or deferral period has not
lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered,
other than by will or the laws of descent and distribution, and such Award may
be exercised during the life of the Participant only by the Participant or the
Participant’s guardian or legal representative. To the extent and under such
terms and conditions as determined by the Committee, a Participant may assign or
transfer an Award (each transferee thereof, a “Permitted Assignee”) to (i) the
Participant’s spouse, children or grandchildren (including any adopted and step
children or grandchildren), parents, grandparents or siblings, (ii) to a trust
for the benefit of one or more of the Participant or the persons referred to in
clause (i), (iii) to a partnership, limited liability company or corporation in
which the Participant or the persons referred to in clause (i) are the only
partners, members or shareholders or (iv) for charitable donations; provided
that such Permitted Assignee shall be bound by and subject to all of the terms
and conditions of the Plan and the Award Agreement relating to the transferred
Award and shall execute an agreement satisfactory to the Company evidencing such
obligations; and provided further that such Participant shall remain bound by
the terms and conditions of the Plan.
     12.4. Termination of Employment. The Committee shall determine and set
forth in each Award Agreement whether any Awards granted in such Award Agreement
will continue to be exercisable, and the terms of such exercise, on and after
the date that a Participant ceases to be employed by or to provide services to
the Company or any Subsidiary (including as a Director), whether by reason of
death, disability, voluntary or involuntary termination of employment or
services, or otherwise. The date of termination of a Participant’s employment or
services will be determined by the Committee, which determination will be final.

 

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     12.5. One-Time Option Exchange Offer. Notwithstanding any other provision
of the Plan to the contrary, upon approval by the Company’s shareholders of this
Section 12.5 in connection with the Company’s 2009 Annual Meeting, the Committee
may provide for, and the Company may implement, a one-time-only option exchange
offer, pursuant to which certain outstanding Options could, at the election of
the person holding such Option, be tendered to the Company for cancellation in
exchange for the issuance of a lesser amount of Options with a lower exercise
price, provided that such one-time-only option exchange offer is commenced
within 12 months of the date of such shareholder approval at the Company’s 2009
Annual Meeting.
     12.6. Deferral; Dividend Equivalents. The Committee shall be authorized to
establish procedures pursuant to which the payment of any Award may be deferred,
subject to the requirements of Code Section 409A. Subject to the provisions of
the Plan and any Award Agreement, the recipient of an Award other than an Option
or Stock Appreciation Right may, if so determined by the Committee, be entitled
to receive, currently or on a deferred basis, amounts equivalent to cash, stock
or other property dividends on Shares (“Dividend Equivalents”) with respect to
the number of Shares covered by the Award, as determined by the Committee, in
its sole discretion. The Committee may provide that the Dividend Equivalents (if
any) shall be deemed to have been reinvested in additional Shares or otherwise
reinvested and may provide that the Dividend Equivalents are subject to the same
vesting or performance conditions as the underlying Award. Notwithstanding the
foregoing, Dividend Equivalents distributed in connection with an Award that
vests based on the achievement of performance goals shall be subject to
restrictions and risk of forfeiture to the same extent as the Award with respect
to which such cash, stock or other property has been distributed.
13. MISCELLANEOUS
     13.1. Award Agreements. Each Award Agreement shall either be (a) in writing
in a form approved by the Committee and executed by the Company by an officer
duly authorized to act on its behalf, or (b) an electronic notice in a form
approved by the Committee and recorded by the Company (or its designee) in an
electronic recordkeeping system used for the purpose of tracking one or more
types of Awards as the Committee may provide; in each case and if required by
the Committee, the Award Agreement shall be executed or otherwise electronically
accepted by the recipient of the Award in such form and manner as the Committee
may require. The Committee may authorize any officer of the Company to execute
any or all Award Agreements on behalf of the Company. The Award Agreement shall
set forth the material terms and conditions of the Award as established by the
Committee consistent with the provisions of the Plan.
     13.2. Tax Withholding. The Company shall have the right to make all
payments or distributions pursuant to the Plan to a Participant (or a Permitted
Assignee thereof) (any such person, a “Payee”) net of any applicable federal,
state and local taxes required to be paid or withheld as a result of (a) the
grant of any Award, (b) the exercise of an Option or Stock Appreciation Right,
(c) the delivery of Shares or cash, (d) the lapse of any restrictions in
connection with any Award or (e) any other event occurring pursuant to the Plan.
The Company or any Subsidiary shall have the right to withhold from wages or
other amounts otherwise payable to such Payee such withholding taxes as may be
required by law, or to otherwise require the Payee to pay such withholding
taxes. If the Payee shall fail to make such tax payments as are required, the
Company or its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to
such Payee or to take such other action as may be necessary to satisfy such
withholding obligations. The Committee shall be authorized to establish
procedures for election by Participants to satisfy such obligation for the
payment of such taxes by tendering previously acquired Shares (either actually
or by attestation,

 

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valued at their then Fair Market Value), or by directing the Company to retain
Shares (up to the Participant’s minimum required tax withholding rate or such
other rate that will not cause an adverse accounting consequence or cost)
otherwise deliverable in connection with the Award.
     13.3. Right of Discharge Reserved; Claims to Awards. Nothing in the Plan
nor the grant of an Award hereunder shall confer upon any Employee or Director
the right to continue in the employment or service of the Company or any
Subsidiary or affect any right that the Company or any Subsidiary may have to
terminate the employment or service of (or to demote or to exclude from future
Awards under the Plan) any such Employee or Director at any time for any reason.
Except as specifically provided by the Committee, the Company shall not be
liable for the loss of existing or potential profit from an Award granted in the
event of termination of an employment or other relationship. No Employee or
Director shall have any claim to be granted any Award under the Plan, and there
is no obligation for uniformity of treatment of Employees or Directors under the
Plan.
     13.4. Prospective Recipient. The prospective recipient of any Award under
the Plan shall not, with respect to such Award, be deemed to have become a
Participant, or to have any rights with respect to such Award, until and unless
such recipient shall have executed an agreement or other instrument evidencing
the Award and delivered a copy thereof to the Company, and otherwise complied
with the then applicable terms and conditions.
     13.5. Substitute Awards. Notwithstanding any other provision of the Plan,
the terms of Substitute Awards may vary from the terms set forth in the Plan to
the extent the Committee deems appropriate to conform, in whole or in part, to
the provisions of the awards in substitution for which they are granted.
     13.6. Cancellation of Award. Notwithstanding anything to the contrary
contained herein, an Award Agreement may provide that the Award shall be
canceled if the Participant, without the consent of the Company, while employed
by the Company or any Subsidiary or after termination of such employment or
service, engages in activity that violates any agreement between the Company or
any Subsidiary and Participant, including any agreement not to compete with the
Company, as determined by the Committee in its sole discretion. The Committee
may provide in an Award Agreement that if within the time period specified in
the Agreement the Participant establishes a relationship with a competitor or
engages in an activity referred to in the preceding sentence, the Participant
will forfeit any gain realized on the vesting or exercise of the Award and must
repay such gain to the Company.
     13.7. Stop Transfer Orders. All certificates for Shares delivered under the
Plan pursuant to any Award shall be subject to such stop-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Shares are then listed, and any applicable
federal or state securities law, and the Committee may cause a legend or legends
to be put on any such certificates to make appropriate reference to such
restrictions.
     13.8. Nature of Payments. All Awards made pursuant to the Plan are in
consideration of services performed or to be performed for the Company or any
Subsidiary, division or business unit of the Company. Any income or gain
realized pursuant to Awards under the Plan and any Stock Appreciation Rights
constitute a special incentive payment to the Participant and shall not be taken
into account, to the extent permissible under applicable law, as compensation
for purposes of any of the employee benefit plans of the Company or any
Subsidiary except as may

 

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be determined by the Committee or by the Board or board of directors of the
applicable Subsidiary.
     13.9. Other Plans. Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
     13.10. Severability. The provisions of the Plan shall be deemed severable.
If any provision of the Plan shall be held unlawful or otherwise invalid or
unenforceable in whole or in part by a court of competent jurisdiction, such
provision shall (a) be deemed limited to the extent that such court of competent
jurisdiction deems it lawful, valid and/or enforceable and as so limited shall
remain in full force and effect, and (b) not affect any other provision of the
Plan or part thereof, each of which shall remain in full force and effect. If
the making of any payment or the provision of any other benefit required under
the Plan shall be held unlawful or otherwise invalid or unenforceable by a court
of competent jurisdiction, such unlawfulness, invalidity or unenforceability
shall not prevent any other payment or benefit from being made or provided under
the Plan, and if the making of any payment in full or the provision of any other
benefit required under the Plan in full would be unlawful or otherwise invalid
or unenforceable, then such unlawfulness, invalidity or unenforceability shall
not prevent such payment or benefit from being made or provided in part, to the
extent that it would not be unlawful, invalid or unenforceable, and the maximum
payment or benefit that would not be unlawful, invalid or unenforceable shall be
made or provided under the Plan.
     13.11. Construction. As used in the Plan, the words “include” and
“including,” and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words “without
limitation.”
     13.12. Unfunded Status of the Plan. The Plan is intended to constitute an
“unfunded” plan for incentive compensation. With respect to any payments not yet
made to a Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than those of a general creditor of
the Company. In its sole discretion, the Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver the Shares or payments in lieu of or with respect to Awards hereunder;
provided, however, that the existence of such trusts or other arrangements is
consistent with the unfunded status of the Plan.
     13.13. Governing Law. The Plan and all determinations made and actions
taken thereunder, to the extent not otherwise governed by the Code or the laws
of the United States, shall be governed by the laws of the State of Washington,
without reference to principles of conflict of laws, and construed accordingly.
     13.14. Effective Date; Termination. This amendment and restatement of the
Plan shall be effective on Exchange Program Closing Date. The amendment and
restatement of the Plan shall be null and void and of no effect if the Company,
for any reason, does not close the Exchange Program. Awards may be granted under
the Plan at any time and from time to time on or prior to the tenth anniversary
of the effective date of the amendment and restatement of the Plan, on which
date the Plan will expire except as to Awards then outstanding under the Plan.
Such outstanding Awards shall remain in effect until they have been exercised or
terminated, or have expired.

 

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     13.15. Foreign Employees. Awards may be granted to Participants who are
foreign nationals or employed outside the United States, or both, on such terms
and conditions different from those applicable to Awards to Employees employed
in the United States as may, in the judgment of the Committee, be necessary or
desirable in order to recognize differences in local law or tax policy. The
Committee also may impose conditions on the exercise or vesting of Awards in
order to minimize the Company’s obligation with respect to tax equalization for
Employees on assignments outside their home country.
     13.16. Compliance with Section 409A of the Code. This Plan is intended to
comply and shall be administered in a manner that is intended to comply with
Section 409A of the Code and shall be construed and interpreted in accordance
with such intent. To the extent that an Award or the payment, settlement or
deferral thereof is subject to Section 409A of the Code, the Award shall be
granted, paid, settled or deferred in a manner that will comply with
Section 409A of the Code, including regulations or other guidance issued with
respect thereto, except as otherwise determined by the Committee. Any provision
of this Plan that would cause the grant of an Award or the payment, settlement
or deferral thereof to fail to satisfy Section 409A of the Code shall be amended
to comply with Section 409A of the Code on a timely basis, which may be made on
a retroactive basis, in accordance with regulations and other guidance issued
under Section 409A of the Code.
     13.17. Captions. The captions in the Plan are for convenience of reference
only, and are not intended to narrow, limit or affect the substance or
interpretation of the provisions contained herein.
     13.18. Conditions to Issuance of Shares. The granting of Awards and the
issuance of Shares under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be necessary or appropriate. Shares (or if
applicable, cash or other property) shall not be issued pursuant to an Award
unless, as determined by the Company, the issuance and delivery of the Shares
(or if applicable, cash or other property) complies with all such laws, rules,
regulations and approvals.