Exhibit 10.1

THE WALT DISNEY COMPANY/PIXAR

2004 EQUITY INCENTIVE PLAN

(As Amended and Restated Effective November 28, 2006)

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TABLE OF CONTENTS

 

          Page

SECTION 1 BACKGROUND AND PURPOSE

   1

1.1

   Background and Effective Date    1

1.2

   Purpose of the Plan    1

SECTION 2 DEFINITIONS

   1

2.1

   “1934 Act”    1

2.2

   “Affiliate”    1

2.3

   “Award”    2

2.4

   “Award Agreement”    2

2.5

   “Board” or “Board of Directors”    2

2.6

   “Code”    2

2.7

   “Committee”    2

2.8

   “Company”    2

2.9

   “Consultant”    2

2.10

   “Director”    2

2.11

   “Disability”    2

2.12

   “Earnings Per Share”    2

2.13

   “Employee”    2

2.14

   “Exchange Program”    2

2.15

   “Exercise Price”    2

2.16

   “Fair Market Value”    2

2.17

   “Fiscal Year”    3

2.18

   “Grant Date”    3

2.19

   “Incentive Stock Option”    3

2.20

   “Nonemployee Director”    3

2.21

   “Nonqualified Stock Option”    3

2.22

   “Option”    3

2.23

   “Participant”    3

2.24

   “Performance Goals”    3

2.25

   “Performance Period”    3

2.26

   “Performance Share”    3

2.27

   “Performance Unit”    3

2.28

   “Period of Restriction”    4

2.29

   “Plan”    4

2.30

   “Profit After Tax”    4

2.31

   “Restricted Stock”    4

2.32

   “Retirement”    4

2.33

   “Return on Equity”    4

2.34

   “Revenue”    4

2.35

   “Rule 16b-3”    4

2.36

   “Section 16 Person”    4

2.37

   “Shares”    4

2.38

   “Stock Appreciation Right” or “SAR”    4

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TABLE OF CONTENTS

(continued)

 

          Page

2.39

   “Subsidiary”    4

2.40

   “Termination of Service”    5

2.41

   “Total Shareholder Return”    5

SECTION 3 ADMINISTRATION

   5

3.1

   The Committee    5

3.2

   Authority of the Committee    5

3.3

   Delegation by the Committee    5

3.4

   Decisions Binding    6

SECTION 4 SHARES SUBJECT TO THE PLAN

   6

4.1

   Number of Shares    6

4.2

   Lapsed Awards    6

4.3

   Adjustments in Awards and Authorized Shares    6

SECTION 5 STOCK OPTIONS

   6

5.1

   Grant of Options    6

5.2

   Award Agreement    7

5.3

   Exercise Price    7

5.4

   Expiration of Options    7

5.5

   Exercisability of Options    8

5.6

   Payment    8

5.7

   Restrictions on Share Transferability    8

5.8

   Certain Additional Provisions for Incentive Stock Options    8

SECTION 6 STOCK APPRECIATION RIGHTS

   9

6.1

   Grant of SARs    9

6.2

   SAR Agreement    9

6.3

   Expiration of SARs    9

6.4

   Payment of SAR Amount    9

SECTION 7 RESTRICTED STOCK

   10

7.1

   Grant of Restricted Stock    10

7.2

   Restricted Stock Agreement    10

7.3

   Transferability    10

7.4

   Other Restrictions    10

7.5

   Removal of Restrictions    11

7.6

   Voting Rights    11

7.7

   Dividends and Other Distributions    11

7.8

   Return of Restricted Stock to Company    11

SECTION 8 PERFORMANCE UNITS

   11

8.1

   Grant of Performance Units    11

8.2

   Value of Performance Units    11

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TABLE OF CONTENTS

(continued)

 

          Page

8.3

   Performance Objectives and Other Terms    11

8.4

   Earning of Performance Units    12

8.5

   Form and Timing of Payment of Performance Units    12

8.6

   Cancellation of Performance Units    12

SECTION 9 PERFORMANCE SHARES

   12

9.1

   Grant of Performance Shares    12

9.2

   Value of Performance Shares    13

9.3

   Performance Share Agreement    13

9.4

   Performance Objectives and Other Terms    13

9.5

   Earning of Performance Shares    13

9.6

   Form and Timing of Payment of Performance Shares    13

9.7

   Cancellation of Performance Shares    14

SECTION 10 [INTENTIONALLY OMITTED]

   14

SECTION 11 MISCELLANEOUS

   14

11.1

   Deferrals    14

11.2

   No Effect on Employment or Service    14

11.3

   Participation    14

11.4

   Indemnification    14

11.5

   Successors    15

11.6

   Beneficiary Designations    15

11.7

   Limited Transferability of Awards    15

11.8

   No Rights as Shareholder    15

SECTION 12 AMENDMENT, TERMINATION, AND DURATION

   15

12.1

   Amendment, Suspension, or Termination    15

12.2

   Duration of the Plan    15

SECTION 13 TAX WITHHOLDING

   16

13.1

   Withholding Requirements    16

13.2

   Withholding Arrangements    16

SECTION 14 LEGAL CONSTRUCTION

   16

14.1

   Gender and Number    16

14.2

   Severability    16

14.3

   Requirements of Law    16

14.4

   Securities Law Compliance    16

14.5

   Governing Law    16

14.6

   Captions    17

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The WALT DISNEY COMPANY/ PIXAR

2004 EQUITY INCENTIVE PLAN

SECTION 1

BACKGROUND AND PURPOSE

1.1 Background and Effective Date. The Plan, formerly known as the Pixar 2004
Equity Incentive Plan, adopted by the Board of Directors of Pixar, a California
corporation (“Pixar”), and approved by its shareholders, became effective on
August 20, 2004. In connection with the merger (the “Merger”) of Lux Acquisition
Corp., a California corporation and wholly owned subsidiary of The Walt Disney
Company, with and into Pixar, the Plan was assumed by The Walt Disney
Corporation, effective upon the consummation of the Merger. The Plan has been
amended and restated to reflect the exchange ratio in the Merger and certain
other Merger-related changes.

1.2 Purpose of the Plan. The Plan is intended to attract, motivate, and retain
(a) employees of Pixar and its Subsidiaries, (b) consultants who provide
significant services to Pixar and its Subsidiaries, and (c) directors of Pixar
who are employees of neither Pixar nor any of its Subsidiaries. The Plan also is
designed to encourage stock ownership by Participants, thereby aligning their
interests with those of the Company’s shareholders and to permit the payment of
compensation that qualifies as performance-based compensation under
Section 162(m) of the Code.

SECTION 2

DEFINITIONS

The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:

2.1 “1934 Act” means the Securities Exchange Act of 1934, as amended. Reference
to a specific section of the 1934 Act or regulation thereunder shall include
such section or regulation, any valid regulation promulgated under such section,
and any comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.

2.2 “Affiliate” means any corporation or any other entity (including, but not
limited to, partnerships and joint ventures) controlling, controlled by, or
under common control with the Company.

2.3 “Award” means, individually or collectively, a grant under the Plan of
Incentive Stock Options, Nonqualified Stock Options, SARs, Restricted Stock,
Performance Units, or Performance Shares.

 

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2.4 “Award Agreement” means the written agreement setting forth the terms and
conditions applicable to each Award granted under the Plan.

2.5 “Board” or “Board of Directors” means the Board of Directors of the Company.

2.6 “Code” means the Internal Revenue Code of 1986, as amended. Reference to a
specific section of the Code or regulation thereunder shall include such section
or regulation, any valid regulation promulgated under such section, and any
comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.

2.7 “Committee” means the committee appointed by the Board (pursuant to
Section 3.1) to administer the Plan.

2.8 “Company” means The Walt Disney Company, a Delaware corporation, or any
successor thereto.

2.9 “Consultant” means any consultant, independent contractor, or other person
who provides significant services to Pixar or its Subsidiaries, but who is
neither an Employee nor a Director.

2.10 “Director” means any individual who is a member of the Board of Directors
of Pixar.

2.11 “Disability” means a permanent disability in accordance with a policy or
policies established by the Committee (in its discretion) from time to time.

2.12 “Earnings Per Share” means as to any Performance Period, the Company’s
Profit After Tax, divided by a weighted average number of common shares
outstanding and dilutive common equivalent shares deemed outstanding, determined
in accordance with generally accepted accounting principles.

2.13 “Employee” means any employee of Pixar or its Subsidiaries, whether such
employee is so employed at the time the Plan is adopted or becomes so employed
subsequent to the adoption of the Plan.

2.14 “Exchange Program” means a program established by the Committee under which
outstanding Awards are amended to provide for a lower Exercise Price or
surrendered or cancelled in exchange for (a) Awards with a lower Exercise Price,
(b) a different type of Award, (c) cash, or (d) a combination of (a), (b) and/or
(c).

2.15 “Exercise Price” means the price at which a Share may be purchased by a
Participant pursuant to the exercise of an Option.

2.16 “Fair Market Value” of a share of Common Stock as of a given date means the
average of the highest and lowest of the New York Stock Exchange composite tape
market prices at which the shares of Common Stock shall have been sold regular
way on the date as of which fair

 

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market value is to be determined or, if there shall be no such sale on such
date, the next preceding day on which such a sale shall have occurred. If Common
Stock is not listed on the New York Stock Exchange on the date as of which Fair
Market Value is to be determined, the Committee shall determine in good faith
the Fair Market Value in whatever manner it considers appropriate.

2.17 “Fiscal Year” means the fiscal year of the Company.

2.18 “Grant Date” means, with respect to an Award, the date that the Award was
granted. The Grant Date of an Award shall not be earlier than the date the Award
is approved by the Committee.

2.19 “Incentive Stock Option” means an Option to purchase Shares that is
designated as an Incentive Stock Option and is intended to meet the requirements
of Section 422 of the Code.

2.20 “Nonemployee Director” means a Director who is not an Employee.

2.21 “Nonqualified Stock Option” means an option to purchase Shares that is not
intended to be an Incentive Stock Option.

2.22 “Option” means an Incentive Stock Option or a Nonqualified Stock Option.

2.23 “Participant” means an Employee, Consultant, or Nonemployee Director who
has an outstanding Award.

2.24 “Performance Goals” means the goal(s) (or combined goal(s)) determined by
the Committee (in its discretion) to be applicable to a Participant with respect
to an Award. As determined by the Committee, the Performance Goals applicable to
an Award may provide for a targeted level or levels of achievement using one or
more of the following measures: (a) Earnings Per Share, (b) Profit After Tax,
(c) Return on Equity, (d) Revenue, and (e) Total Shareholder Return. The
Performance Goals may differ from Participant to Participant and from Award to
Award. Any criteria used may be measured, as applicable, (i) in absolute terms,
(ii) in relative terms (including, but not limited to, passage of time and/or
against another company or companies), (iii) on a per-share basis, (iv) against
the performance of the Company as a whole or of a particular audio/visual
product or software product of the Company or any other Company product related
to such products, and/or (v) on a pre-tax or after-tax basis. Prior to the
determination date, the Committee shall determine whether any element(s) or
item(s) shall be included in or excluded from the calculation of any Performance
Goal with respect to any Participants.

“Performance Period” means any Fiscal Year or such longer period as determined
by the Committee in its sole discretion.

2.25 “Performance Share” means an Award granted to a Participant pursuant to
Section 9.

2.26 “Performance Unit” means an Award granted to a Participant pursuant to
Section 8.

 

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2.27 “Period of Restriction” means the period during which the transfer of
Shares of Restricted Stock are subject to restrictions and therefore, the Shares
are subject to a substantial risk of forfeiture. As provided in Section 7, such
restrictions may be based on the passage of time, the achievement of target
levels of performance, or the occurrence of other events as determined by the
Committee, in its discretion.

2.28 “Plan” means The Walt Disney Company/Pixar 2004 Equity Incentive Plan, as
set forth in this instrument and as hereafter amended from time to time.

2.29 “Profit After Tax” means as to any Performance Period, the Company’s income
after taxes, determined in accordance with generally accepted accounting
principles.

2.30 “Restricted Stock” means an Award granted to a Participant pursuant to
Section 7.

2.31 “Retirement” means, in the case of an Employee or a Nonemployee Director, a
Termination of Service occurring in accordance with a policy or policies
established by the Committee (in its discretion) from time to time. With respect
to a Consultant, no Termination of Service shall be deemed to be on account of
“Retirement.”

2.32 “Return on Equity” means as to any Performance Period, the percentage equal
to the Company’s Profit After Tax divided by average shareholder’s equity,
determined in accordance with generally accepted accounting principles.

2.33 “Revenue” means as to any Performance Period, the Company’s net revenues
generated from third parties, determined in accordance with generally accepted
accounting principles.

2.34 “Rule 16b-3” means Rule 16b-3 promulgated under the 1934 Act, and any
future regulation amending, supplementing or superseding such regulation.

2.35 “Section 16 Person” means a person who, with respect to the Shares, is
subject to Section 16 of the 1934 Act.

2.36 “Shares” means the shares of common stock of the Company.

2.37 “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with a related Option, that pursuant to Section 6 is designated as an
SAR.

2.38 “Subsidiary” means any corporation in an unbroken chain of corporations
beginning with the Company or Pixar, as applicable, as the corporation at the
top of the chain, but only if each of the corporations below the Company (other
than the last corporation in the unbroken chain) then owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

 

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2.39 “Termination of Service” means (a) in the case of an Employee, a cessation
of the employee-employer relationship between the Employee and the Company or an
Affiliate for any reason, including, but not by way of limitation, a termination
by resignation, discharge, death, Disability, Retirement, or the disaffiliation
of an Affiliate, but excluding any such termination where there is a
simultaneous reemployment by the Company or an Affiliate; (b) in the case of a
Consultant, a cessation of the service relationship between the Consultant and
the Company or an Affiliate for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, or the
disaffiliation of an Affiliate, but excluding any such termination where there
is a simultaneous re-engagement of the consultant by the Company or an
Affiliate; and (c) in the case of a Nonemployee Director, a cessation of the
Director’s service on the Board for any reason, including, but not by way of
limitation, a termination by resignation, death, Disability, Retirement or
non-reelection to the Board.

2.40 “Total Shareholder Return” means as to any Performance Period, the total
return (change in share price plus reinvestment of any dividends) of a Share.

SECTION 3

ADMINISTRATION

3.1 The Committee. The Plan shall be administered by the Committee (and/or the
Board, as determined by the Board). The Committee shall consist of not less than
two (2) Directors who shall be appointed from time to time by, and shall serve
at the pleasure of, the Board of Directors. Unless determined otherwise by the
Board, the Committee shall be comprised solely of Directors who are (a) “outside
directors” under Section 162(m) of the Code, and (b) “non-employee directors”
under Rule 16b-3.

3.2 Authority of the Committee. It shall be the duty of the Committee to
administer the Plan in accordance with the Plan’s provisions. The Committee
shall have all powers and discretion necessary or appropriate to administer the
Plan and to control its operation, including, but not limited to, the power to
(a) determine which Employees, Consultants and Directors shall be granted
Awards, (b) prescribe the terms and conditions of the Awards, (c) interpret the
Plan and the Awards, (d) adopt such procedures and subplans as are necessary or
appropriate to permit participation in the Plan by Employees, Consultants and
Directors who are foreign nationals or employed outside of the United States,
(e) implement an Exchange Program, (f) adopt rules for the administration,
interpretation and application of the Plan as are consistent therewith, and
(g) interpret, amend or revoke any such rules.

3.3 Delegation by the Committee. The Committee, in its sole discretion and on
such terms and conditions as it may provide, may delegate all or any part of its
authority and powers under the Plan to one or more Directors or officers of the
Company. Notwithstanding the foregoing, with respect to Awards that are intended
to qualify as performance-based compensation under Section 162(m) of the Code,
the Committee may not delegate its authority and powers with respect to such
Awards if such delegation would cause the Awards to fail to so qualify (unless
determined otherwise by the Board).

 

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3.4 Decisions Binding. All determinations and decisions made by the Committee,
the Board, and any delegate of the Committee pursuant to the provisions of the
Plan shall be final, conclusive, and binding on all persons, and shall be given
the maximum deference permitted by law.

SECTION 4

SHARES SUBJECT TO THE PLAN

4.1 Number of Shares. Subject to adjustment as provided in Section 4.3, the
total number of Shares available for issuance under the Plan as of the closing
of the Merger shall equal the sum of (a) 23,859,591, and (b) any Shares (not to
exceed 48,300,000) that otherwise would have been returned to the 1995 Stock
Plan and 1995 Director Option Plan as of August 20, 2004, on account of the
expiration, cancellation or forfeiture of awards granted thereunder. No more
than 36,800,000 of the Shares available under the Plan may be issued pursuant to
Awards that are Incentive Stock Options. Shares granted under the Plan may be
either authorized but unissued Shares or treasury Shares.

4.2 Lapsed Awards. If an Award is settled in cash, or is cancelled, terminates,
expires, or lapses for any reason, any Shares subject to such Award again shall
be available to be the subject of an Award, except as determined by the
Committee.

4.3 Adjustments in Awards and Authorized Shares. In the event that any dividend
or other distribution (whether in the form of cash, Shares, other securities, or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other
change in the corporate structure of the Company affecting the Shares such that
an adjustment is determined by the Committee (in its sole discretion) to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust the number and
class of Shares that may be issued under the Plan, the number and class of
Shares that may be added annually to the Shares reserved under the Plan, the
number, class, and price of Shares subject to outstanding Awards, and the
numerical limits of Sections 4.1, 5.1, 6.1, 7.1, 8.1, 9.1 and 10.1.
Notwithstanding the preceding, the number of Shares subject to any Award always
shall be a whole number.

SECTION 5

STOCK OPTIONS

5.1 Grant of Options. Subject to the terms and provisions of the Plan, Options
may be granted to Employees, Directors and Consultants at any time and from time
to time as determined by the Committee in its sole discretion. The Committee, in
its sole discretion, shall determine the number of Shares subject to each
Option, provided that during any Fiscal Year, no Participant shall be granted
Options (and/or other Awards) covering more than a total of 13,800,000 Shares.
Subject to Section 12.2, the Committee may grant Incentive Stock Options,
Nonqualified Stock Options, or a combination thereof.

 

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5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement that
shall specify the Exercise Price, the expiration date of the Option, the number
of Shares covered by the Option, any conditions to exercise the Option, and such
other terms and conditions as the Committee, in its discretion, shall determine.
The Award Agreement shall also specify whether the Option is intended to be an
Incentive Stock Option or a Nonqualified Stock Option.

5.3 Exercise Price. Subject to the provisions of this Section 5.3, the Exercise
Price for each Option shall be determined by the Committee in its sole
discretion.

5.3.1 Nonqualified Stock Options. The Exercise Price of each Nonqualified Stock
option shall be determined by the Committee in its discretion but shall be not
less than one hundred percent (100%) of the Fair Market Value of a Share on the
Grant Date.

5.3.2 Incentive Stock Options. In the case of an Incentive Stock Option, the
Exercise Price shall be not less than one hundred percent (100%) of the Fair
Market Value of a Share on the Grant Date; provided, however, that if on the
Grant Date, the Employee (together with persons whose stock ownership is
attributed to the Employee pursuant to Section 424(d) of the Code) owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its Subsidiaries, the Exercise Price shall be not
less than one hundred and ten percent (110%) of the Fair Market Value of a Share
on the Grant Date.

5.3.3 Substitute Options. Notwithstanding the provisions of Section 5.3.2, in
the event that the Company or an Affiliate consummates a transaction described
in Section 424(a) of the Code (e.g., the acquisition of property or stock from
an unrelated corporation), persons who become Employees, Nonemployee Directors
or Consultants on account of such transaction may be granted Options in
substitution for options granted by their former employer. If such substitute
Options are granted, the Committee, in its sole discretion and consistent with
Section 424(a) of the Code, may determine that such substitute Options shall
have an exercise price less than one hundred percent (100%) of the Fair Market
Value of the Shares on the Grant Date.

5.4 Expiration of Options.

5.4.1 Expiration Dates. Each Option shall terminate no later than the first to
occur of the following events:

(a) The date for termination of the Option set forth in the written Award
Agreement; or

(b) The expiration of ten (10) years from the Grant Date.

5.4.2 Death of Participant. Notwithstanding Section 5.4.1, if a Participant dies
prior to the expiration of his or her Options, the Committee, in its discretion,
may provide that his or her Options shall be exercisable for up to three
(3) years after the date of death.

5.4.3 Committee Discretion. Subject to the ten and thirteen-year limits of
Sections 5.4.1 and 5.4.2, the Committee, in its sole discretion, (a) shall
provide in each Award Agreement when each Option expires and becomes
unexercisable, and (b) may, after an Option is

 

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granted, extend the maximum term of the Option (subject to Section 5.8.4
regarding Incentive Stock Options).

5.5 Exercisability of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall determine in its sole discretion. After an Option is
granted, the Committee, in its sole discretion, may accelerate the
exercisability of the Option.

5.6 Payment. Options shall be exercised by the Participant giving notice and
following such procedures as the Company (or its designee) may specify from time
to time. Exercise of an Option also requires that the Participant make
arrangements satisfactory to the Company for full payment of the Exercise Price
for the Shares. All exercise notices shall be given in the form and manner
specified by the Company from time to time. The Exercise Price shall be payable
to the Company in full in cash or its equivalent. The Committee, in its sole
discretion, also may permit exercise (a) by tendering previously acquired Shares
having an aggregate Fair Market Value at the time of exercise equal to the total
Exercise Price, or (b) by any other means which the Committee, in its sole
discretion, determines to both provide legal consideration for the Shares, and
to be consistent with the purposes of the Plan. Any Shares tendered in payment
of the Exercise Price of an Option must have been owned by the Participant (or
any beneficiary) for at least six (6) months prior to the date of exercise,
unless determined otherwise by Committee (in its sole discretion). As soon as
practicable after receipt of a notification of exercise satisfactory to the
Company and full payment for the Shares purchased, the Company shall deliver to
the Participant (or the Participant’s designated broker), Share certificates
(which may be in book entry form) representing such Shares.

5.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option as it
may deem advisable, including, but not limited to, restrictions related to
applicable federal securities laws, the requirements of any national securities
exchange or system upon which Shares are then listed or traded, or any blue sky
or state securities laws.

5.8 Certain Additional Provisions for Incentive Stock Options.

5.8.1 Exercisability. The aggregate Fair Market Value (determined on the Grant
Date(s)) of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by any Employee during any calendar year (under
all plans of the Company and its Subsidiaries) shall not exceed $100,000.

5.8.2 Termination of Service. No Incentive Stock Option may be exercised more
than three (3) months after the Participant’s Termination of Service for any
reason other than Disability or death, unless (a) the Participant dies during
such three-month period, and/or (b) the Award Agreement or the Committee permits
later exercise (in which case the Option instead may be deemed to be a
Nonqualified Stock Option). No Incentive Stock Option may be exercised more than
one (1) year after the Participant’s Termination of Service on account of
Disability, unless (a) the Participant dies during such one-year period, and/or
(b) the Award Agreement or the Committee

 

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permit later exercise (in which case the option instead may be deemed to be a
Nonqualified Stock Option).

5.8.3 Employees Only. Incentive Stock Options may be granted only to persons who
are Employees on the Grant Date.

5.8.4 Expiration. No Incentive Stock Option may be exercised after the
expiration of ten (10) years from the Grant Date; provided, however, that if the
Option is granted to an Employee who, together with persons whose stock
ownership is attributed to the Employee pursuant to Section 424(d) of the Code,
owns stock possessing more than 10% of the total combined voting power of all
classes of the stock of the Company or any of its Subsidiaries, the Option may
not be exercised after the expiration of five (5) years from the Grant Date.

SECTION 6

STOCK APPRECIATION RIGHTS

6.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be
granted to Employees, Directors and Consultants at any time and from time to
time as shall be determined by the Committee, in its sole discretion.

6.1.1 Number of Shares. The Committee shall have complete discretion to
determine the number of SARs granted to any Participant, provided that during
any Fiscal Year, no Participant shall be granted SARs (and/or other Awards)
covering more than a total of 13,800,000 Shares.

6.1.2 Exercise Price and Other Terms. The Committee, subject to the provisions
of the Plan, shall have complete discretion to determine the terms and
conditions of SARs granted under the Plan. The Exercise Price of each SAR shall
be determined by the Committee in its discretion but shall not be less than one
hundred percent (100%) of the Fair Market Value of a Share on the Grant Date.

6.2 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that
shall specify the exercise price, the term of the SAR, the conditions of
exercise, and such other terms and conditions as the Committee, in its sole
discretion, shall determine.

6.3 Expiration of SARs. An SAR granted under the Plan shall expire upon the date
determined by the Committee, in its sole discretion, and set forth in the Award
Agreement. Notwithstanding the foregoing, the rules of Section 5.4 also shall
apply to SARs.

6.4 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:

(a) The difference between the Fair Market Value of a Share on the date of
exercise over the exercise price; times

 

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(b) The number of Shares with respect to which the SAR is exercised. At the
discretion of the Committee, the payment upon SAR exercise may be in cash, in
Shares of equivalent value, or in some combination thereof.

SECTION 7

RESTRICTED STOCK

7.1 Grant of Restricted Stock. Subject to the terms and provisions of the Plan,
the Committee, at any time and from time to time, may grant Shares of Restricted
Stock to Employees, Directors and Consultants as the Committee, in its sole
discretion, shall determine. The Committee, in its sole discretion, shall
determine the number of Shares to be granted to each Participant, provided that
during any Fiscal Year, no Participant shall receive more than a total of
13,800,000 Shares of Restricted Stock (and/or other Awards).

7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be
evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the
Committee, in its sole discretion, shall determine. Unless the Committee
determines otherwise, Shares of Restricted Stock shall be held by the Company as
escrow agent until the restrictions on such Shares have lapsed.

7.3 Transferability. Except as provided in this Section 7, Shares of Restricted
Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable Period of Restriction.

7.4 Other Restrictions. The Committee, in its sole discretion, may impose such
other restrictions on Shares of Restricted Stock as it may deem advisable or
appropriate, in accordance with this Section 7.4.

7.4.1 General Restrictions. The Committee may set restrictions based upon
continued employment or service with the Company and its Affiliates, the
achievement of specific performance objectives (Company-wide, departmental, or
individual), applicable federal or state securities laws, or any other basis
determined by the Committee in its discretion.

7.4.2 Section 162(m) Performance Restrictions. For purposes of qualifying grants
of Restricted Stock as “performance-based compensation” under Section 162(m) of
the Code, the Committee, in its discretion, may set restrictions based upon the
achievement of Performance Goals. The Performance Goals shall be set by the
Committee on or before the latest date permissible to enable the Restricted
Stock to qualify as “performance-based compensation” under Section 162(m) of the
Code. In granting Restricted Stock which is intended to qualify under
Section 162(m) of the Code, the Committee shall follow any procedures determined
by it from time to time to be necessary or appropriate to ensure qualification
of the Restricted Stock under Section 162(m) of the Code (e.g., in determining
the Performance Goals).

7.4.3 Legend on Certificates. The Committee, in its discretion, may legend the
certificates representing Restricted Stock to give appropriate notice of such
restrictions.

 

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7.5 Removal of Restrictions. Except as otherwise provided in this Section 7,
Shares of Restricted Stock covered by each Restricted Stock grant made under the
Plan shall be released from escrow as soon as practicable after the last day of
the Period of Restriction. The Committee, in its discretion, may accelerate the
time at which any restrictions shall lapse or be removed. After the restrictions
have lapsed, the Participant shall be entitled to have any legend or legends
under Section 7.4.3 removed from his or her Share certificate and the Shares
shall be freely transferable by the Participant. The Committee (in its
discretion) may establish procedures regarding the release of Shares from escrow
and the removal of legends, as necessary or appropriate to minimize
administrative burdens on the Company

7.6 Voting Rights. During the Period of Restriction, Participants holding Shares
of Restricted Stock granted hereunder may exercise full voting rights with
respect to those Shares, unless the Committee determines otherwise.

7.7 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement. Any such dividends or distribution
shall be subject to the same restrictions on transferability and forfeitability
as the Shares of Restricted Stock with respect to which they were paid, unless
otherwise provided in the Award Agreement.

7.8 Return of Restricted Stock to Company. On the date set forth in the Award
Agreement, the Restricted Stock for which restrictions have not lapsed shall
revert to the Company and again shall become available for grant under the Plan.

SECTION 8

PERFORMANCE UNITS

8.1 Grant of Performance Units. Performance Units may be granted to Employees,
Directors and Consultants at any time and from time to time, as shall be
determined by the Committee, in its sole discretion. The Committee shall have
complete discretion in determining the number of Performance Units granted to
each Participant provided that during any Fiscal Year, no Participant shall
receive Performance Units having an initial value greater than $3,000,000.

8.2 Value of Performance Units. Each Performance Unit shall have an initial
value that is established by the Committee on or before the Grant Date.

8.3 Performance Objectives and Other Terms. The Committee, in its discretion,
shall set performance objectives or other vesting criteria which, depending on
the extent to which they are met, will determine the number or value of
Performance Units that will be paid out to the Participants. Each Award of
Performance Units shall be evidenced by an Award Agreement that shall specify
the Performance Period, and such other terms and conditions as the Committee, in
its sole discretion, shall determine.

 

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8.3.1 General Performance Objectives or Vesting Criteria. The Committee may set
performance objectives or vesting criteria based upon the achievement of
Company-wide, departmental, or individual goals, applicable federal or state
securities laws, or any other basis determined by the Committee in its
discretion (for example, but not by way of limitation, continuous service as an
Employee, Director or Consultant).

8.3.2 Section 162(m) Performance Objectives. For purposes of qualifying grants
of Performance Units as “performance-based compensation” under Section 162(m) of
the Code, the Committee, in its discretion, may determine that the performance
objectives applicable to Performance Units shall be based on the achievement of
Performance Goals. The Performance Goals shall be set by the Committee on or
before the latest date permissible to enable the Performance Units to qualify as
“performance-based compensation” under Section 162(m) of the Code. In granting
Performance Units that are intended to qualify under Section 162(m) of the Code,
the Committee shall follow any procedures determined by it from time to time to
be necessary or appropriate to ensure qualification of the Performance Units
under Section 162(m) of the Code (e.g., in determining the Performance Goals).

8.4 Earning of Performance Units. After the applicable Performance Period has
ended, the holder of Performance Units shall be entitled to receive a payout of
the number of Performance Units earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance objectives have been achieved. After the grant of a Performance
Unit, the Committee, in its sole discretion, may reduce or waive any performance
objectives for such Performance Unit.

8.5 Form and Timing of Payment of Performance Units. Payment of earned
Performance Units shall be made as soon as practicable after the expiration of
the applicable Performance Period. The Committee, in its sole discretion, may
pay earned Performance Units in the form of cash, in Shares (which have an
aggregate Fair Market Value equal to the value of the earned Performance Units
at the close of the applicable Performance Period) or in a combination thereof.

8.6 Cancellation of Performance Units. On the date set forth in the Award
Agreement, all unearned or unvested Performance Units shall be forfeited to the
Company, and again shall be available for grant under the Plan.

SECTION 9

PERFORMANCE SHARES

9.1 Grant of Performance Shares. Performance Shares may be granted to Employees,
Directors and Consultants at any time and from time to time, as shall be
determined by the Committee, in its sole discretion. The Committee shall have
complete discretion in determining the number of Performance Shares granted to
each Participant, provided that during any Fiscal Year, no Participant shall be
granted more than a total of 13,800,000 Performance Shares (and/or other
Awards).

 

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9.2 Value of Performance Shares. Each Performance Share shall have an initial
value equal to the Fair Market Value of a Share on the Grant Date.

9.3 Performance Share Agreement. Each Award of Performance Shares shall be
evidenced by an Award Agreement that shall specify any vesting conditions, the
number of Performance Shares granted, and such other terms and conditions as the
Committee, in its sole discretion, shall determine.

9.4 Performance Objectives and Other Terms. The Committee, in its discretion,
shall set performance objectives or other vesting criteria which, depending on
the extent to which they are met, will determine the number or value of
Performance Shares that will be paid out to the Participants. Each Award of
Performance Shares shall be evidenced by an Award Agreement that shall specify
the Performance Period, and such other terms and conditions as the Committee, in
its sole discretion, shall determine.

9.4.1 General Performance Objectives or Vesting Criteria. The Committee may set
performance objectives or vesting criteria based upon the achievement of
Company-wide, departmental, or individual goals, applicable federal or state
securities laws, or any other basis determined by the Committee in its
discretion (for example, but not by way of limitation, continuous service as an
Employee, Director or Consultant).

9.4.2 Section 162(m) Performance Objectives. For purposes of qualifying grants
of Performance Shares as “performance-based compensation” under Section 162(m)
of the Code, the Committee, in its discretion, may determine that the
performance objectives applicable to Performance Shares shall be based on the
achievement of Performance Goals. The Performance Goals shall be set by the
Committee on or before the latest date permissible to enable the Performance
Shares to qualify as “performance-based compensation” under Section 162(m) of
the Code. In granting Performance Shares that are intended to qualify under
Section 162(m) of the Code, the Committee shall follow any procedures determined
by it from time to time to be necessary or appropriate to ensure qualification
of the Performance Shares under Section 162(m) of the Code (e.g., in determining
the Performance Goals).

9.5 Earning of Performance Shares. After the applicable Performance Period has
ended, the holder of Performance Shares shall be entitled to receive a payout of
the number of Performance Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance objectives have been achieved. After the grant of a Performance
Share, the Committee, in its sole discretion, may reduce or waive any
performance objectives for such Performance Share.

9.6 Form and Timing of Payment of Performance Shares. Payment of vested
Performance Shares shall be made as soon as practicable after vesting (subject
to any deferral permitted under Section 11.1). The Committee, in its sole
discretion, may pay Performance Shares in the form of cash, in Shares or in a
combination thereof.

 

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9.7 Cancellation of Performance Shares. On the date set forth in the Award
Agreement, all unvested Performance Shares shall be forfeited to the Company,
and except as otherwise determined by the Committee, again shall be available
for grant under the Plan.

SECTION 10

[INTENTIONALLY OMITTED]

SECTION 11

MISCELLANEOUS

11.1 Deferrals. The Committee, in its sole discretion, may permit a Participant
to defer receipt of the payment of cash or the delivery of Shares that would
otherwise be due to such Participant under an Award. Any such deferral elections
shall be subject to such rules and procedures as shall be determined by the
Committee in its sole discretion.

11.2 No Effect on Employment or Service. Nothing in the Plan shall interfere
with or limit in any way the right of the Company to terminate any Participant’s
employment or service at any time, with or without cause. For purposes of the
Plan, transfer of employment of a Participant between the Company and any one of
its Subsidiaries (or between its Subsidiaries) shall not be deemed a Termination
of Service. Employment with the Company and its Subsidiaries is on an at-will
basis only.

11.3 Participation. No Employee, Director or Consultant shall have the right to
be selected to receive an Award under this Plan, or, having been so selected, to
be selected to receive a future Award.

11.4 Indemnification. Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held harmless by the
Company against and from (a) any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action taken or
failure to act under the Plan or any Award Agreement, and (b) from any and all
amounts paid by him or her in settlement thereof, with the Company’s approval,
or paid by him or her in satisfaction of any judgment in any such claim, action,
suit, or proceeding against him or her, provided he or she shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he or she undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company’s
Articles of Incorporation or Bylaws, by contract, as a matter of law, or
otherwise, or under any power that the Company may have to indemnify them or
hold them harmless.

 

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11.5 Successors. All obligations of the Company under the Plan, with respect to
Awards granted hereunder, shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business or assets of the Company.

11.6 Beneficiary Designations. If permitted by the Committee, a Participant
under the Plan may name a beneficiary or beneficiaries to whom any vested but
unpaid Award shall be paid in the event of the Participant’s death. Each such
designation shall revoke all prior designations by the Participant and shall be
effective only if given in a form and manner acceptable to the Committee. In the
absence of any such designation, any vested benefits remaining unpaid at the
Participant’s death shall be paid to the Participant’s estate and, subject to
the terms of the Plan and of the applicable Award Agreement, any unexercised
vested Award may be exercised by the administrator or executor of the
Participant’s estate.

11.7 Limited Transferability of Awards. No Award granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will, by the laws of descent and distribution, or to the limited
extent provided in Section 11.6. All rights with respect to an Award granted to
a Participant shall be available during his or her lifetime only to the
Participant. Notwithstanding the foregoing, a Participant may, if the Committee
(in its discretion) so permits, transfer an Award to an individual or entity
other than the Company. Any such transfer shall be made in accordance with such
procedures as the Committee may specify from time to time.

11.8 No Rights as Shareholder. Except to the limited extent provided in
Sections 7.6, no Participant (nor any beneficiary) shall have any of the rights
or privileges of a shareholder of the Company with respect to any Shares
issuable pursuant to an Award (or exercise thereof), unless and until
certificates representing such Shares shall have been issued, recorded on the
records of the Company or its transfer agents or registrars, and delivered to
the Participant (or beneficiary).

SECTION 12

AMENDMENT, TERMINATION, AND DURATION

12.1 Amendment, Suspension, or Termination. The Board, in its sole discretion,
may amend, suspend or terminate the Plan, or any part thereof, at any time and
for any reason. The amendment, suspension, or termination of the Plan shall not,
without the consent of the Participant, alter or impair any rights or
obligations under any Award theretofore granted to such Participant.
Notwithstanding anything to the contrary in the Plan, the Company reserves the
right, but not the obligation, to revise the Plan and any Awards as it deems
necessary or advisable, in its sole discretion and without the consent of the
Participant, to comply with Section 409A of the Code or to otherwise avoid
imposition of any additional tax or income recognition under Section 409A of the
Code. No Award may be granted during any period of suspension or after
termination of the Plan.

12.2 Duration of the Plan. The Plan became effective August 20, 2004, and
subject to Section 12.1 (regarding the Board’s right to amend or terminate the
Plan), shall remain in effect

 

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thereafter. However, without further shareholder approval, no Incentive Stock
Option may be granted under the Plan following the Merger.

SECTION 13

TAX WITHHOLDING

13.1 Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company shall have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, and local taxes
(including the Participant’s FICA obligation) required to be withheld with
respect to such Award (or exercise thereof).

13.2 Withholding Arrangements. The Committee, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part by
(a) electing to have the Company withhold otherwise deliverable Shares, or
(b) delivering to the Company already-owned Shares having a Fair Market Value
equal to the minimum amount required to be withheld.

SECTION 14

LEGAL CONSTRUCTION

14.1 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

14.2 Severability. In the event any provision of the Plan shall be held illegal
or invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.

14.3 Requirements of Law. 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 required.

14.4 Securities Law Compliance. With respect to Section 16 Persons, transactions
under this Plan are intended to qualify for the exemption provided by Rule
16b-3. To the extent any provision of the Plan, Award Agreement or action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable or appropriate by the Committee.

14.5 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of Delaware (with the
exception of its conflict of laws provisions).

 

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14.6 Captions. Captions are provided herein for convenience only, and shall not
serve as a basis for interpretation or construction of the Plan.

 

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