EXHIBIT 10.1
 
NUANCE COMMUNICATIONS, INC.
(FORMERLY KNOWN AS SCANSOFT, INC.)
 
2000 STOCK PLAN
(As proposed to be amended at the 2007 Annual Meeting of Stockholders)
 
1. Purposes of the Plan.  The purposes of this Plan are:
 

  •  to attract and retain the best available personnel for positions of
substantial responsibility,     •  to provide additional incentive to Employees,
Directors and Consultants, and     •  to promote the success of the Company’s
business.

 
The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock
Options, Stock Purchase Rights, Stock Appreciation Rights, and Restricted Stock
Units.
 
2. Definitions.  As used herein, the following definitions shall apply:
 
(a) “Administrator” means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 4 of the Plan.
 
(b) “Affiliated SAR” means an SAR that is granted in connection with a related
Option, and which automatically will be deemed to be exercised at the same time
that the related Option is exercised.
 
(c) “Applicable Laws” means the requirements relating to the administration of
equity-based awards under U.S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any foreign country
or jurisdiction where Awards are, or will be, granted under the Plan.
 
(d) “Annual Revenue” means the Company’s or a business unit’s net sales for the
Fiscal Year, determined in accordance with generally accepted accounting
principles; provided, however, that prior to the Fiscal Year, the Committee
shall determine whether any significant item(s) shall be excluded or included
from the calculation of Annual Revenue with respect to one or more Participants.
 
(e) “Award” means, individually or collectively, a grant under the Plan of
Options, Stock Purchase Rights, Stock Appreciation Rights, and Restricted Stock
Units.
 
(f) “Award Agreement” means the written or electronic agreement setting forth
the terms and provisions applicable to each Award granted under the Plan. The
Award Agreement is subject to the terms and conditions of the Plan.
 
(g) “Board” means the Board of Directors of the Company.
 
(h) “Cash Position” means the Company’s level of cash and cash equivalents.
 
(i) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to
a section of the Code herein will be a reference to any successor or amended
section of the Code.
 
(j) “Committee” means a committee of Directors appointed by the Board in
accordance with Section 4 of the Plan.
 
(k) “Common Stock” means the common stock of the Company.
 
(l) “Company” means Nuance Communications, Inc. (formerly known as ScanSoft,
Inc.) a Delaware corporation. With respect to the definitions of the Performance
Goals, the Committee may determine that “Company” means Nuance Communications,
Inc. and its consolidated subsidiaries.
 
(m) “Consultant” means any person, including an advisor, engaged by the Company
or a Parent or Subsidiary to render services to such entity.

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(n) “Controllable Profits” means as to any Plan Year, a business unit’s Annual
Revenue minus (a) cost of sales, (b) research, development, and engineering
expense, (c) marketing and sales expense, (d) general and administrative
expense, (e) extended receivables expense, and (f) shipping requirement
deviation expense.
 
(o) “Customer Satisfaction MBOs” means as to any Participant for any Plan Year,
the objective and measurable individual goals set by a “management by
objectives” process and approved by the Committee, which goals relate to the
satisfaction of external or internal customer requirements(p) .
 
(p) “Director” means a member of the Board.
 
(q) “Disability” means total and permanent disability as defined in
Section 22(e)(3) of the Code.
 
(r) “Earnings Per Share” means as to any Fiscal Year, the Company’s or a
business unit’s Net Income, divided by a weighted average number of common
shares outstanding and dilutive common equivalent shares deemed outstanding,
determined in accordance with generally accepted accounting principles.
 
(s) “Employee” means any person, including Officers and Directors, employed by
the Company or any Parent or Subsidiary of the Company. Neither service as a
Director nor payment of a director’s fee by the Company shall be sufficient to
constitute “employment” by the Company.
 
(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
(u) “Fair Market Value” means, as of any date, the value of Common Stock
determined as follows:
 
(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market
or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system on the day of determination,
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable;
 
(ii) If the Common Stock is regularly quoted by a recognized securities dealer
but selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the Common
Stock on the last market trading day on the day of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable; or
 
(iii) In the absence of an established market for the Common Stock, the Fair
Market Value shall be determined in good faith by the Administrator.
 
(v) “Fiscal Year” means the fiscal year of the Company.
 
(w) “Freestanding SAR” means an SAR that is granted independent of any Option.
 
(x) “Incentive Stock Option” means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.
 
(y) “Individual Objectives” means as to a Participant, the objective and
measurable goals set by a “management by objectives” process and approved by the
Committee (in its discretion).
 
(z) “Net Income” means as to any Fiscal Year, the income after taxes of the
Company for the Fiscal Year determined in accordance with generally accepted
accounting principles, provided that prior to the Fiscal Year, the Committee
shall determine whether any significant item(s) shall be included or excluded
from the calculation of Net Income with respect to one or more Participants.
 
(aa) “New Orders” means as to any Plan Year, the firm orders for a system,
product, part, or service that are being recorded for the first time as defined
in the Company’s order Recognition Policy.
 
(bb) “Nonstatutory Stock Option” means an Option that by its terms does not
qualify or is not intended to qualify as an Incentive Stock Option.
 
(cc) “Officer” means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

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(dd) “Operating Cash Flow” means the Company’s or a business unit’s sum of Net
Income plus depreciation and amortization less capital expenditures plus changes
in working capital comprised of accounts receivable, inventories, other current
assets, trade accounts payable, accrued expenses, product warranty, advance
payments from customers and long-term accrued expenses, determined in accordance
with generally acceptable accounting principles.
 
(ee) “Operating Income” means the Company’s or a business unit’s income from
operations but excluding any unusual items, determined in accordance with
generally accepted accounting principles.
 
(ff) “Option” means a stock option granted pursuant to the Plan.
 
(gg) “Optionee” means the holder of an outstanding Option or Stock Purchase
Right granted under the Plan.
 
(hh) “Optioned Stock” means the Shares subject to an Award.
 
(ii) “Parent” means a “parent corporation,” whether now or hereafter existing,
as defined in Section 424(e) of the Code.
 
(jj) “Participant” means the holder of an outstanding Award, which shall include
an Optionee.
 
(kk) “Performance Goals” means the goal(s) (or combined goal(s)) determined by
the Committee (in its discretion) to be applicable to a Participant with respect
to an Award. As determined by the Committee, the Performance Goals applicable to
an Award may provide for a targeted level or levels of achievement using one or
more of the following measures: (a) Annual Revenue, (b) Cash Position,
(c) Controllable Profits, (d) Customer Satisfaction MBOs, (e) Earnings Per
Share, (f) Individual Objectives, (g) Net Income, (h) New Orders, (i) Operating
Cash Flow, (j) Operating Income, (k) Return on Assets, (l) Return on Equity,
(m) Return on Sales, and (n) Total Shareholder Return. The Performance Goals may
differ from Participant to Participant and from Award to Award.
 
(ll) “Plan” means this 2000 Stock Plan, as amended and restated.
 
(mm) “Restricted Stock” means Shares acquired pursuant to a grant of Stock
Purchase Rights under Section 9 of the Plan or pursuant to the early exercise of
an Option.
 
(nn) “Restricted Stock Purchase Agreement” means a written agreement between the
Company and the Participant evidencing the terms and restrictions applying to
stock purchased under a Stock Purchase Right. The Restricted Stock Purchase
Agreement is subject to the terms and conditions of the Plan and the Notice of
Grant.
 
(oo) “Restricted Stock Unit” means an Award granted to a Participant pursuant to
Section 11.
 
(pp) “Return on Assets” means the percentage equal to the Company’s or a
business unit’s Operating Income before incentive compensation, divided by
average net Company or business unit, as applicable, assets, determined in
accordance with generally accepted accounting principles.
 
(qq) “Return on Equity” means the percentage equal to the Company’s Net Income
divided by average stockholder’s equity, determined in accordance with generally
accepted accounting principles.
 
(rr) “Return on Sales” means the percentage equal to the Company’s or a business
unit’s Operating Income before incentive compensation, divided by the Company’s
or the business unit’s, as applicable, revenue, determined in accordance with
generally accepted accounting principles.
 
(ss) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
 
(tt) “Section 16(b)” means Section 16(b) of the Exchange Act.
 
(uu) “Service Provider” means an Employee, Director or Consultant.
 
(vv) “Share” means a share of the Common Stock, as adjusted in accordance with
Section 14 of the Plan.

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(ww) “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with an Option, which pursuant to Section 10 is designated as an SAR.
 
(xx) “Stock Purchase Right” means the right to purchase Shares pursuant to
Section 9 of the Plan.
 
(yy) “Subsidiary” means a “subsidiary corporation”, whether now or hereafter
existing, as defined in Section 424(f) of the Code.
 
(zz) “Tandem SAR” means an SAR that is granted in connection with a related
Option, the exercise of which will require forfeiture of the right to purchase
an equal number of Shares under the related Option (and when a Share is
purchased under the Option, the SAR will be canceled to the same extent).
 
(aaa) “Total Shareholder Return” means the total return (change in share price
plus reinvestment of any dividends) of a Share.
 
3. Stock Subject to the Plan.  Subject to the provisions of Section 14 of the
Plan, the maximum aggregate number of Shares that may be issued under the Plan
is 20,050,000 Shares (the “Plan Maximum”). If any outstanding Award for any
reason expires or is terminated or canceled without having been exercised or
settled in full, or if Shares acquired pursuant to an Award subject to
forfeiture or repurchase are forfeited or repurchased by the Company, the Shares
allocable to the terminated portion of such Award or such forfeited or
repurchased Shares shall again be available for grant under the Plan. Shares
shall not be deemed to have been granted pursuant to the Plan (a) with respect
to any portion of an Award that is settled in cash or (b) to the extent such
Shares are withheld in satisfaction of tax withholding obligations. Upon payment
in Shares pursuant to the exercise of a Stock Appreciation Right, the number of
Shares available for grant under the Plan shall be reduced only by the number of
Shares actually issued in such payment. If the exercise price of an Option is
paid by tender to the Company of Shares underlying the Option, the number of
Shares available for grant under the Plan shall be reduced by the net number of
Shares for which the Option is exercised. The Shares may be authorized, but
unissued, or reacquired Common Stock.
 
4. Administration of the Plan.
 
(a) Procedure.
 
(i) Multiple Administrative Bodies.  Different Committees with respect to
different groups of Service Providers may administer the Plan.
 
(ii) Section 162(m).  To the extent that the Administrator determines it to be
desirable to qualify Awards granted hereunder as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the Plan shall
be administered by a Committee of two or more “outside directors” within the
meaning of Section 162(m) of the Code. For purposes of qualifying grants of
Awards as “performance-based compensation” under Section 162(m) of the Code, the
Committee, in its discretion, may set restrictions based upon the achievement of
Performance Goals. The Performance Goals shall be set by the Committee on or
before the latest date permissible to enable the Awards to qualify as
“performance-based compensation” under Section 162(m) of the Code. In granting
Awards which are intended to qualify under Section 162(m) of the Code, the
Committee shall follow any procedures determined by it from time to time to be
necessary or appropriate to ensure qualification of the Awards under
Section 162(m) of the Code (e.g., in determining the Performance Goals).
 
(iii) Rule 16b-3.  To the extent desirable to qualify transactions hereunder as
exempt under Rule 16b-3, the transactions contemplated hereunder shall be
structured to satisfy the requirements for exemption under Rule 16b-3.
 
(iv) Other Administration.  Other than as provided above, the Plan shall be
administered by (A) the Board or (B) a Committee, which committee shall be
constituted to satisfy Applicable Laws.

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(b) Powers of the Administrator.  Subject to the provisions of the Plan, and in
the case of a Committee, subject to the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
 
(i) to determine the Fair Market Value;
 
(ii) to select the Service Providers to whom Awards may be granted hereunder;
 
(iii) to determine the number of Shares to be covered by each Award granted
hereunder;
 
(iv) to approve forms of agreement for use under the Plan;
 
(v) to determine the terms and conditions, not inconsistent with the terms of
the Plan, of any Award granted hereunder. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Awards may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture restrictions in connection with the termination of a
Participant’s status as a Service Provider, and any restriction or limitation
regarding any Award or the Shares relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall determine;
 
(vi) to construe and interpret the terms of the Plan and awards granted pursuant
to the Plan;
 
(vii) to prescribe, amend and rescind rules and regulations relating to the
Plan, including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax laws;
 
(viii) to modify or amend each Award (subject to Section 17(c) of the Plan),
including the discretionary authority to extend the post-termination
exercisability period of Awards longer than is otherwise provided for in the
Plan;
 
(ix) to allow Participants to satisfy withholding tax obligations by electing to
have the Company withhold from the Shares to be issued upon exercise of an Award
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld. The Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined. All elections by a Participant to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;
 
(x) to authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Award previously granted by the
Administrator;
 
(xi) to allow a Participant to defer the receipt of payment of cash or the
delivery of Shares that would otherwise be due to such Participant under an
Award; or
 
(xii) to make all other determinations deemed necessary or advisable for
administering the Plan.
 
(c) Effect of Administrator’s Decision.  The Administrator’s decisions,
determinations and interpretations shall be final and binding on all
Participants and any other holders of Awards.
 
5. Eligibility.  Nonstatutory Stock Options, Stock Purchase Rights, Stock
Appreciation Rights, and Restricted Stock Units may be granted to Service
Providers. Incentive Stock Options may be granted only to Employees.
 
6. Limitations.
 
(a) Each Option shall be designated in the Award Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 6(a),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.

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(b) The following limitations shall apply to grants of Options and Stock
Appreciation Rights:
 
(i) No Service Provider shall be granted, in any Fiscal Year, Options or Stock
Appreciation Rights covering more than 1,000,000 Shares.
 
(ii) In connection with his or her initial service, a Service Provider may be
granted Options or Stock Appreciation Rights covering up to an additional
1,000,000 Shares, which shall not count against the limit set forth in
subsection (i) above.
 
(iii) The foregoing limitations shall be adjusted proportionately in connection
with any change in the Company’s capitalization as described in Section 14.
 
(iv) If an Option or Stock Appreciation Right is cancelled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 14), the cancelled Option or Stock Appreciation
Right will be counted against the limits set forth in subsections (i) and
(ii) above. For this purpose, if the exercise price of an Option or Stock
Appreciation Right is reduced, the transaction will be treated as a cancellation
of the Option or Stock Appreciation Right and the grant of a new Option or Stock
Appreciation Right.
 
(c) The exercise price of any Option or SAR outstanding or to be granted in the
future under the Plan shall not be reduced or cancelled and re-granted at a
lower exercise price (including pursuant to any “6 month and 1 day” cancellation
and re-grant scheme), regardless of whether or not the Shares subject to the
cancelled Options or SARs are put back into the available pool for grant. In
addition, the Administrator shall not replace underwater Options or SARs with
restricted stock in an exchange, buy-back or other scheme. Moreover, the
Administrator shall not replace any Options or SARs with new options or stock
appreciation rights having a lower exercise price or accelerated vesting
schedule in an exchange, buy-back or other scheme.
 
7. Term of Plan.  Subject to Section 20 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 17 of the Plan.
 
8. Stock Options
 
(a) Term of Option.  The term of each Option shall be stated in the Award
Agreement, but in no event shall the term of an Option be more than seven
(7) years from the date of grant. Moreover, in the case of an Incentive Stock
Option granted to a Participant who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Award
Agreement.
 
(b) Option Exercise Price and Consideration.
 
(i) Exercise Price.  The per Share exercise price for the Shares to be issued
pursuant to the exercise of an Option shall be no less than 100% of the Fair
Market Value per Share on the date of grant. In the case of an Incentive Stock
Option granted to an Employee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
 
(ii) Waiting Period and Exercise Dates.  At the time an Option is granted, the
Administrator shall fix the period within which the Option may be exercised and
shall determine any conditions that must be satisfied before the Option may be
exercised.
 
(iii) Form of Consideration.  The Administrator shall determine the acceptable
form of consideration for exercising an Option, including the method of payment.
In the case of an Incentive Stock Option, the Administrator shall determine the
acceptable form of consideration at the time of grant. Such consideration may
consist entirely of:
 
(1) cash;
 
(2) check;

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(3) other Shares which (A) in the case of Shares acquired upon exercise of an
option, have been owned by the Participant for more than six months on the date
of surrender, and (B) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which said Option shall be
exercised;
 
(4) consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan;
 
(5) a reduction in the amount of any Company liability to the Participant,
including any liability attributable to the Participant’s participation in any
Company-sponsored deferred compensation program or arrangement;
 
(6) any combination of the foregoing methods of payment; or
 
(7) such other consideration and method of payment for the issuance of Shares to
the extent permitted by Applicable Laws.
 
(c) Exercise of Option.
 
(i) Procedure for Exercise; Rights as a Stockholder.  Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Award Agreement. An Option may not be exercised for a fraction of a
Share.
 
(1) An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in such form as the Administrator may specify
from time to time) from the person entitled to exercise the Option, and
(ii) full payment for the Shares with respect to which the Option is exercised
(together with any applicable withholding taxes). Full payment may consist of
any consideration and method of payment authorized by the Administrator and
permitted by the Award Agreement and the Plan. Shares issued upon exercise of an
Option shall be issued in the name of the Participant or, if requested by the
Participant, in the name of the Participant and his or her spouse. Until the
Shares are issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 14 of the Plan.
 
(2) Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
 
(ii) Termination of Relationship as a Service Provider.  If a Participant ceases
to be a Service Provider, other than upon the Participant’s death or Disability,
the Participant may exercise his or her Option within such period of time as is
specified in the Award Agreement to the extent that the Option is vested on the
date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Award Agreement). In the absence of a specified
time in the Award Agreement, the Option shall remain exercisable for three
(3) months following the Participant’s termination. If, on the date of
termination, the Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Participant does not exercise his or her Option
within the time specified by the Administrator, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
 
(iii) Disability of Participant.  If a Participant ceases to be a Service
Provider as a result of the Participant’s Disability, the Participant may
exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement). In the absence of a specified time in the Award
Agreement, the Option shall remain exercisable for twelve (12) months following
the Participant’s termination. If, on the date of termination, the Participant
is not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination,

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the Participant does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
 
(iv) Death of Participant.  If a Participant dies while a Service Provider, the
Option may be exercised following the Participant’s death within such period of
time as is specified in the Award Agreement (but in no event may the Option be
exercised later than the expiration of the term of such Option as set forth in
the Award Agreement), by the Participant’s estate or by a person who acquires
the right to exercise the Option by bequest or inheritance, but only to the
extent that the Option is vested on the date of death. In the absence of a
specified time in the Award Agreement, the Option shall remain exercisable for
twelve (12) months following the Participant’s termination. If, at the time of
death, the Participant is not vested as to his or her entire Option, the Shares
covered by the unvested portion of the Option shall immediately revert to the
Plan. The Option may be exercised by the executor or administrator of the
Participant’s estate or, if none, by the person(s) entitled to exercise the
Option under the Participant’s will or the laws of descent or distribution. If
the Option is not so exercised within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
 
(v) Buyout Provisions.  The Administrator may at any time offer to buy out for a
payment in cash or Shares an Option previously granted based on such terms and
conditions as the Administrator shall establish and communicate to the
Participant at the time that such offer is made.
 
9. Stock Purchase Rights.
 
(a) Rights to Purchase.  Stock Purchase Rights may be issued either alone, in
addition to, or in tandem with other Awards granted under the Plan and/or cash
awards made outside of the Plan. After the Administrator determines that it will
offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing or electronically, of the terms, conditions and restrictions related to
the offer, including the number of Shares that the offeree shall be entitled to
purchase (subject to the limits set forth in Section 3), the price to be paid,
and the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator. The following limitations shall apply to grants
of Stock Purchase Rights:
 
(i) No Service Provider shall be granted, in any Fiscal Year, Stock Purchase
Rights covering more than 750,000 Shares.
 
(ii) The foregoing limitation shall be adjusted proportionately in connection
with any change in the Company’s capitalization as described in Section 14.
 
(iii) If a Stock Purchase Right is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 14), the cancelled Stock Purchase Right will be counted
against the limit set forth in subsection (i) above.
 
(b) Repurchase Option.  Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser’s
service with the Company for any reason (including death or Disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock Purchase
Agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at a rate determined by the Administrator.
 
(c) Other Provisions.  The Restricted Stock Purchase Agreement shall contain
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion.
 
(d) Rights as a Stockholder.  Once the Stock Purchase Right is exercised, the
purchaser shall have the rights equivalent to those of a stockholder, and shall
be a stockholder when his or her purchase is entered upon the records of the
duly authorized transfer agent of the Company. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the Stock
Purchase Right is exercised, except as provided in Section 14 of the Plan.

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10. Stock Appreciation Rights
 
(a) Grant of SARs.  Subject to the terms and conditions of the Plan, an SAR may
be granted to Service Providers at any time and from time to time as will be
determined by the Administrator, in its sole discretion. The Administrator may
grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination
thereof.
 
(b) Number of Shares.  The Administrator will have complete discretion to
determine the number of SARs granted to any Service Provider.
 
(c) Exercise Price and Other Terms.  The Administrator, subject to the
provisions of the Plan, will determine the terms and conditions of SARs granted
under the Plan; provided, that, the exercise price of an SAR is at least 100% of
the Fair Market Value of the Shares subject to the SAR; provided, further, the
exercise price of Tandem or Affiliated SARs will equal the exercise price of the
related Option.
 
(d) Exercise of Tandem SARs.  Tandem SARs may be exercised for all or part of
the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable. With respect to a Tandem SAR granted in connection with an
Incentive Stock Option: (i) the Tandem SAR will expire no later than the
expiration of the underlying Incentive Stock Option; (ii) the value of the
payout with respect to the Tandem SAR will be for no more than one hundred
percent (100%) of the difference between the exercise price of the underlying
Incentive Stock Option and the Fair Market Value of the Shares subject to the
underlying Incentive Stock Option at the time the Tandem SAR is exercised; and
(iii) the Tandem SAR will be exercisable only when the Fair Market Value of the
Shares subject to the Incentive Stock Option exceeds the Exercise Price of the
Incentive Stock Option.
 
(e) Exercise of Affiliated SARs.  An Affiliated SAR will be deemed to be
exercised upon the exercise of the related Option. The deemed exercise of an
Affiliated SAR will not necessitate a reduction in the number of Shares subject
to the related Option.
 
(f) Exercise of Freestanding SARs.  Freestanding SARs will be exercisable on
such terms and conditions as the Administrator, in its sole discretion, will
determine.
 
(g) SAR Agreement.  Each SAR grant will be evidenced by an Award Agreement that
will specify the exercise price, the term of the SAR, the conditions of
exercise, and such other terms and conditions as the Administrator, in its sole
discretion, will determine.
 
(h) Expiration of SARs.  An SAR granted under the Plan will expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the
Award Agreement. Notwithstanding the foregoing, the rules of Section 8(c) also
will apply to SARs.
 
(i) Payment of SAR Amount.  Upon exercise of an SAR, a Participant will be
entitled to receive payment from the Company in an amount determined by
multiplying:
 
(i) The difference between the Fair Market Value of a Share on the date of
exercise over the exercise price; times
 
(ii) The number of Shares with respect to which the SAR is exercised.
 
At the discretion of the Administrator, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.
 
11. Restricted Stock Units.
 
(a) Grant of Restricted Stock Units.  Restricted Stock Units may be granted to
Service Providers at any time and from time to time, as will be determined by
the Administrator, in its sole discretion. The Administrator will have complete
discretion in determining the number of Restricted Stock Units granted to each
Participant, subject to the limits set forth in Section 3 of the Plan. The
following limitations shall apply to grants of Restricted Stock Units:
 
(i) No Service Provider shall be granted, in any Fiscal Year, Restricted Stock
Units covering more than 750,000 Shares.

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(ii) The foregoing limitation shall be adjusted proportionately in connection
with any change in the Company’s capitalization as described in Section 14.
 
(iii) If a Restricted Stock Unit is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 14), the cancelled Restricted Stock Unit will be counted
against the limit set forth in subsection (i) above.
 
(b) Value of Restricted Stock Units.  Each Restricted Stock Unit will have an
initial value that is established by the Administrator on or before the date of
grant.
 
(c) Performance Objectives and Other Terms.  The Administrator will set
performance objectives or other vesting provisions (including, without
limitation, continued status as a Service Provider) in its discretion which,
depending on the extent to which they are met, will determine the number or
value of Restricted Stock Units that will be paid out to the Service Providers.
The time period during which the performance objectives or other vesting
provisions must be met will be called the “Performance Period.” Each award of
Restricted Stock Units will be evidenced by an Award Agreement that will specify
the Performance Period, and such other terms and conditions as the
Administrator, in its sole discretion, will determine. The Administrator may set
performance objectives based upon the achievement of Company-wide, divisional,
or individual goals, applicable federal or state securities laws, or any other
basis determined by the Administrator in its discretion.
 
(d) Earning of Restricted Stock Units.  After the applicable Performance Period
has ended, the holder of Restricted Stock Units will be entitled to receive a
payout of the number of Restricted Stock Units earned by the Participant over
the Performance Period, to be determined as a function of the extent to which
the corresponding performance objectives or other vesting provisions have been
achieved. After the grant of a Restricted Stock Units, the Administrator, in its
sole discretion, may reduce or waive any performance objectives or other vesting
provisions for such Restricted Stock Unit.
 
(e) Form and Timing of Payment of Restricted Stock Units.  Payment of earned
Restricted Stock Units will be made as soon as practicable after the expiration
of the applicable Performance Period. The Administrator, in its sole discretion,
may pay earned Restricted Stock Units in the form of cash, in Shares (which have
an aggregate Fair Market Value equal to the value of the earned Restricted Stock
Units at the close of the applicable Performance Period) or in a combination
thereof.
 
(f) Cancellation of Restricted Stock Units.  On the date set forth in the Award
Agreement, all unearned or unvested Restricted Stock Units will be forfeited to
the Company, and again will be available for grant under the Plan.
 
12. Leaves of Absence.  Unless the Administrator provides otherwise, vesting of
Awards granted hereunder will be suspended during any unpaid leave of absence. A
Service Provider will not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, or any Subsidiary. For purposes of
Incentive Stock Options, no such leave may exceed ninety (90) days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, then three months following the 91st day of such leave any
Incentive Stock Option held by the Participant will cease to be treated as an
Incentive Stock Option and will be treated for tax purposes as a Nonstatutory
Stock Option.
 
13. Non-Transferability of Awards.  Unless determined otherwise by the
Administrator, an Award may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Participant, only by the Participant. If the Administrator makes an Award
transferable, such Award shall contain such additional terms and conditions as
the Administrator deems appropriate.
 
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
Sale.
 
(a) Changes in Capitalization.  Subject to any required action by the
stockholders of the Company, the number and class of Shares that may be
delivered under the Plan and/or the number, class, and price of Shares covered
by each outstanding Award, and the numerical Share limits in Sections 3, 6, 9
and 11 of the Plan, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split,

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reverse stock split, stock dividend, combination or reclassification of the
Shares, or any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been “effected without receipt of consideration.” Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of Shares subject to an Award.
 
(b) Dissolution or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Participant as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for a Participant to have the
right to exercise his or her Award until ten (10) days prior to such transaction
as to all of the Optioned Stock covered thereby, including Shares as to which
the Award would not otherwise be exercisable. In addition, the Administrator may
provide that any Company repurchase option applicable to any Shares purchased
upon exercise of an Award shall lapse as to all such Shares, provided the
proposed dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Award will
terminate immediately prior to the consummation of such proposed action.
 
(c) Merger or Asset Sale.  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, each outstanding Award shall be assumed or an equivalent option or
right 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 the Award, the Participant will fully vest in and have
the right to exercise all of his or her outstanding Options and Stock
Appreciation Rights, including Shares as to which such Awards would not
otherwise be vested or exercisable, all restrictions on Restricted Stock will
lapse, and, with respect to Restricted Stock Units, all Performance Goals or
other vesting criteria will be deemed achieved at target levels and all other
terms and conditions met. In addition, if an Option or Stock Appreciation Right
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator will notify the
Participant in writing or electronically that the Option or Stock Appreciation
Right will be fully vested and exercisable for a period of 15 days from the date
of such notice, and the Option or Stock Appreciation Right will terminate upon
the expiration of such period.
 
For the purposes of this paragraph, the Award shall be considered assumed if,
following the merger or sale of assets, the Award confers the right to purchase
or receive, for each Share subject to the Award immediately prior to the merger
or sale of assets, the consideration (whether stock, cash, or other securities
or property) or, in the case of a Stock Appreciation Right upon the exercise of
which the Administrator determines to pay cash or a Restricted Stock Unit which
the Administrator can determine to pay in cash, the fair market value of the
consideration received in the merger or sale of assets by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares); provided, however, that
if such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of an Option or Stock Appreciation Right or upon
the payout of a Restricted Stock Unit, for each Share subject to such Award (or
in the case of Restricted Stock Units, the number of implied shares determined
by dividing the value of the Restricted Stock Units by the per Share
consideration received by holders of Common Stock in the merger or sale of
assets), to be solely common stock of the successor corporation or its Parent
equal in fair market value to the per Share consideration received by holders of
Common Stock in the merger or sale of assets.
 
Notwithstanding anything in this Section 14(c) to the contrary, an Award that
vests, is earned or paid-out upon the satisfaction of one or more Performance
Goals will not be considered assumed if the Company or its successor modifies
any of such Performance Goals without the Participant’s consent; provided,
however, a modification to such Performance Goals only to reflect the successor
corporation’s corporate structure post-merger or post-sale of assets will not be
deemed to invalidate an otherwise valid Award assumption.
 
15. No Effect on Employment or Service.  Neither the Plan nor any Award will
confer upon a Participant any right with respect to continuing the Participant’s
relationship as a Service Provider with the Company, nor will they

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interfere in any way with the Participant’s right or the Company’s right to
terminate such relationship at any time, with or without cause, to the extent
permitted by Applicable Laws.
 
16. Date of Grant.  The date of grant of an Award shall be, for all purposes,
the date on which the Administrator makes the determination granting such Award,
or such other later date as is determined by the Administrator. Notice of the
determination shall be provided to each Participant within a reasonable time
after the date of such grant.
 
17. Amendment and Termination of the Plan.
 
(a) Amendment and Termination.  The Board may at any time amend, alter, suspend
or terminate the Plan.
 
(b) Stockholder Approval.  The Company shall obtain stockholder approval of any
Plan amendment to the extent necessary and desirable to comply with Applicable
Laws.
 
(c) Effect of Amendment or Termination.  No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Participant, unless
mutually agreed otherwise between the Participant and the Administrator, which
agreement must be in writing and signed by the Participant and the Company.
Termination of the Plan shall not affect the Administrator’s ability to exercise
the powers granted to it hereunder with respect to Awards granted under the Plan
prior to the date of such termination.
 
18. Conditions Upon Issuance of Shares.
 
(a) Legal Compliance.  Shares shall not be issued pursuant to the exercise of an
Award unless the exercise of such Award and the issuance and delivery of such
Shares shall comply with Applicable Laws and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
 
(b) Investment Representations.  As a condition to the exercise of an Award, the
Company may require the person exercising such Award to represent and warrant at
the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
 
19. Inability to Obtain Authority.  The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
 
20. Stockholder Approval.  The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.

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