Exhibit 10.1

 

 

AMBASSADORS INTERNATIONAL, INC.

 

2005 INCENTIVE AWARD PLAN

 

Ambassadors International, Inc., a Delaware corporation (the “Company”), by
resolution of the Board of Directors of the Company, hereby adopts the
Ambassadors International, Inc. 2005 Incentive Award Plan (the “Plan”). The Plan
will become effective upon the approval of the Company’s stockholders (the
“Effective Date”).

 

The purpose of the Plan is to promote the success and enhance the value of the
Company by linking the personal interests of the members of the Board,
Employees, and Consultants to those of the Company’s stockholders and by
providing such individuals with an incentive for outstanding performance to
generate superior returns to the Company’s stockholders. The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of members of the Board, Employees, and
Consultants upon whose judgment, interest, and special effort the successful
conduct of the Company’s operation is largely dependent.

 

ARTICLE I.

 

DEFINITIONS

 

Wherever the following terms are used in the Plan they shall have the meanings
specified below, unless the context clearly indicates otherwise. The singular
pronoun shall include the plural where the context so indicates.

 

1.1. “Administrator” shall mean the entity that conducts the general
administration of the Plan as provided herein. With reference to the
administration of the Plan with respect to Awards granted to Independent
Directors, the term “Administrator” shall refer to the Board. With reference to
the administration of the Plan with respect to any other Award, the term
“Administrator” shall refer to the Committee unless the Board has assumed the
authority for administration of the Plan generally as provided in Section 11.1.
With reference to the duties of the Committee under the Plan which have been
delegated to one or more persons pursuant to Section 11.5, the term
“Administrator” shall refer to such person(s) unless the Committee or the Board
has revoked such delegation.

 

1.2. “Award” shall mean an Option, a Restricted Stock award, a Restricted Stock
Unit award, a Performance Award, a Dividend Equivalents award, a Deferred Stock
award, a Stock Payment award or a Stock Appreciation Right, which may be awarded
or granted under the Plan (collectively, “Awards”).

 

1.3. “Award Agreement” shall mean a written agreement executed by an authorized
officer of the Company and the Holder which shall contain such terms and
conditions with respect to an Award as the Administrator shall determine,
consistent with the Plan.

 

1.4. “Award Limit” shall mean two hundred thousand shares (200,000) shares of
Common Stock, as adjusted pursuant to Section 12.3; provided, however, that,
solely with respect to Performance Awards granted pursuant to Section 8.2(b),
“Award Limit” shall mean $500,000.

 

1.5. “Board” shall mean the Board of Directors of the Company.

 

1.6. “Change in Control” means the occurrence of any of the following events:

 

(a) the acquisition, directly or indirectly, by any “person” or “group” (as
those terms are defined in Sections 3(a)(9), 13(d), and 14(d) of the Exchange
Act and the rules thereunder) of “beneficial ownership” (as determined pursuant
to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally
in the

 

1

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

election of directors (“voting securities”) of the Company that represent 40% or
more of the combined voting power of the Company’s then outstanding voting
securities, other than

 

(i) an acquisition by a trustee or other fiduciary holding securities under any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any person controlled by the Company or by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any person controlled
by the Company,

 

(ii) an acquisition of voting securities by the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of the stock of the Company, or

 

(iii) an acquisition of voting securities pursuant to a transaction described in
subsection (c) below that would not be a Change in Control under subsection (c);

 

provided, however, that notwithstanding the foregoing, an acquisition of the
Company’s securities by the Company which causes the Company’s voting securities
beneficially owned by a person or group to represent 40% or more of the combined
voting power of the Company’s then outstanding voting securities shall not be
considered an acquisition by any person or group for purposes of this subsection
(a); provided, however, that if a person or group shall become the beneficial
owner of 40% or more of the combined voting power of the Company’s then
outstanding voting securities by reason of share acquisitions by the Company as
described above and shall, after such share acquisitions by the Company, become
the beneficial owner of any additional voting securities of the Company, then
such acquisition shall constitute a Change in Control;

 

(b) individuals who, as of the Effective Date, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board;

 

(c) the consummation by the Company (whether directly involving the Company or
indirectly involving the Company through one or more intermediaries) of (i) a
merger, consolidation, reorganization, or business combination or (ii) a sale or
other disposition of all or substantially all of the Company’s assets or (iii)
the acquisition of assets or stock of another entity, in each case, other than a
transaction

 

(A) which results in the Company’s voting securities outstanding immediately
before the transaction continuing to represent (either by remaining outstanding
or by being converted into voting securities of the Company or the person that,
as a result of the transaction, controls, directly or indirectly, the Company or
owns, directly or indirectly, all or substantially all of the Company’s assets
or otherwise succeeds to the business of the Company (the Company or such
person, the “Successor Entity”)) directly or indirectly, at least 50% of the
combined voting power of the Successor Entity’s outstanding voting securities
immediately after the transaction,

 

(B) after which more than 50% of the members of the board of directors of the
Successor Entity were members of the Incumbent Board at the time of the Board’s
approval of the agreement providing for the transaction or other action of the
Board approving the transaction, and

 

(C) after which no person or group beneficially owns voting securities
representing 40% or more of the combined voting power of the Successor Entity;
provided, however, that no person or group shall be treated for purposes of this
subsection (iii) as beneficially owning 40% or more of combined voting power of
the Successor Entity solely as a result of the voting power held in the Company
prior to the consummation of the transaction; or

 

2

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

(d) stockholder approval of a liquidation or dissolution of the Company.

 

For purposes of subsection (a) above, the calculation of voting power shall be
made as if the date of the acquisition were a record date for a vote of the
Company’s stockholders, and for purposes of subsection (c) above, the
calculation of voting power shall be made as if the date of the consummation of
the transaction were a record date for a vote of the Company’s stockholders.

 

1.7. “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

1.8. “Committee” shall mean the Compensation Committee of the Board, or another
committee or subcommittee of the Board, appointed as provided in Section 11.1.

 

1.9. “Common Stock” shall mean the common stock of the Company, par value $0.01
per share.

 

1.10. “Company” shall mean Ambassadors International, Inc., a Delaware
corporation.

 

1.11. “Consultant” shall mean any consultant or adviser if: (a) the consultant
or adviser renders bona fide services to the Company; (b) the services rendered
by the consultant or adviser are not in connection with the offer or sale of
securities in a capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Company’s securities; and (c) the
consultant or adviser is a natural person who has contracted directly with the
Company to render such services.

 

1.12. “Deferred Stock” shall mean rights to receive Common Stock awarded under
Article VIII of the Plan.

 

1.13. “Director” shall mean a member of the Board.

 

1.14. “Dividend Equivalent” shall mean a right to receive the equivalent value
(in cash or Common Stock) of dividends paid on Common Stock, awarded under
Article VIII of the Plan.

 

1.15. “DRO” shall mean a domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder.

 

1.16. “Employee” shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company, or of any
corporation which is a Subsidiary.

 

1.17. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

1.18. “Fair Market Value” of a share of Common Stock as of a given date shall
be: (a) the closing price of a share of Common Stock on the principal exchange
on which shares of Common Stock are then trading, if any (or as reported on any
composite index which includes such principal exchange), on the trading day
previous to such date, or if shares were not traded on the trading day previous
to such date, then on the next preceding date on which a trade occurred, or (b)
if Common Stock is not traded on an exchange but is quoted on Nasdaq or a
successor quotation system, the mean between the closing representative bid and
asked prices for the Common Stock on the trading day previous to such date as
reported by Nasdaq or such successor quotation system, or (c) if Common Stock is
not publicly traded on an exchange and not quoted on Nasdaq or a successor
quotation system, the Fair Market Value of a share of Common Stock as
established by the Administrator acting in good faith.

 

1.19. “Holder” shall mean a person who has been granted or awarded an Award.

 

1.20. “Incentive Stock Option” shall mean an option which conforms to the
applicable provisions of Section 422 of the Code and which is designated as an
Incentive Stock Option by the Administrator.

 

1.21. “Independent Director” shall mean a member of the Board who is not an
Employee.

 

3

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

1.22. “Non-Qualified Stock Option” shall mean an Option which is not designated
as an Incentive Stock Option by the Administrator.

 

1.23. “Option” shall mean a stock option granted under Article IV of the Plan.
An Option granted under the Plan shall, as determined by the Administrator, be
either a Non-Qualified Stock Option or an Incentive Stock Option; provided,
however, that Options granted to Independent Directors and Consultants shall be
Non-Qualified Stock Options.

 

1.24. “Performance Award” shall mean a cash bonus, stock bonus or other
performance or incentive award that is paid in cash, Common Stock or a
combination of both, awarded under Article VIII of the Plan.

 

1.25. “Performance Criteria” means the criteria that the Committee selects for
an Award for purposes of establishing the Performance Goal or Performance Goals
for a Performance Period. The Performance Criteria that will be used to
establish Performance Goals are limited to the following: (a) net earnings
(either before or after (i) interest, (ii) taxes, (iii) depreciation and (iv)
amortization), (b) sales or revenue, (c) net income (either before or after
taxes), (d) operating earnings, (e) cash flow (including, but not limited to,
operating cash flow and free cash flow), (f) return on assets, (g) return on
stockholders’ equity, (h) return on sales, (i) gross or net profit margin, (j)
expense, (k) working capital, (l) earnings per share, (m) price per share of
Common Stock, and (n) market share, any of which may be measured either in
absolute terms or as compared to any incremental increase or as compared to
results of a peer group. The Committee shall, within the time prescribed by
Section 162(m) of the Code, define in an objective fashion the manner of
calculating the Performance Criteria it selects to use for such Performance
Period for such Award; provided, however, that each Performance Criteria shall
be determined in accordance with generally accepted accounting principles to the
extent applicable.

 

1.26. “Performance Goals” means, for a Performance Period, the goals established
in writing by the Committee for the Performance Period based upon the
Performance Criteria. Depending on the Performance Criteria used to establish
such Performance Goals, the Performance Goals may be expressed in terms of
overall Company performance or the performance of a division, business unit, or
an individual. The Committee, in its discretion, may, within the time prescribed
by Section 162(m) of the Code, adjust or modify the calculation of Performance
Goals for such Performance Period in order to prevent the dilution or
enlargement of the rights of any Holder of a Performance Award (a) in the event
of, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event, or development, or (b) in recognition of, or in anticipation
of, any other unusual or nonrecurring events affecting the Company, or the
financial statements of the Company, or in response to, or in anticipation of,
changes in applicable laws, regulations, accounting principles, or business
conditions.

 

1.27. “Performance Period” means one or more periods of time, which may be of
varying and overlapping durations, as the Committee may select, over which the
attainment of one or more Performance Goals will be measured for the purpose of
determining a Holder’s right to, and the payment of, a Performance Award.

 

1.28. “Plan” shall mean the 2005 Incentive Award Plan of Ambassadors
International, Inc.

 

1.29. “Restricted Stock” shall mean Common Stock awarded under Article VII of
the Plan.

 

1.30. “Restricted Stock Units” shall mean rights to receive Common Stock awarded
under Article VIII.

 

1.31. “Rule 16b-3” shall mean Rule 16b-3 promulgated under the Exchange Act, as
such Rule may be amended from time to time.

 

1.32. “Section 162(m) Participant” shall mean any key Employee designated by the
Administrator as a key Employee whose compensation for the fiscal year in which
the key Employee is so designated or a future fiscal year may be subject to the
limit on deductible compensation imposed by Section 162(m) of the Code.

 

4

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

1.33. “Securities Act” shall mean the Securities Act of 1933, as amended.

 

1.34. “Stock Appreciation Right” shall mean a stock appreciation right granted
under Article IX of the Plan.

 

1.35. “Stock Payment” shall mean: (a) a payment in the form of shares of Common
Stock, or (b) an option or other right to purchase shares of Common Stock, as
part of a deferred compensation arrangement, made in lieu of all or any portion
of the compensation, including without limitation, salary, bonuses, commissions
and directors’ fees, that would otherwise become payable to a key Employee,
Independent Director or Consultant in cash, awarded under Article VIII of the
Plan.

 

1.36. “Subsidiary” shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations 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.

 

1.37. “Substitute Award” shall mean an Option granted under this Plan upon the
assumption of, or in substitution for, outstanding equity awards previously
granted by a company or other entity in connection with a corporate transaction,
such as a merger, combination, consolidation or acquisition of property or
stock; provided, however, that in no event shall the term “Substitute Award” be
construed to refer to an award made in connection with the cancellation and
repricing of an Option.

 

1.38. “Termination of Consultancy” shall mean the time when the engagement of a
Holder as a Consultant to the Company or a Subsidiary is terminated for any
reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement, but excluding terminations where
there is a simultaneous commencement of employment with the Company or any
Subsidiary. The Administrator, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Consultancy,
including, but not by way of limitation, the question of whether a Termination
of Consultancy resulted from a discharge for good cause, and all questions of
whether a particular leave of absence constitutes a Termination of Consultancy.
Notwithstanding any other provision of the Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate a Consultant’s service at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.

 

1.39. “Termination of Directorship” shall mean the time when a Holder who is an
Independent Director ceases to be a Director for any reason, including, but not
by way of limitation, a termination by resignation, failure to be elected, death
or retirement. The Board, in its sole and absolute discretion, shall determine
the effect of all matters and questions relating to Termination of Directorship
with respect to Independent Directors.

 

1.40. “Termination of Employment” shall mean the time when the employee-employer
relationship between a Holder and the Company or any Subsidiary is terminated
for any reason, with or without cause, including, but not by way of limitation,
a termination by resignation, discharge, death, disability or retirement; but
excluding: (a) terminations where there is a simultaneous reemployment or
continuing employment of a Holder by the Company or any Subsidiary, (b) at the
discretion of the Administrator, terminations which result in a temporary
severance of the employee-employer relationship, and (c) at the discretion of
the Administrator, terminations which are followed by the simultaneous
establishment of a consulting relationship by the Company or a Subsidiary with
the former employee. The Administrator, in its absolute discretion, shall
determine the effect of all matters and questions relating to Termination of
Employment, including, but not by way of limitation, the question of whether a
Termination of Employment resulted from a discharge for good cause, and all
questions of whether a particular leave of absence constitutes a Termination of
Employment; provided, however, that, with respect to Incentive Stock Options,
unless otherwise determined by the Administrator in its discretion, a leave of
absence, change in status from an employee to an independent contractor or other
change in the employee-employer relationship shall constitute a Termination of
Employment if, and to the extent that, such leave of absence, change in status
or other change interrupts employment for the purposes of Section 422(a)(2) of
the Code and the then applicable regulations and revenue rulings under said
Section.

 

5

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

ARTICLE II.

 

SHARES SUBJECT TO PLAN

 

2.1. Shares Subject to Plan.

 

(a) Subject to Section 12.3 and Section 2.1(b), the maximum number of shares of
Stock which may be issued or transferred pursuant to Awards under the Plan shall
be 600,000 shares.

 

(b) To the extent that an Award terminates, expires, or lapses for any reason,
any shares of Common Stock then subject to such Award shall again be available
for the grant of an Award pursuant to the Plan. Additionally, any shares of
Common Stock tendered or withheld to satisfy the grant or exercise price or tax
withholding obligation pursuant to any Award shall again be available for the
grant of an Award pursuant to the Plan. To the extent permitted by applicable
law or any exchange rule, shares of Common Stock issued in assumption of, or in
substitution for, any outstanding awards of any entity acquired in any form of
combination by the Company or any Subsidiary shall not be counted against shares
of Common Stock available for grant pursuant to this Plan. If any shares of
Restricted Stock are surrendered by the Holder or repurchased by the Company
pursuant to Section 7.4 or 7.5 hereof, such shares may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1(a).
Notwithstanding the provisions of this Section 2.1(b), no shares of Common Stock
may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.

 

2.2. Stock Distributed. Any Common Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Common Stock, shares of
Common Stock held in treasury or shares of Common Stock purchased on the open
market.

 

2.3. Limitation on Number of Shares Subject to Awards. Notwithstanding any
provision in the Plan to the contrary, and subject to Article 11, the maximum
number of shares of Common Stock with respect to one or more Awards that may be
granted to any one Employee, Independent Director or Consultant during each
calendar year shall not exceed the Award Limit. To the extent required by
Section 162(m) of the Code, shares subject to Awards which are canceled continue
to be counted against the Award Limit.

 

ARTICLE III.

 

GRANTING OF AWARDS

 

3.1. Award Agreement. Each Award shall be evidenced by an Award Agreement. Award
Agreements evidencing Awards intended to qualify as performance-based
compensation (as described in Section 162(m)(4)(C) of the Code) shall contain
such terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m) of the Code. Award Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.

 

3.2. Provisions Applicable to Section 162(m) Participants.

 

(a) The Committee, in its discretion, may determine whether an Award is to
qualify as performance-based compensation (as described in Section 162(m)(4)(C)
of the Code).

 

(b) Notwithstanding anything in the Plan to the contrary, the Committee may
grant any Award to a Section 162(m) Participant, including Restricted Stock the
restrictions with respect to which lapse upon the attainment of performance
goals which are related to one or more of the Performance Criteria and any
performance or incentive award described in Article VIII that vests or becomes
exercisable or payable upon the attainment of performance goals which are
related to one or more of the Performance Criteria.

 

6

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

(c) To the extent necessary to comply with the performance-based compensation
requirements of Section 162(m)(4)(C) of the Code, with respect to any Award
granted under Articles VII and VIII which may be granted to one or more Section
162(m) Participants, no later than ninety (90) days following the commencement
of any fiscal year in question or any other designated fiscal period or period
of service (or such other time as may be required or permitted by Section 162(m)
of the Code), the Committee shall, in writing, (i) designate one or more Section
162(m) Participants, (ii) select the Performance Criteria applicable to the
fiscal year or other designated fiscal period or period of service, (iii)
establish the various performance targets, in terms of an objective formula or
standard, and amounts of such Awards, as applicable, which may be earned for
such fiscal year or other designated fiscal period or period of service, and
(iv) specify the relationship between Performance Criteria and the performance
targets and the amounts of such Awards, as applicable, to be earned by each
Section 162(m) Participant for such fiscal year or other designated fiscal
period or period of service. Following the completion of each fiscal year or
other designated fiscal period or period of service, the Committee shall certify
in writing whether the applicable performance targets have been achieved for
such fiscal year or other designated fiscal period or period of service. In
determining the amount earned by a Section 162(m) Participant, the Committee
shall have the right to reduce (but not to increase) the amount payable at a
given level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or corporate
performance for the fiscal year or other designated fiscal period or period of
service.

 

(d) Furthermore, notwithstanding any other provision of the Plan, any Award
which is granted to a Section 162(m) Participant and is intended to qualify as
performance-based compensation (as described in Section 162(m)(4)(C) of the
Code) shall be subject to any additional limitations set forth in Section 162(m)
of the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation (as described in Section 162(m)(4)(C) of the
Code), and the Plan shall be deemed amended to the extent necessary to conform
to such requirements.

 

3.3. Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan, the Plan, and any Award granted or awarded to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

 

3.4. Consideration. In consideration of the granting of an Award under the Plan,
the Holder shall agree, in the Award Agreement, to remain in the employ of (or
to consult for or to serve as an Independent Director of, as applicable) the
Company or any Subsidiary for a period of at least one year (or such shorter
period as may be fixed in the Award Agreement or by action of the Administrator
following grant of the Award) after the Award is granted (or, in the case of an
Independent Director, until the next annual meeting of stockholders of the
Company).

 

3.5. At-Will Employment. Nothing in the Plan or in any Award Agreement hereunder
shall confer upon any Holder any right to continue in the employ of, or as a
Consultant for, the Company or any Subsidiary, or as a Director of the Company,
or shall interfere with or restrict in any way the rights of the Company and any
Subsidiary, which rights are hereby expressly reserved, to discharge any Holder
at any time for any reason whatsoever, with or without cause, except to the
extent expressly provided otherwise in a written employment agreement between
the Holder and the Company and any Subsidiary.

 

7

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

ARTICLE IV.

 

GRANTING OF OPTIONS TO EMPLOYEES,

CONSULTANTS AND INDEPENDENT DIRECTORS

 

4.1. Eligibility. Any Employee or Consultant selected by the Administrator
pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option. Each
Independent Director of the Company shall be eligible to be granted Options at
the times and in the manner set forth in Section 4.5.

 

4.2. Disqualification for Stock Ownership. No person may be granted an Incentive
Stock Option under the Plan if such person, at the time the Incentive Stock
Option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any then existing
Subsidiary or parent corporation (within the meaning of Section 422 of the Code)
unless such Incentive Stock Option conforms to the applicable provisions of
Section 422 of the Code.

 

4.3. Qualification of Incentive Stock Options. No Incentive Stock Option shall
be granted to any person who is not an Employee.

 

4.4. Granting of Options to Employees and Consultants.

 

(a) The Administrator shall from time to time, in its absolute discretion, and,
subject to applicable limitations of the Plan:

 

(i) Determine which Employees are key Employees and select from among the key
Employees or Consultants (including Employees or Consultants who have previously
received Awards under the Plan) such of them as in its opinion should be granted
Options;

 

(ii) Subject to the Award Limit, determine the number of shares to be subject to
such Options granted to the selected key Employees or Consultants;

 

(iii) Subject to Section 4.3, determine whether such Options are to be Incentive
Stock Options or Non-Qualified Stock Options and whether such Options are to
qualify as performance-based compensation (as described in Section 162(m)(4)(C)
of the Code); and

 

(iv) Determine the terms and conditions of such Options, consistent with the
Plan; provided, however, that the terms and conditions of Options intended to
qualify as performance-based compensation (as described in Section 162(m)(4)(C)
of the Code) shall include, but not be limited to, such terms and conditions as
may be necessary to meet the applicable provisions of Section 162(m) of the
Code.

 

(b) Upon the selection of a key Employee or Consultant to be granted an Option,
the Administrator shall instruct the Secretary of the Company to issue the
Option and may impose such conditions on the grant of the Option as it deems
appropriate.

 

(c) Any Incentive Stock Option granted under the Plan may be modified by the
Administrator, with the consent of the Holder, to disqualify such Option from
treatment as an “incentive stock option” under Section 422 of the Code.

 

4.5. Granting of Options to Independent Directors. The Board shall from time to
time, in its absolute discretion, and subject to applicable limitations of the
Plan:

 

(a) Select from among the Independent Directors (including Independent Directors
who have previously received Awards under the Plan) such of them as in its
opinion should be granted Options;

 

(b) Subject to the Award Limit, determine the number of shares to be subject to
such Options granted to the selected Independent Directors; and

 

8

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

(c) Subject to the provisions of Article 5, determine the terms and conditions
of such Options, consistent with the Plan.

 

All the foregoing Option grants authorized by this Section 4.5 are subject to
stockholder approval of the Plan.

 

4.6. Options in Lieu of Cash Compensation. Options may be granted under the Plan
to Employees and Consultants in lieu of cash bonuses which would otherwise be
payable to such Employees and Consultants, and to Independent Directors in lieu
of directors’ fees which would otherwise be payable to such Independent
Directors, pursuant to such policies which may be adopted by the Administrator
from time to time.

 

ARTICLE V.

 

TERMS OF OPTIONS

 

5.1. Option Price. The price per share of the shares subject to each Option
granted to Employees, Independent Directors and Consultants shall be set by the
Administrator; provided, however, that:

 

(a) In the case of Incentive Stock Options, such price shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted (or the date the Option is modified, extended or renewed for purposes
of Section 424(h) of the Code);

 

(b) In the case of Incentive Stock Options granted to an individual then owning
(within the meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any Subsidiary
or parent corporation thereof (within the meaning of Section 422 of the Code),
such price shall not be less than 110% of the Fair Market Value of a share of
Common Stock on the date the Option is granted (or the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code); and

 

(c) In the case of Non-Qualified Stock Options, such price shall not be less
than 100% of the Fair Market Value of a share of Common Stock on the date the
Option is granted.

 

5.2. Option Term. The term of an Option granted to an Employee, Independent
Director or Consultant shall be set by the Administrator in its discretion;
provided, however, that, in the case of Incentive Stock Options, the term shall
not be more than ten (10) years from the date the Incentive Stock Option is
granted, or five (5) years from the date the Incentive Stock Option is granted
if the Incentive Stock Option is granted to an individual then owning (within
the meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code). Except as
limited by requirements of Section 422 of the Code and regulations and rulings
thereunder applicable to Incentive Stock Options, the Administrator may extend
the term of any outstanding Option in connection with any Termination of
Employment, Termination of Directorship or Termination of Consultancy of the
Holder, or amend any other term or condition of such Option relating to such a
Termination of Employment, Termination of Directorship or Termination of
Consultancy.

 

5.3. Option Vesting.

 

(a) The period during which the right to exercise, in whole or in part, an
Option granted to an Employee, Independent Director or a Consultant vests in the
Holder shall be set by the Administrator and the Administrator may determine
that an Option may not be exercised in whole or in part for a specified period
after it is granted; provided, however, that, unless the Administrator otherwise
provides in the terms of the Award Agreement or otherwise, no Option shall be
exercisable by any Holder who is then subject to Section 16 of the Exchange Act
within the period ending six months and one day after the date the Option is
granted. At any time after grant of an Option, the Administrator may, in its
sole and absolute discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option granted to an Employee,
Independent Director or Consultant vests.

 

9

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

(b) No portion of an Option granted to an Employee, Independent Director or
Consultant which is unexercisable at Termination of Employment, Termination of
Directorship or Termination of Consultancy, as applicable, shall thereafter
become exercisable, except as may be otherwise provided by the Administrator
either in the Award Agreement or by action of the Administrator following the
grant of the Option.

 

(c) To the extent that the aggregate fair market value of stock with respect to
which “incentive stock options” (within the meaning of Section 422 of the Code,
but without regard to Section 422(d) of the Code) are exercisable for the first
time by a Holder during any calendar year under the Plan, and all other plans of
the Company and any Subsidiary or parent corporation thereof, within the meaning
of Section 424 of the Code, exceeds $100,000, the Options shall be treated as
Non-Qualified Stock Options to the extent required by Section 422 of the Code.
The rule set forth in the preceding sentence shall be applied by taking Options
and other “incentive stock options” into account in the order in which they were
granted. For purposes of this Section 5.3(c), the fair market value of stock
shall be determined as of the time the Option or other “incentive stock options”
with respect to such stock is granted.

 

5.4. Substitute Awards. Notwithstanding the foregoing provisions of this Article
V to the contrary, in the case of an Option that is a Substitute Award, the
price per share of the shares subject to such Option may be less than the Fair
Market Value per share on the date of grant, provided, that the excess of: (a)
the aggregate Fair Market Value (as of the date such Substitute Award is
granted) of the shares subject to the Substitute Award, over (b) the aggregate
exercise price thereof does not exceed the excess of: (x) the aggregate fair
market value (as of the time immediately preceding the transaction giving rise
to the Substitute Award, such fair market value to be determined by the
Committee) of the shares of the predecessor entity that were subject to the
grant assumed or substituted for by the Company, over (y) the aggregate exercise
price of such shares.

 

ARTICLE VI.

 

EXERCISE OF OPTIONS

 

6.1. Partial Exercise. An exercisable Option may be exercised in whole or in
part. However, an Option shall not be exercisable with respect to fractional
shares and the Administrator may require that, by the terms of the Option, a
partial exercise be with respect to a minimum number of shares.

 

6.2. Manner of Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the
Company, or such other person or entity designated by the Board, or his, her or
its office, as applicable:

 

(a) A written notice complying with the applicable rules established by the
Administrator stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Holder or other person then entitled to exercise
the Option or such portion of the Option;

 

(b) Such representations and documents as the Administrator, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Administrator may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect
such compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;

 

(c) In the event that the Option shall be exercised pursuant to Section 12.1 by
any person or persons other than the Holder, appropriate proof of the right of
such person or persons to exercise the Option; and

 

(d) Full cash payment to the Secretary of the Company for the shares with
respect to which the Option, or portion thereof, is exercised. However, the
Administrator may, in its discretion, (i) allow payment, in whole or in part,
through the delivery of shares of Common Stock which have been owned by the
Holder for at least six months, duly endorsed for transfer to the Company with a
Fair Market Value on the date of

 

10

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

delivery equal to the aggregate exercise price of the Option or exercised
portion thereof; (ii) allow payment, in whole or in part, through the surrender
of shares of Common Stock then issuable upon exercise of the Option having a
Fair Market Value on the date of Option exercise equal to the aggregate exercise
price of the Option or exercised portion thereof; (iii) allow payment, in whole
or in part, through the delivery of property of any kind which constitutes good
and valuable consideration; (iv) allow payment, in whole or in part, through the
delivery of a notice that the Holder has placed a market sell order with a
broker with respect to shares of Common Stock then issuable upon exercise of the
Option, and that the broker has been directed to pay a sufficient portion of the
net proceeds of the sale to the Company in satisfaction of the Option exercise
price, provided that payment of such proceeds is then made to the Company upon
settlement of such sale; or (v) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (i), (ii), (iii) and (iv);
provided, however, that the payment in the manner prescribed in the preceding
paragraphs shall not be permitted to the extent that the Administrator
determines that payment in such manner shall result in an extension or
maintenance of credit, an arrangement for the extension of credit, or a renewal
or an extension of credit in the form of a personal loan to or for any Director
or executive officer of the Company that is prohibited by Section 13(k) of the
Exchange Act or other applicable law.

 

6.3. Conditions to Issuance of Stock Certificates. The Company shall not be
required to issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

 

(a) The admission of such shares to listing on all stock exchanges on which such
class of stock is then listed;

 

(b) The completion of any registration or other qualification of such shares
under any state or federal law, or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body
which the Administrator shall, in its absolute discretion, deem necessary or
advisable;

 

(c) The obtaining of any approval or other clearance from any state or federal
governmental agency which the Administrator shall, in its absolute discretion,
determine to be necessary or advisable;

 

(d) The lapse of such reasonable period of time following the exercise of the
Option as the Administrator may establish from time to time for reasons of
administrative convenience; and

 

(e) The receipt by the Company of full payment for such shares, including
payment of any applicable withholding tax, which in the discretion of the
Administrator may be in the form of consideration used by the Holder to pay for
such shares under Section 6.2(d).

 

6.4. Rights as Stockholders. Holders shall not be, nor have any of the rights or
privileges of, stockholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such Holders.

 

6.5. Ownership and Transfer Restrictions. The Administrator, in its absolute
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Award Agreement and
may be referred to on the certificates evidencing such shares. The Holder shall
give the Company prompt notice of any disposition of shares of Common Stock
acquired by exercise of an Incentive Stock Option within (a) two years from the
date of granting (including the date the Option is modified, extended or renewed
for purposes of Section 424(h) of the Code) such Option to such Holder, or (b)
one year after the transfer of such shares to such Holder.

 

6.6. Additional Limitations on Exercise of Options. Holders may be required to
comply with any timing or other restrictions with respect to the settlement or
exercise of an Option, including a window-period limitation, as may be imposed
in the discretion of the Administrator.

 

11

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

ARTICLE VII.

 

AWARD OF RESTRICTED STOCK

 

7.1. Eligibility. Subject to the Award Limit, Restricted Stock may be awarded to
any Employee who the Administrator determines is a key Employee, or any
Independent Director or any Consultant who the Administrator determines should
receive such an Award.

 

7.2. Award of Restricted Stock.

 

(a) The Administrator may from time to time, in its absolute discretion:

 

(i) Determine which Employees are key Employees, and select from among the Key
Employees, Independent Directors or Consultants (including Employees,
Independent Directors or Consultants who have previously received Awards under
the Plan) such of them as in its opinion should be awarded Restricted Stock; and

 

(ii) Determine the purchase price, if any, and other terms and conditions
applicable to such Restricted Stock, consistent with the Plan.

 

(b) The Administrator shall establish the purchase price, if any, and form of
payment for Restricted Stock; provided, however, that such purchase price shall
be no less than the par value of the Common Stock to be purchased, unless
otherwise permitted by applicable state law. In all cases, legal consideration
shall be required for each issuance of Restricted Stock.

 

(c) Upon the selection of an Employee, Independent Director or Consultant to be
awarded Restricted Stock, the Administrator shall instruct the Secretary of the
Company to issue such Restricted Stock and may impose such conditions on the
issuance of such Restricted Stock as it deems appropriate.

 

7.3. Rights as Stockholders. Subject to Section 7.4, upon delivery of the shares
of Restricted Stock to the escrow holder pursuant to Section 7.6, the Holder
shall have, unless otherwise provided by the Administrator, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his or
her Award Agreement, including the right to receive all dividends and other
distributions paid or made with respect to the shares; provided, however, that,
in the discretion of the Administrator, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in
Section 7.4.

 

7.4. Restriction. All shares of Restricted Stock issued under the Plan
(including any shares received by Holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Administrator shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment,
directorship or consultancy with the Company, Company performance and individual
performance; provided, however, that, unless the Administrator otherwise
provides in the terms of the Award Agreement or otherwise, no share of
Restricted Stock granted to a person subject to Section 16 of the Exchange Act
shall be sold, assigned or otherwise transferred until at least six months and
one day have elapsed from the date on which the Restricted Stock was issued, and
provided, further, that, except with respect to shares of Restricted Stock
granted to Section 162(m) Participants, by action taken after the Restricted
Stock is issued, the Administrator may, on such terms and conditions as it may
determine to be appropriate, remove any or all of the restrictions imposed by
the terms of the Award Agreement. Restricted Stock may not be sold or encumbered
until all restrictions are terminated or expire. If no consideration was paid by
the Holder upon issuance, a Holder’s rights in unvested Restricted Stock shall
lapse, and such Restricted Stock shall be surrendered to the Company without
consideration, upon Termination of Employment, Termination of Directorship, or
Termination of Consultancy, as applicable; and, provided, however, that the
Administrator in its sole and absolute discretion may provide that such rights
shall not lapse in the event of a Termination of Employment, Termination of
Directorship or Termination of Consultancy, as applicable, following a “change
of ownership or control” (within the meaning of Treasury Regulation Section

 

12

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

1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because
of the Holder’s death or disability; and, provided, further, except with respect
to shares of Restricted Stock granted to Section 162(m) Participants, the
Administrator in its sole and absolute discretion may provide that no such lapse
or surrender shall occur in the event of a Termination of Employment,
Termination of Directorship, or Termination of Consultancy, as applicable,
without cause or following any Change in Control or because of the Holder’s
retirement, or otherwise.

 

7.5. Repurchase of Restricted Stock. The Administrator shall provide in the
terms of each individual Award Agreement that the Company shall have the right
to repurchase from the Holder the Restricted Stock then subject to restrictions
under the Award Agreement immediately upon a Termination of Employment,
Termination of Directorship, or Termination of Consultancy, as applicable, at a
cash price per share equal to the price paid by the Holder for such Restricted
Stock; provided, however, that the Administrator in its sole and absolute
discretion may provide that no such right of repurchase shall exist in the event
of a Termination of Employment, Termination of Directorship or Termination of
Consultancy, as applicable, following a “change of ownership or control” (within
the meaning of Treasury Regulation Section 1.162-27(e)(2)(v) or any successor
regulation thereto) of the Company or because of the Holder’s death or
disability; and, provided, further, that, except with respect to shares of
Restricted Stock granted to Section 162(m) Participants, the Administrator in
its sole and absolute discretion may provide that no such right of repurchase
shall exist in the event of a Termination of Employment, Termination of
Directorship, or Termination of Consultancy, as applicable, without cause or
following any Change in Control or because of the Holder’s retirement, or
otherwise.

 

7.6. Escrow. The Secretary of the Company or such other escrow holder as the
Administrator may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Award Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.

 

7.7. Legend. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Administrator shall cause a legend or legends to
be placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed thereby.

 

7.8. Section 83(b) Election. If a Holder makes an election under Section 83(b)
of the Code, or any successor section thereto, to be taxed with respect to the
Restricted Stock as of the date of transfer of the Restricted Stock rather than
as of the date or dates upon which the Holder would otherwise be taxable under
Section 83(a) of the Code, the Holder shall deliver a copy of such election to
the Company immediately after filing such election with the Internal Revenue
Service.

 

ARTICLE VIII.

 

PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK, STOCK

PAYMENTS, RESTRICTED STOCK UNITS

 

8.1. Eligibility. Subject to the Award Limit, one or more Performance Awards,
Dividend Equivalent awards, Deferred Stock awards, Stock Payment awards, and/or
Restricted Stock Unit awards may be granted to any Employee whom the
Administrator determines is a key Employee, or any Independent Director or any
Consultant whom the Administrator determines should receive such an Award.

 

8.2. Performance Awards.

 

(a) Any key Employee, Independent Director or Consultant selected by the
Administrator may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to any one or more of the Performance Criteria
or other specific performance criteria determined appropriate by the

 

13

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

Administrator, in each case on a specified date or dates or over any period or
periods determined by the Administrator. In making such determinations, the
Administrator shall consider (among such other factors as it deems relevant in
light of the specific type of award) the contributions, responsibilities and
other compensation of the particular key Employee, Independent Director or
Consultant.

 

(b) Without limiting Section 8.2(a), the Administrator may grant Performance
Awards to any Section 162(m) Participant in the form of a cash bonus payable
upon the attainment of objective performance goals which are established by the
Administrator and relate to one or more of the Performance Criteria, in each
case on a specified date or dates or over any period or periods determined by
the Administrator. Any such bonuses paid to Section 162(m) Participants shall be
based upon objectively determinable bonus formulas established in accordance
with the provisions of Section 3.2. The maximum aggregate amount of all
Performance Awards granted to a Section 162(m) Participant under this Section
8.2(b) during any calendar year shall not exceed the Award Limit. Unless
otherwise specified by the Administrator at the time of grant, the Performance
Criteria with respect to a Performance Award payable to a Section 162(m)
Participant shall be determined on the basis of generally accepted accounting
principles.

 

8.3. Dividend Equivalents.

 

(a) Any key Employee, Independent Director or Consultant selected by the
Administrator may be granted Dividend Equivalents based on the dividends
declared on Common Stock, to be credited as of dividend payment dates, during
the period between the date a Stock Appreciation Right, Deferred Stock,
Performance Award or Restricted Stock Unit award is granted and the date such
Stock Appreciation Right, Deferred Stock, Performance Award or Restricted Stock
Unit award vests, is exercised, is distributed or expires, as determined by the
Administrator. Such Dividend Equivalents shall be converted to cash or
additional shares of Common Stock by such formula and at such time and subject
to such limitations as may be determined by the Administrator.

 

(b) Any Holder of an Option who is an Employee, Independent Director or
Consultant selected by the Administrator may be granted Dividend Equivalents
based on the dividends declared on Common Stock, to be credited as of dividend
payment dates, during the period between the date an Option is granted and the
date such Option vests, is exercised, or expires, as determined by the
Administrator. Such Dividend Equivalents shall be converted to cash or
additional shares of Common Stock by such formula and at such time and subject
to such limitations as may be determined by the Administrator.

 

(c) Dividend Equivalents granted with respect to Options intended to be
qualified performance-based compensation for purposes of Section 162(m) of the
Code shall be payable, with respect to pre-exercise periods, regardless of
whether such Option is subsequently exercised.

 

8.4. Stock Payments. Any key Employee, Independent Director or Consultant
selected by the Administrator may receive Stock Payments in the manner
determined from time to time by the Administrator. The number of shares shall be
determined by the Administrator and may be based upon the Performance Criteria
or other specific performance criteria determined appropriate by the
Administrator, determined on the date such Stock Payment is made or on any date
thereafter.

 

8.5. Deferred Stock. Any key Employee, Independent Director or Consultant
selected by the Administrator may be granted an award of Deferred Stock in the
manner determined from time to time by the Administrator. The number of shares
of Deferred Stock shall be determined by the Administrator and may be linked to
the Performance Criteria or other specific performance criteria determined to be
appropriate by the Administrator, in each case on a specified date or dates or
over any period or periods determined by the Administrator. Common Stock
underlying a Deferred Stock award will not be issued until the Deferred Stock
award has vested, pursuant to a vesting schedule or performance criteria set by
the Administrator. Unless otherwise provided by the Administrator, a Holder of
Deferred Stock shall have no rights as a Company stockholder with respect to
such Deferred Stock until such time as the Award has vested and the Common Stock
underlying the Award has been issued.

 

14

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

8.6. Restricted Stock Units. Any key Employee, Independent Director or
Consultant selected by the Administrator may be granted an award of Restricted
Stock Units in the manner determined from time to time by the Administrator. The
Administrator is authorized to make awards of Restricted Stock Units in such
amounts and subject to such terms and conditions as determined by the
Administrator. The Administrator shall specify the date or dates on which the
Restricted Stock Units shall become fully vested and nonforfeitable, and may
specify such conditions to vesting as it deems appropriate, and may specify that
such Restricted Stock Units become fully vested and nonforfeitable pursuant to
the satisfaction of one or more Performance Goals or other specific performance
goals as the Administrator determines to be appropriate at the time of the grant
of the Restricted Stock Units or thereafter, in each case on a specified date or
dates or over any period or periods determined by the Administrator. The
Administrator shall specify the distribution dates applicable to each award of
Restricted Stock Units which shall be no earlier than the vesting dates or
events of the award and may be determined at the election of the Employee,
Independent Director or Consultant. On the distribution dates, the Company shall
issue to the Holder one unrestricted, fully transferable share of Common Stock
for each Restricted Stock Unit distributed. The Administrator shall specify the
purchase price, if any, to be paid by the Employee, Independent Director or
Consultant to the Company for such shares of Common Stock to be distributed
pursuant to the Restricted Stock Unit award.

 

8.7. Term. The term of a Performance Award, Dividend Equivalent award, Deferred
Stock award, Stock Payment award and/or Restricted Stock Unit award shall be set
by the Administrator in its discretion.

 

8.8. Exercise or Purchase Price. The Administrator may establish the exercise or
purchase price of a Performance Award, shares of Deferred Stock, shares
distributed as a Stock Payment award or shares distributed pursuant to a
Restricted Stock Unit award; provided, however, that such price shall not be
less than the par value of a share of Common Stock, unless otherwise permitted
by applicable state law.

 

8.9. Exercise upon Termination of Employment, Termination of Consultancy or
Termination of Directorship. A Performance Award, Dividend Equivalent award,
Deferred Stock award, Stock Payment award and/or Restricted Stock Unit award is
exercisable or distributable only while the Holder is an Employee, Consultant or
Independent Director, as applicable; provided, however, that the Administrator
in its sole and absolute discretion may provide that the Performance Award,
Dividend Equivalent award, Deferred Stock award, Stock Payment award and/or
Restricted Stock Unit award may be exercised or distributed subsequent to a
Termination of Employment, Termination of Directorship or Termination of
Consultancy following a “change of control or ownership” (within the meaning of
Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the Company;
and, provided, further, that, except with respect to Performance Awards granted
to Section 162(m) Participants, the Administrator in its sole and absolute
discretion may provide that Performance Awards may be exercised or paid
following a Termination of Employment, Termination of Directorship or
Termination of Consultancy without cause, or following a Change in Control, or
because of the Holder’s retirement, death or disability, or otherwise.

 

8.10. Form of Payment. Payment of the amount determined under Section 8.2 or 8.3
above shall be in cash, in Common Stock or a combination of both, as determined
by the Administrator. To the extent any payment under this Article VIII is
effected in Common Stock, it shall be made subject to satisfaction of all
provisions of Section 6.3.

 

ARTICLE IX.

 

STOCK APPRECIATION RIGHTS

 

9.1. Grant of Stock Appreciation Rights. A Stock Appreciation Right may be
granted to any key Employee, Independent Director or Consultant selected by the
Administrator. A Stock Appreciation Right may be granted: (a) in connection and
simultaneously with the grant of an Option, (b) with respect to a previously
granted Option, or (c) independent of an Option. A Stock Appreciation Right
shall be subject to such terms and conditions not inconsistent with the Plan as
the Administrator shall impose and shall be evidenced by an Award Agreement.

 

15

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

9.2. Coupled Stock Appreciation Rights.

 

(a) A Coupled Stock Appreciation Right (“CSAR”) shall be related to a particular
Option and shall be exercisable only when and to the extent the related Option
is exercisable.

 

(b) A CSAR may be granted to the Holder for no more than the number of shares
subject to the simultaneously or previously granted Option to which it is
coupled.

 

(c) A CSAR shall entitle the Holder (or other person entitled to exercise the
Option pursuant to the Plan) to surrender to the Company unexercised a portion
of the Option to which the CSAR relates (to the extent then exercisable pursuant
to its terms) and to receive from the Company in exchange therefor an amount
determined by multiplying the difference obtained by subtracting the Option
exercise price from the Fair Market Value of a share of Common Stock on the date
of exercise of the CSAR by the number of shares of Common Stock with respect to
which the CSAR shall have been exercised, subject to any limitations the
Administrator may impose.

 

9.3. Independent Stock Appreciation Rights.

 

(a) An Independent Stock Appreciation Right (“ISAR”) shall be unrelated to any
Option and shall have a term set by the Administrator. An ISAR shall be
exercisable in such installments as the Administrator may determine. An ISAR
shall cover such number of shares of Common Stock as the Administrator may
determine; provided, however, that unless the Administrator otherwise provides
in the terms of the ISAR or otherwise, no ISAR granted to a person subject to
Section 16 of the Exchange Act shall be exercisable until at least six months
have elapsed following the date on which the Option was granted. The exercise
price per share of Common Stock subject to each ISAR shall be set by the
Administrator; provided, that such exercise price per share shall not be less
than 100% of the Fair Market Value of a share of Common Stock on the date the
ISAR is granted. An ISAR is exercisable only while the Holder is an Employee,
Independent Director or Consultant; provided, that the Administrator may
determine that the ISAR may be exercised subsequent to Termination of
Employment, Termination of Directorship or Termination of Consultancy without
cause, or following a Change in Control of the Company, or because of the
Holder’s retirement, death or disability, or otherwise.

 

(b) An ISAR shall entitle the Holder (or other person entitled to exercise the
ISAR pursuant to the Plan) to exercise all or a specified portion of the ISAR
(to the extent then exercisable pursuant to its terms) and to receive from the
Company an amount determined by multiplying (i) the difference obtained by
subtracting the exercise price per share of the ISAR from the Fair Market Value
of a share of Common Stock on the date of exercise of the ISAR by (ii) the
number of shares of Common Stock with respect to which the ISAR shall have been
exercised, subject to any limitations the Administrator may impose.

 

9.4. Payment and Limitations on Exercise.

 

(a) Payment of the amounts determined under Section 9.2(c) and 9.3(b) above
shall be in shares of Common Stock (based on its Fair Market Value as of the
date the Stock Appreciation Right is exercised). The Company shall not be
required to issue or deliver any certificate or certificates for shares of stock
issuable upon the exercise of any Stock Appreciation Right prior to fulfillment
of the conditions set forth in Section 6.3 above.

 

(b) Holders of Stock Appreciation Rights may be required to comply with any
timing or other restrictions with respect to the settlement or exercise of a
Stock Appreciation Right, including a window-period limitation, as may be
imposed in the discretion of the Administrator.

 

16

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

ARTICLE X.

 

COMPLIANCE WITH SECTION 409A OF THE CODE

 

10.1. Awards subject to Code Section 409A. Any Award that constitutes, or
provides for, a deferral of compensation subject to Section 409A of the Code (a
“Section 409A Award”) shall satisfy the requirements of Section 409A of the Code
and this Article X, to the extent applicable. The Award Agreement with respect
to a Section 409A Award shall incorporate the terms and conditions required by
Section 409A of the Code and this Article X.

 

10.2. Distributions under a Section 409A Award.

 

(a) Subject to subsection (b), any shares of Common Stock or other property or
amounts to be paid or distributed upon the grant, issuance, vesting, exercise or
payment of a Section 409A Award shall be distributed in accordance with the
requirements of Section 409A(a)(2) of the Code, and shall not be distributed
earlier than:

 

(i) the Holder’s separation from service, as determined by the Secretary of the
Treasury,

 

(ii) the date the Holder becomes disabled,

 

(iii) the Holder’s death,

 

(iv) a specified time (or pursuant to a fixed schedule) specified under the
Award Agreement at the date of the deferral compensation,

 

(v) to the extent provided by the Secretary of the Treasury, a change in the
ownership or effective control of the Company or a Subsidiary, or in the
ownership of a substantial portion of the assets of the Company or a Subsidiary,
or

 

(vi) the occurrence of an unforeseeable emergency with respect to the Holder.

 

(b) In the case of a Holder who is a specified employee, the requirement of
paragraph (a)(i) shall be met only if the distributions with respect to the
Section 409A Award may not be made before the date which is six months after the
Holder’s separation from service (or, if earlier, the date of the Holder’s
death). For purposes of this subsection (b), a Holder shall be a specified
employee if such Holder is a key employee (as defined in Section 416(i) of the
Code without regard to paragraph (5) thereof) of a corporation any stock of
which is publicly traded on an established securities market or otherwise, as
determined under Section 409A(a)(2)(B)(i) of the Code and the Treasury
Regulations thereunder.

 

(c) The requirement of paragraph (a)(vi) shall be met only if, as determined
under Treasury Regulations under Section 409A(a)(2)(B)(ii) of the Code, the
amounts distributed with respect to the unforeseeable emergency do not exceed
the amounts necessary to satisfy such unforeseeable emergency plus amounts
necessary to pay taxes reasonably anticipated as a result of the distribution,
after taking into account the extent to which such unforeseeable emergency is or
may be relieved through reimbursement or compensation by insurance or otherwise
or by liquidation of the Holder’s assets (to the extent the liquidation of such
assets would not itself cause severe financial hardship).

 

(d) For purposes of this Section, the terms specified therein shall have the
respective meanings ascribed thereto under Section 409A of the Code and the
Treasury Regulations thereunder.

 

10.3. Prohibition on Acceleration of Benefits. The time or schedule of any
distribution or payment of any shares of Common Stock or other property or
amounts under a Section 409A Award shall not be accelerated, except as otherwise
permitted under Section 409A(a)(3) of the Code and the Treasury Regulations
thereunder.

 

10.4. Elections under Section 409A Awards.

 

(a) Any deferral election provided under or with respect to an Award to any
Employee, Independent Director or Consultant, or to the Holder of a Section 409A
Award, shall satisfy the requirements of Section 409A(a)(4)(B) of the Code, to
the extent applicable, and, except as otherwise permitted under paragraph

 

17

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

(i) or (ii), any such deferral election with respect to compensation for
services performed during a taxable year shall be made not later than the close
of the preceding taxable year, or at such other time as provided in Treasury
Regulations.

 

(i) In the case of the first year in which an Employee, Independent Director or
Consultant, or the Holder, becomes eligible to participate in the Plan, any such
deferral election may be made with respect to services to be performed
subsequent to the election within thirty (30) days after the date the Employee,
Independent Director or Consultant, or the Holder, becomes eligible to
participate in the Plan, as provided under Section 409A(a)(4)(B)(ii) of the
Code.

 

(ii) In the case of any performance-based compensation based on services
performed by an Employee, Independent Director or Consultant, or the Holder,
over a period of at least twelve (12) months, any such deferral election may be
made no later than six months before the end of the period, as provided under
Section 409A(a)(4)(B)(iii) of the Code.

 

(b) In the event that a Section 409A Award permits, under a subsequent election
by the Holder of such Section 409A Award, a delay in a distribution or payment
of any shares of Common Stock or other property or amounts under such Section
409A Award, or a change in the form of distribution or payment, such subsequent
election shall satisfy the requirements of Section 409A(a)(4)(C) of the Code,
and:

 

(i) such subsequent election may not take effect until at least twelve (12)
months after the date on which the election is made,

 

(ii) in the case such subsequent election relates to a distribution or payment
not described in Section 10.2(a)(ii), (iii) or (vi), the first payment with
respect to such election may be deferred for a period of not less than five
years from the date such distribution or payment otherwise would have been made,
and

 

(iii) in the case such subsequent election relates to a distribution or payment
described in Section 10.2(a)(iv), such election may not be made less than twelve
(12) months prior to the date of the first scheduled distribution or payment
under Section 10.2(a)(iv).

 

10.5. Compliance in Form and Operation. A Section 409A Award, and any election
under or with respect to such Section 409A Award, shall comply in form and
operation with the requirements of Section 409A of the Code and the Treasury
Regulations thereunder.

 

ARTICLE XI.

 

ADMINISTRATION

 

11.1. Compensation Committee. The Compensation Committee (or another committee
or a subcommittee of the Board assuming the functions of the Committee under the
Plan) shall consist solely of two or more Independent Directors appointed by and
holding office at the pleasure of the Board, each of whom is both a
“non-employee director” as defined by Rule 16b-3 and an “outside director” for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.

 

11.2. Duties and Powers of Committee. It shall be the duty of the Committee to
conduct the general administration of the Plan in accordance with its
provisions. The Committee shall have the power to interpret the Plan and the
Award Agreements, and to adopt such rules for the administration, interpretation
and application of the Plan as are consistent therewith, to interpret, amend or
revoke any such rules and to amend any Award Agreement provided that the rights
or obligations of the Holder of the Award that is the subject of any such Award
Agreement are not affected adversely. Any such grant or award under the Plan
need not be the same with respect to each Holder. Any such interpretations and
rules with respect to Incentive Stock Options shall be consistent with the
provisions of Section 422 of the Code. In its absolute discretion, the Board may
at any time

 

18

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

and from time to time exercise any and all rights and duties of the Committee
under the Plan except with respect to matters which under Rule 16b-3 or Section
162(m) of the Code, or any regulations or rules issued thereunder, are required
to be determined in the sole discretion of the Committee. Notwithstanding the
foregoing, the full Board, acting by a majority of its members in office, shall
conduct the general administration of the Plan with respect to Options and
Dividend Equivalents granted to Independent Directors.

 

11.3. Majority Rule; Unanimous Written Consent. The Committee shall act by a
majority of its members in attendance at a meeting at which a quorum is present
or by a memorandum or other written instrument signed by all members of the
Committee.

 

11.4. Compensation; Professional Assistance; Good Faith Actions. Members of the
Committee shall receive such compensation, if any, for their services as members
as may be determined by the Board. All expenses and liabilities which members of
the Committee incur in connection with the administration of the Plan shall be
borne by the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers, brokers or other persons. The
Committee, the Company and the Company’s officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee or the Board in good faith shall be final and binding upon all
Holders, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or Awards, and all
members of the Committee and the Board shall be fully protected by the Company
in respect of any such action, determination or interpretation.

 

11.5. Delegation of Authority to Grant Awards. The Committee may, but need not,
delegate from time to time some or all of its authority to grant Awards under
the Plan to a committee consisting of one or more members of the Committee or of
one or more officers of the Company; provided, however, that the Committee may
not delegate its authority to grant Awards to individuals: (a) who are subject
on the date of the grant to the reporting rules under Section 16(a) of the
Exchange Act, (b) who are Section 162(m) Participants, or (c) who are officers
of the Company who are delegated authority by the Committee hereunder. Any
delegation hereunder shall be subject to the restrictions and limits that the
Committee specifies at the time of such delegation of authority and may be
rescinded at any time by the Committee. At all times, any committee appointed
under this Section 11.5 shall serve in such capacity at the pleasure of the
Committee.

 

ARTICLE XII.

 

MISCELLANEOUS PROVISIONS

 

12.1. Transferability of Awards.

 

(a) Except as otherwise provided in Section 12.1(b):

 

(i) No Award under the Plan may be sold, pledged, assigned or transferred in any
manner other than by will or the laws of descent and distribution or, subject to
the consent of the Administrator, pursuant to a DRO, unless and until such Award
has been exercised, or the shares underlying such Award have been issued, and
all restrictions applicable to such shares have lapsed;

 

(ii) No Option, Restricted Stock award, Deferred Stock award, Performance Award,
Stock Appreciation Right, Dividend Equivalent award, Stock Payment award or
Restricted Stock Unit award or interest or right therein shall be liable for the
debts, contracts or engagements of the Holder or his successors in interest or
shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence; and

 

19

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

(iii) During the lifetime of the Holder, only the Holder may exercise an Option
or other Award (or any portion thereof) granted to him under the Plan, unless it
has been disposed of pursuant to a DRO; after the death of the Holder, any
exercisable portion of an Option or other Award may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Award Agreement,
be exercised by his personal representative or by any person empowered to do so
under the deceased Holder’s will or under the then applicable laws of descent
and distribution.

 

(b) Notwithstanding Section 12.1(a), the Administrator, in its sole discretion,
may determine to permit a Holder to transfer a Non-Qualified Stock Option to any
one or more Permitted Transferees (as defined below), subject to the following
terms and conditions: (i) a Non-Qualified Stock Option transferred to a
Permitted Transferee shall not be assignable or transferable by the Permitted
Transferee other than by will or the laws of descent and distribution; (ii) any
Non-Qualified Stock Option which is transferred to a Permitted Transferee shall
continue to be subject to all the terms and conditions of the Non-Qualified
Stock Option as applicable to the original Holder (other than the ability to
further transfer the Non-Qualified Stock Option); and (iii) the Holder and the
Permitted Transferee shall execute any and all documents requested by the
Administrator, including, without limitation documents to (A) confirm the status
of the transferee as a Permitted Transferee, (B) satisfy any requirements for an
exemption for the transfer under applicable federal and state securities laws
and (C) evidence the transfer. For purposes of this Section 12.1(b), “Permitted
Transferee” shall mean, with respect to a Holder, any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the Holder’s household (other than a tenant or employee), a trust in
which these persons (or the Holder) control the management of assets, and any
other entity in which these persons (or the Holder) own more than fifty percent
of the voting interests, or any other transferee specifically approved by the
Administrator after taking into account any state or federal tax or securities
laws applicable to transferable Non-Qualified Stock Options.

 

12.2. Amendment, Suspension or Termination of the Plan. Except as otherwise
provided in this Section 12.2, the Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or from time to time by
the Administrator. However, without approval of the Company’s stockholders given
within twelve (12) months before or after the action by the Administrator, no
action of the Administrator may, except as provided in Section 12.3, (i)
increase the limits imposed in Section 2.1 on the maximum number of shares which
may be issued under the Plan, (ii) expand the classes of persons to whom Awards
may be granted under the Plan, or (iii) decrease the exercise price of any
outstanding Option or Stock Appreciation Right granted under the Plan. No
amendment, suspension or termination of the Plan shall, without the consent of
the Holder, alter or impair any rights or obligations under any Award
theretofore granted or awarded, unless the Award itself otherwise expressly so
provides. No Awards may be granted or awarded during any period of suspension or
after termination of the Plan, and in no event may any Award be granted under
the Plan after the first to occur of the following events:

 

(a) The expiration of ten (10) years from the date the Plan is adopted by the
Board; or

 

(b) The expiration of ten (10) years from the date the Plan is approved by the
Company’s stockholders under Section 12.4.

 

12.3. Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.

 

(a) Subject to Section 12.3(e), in the event that the Administrator determines
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale,
transfer, exchange or other disposition of all or substantially all of the
assets of the Company, or exchange of Common Stock or other securities of the
Company, issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event, in
the Administrator’s sole discretion, affects the Common Stock such that an
adjustment is determined by the Administrator to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be

 

20

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

made available under the Plan or with respect to an Award, then the
Administrator shall, in such manner as it may deem equitable, adjust any or all
of:

 

(i) The number and kind of shares of Common Stock (or other securities or
property) with respect to which Awards may be granted or awarded (including, but
not limited to, adjustments of the limitations in Section 2.1 on the maximum
number and kind of shares which may be issued under the Plan, and the maximum
number and kind of shares which may be granted or issued as Restricted Stock
awards, Restricted Stock Unit awards, Performance Awards, Dividend Equivalent
awards, Deferred Stock awards or Stock Payment awards, and adjustments of the
Award Limit);

 

(ii) The number and kind of shares of Common Stock (or other securities or
property) subject to outstanding Awards; and

 

(iii) The grant or exercise price with respect to any Award.

 

(b) Subject to Sections 12.3(c) and 12.3(e), in the event of any transaction or
event described in Section 12.3(a) or any unusual or nonrecurring transactions
or events affecting the Company, any affiliate of the Company, or the financial
statements of the Company or any affiliate, or of changes in applicable laws,
regulations or accounting principles, the Administrator, in its sole and
absolute discretion, and on such terms and conditions as it deems appropriate,
either by the terms of the Award or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the Holder’s request,
is hereby authorized to take any one or more of the following actions whenever
the Administrator determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Award under the Plan, to
facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles:

 

(i) To provide for either the purchase of any such Award for an amount of cash
equal to the amount that could have been attained upon the exercise of such
Award or realization of the Holder’s rights had such Award been currently
exercisable or payable or fully vested or the replacement of such Award with
other rights or property selected by the Administrator in its sole discretion;

 

(ii) To provide that the Award cannot vest, be exercised or become payable after
such event;

 

(iii) To provide that such Award shall be exercisable as to all shares covered
thereby, notwithstanding anything to the contrary in Section 5.3 or the
provisions of such Award;

 

(iv) To provide that such Award be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be substituted for by
similar options, rights or awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices;

 

(v) To make adjustments in the number and type of shares of Common Stock (or
other securities or property) subject to outstanding Awards, and/or in the terms
and conditions of (including the grant, exercise or purchase price), and the
criteria included in, outstanding options, rights and awards and options, rights
and awards which may be granted in the future; and

 

(vi) To provide that, for a specified period of time prior to such event, the
restrictions imposed under an Award Agreement upon some or all shares of
Restricted Stock, Restricted Stock Units or Deferred Stock may be terminated,
and, in the case of Restricted Stock, some or all shares of such Restricted
Stock may cease to be subject to repurchase under Section 7.5 or forfeiture
under Section 7.4 after such event.

 

(c) Notwithstanding any other provision of the Plan, in the event of a merger of
the Company with or into another corporation, or the sale of substantially all
of the assets of the Company, the Committee may cause any or all Awards
outstanding hereunder to be assumed or an equivalent option substituted by the
successor corporation or a parent or subsidiary of the successor corporation. In
the event that the successor corporation refuses to assume or substitute for any
such Award, the Committee may cause any or all of such Awards to become fully
exercisable immediately prior to the consummation of such transaction and all

 

21

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

forfeiture restrictions on any or all of such Awards to lapse. Upon, or in
anticipation of, a merger, consolidation or other similar transaction involving
the Company, the Committee may cause any and all Awards outstanding hereunder to
terminate at a specific time in the future, including but not limited to the
date of such transaction; provided, however, that each Participant shall have
the right to exercise such Awards during a period of time as the Committee, in
its sole and absolute discretion, shall determine. In the event that any
agreement between the Company or any Company subsidiary or affiliate and a
Participant contains provisions that conflict with and are more restrictive than
the provisions of this Section 12.3(c), this Section 12.3(c) shall prevail and
control and the more restrictive terms of such agreement (and only such terms)
shall be of no force or effect.

 

(d) Subject to Sections 12.3(e), 3.2 and 3.3, the Administrator may, in its
discretion, include such further provisions and limitations in any Award,
agreement or certificate, as it may deem equitable and in the best interests of
the Company.

 

(e) With respect to Awards which are granted to Section 162(m) Participants and
are intended to qualify as performance-based compensation under Section
162(m)(4)(C), no adjustment or action described in this Section 12.3 or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify under Section
162(m)(4)(C), or any successor provisions thereto. No adjustment or action
described in this Section 12.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action
shall be authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Administrator determines that the Award is
not to comply with such exemptive conditions. The number of shares of Common
Stock subject to any Award shall always be rounded to the next whole number.

 

(f) The existence of the Plan, the Award Agreement and the Awards granted
hereunder shall not affect or restrict in any way the right or power of the
Company or the stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company’s capital
structure or its business, any merger or consolidation of the Company, any issue
of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.

 

(g) No action shall be taken under this Section 12.3 which shall cause an Award
to fail to comply with Section 409A of the Code or the Treasury Regulations
thereunder, to the extent applicable to such Award.

 

12.4. Approval of Plan by Stockholders. The Plan will be submitted for the
approval of the Company’s stockholders within twelve (12) months after the date
of the Board’s initial adoption of the Plan. No Awards may be granted or awarded
prior to such stockholder approval. In addition, if the Board determines that
Awards other than Options or Stock Appreciation Rights which may be granted to
Section 162(m) Participants should continue to be eligible to qualify as
performance-based compensation under Section 162(m)(4)(C) of the Code, the
Performance Criteria must be disclosed to and approved by the Company’s
stockholders no later than the first stockholder meeting that occurs in the
fifth year following the year in which the Company’s stockholders previously
approved the Plan, as amended and restated to include the Performance Criteria.

 

12.5. Tax Withholding. The Company or any Subsidiary shall have the authority
and the right to deduct or withhold, or require a Holder to remit to the
Company, an amount sufficient to satisfy federal, state, local and foreign taxes
(including the Holder’s FICA obligation) required by law to be withheld with
respect to any taxable event concerning a Holder arising as a result of this
Plan. The Administrator may in its discretion and in satisfaction of the
foregoing requirement allow a Holder to elect to have the Company withhold
shares of Common Stock otherwise issuable under an Award (or allow the return of
shares of Common Stock) having a Fair Market Value equal to the sums required to
be withheld. Notwithstanding any other provision of the Plan,

 

22

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

the number of shares of Common Stock which may be withheld with respect to the
issuance, vesting, exercise or payment of any Award (or which may be repurchased
from the Holder of such Award within six months (or such other period as may be
determined by the Administrator) after such shares of Common Stock were acquired
by the Holder from the Company) in order to satisfy the Holder’s federal, state,
local and foreign income and payroll tax liabilities with respect to the
issuance, vesting, exercise or payment of the Award shall be limited to the
number of shares which have a Fair Market Value on the date of withholding or
repurchase equal to the aggregate amount of such liabilities based on the
minimum statutory withholding rates for federal, state, local and foreign income
tax and payroll tax purposes that are applicable to such supplemental taxable
income.

 

12.6. Prohibition on Repricing. Subject to Section 12.3, the Administrator shall
not, without the approval of the stockholders of the Company authorize the
amendment of any outstanding Award to reduce its price per share. Furthermore,
no Award shall be canceled and replaced with the grant of an Award having a
lesser price per share without the further approval of stockholders of the
Company.

 

12.7. Forfeiture Provisions. Pursuant to its general authority to determine the
terms and conditions applicable to Awards under the Plan, the Administrator
shall have the right to provide, in the terms of Awards made under the Plan, or
to require a Holder to agree by separate written instrument, that: (a)(i) any
proceeds, gains or other economic benefit actually or constructively received by
the Holder upon any receipt or exercise of the Award, or upon the receipt or
resale of any Common Stock underlying the Award, must be paid to the Company,
and (ii) the Award shall terminate and any unexercised portion of the Award
(whether or not vested) shall be forfeited, if (b)(i) a Termination of
Employment, Termination of Directorship or Termination of Consultancy occurs
prior to a specified date, or within a specified time period following receipt
or exercise of the Award, or (ii) the Holder at any time, or during a specified
time period, engages in any activity in competition with the Company, or which
is inimical, contrary or harmful to the interests of the Company, as further
defined by the Administrator or (iii) the Holder incurs a Termination of
Employment, Termination of Directorship or Termination of Consultancy for
“cause” (as such term is defined in the sole and absolute discretion of the
Committee, or as set forth in a written agreement relating to such Award between
the Company and the Holder).

 

12.8. Effect of Plan upon Options and Compensation Plans. The adoption of the
Plan shall not affect any other compensation or incentive plans in effect for
the Company or any Subsidiary. Nothing in the Plan shall be construed to limit
the right of the Company: (a) to establish any other forms of incentives or
compensation for Employees, Directors or Consultants of the Company or any
Subsidiary, or (b) to grant or assume options or other rights or awards
otherwise than under the Plan in connection with any proper corporate purpose
including but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, partnership,
limited liability company, firm or association.

 

12.9. Compliance with Laws. The Plan, the granting and vesting of Awards under
the Plan and the issuance and delivery of shares of Common Stock and the payment
of money under the Plan or under Awards granted or awarded hereunder are subject
to compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
the Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
and regulations.

 

12.10. Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of the Plan.

 

12.11. Governing Law. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.

 

23