EXHIBIT 10.117
VERSAR, INC.
2005 STOCK INCENTIVE PLAN
1. Establishment, Purpose, and Types of Awards
     Versar, Inc. (the “Company”) hereby establishes this equity-based incentive
compensation plan to be known as the “Versar, Inc. 2005 Stock Incentive Plan”
(hereinafter referred to as the “Plan”), in order to provide incentives and
awards to select employees and directors of the Company and its Affiliates.
     The Plan permits the granting of the following types of awards (“Awards”),
according to the Sections of the Plan listed here:

         
 
  Section 6   Options
 
  Section 7   Share Appreciation Rights
 
  Section 8   Restricted Shares and Restricted Share Units
 
  Section 9   Deferred Share Units
 
  Section 10   Performance Awards

     The Plan is not intended to affect and shall not affect any stock options,
equity-based compensation, or other benefits that the Company or its Affiliates
may have provided, or may separately provide in the future pursuant to any
agreement, plan, or program that is independent of this Plan.
2. Defined Terms
     Terms in the Plan that begin with an initial capital letter have the
defined meaning set forth in Appendix A, unless defined elsewhere in this Plan
or the context of their use clearly indicates a different meaning.
3. Shares Subject to the Plan
     Subject to the provisions of Section 13 of the Plan, the maximum number of
Shares that the Company may issue for all Awards is 400,000 Shares, subject to
the limitation set forth in Section 5(c). For all Awards, the Shares issued
pursuant to the Plan may be authorized but unissued Shares, or Shares that the
Company has reacquired or otherwise holds in treasury.
     Shares that are subject to an Award that for any reason expires, is
forfeited, is cancelled, or becomes unexercisable, and Shares that are for any
other reason not paid or delivered under the Plan shall again, except to the
extent prohibited by Applicable Law, be available for subsequent Awards under
the Plan. Notwithstanding the foregoing, but subject to adjustments pursuant to
Section 13 below, the number of Shares that are available for ISO Awards shall
be determined, to the extent required under applicable tax laws, by reducing the
number of Shares designated in the preceding paragraph by the number of Shares
issued pursuant to Awards, provided that any Shares that are issued under the
Plan and forfeited back to the Plan shall be available for issuance pursuant to
future ISO Awards.
4. Administration
     (a) General. The Committee shall administer the Plan in accordance with its
terms, provided that the Board may act in lieu of the Committee on any matter.
The Committee shall hold meetings at such times and places as it may determine
and shall make such rules and regulations for the conduct of its business as it
deems advisable.

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In the absence of a duly appointed Committee or if the Board otherwise chooses
to act in lieu of the Committee, the Board shall function as the Committee for
all purposes of the Plan.
     (b) Committee Composition. The Board shall appoint the members of the
Committee. If and to the extent permitted by Applicable Law, the Committee may
authorize one or more Reporting Persons (or other officers) to make Awards to
Eligible Persons who are not Reporting Persons (or other officers whom the
Committee has specifically authorized to make Awards). The Board may at any time
appoint additional members to the Committee, remove and replace members of the
Committee with or without Cause, and fill vacancies on the Committee however
caused.
     (c) Powers of the Committee. Subject to the provisions of the Plan, the
Committee shall have the authority, in its sole discretion:
     (i) to determine Eligible Persons to whom Awards shall be granted from time
to time and the number of Shares, units, or SARs to be covered by each Award;
     (ii) to determine, from time to time, the Fair Market Value of Shares;
     (iii) to determine, and to set forth in Award Agreements, the terms and
conditions of all Awards, including any applicable exercise or purchase price,
the installments and conditions under which an Award shall become vested (which
may be based on performance), terminated, expired, cancelled, or replaced, and
the circumstances for vesting acceleration or waiver of forfeiture restrictions,
and other restrictions and limitations;
     (iv) to approve the forms of Award Agreements and all other documents,
notices and certificates in connection therewith which need not be identical
either as to type of Award or among Participants;
     (v) to construe and interpret the terms of the Plan and any Award
Agreement, to determine the meaning of their terms, and to prescribe, amend, and
rescind rules and procedures relating to the Plan and its administration;
     (vi) in order to fulfill the purposes of the Plan and without amending the
Plan, modify, cancel, or waive the Company’s rights with respect to any Awards,
to adjust or to modify Award Agreements for changes in Applicable Law, and to
recognize differences in foreign law, tax policies, or customs; and
     (vii) to make all other interpretations and to take all other actions that
the Committee may consider necessary or advisable to administer the Plan or to
effectuate its purposes.
     Subject to Applicable Law and the restrictions set forth in the Plan, the
Committee may delegate administrative functions to individuals who are Reporting
Persons, officers, or Employees of the Company or its Affiliates.
     (d) Deference to Committee Determinations. The Committee shall have the
discretion to interpret or construe ambiguous, unclear, or implied (but omitted)
terms in any fashion it deems to be appropriate in its sole discretion, and to
make any findings of fact needed in the administration of the Plan or Award
Agreements. The Committee’s prior exercise of its discretionary authority shall
not obligate it to exercise its authority in a like fashion thereafter. The
Committee’s interpretation and construction of any provision of the Plan, or of
any Award or Award Agreement, shall be final, binding, and conclusive. The
validity of any such interpretation, construction, decision or finding of fact
shall not be given de novo review if challenged in court, by arbitration, or in
any other forum, and shall be upheld unless clearly arbitrary or capricious.

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     (e) No Liability; Indemnification. Neither the Board nor any Committee
member, nor any Person acting at the direction of the Board or the Committee,
shall be liable for any act, omission, interpretation, construction or
determination made in good faith with respect to the Plan, any Award or any
Award Agreement. The Company and its Affiliates shall pay or reimburse any
member of the Committee, as well as any Director, Employee, or Consultant who
takes action in connection with the Plan, for all expenses incurred with respect
to the Plan, and to the full extent allowable under Applicable Law shall
indemnify each and every one of them for any claims, liabilities, and costs
(including reasonable attorney’s fees) arising out of their good faith
performance of duties under the Plan. The Company and its Affiliates may obtain
liability insurance for this purpose.
5. Eligibility
     (a) General Rule. The Committee may grant ISOs only to Employees (including
officers who are Employees) of the Company or an Affiliate that is a “parent
corporation” or “subsidiary corporation” within the meaning of Section 424 of
the Code, and may grant all other Awards to any Eligible Person. A Participant
who has been granted an Award may be granted an additional Award or Awards if
the Committee shall so determine, if such person is otherwise an Eligible Person
and if otherwise in accordance with the terms of the Plan.
     (b) Grant of Awards. Subject to the express provisions of the Plan, the
Committee shall determine from the class of Eligible Persons those individuals
to whom Awards under the Plan may be granted, the number of Shares subject to
each Award, the price (if any) to be paid for the Shares or the Award and, in
the case of Performance Awards, in addition to the matters addressed in
Section 10 below, the specific objectives, goals and performance criteria that
further define the Performance Award. Each Award shall be evidenced by an Award
Agreement signed by the Company and, if required by the Committee, by the
Participant. The Award Agreement shall set forth the material terms and
conditions of the Award established by the Committee.
     (c) Limits on Awards. During the term of the Plan, no single Participant
may receive Awards that in the aggregate relate to more than 100,000 Shares. The
Committee will adjust this limitation pursuant to Section 13 below.
     (d) Replacement Awards. Subject to Applicable Laws (including any
associated Stockholder approval requirements), the Committee may, in its sole
discretion and upon such terms as it deems appropriate, require as a condition
of the grant of an Award to a Participant that the Participant surrender for
cancellation some or all of the Awards that have previously been granted to the
Participant under this Plan or otherwise. An Award that is conditioned upon such
surrender may or may not be the same type of Award, may cover the same (or a
lesser or greater) number of Shares as such surrendered Award, may have other
terms that are determined without regard to the terms or conditions of such
surrendered Award, and may contain any other terms that the Committee deems
appropriate. In the case of Options, these other terms may not involve an
Exercise Price that is lower than the Exercise Price of the surrendered Option
unless the Company’s stockholders approve the grant itself or the program under
which the grant is made pursuant to the Plan.
6. Option Awards
     (a) Types; Documentation. The Committee may in its discretion grant ISOs to
any Employee and Non-ISOs to any Eligible Person, and shall evidence any such
grants in an Award Agreement that is delivered to the Participant. Each Option
shall be designated in the Award Agreement as an ISO or a Non-ISO, and the same
Award Agreement may grant both types of Options. At the sole discretion of the
Committee, any Option may be exercisable, in whole or in part, immediately upon
the grant thereof, or only after the occurrence of a specified event, or only in
installments, which installments may vary. Options granted under the Plan may
contain such terms and provisions not inconsistent with the Plan that the
Committee shall deem advisable in its sole and absolute discretion.
     (b) ISO $100,000 Limitation. To the extent that the aggregate Fair Market
Value of Shares with respect to which Options designated as ISOs first become
exercisable by a Participant in any calendar year (under this Plan and any other
plan of the Company or any Affiliate) exceeds $100,000, such excess Options
shall be treated

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as Non-ISOs. For purposes of determining whether the $100,000 limit is exceeded,
the Fair Market Value of the Shares subject to an ISO shall be determined as of
the Grant Date. In reducing the number of Options treated as ISOs to meet the
$100,000 limit, the most recently granted Options shall be reduced first. In the
event that Section 422 of the Code is amended to alter the limitation set forth
therein, the limitation of this Section 6(b) shall be automatically adjusted
accordingly.
     (c) Term of Options. Each Award Agreement shall specify a term at the end
of which the Option automatically expires, subject to earlier termination
provisions contained in Section 6(h) hereof; provided, that, the term of any
Option may not exceed ten years from the Grant Date; provided that the term of
any ISO granted to an Employee who is a Ten Percent Holder on the Grant Date
shall not exceed five years from the Grant Date.
     (d) Exercise Price. The exercise price of an Option shall be determined by
the Committee in its discretion and shall be set forth in the Award Agreement,
provided that (i) if an ISO is granted to an Employee who on the Grant Date is a
Ten Percent Holder, the per Share exercise price shall not be less than 110% of
the Fair Market Value per Share on the Grant Date, and (ii) for all other
Options, such per Share exercise price shall not be less than 100% of the Fair
Market Value per Share on the Grant Date. Neither the Company nor the Committee
shall, without stockholder approval, allow for a repricing of Options within the
meaning of the federal securities laws and the rules and regulations of the
American Stock Exchange.
     (e) Exercise of Option. The Committee shall in its sole discretion
determine the times, circumstances, and conditions under which an Option shall
be exercisable, and shall set them forth in the Award Agreement. The Committee
shall have the discretion to determine whether and to what extent the vesting of
Options shall be tolled during any unpaid leave of absence; provided, however,
that in the absence of such determination, vesting of Options shall be tolled
during any such leave approved by the Company.
     (f) Minimum Exercise Requirements. An Option may not be exercised for a
fraction of a Share. The Committee may require in an Award Agreement that an
Option be exercised as to a minimum number of Shares, provided that such
requirement shall not prevent a Participant from purchasing the full number of
Shares as to which the Option is then exercisable.
     (g) Methods of Exercise. Prior to its expiration pursuant to the terms of
the applicable Award Agreement, and subject to the times, circumstances and
conditions for exercise contained in the applicable Award Agreement, each Option
may be exercised, in whole or in part (provided that the Company shall not be
required to issue fractional shares), by delivery of written notice of exercise
to the secretary of the Company accompanied by the full exercise price of the
Shares being purchased. In the case of an ISO, the Committee shall determine the
acceptable methods of payment on the Grant Date and shall include such methods
in the applicable Award Agreement. The methods of payment that the Committee may
in its discretion accept or commit to accept in an Award Agreement include:
     (i) cash or check payable to the Company (in U.S. dollars);
     (ii) other Shares that (A) are owned by the Participant who is purchasing
Shares pursuant to an Option, (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option is being exercised, (C) were not acquired by such Participant pursuant to
the exercise of an Option, unless such Shares have been owned by such
Participant for at least six months or such other period as the Committee may
determine, (D) are all, at the time of such surrender, free and clear of any and
all claims, pledges, liens and encumbrances, or any restrictions which would in
any manner restrict the transfer of such shares to or by the Company (other than
such restrictions as may have existed prior to an issuance of such Shares by the
Company to such Participant), and (E) are duly endorsed for transfer to the
Company;
     (iii) a cashless exercise program that the Committee may approve, from time
to time in its discretion, pursuant to which a Participant may concurrently
provide irrevocable instructions (A) to such

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Participant’s broker or dealer to effect the immediate sale of the purchased
Shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the exercise price of the Option plus
all applicable taxes required to be withheld by the Company by reason of such
exercise, and (B) to the Company to deliver the certificates for the purchased
Shares directly to such broker or dealer in order to complete the sale;
     (iv) a promissory note in a principal amount equal to the exercise price
and otherwise in a form and with such terms as are approved by the Committee or
cancellation of other indebtedness, provided no executive officer or director of
the Company shall be permitted to pay any portion of an Option exercise price by
issuance of a promissory note; or
     (v) any combination of the foregoing methods of payment.
     The Company shall not be required to deliver Shares pursuant to the
exercise of an Option until payment of the full exercise price therefore is
received by the Company.
     (h) Termination of Continuous Service. The Committee may establish and set
forth in the applicable Award Agreement the terms and conditions on which an
Option shall remain exercisable, if at all, following termination of a
Participant’s Continuous Service. The Committee may waive or modify these
provisions at any time. To the extent that a Participant is not entitled to
exercise an Option at the date of his or her termination of Continuous Service,
or if the Participant (or other person entitled to exercise the Option) does not
exercise the Option to the extent so entitled within the time specified in the
Award Agreement or below (as applicable), the Option shall terminate and the
Shares underlying the unexercised portion of the Option shall revert to the Plan
and become available for future Awards. In no event may any Option be exercised
after the expiration of the Option term as set forth in the Award Agreement.
     The following provisions shall apply to the extent an Award Agreement does
not specify the terms and conditions upon which an Option shall terminate when
there is a termination of a Participant’s Continuous Service:
     (i) Termination other than Upon Disability, Death or Retirement or for
Cause. In the event of termination of a Participant’s Continuous Service (other
than as a result of Participant’s death, disability, retirement or termination
for Cause), the Participant shall have the right to exercise an Option at any
time within 90 days following such termination to the extent the Participant was
entitled to exercise such Option at the date of such termination.
     (ii) Disability. In the event of termination of a Participant’s Continuous
Service as a result of his or her being Disabled, the Participant shall have the
right to exercise an Option at any time within one year following such
termination to the extent the Participant was entitled to exercise such Option
at the date of such termination.
     (iii) Retirement. In the event of termination of a Participant’s Continuous
Service as a result of Participant’s retirement, the Participant shall have the
right to exercise the Option at any time within six months following such
termination to the extent the Participant was entitled to exercise such Option
at the date of such termination.
     (iv) Death. In the event of the death of a Participant during the period of
Continuous Service since the Grant Date of an Option, or within thirty days
following termination of the Participant’s Continuous Service, the Option may be
exercised, at any time within one year following the date of the Participant’s
death, by the Participant’s estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the right
to exercise the Option had vested at the date of death or, if earlier, the date
the Participant’s Continuous Service terminated.

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     (v) Cause. If the Committee determines that a Participant’s Continuous
Service terminated due to Cause, the Participant shall immediately forfeit the
right to exercise any Option, and it shall be considered immediately null and
void.
     (i) Reverse Vesting. The Committee in its sole and absolute discretion may
allow a Participant to exercise unvested Options, in which case the Shares then
issued shall be Restricted Shares having analogous vesting restrictions to the
unvested Options.
7. Share Appreciate Rights (SARs)
     (a) Grants. The Committee may in its discretion grant Share Appreciation
Rights to any Eligible Person, in any of the following forms:
     (i) SARs related to Options. The Committee may grant SARs either
concurrently with the grant of an Option or with respect to an outstanding
Option, in which case the SAR shall extend to all or a portion of the Shares
covered by the related Option. An SAR shall entitle the Participant who holds
the related Option, upon exercise of the SAR and surrender of the related
Option, or portion thereof, to the extent the SAR and related Option each were
previously unexercised, to receive payment of an amount determined pursuant to
Section 7(e) below. Any SAR granted in connection with an ISO will contain such
terms as may be required to comply with the provisions of Section 422 of the
Code and the regulations promulgated thereunder.
     (ii) SARs Independent of Options. The Committee may grant SARs which are
independent of any Option subject to such conditions as the Committee may in its
discretion determine, which conditions will be set forth in the applicable Award
Agreement.
     (iii) Limited SARs. The Committee may grant SARs exercisable only upon or
in respect of a Change in Control or any other specified event, and such limited
SARs may relate to or operate in tandem or combination with or substitution for
Options or other SARs, or on a stand-alone basis, and may be payable in cash or
Shares based on the spread between the exercise price of the SAR, and (A) a
price based upon or equal to the Fair Market Value of the Shares during a
specified period, at a specified time within a specified period before, after or
including the date of such event, or (B) a price related to consideration
payable to Company’s stockholders generally in connection with the event.
     (b) Exercise Price. The per Share exercise price of an SAR shall be
determined in the sole discretion of the Committee, shall be set forth in the
applicable Award Agreement, and shall be no less than 100% of the Fair Market
Value of one Share. The exercise price of an SAR related to an Option shall be
the same as the exercise price of the related Option. The exercise price of an
SAR shall be subject to the special rules on pricing contained in Sections 6(d).
Neither the Company nor the Committee shall, without stockholder approval, allow
for a repricing of SARs within the meaning of federal securities laws or the
rules and regulations of the American Stock Exchange.
     (c) Exercise of SARs. Unless the Award Agreement otherwise provides, an SAR
related to an Option will be exercisable at such time or times, and to the
extent, that the related Option will be exercisable; provided that the Award
Agreement shall not, without the approval of the stockholders of the Company,
provide for a vesting period for the exercise of the SAR that is more favorable
to the Participant than the exercise period for the related Option. An SAR may
not have a term exceeding ten years from its Grant Date. An SAR granted
independently of any other Award will be exercisable pursuant to the terms of
the Award Agreement. Whether an SAR is related to an Option or is granted
independently, the SAR may only be exercised when the Fair Market Value of the
Shares underlying the SAR exceeds the exercise price of the SAR.
     (d) Effect on Available Shares. All SARs to be settled in shares of the
Company’s stock shall be counted in full against the number of shares available
for award under the Plan, regardless of the number of shares actually issued
upon settlement of the SARs.

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     (e) Payment. Upon exercise of an SAR related to an Option and the attendant
surrender of an exercisable portion of any related Award, the Participant will
be entitled to receive payment of an amount determined by multiplying –
     (i) the excess of the Fair Market Value of a Share on the date of exercise
of the SAR over the exercise price per Share of the SAR, by
     (ii) the number of Shares with respect to which the SAR has been exercised.
     Notwithstanding the foregoing, an SAR granted independently of an Option
(i) may limit the amount payable to the Participant to a percentage, specified
in the Award Agreement but not exceeding one-hundred percent (100%), of the
amount determined pursuant to the preceding sentence, and (ii) shall be subject
to any payment or other restrictions that the Committee may at any time impose
in its discretion, including restrictions intended to conform the SARs with
Section 409A of the Code.
     (f) Form and Terms of Payment. Subject to Applicable Law, the Committee
may, in its sole discretion, settle the amount determined under Section 7(e)
above solely in cash, solely in Shares (valued at their Fair Market Value on the
date of exercise of the SAR), or partly in cash and partly in Shares. In any
event, cash shall be paid in lieu of fractional Shares. Absent a contrary
determination by the Committee, all SARs shall be settled in cash as soon as
practicable after exercise. Notwithstanding the foregoing, the Committee may, in
an Award Agreement, determine the maximum amount of cash or Shares or
combination thereof that may be delivered upon exercise of an SAR.
     (g) Termination of Employment or Consulting Relationship. The Committee
shall establish and set forth in the applicable Award Agreement the terms and
conditions on which an SAR shall remain exercisable, if at all, following
termination of a Participant’s Continuous Service. The provisions of Section
6(h) above shall apply to the extent an Award Agreement does not specify the
terms and conditions upon which an SAR shall terminate when there is a
termination of a Participant’s Continuous Service.
8. Restricted Shares and Restricted Share Units
     (a) Grants. The Committee may in its discretion grant restricted shares
(“Restricted Shares”) to any Eligible Person and shall evidence such grant in an
Award Agreement that is delivered to the Participant and that sets forth the
number of Restricted Shares, the purchase price for such Restricted Shares (if
any), and the terms upon which the Restricted Shares may become vested. In
addition, the Company may in its discretion grant the right to receive Shares
after certain vesting requirements are met (“Restricted Share Units”) to any
Eligible Person and shall evidence such grant in an Award Agreement that is
delivered to the Participant which sets forth the number of Shares (or formula,
that may be based on future performance or conditions, for determining the
number of Shares) that the Participant shall be entitled to receive upon vesting
and the terms upon which the Shares subject to a Restricted Share Unit may
become vested. The Committee may condition any Award of Restricted Shares or
Restricted Share Units to a Participant on receiving from the Participant such
further assurances and documents as the Committee may require to enforce the
restrictions.
     (b) Vesting and Forfeiture. The Committee shall set forth in an Award
Agreement granting Restricted Shares or Restricted Share Units, the terms and
conditions under which the Participant’s interest in the Restricted Shares or
the Shares subject to Restricted Share Units will become vested and
non-forfeitable. Except as set forth in the applicable Award Agreement or the
Committee otherwise determines, upon termination of a Participant’s Continuous
Service for any other reason, the Participant shall forfeit his or her
Restricted Shares and Restricted Share Units; provided that if a Participant
purchases the Restricted Shares and forfeits them for any reason, the Company
shall return the purchase price to the Participant only if and to the extent set
forth in an Award Agreement.
     (c) Issuance of Restricted Shares Prior to Vesting. The Company shall issue
stock certificates that evidence Restricted Shares pending the lapse of
applicable restrictions, and that bear a legend making appropriate

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reference to such restrictions. Except as set forth in the applicable Award
Agreement or the Committee otherwise determines, the Company or a third party
that the Company designates shall hold such Restricted Shares and any dividends
that accrue with respect to Restricted Shares pursuant to Section 8(e) below.
     (d) Issuance of Shares upon Vesting. As soon as practicable after vesting
of a Participant’s Restricted Shares (or Shares underlying Restricted Share
Units) and the Participant’s satisfaction of applicable tax withholding
requirements, the Company shall release to the Participant, free from the
vesting restrictions, one Share for each vested Restricted Share (or issue one
Share free of the vesting restriction for each vested Restricted Share Unit),
unless an Award Agreement provides otherwise. No fractional shares shall be
distributed, and cash shall be paid in lieu thereof.
     (e) Dividends Payable on Vesting. Whenever Shares are released to a
Participant under Section 8(d) above pursuant to the vesting of Restricted
Shares or the Shares underlying Restricted Share Units are issued to a
Participant pursuant to Section 8(d) above, such Participant shall receive
(unless otherwise provided in the Award Agreement), with respect to each Share
released or issued, an amount equal to any cash dividends (plus, in the
discretion of the Committee, simple interest at a rate as the Committee may
determine) and a number of Shares equal to any stock dividends, which were
declared and paid to the holders of Shares between the Grant Date and the date
such Share is released or issued.
     (f) Section 83(b) Elections. A Participant may make an election under
Section 83(b) of the Code (the “Section 83(b) Election”) with respect to
Restricted Shares. If a Participant who has received Restricted Share Units
provides the Committee with written notice of his or her intention to make
Section 83(b) Election with respect to the Shares subject to such Restricted
Share Units, the Committee may in its discretion convert the Participant’s
Restricted Share Units into Restricted Shares, on a one-for-one basis, in full
satisfaction of the Participant’s Restricted Share Unit Award. The Participant
may then make a Section 83(b) Election with respect to those Restricted Shares.
Shares with respect to which a Participant makes a Section 83(b) Election shall
not be eligible for deferral pursuant to Section 9 below.
     (g) Deferral Elections. At any time within the thirty-day period (or other
shorter or longer period that the Committee selects) in which a Participant who
is a member of a select group of management or highly compensated employees
(within the meaning of the Code) receives an Award of either Restricted Shares
or Restricted Share Units, the Committee may permit the Participant to
irrevocably elect, on a form provided by and acceptable to the Committee, to
defer the receipt of all or a percentage of the Shares that would otherwise be
transferred to the Participant upon the vesting of such Award. If the
Participant makes this election, the Shares subject to the election, and any
associated dividends and interest, shall be credited to an account established
pursuant to Section 9 hereof on the date such Shares would otherwise have been
released or issued to the Participant pursuant to Section 8(d) above.
9. Deferred Share Units
     (a) Elections to Defer. The Committee may permit any Eligible Person who is
a Director, Consultant or member of a select group of management or highly
compensated employees (within the meaning of the Code) to irrevocably elect, on
a form provided by and acceptable to the Committee (the “Election Form”), to
forego the receipt of cash or other compensation (including the Shares
deliverable pursuant to any Award other than Restricted Shares for which a
Section 83(b) Election has been made), and in lieu thereof to have the Company
credit to an internal Plan account (the “Account”) a number of deferred share
units (“Deferred Share Units”) having a Fair Market Value equal to the Shares
and other compensation deferred. These credits will be made at the end of each
calendar month during which compensation is deferred. Each Election Form shall
take effect on the first day of the next calendar year (or on the first day of
the next calendar month in the case of an initial election by a Participant who
is first eligible to defer hereunder) after its delivery to the Company, subject
to Section 8(g) regarding deferral of Restricted Shares and Restricted Share
Units and to Section 10(e) regarding deferral of Performance Awards, unless the
Company sends the Participant a written notice explaining why the Election Form
is invalid within five business days after the Company receives it.
Notwithstanding the foregoing sentence: (i) Election Forms shall be ineffective
with respect to any compensation that a Participant earns before the date on
which the Company receives

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the Election Form, and (ii) the Committee may unilaterally make awards in the
form of Deferred Share Units, regardless of whether or not the Participant
foregoes other compensation.
     (b) Vesting. Unless an Award Agreement expressly provides otherwise, each
Participant shall be 100% vested at all times in any Shares subject to Deferred
Share Units.
     (c) Issuances of Shares. The Company shall provide a Participant with one
Share for each Deferred Share Unit in five substantially equal annual
installments that are issued before the last day of each of the five calendar
years that end after the date on which the Participant’s Continuous Service
terminates, unless –
     (i) the Participant has properly elected a different form of distribution,
on a form approved by the Committee, that permits the Participant to select any
combination of a lump sum and annual installments that are completed within ten
years following termination of the Participant’s Continuous Service, and
     (ii) the Company received the Participant’s distribution election form at
the time the Participant elects to defer the receipt of cash or other
compensation pursuant to Section 9(a), provided that such election may be
changed through any subsequent election that (i) is delivered to the
Administrator at least one year before the date on which distributions are
otherwise scheduled to commence pursuant to the Participant’s election, and
(ii) defers the commencement of distributions by at least five years from the
originally scheduled commencement date.
Fractional shares shall not be issued, and instead shall be paid out in cash.
     (d) Crediting of Dividends. Whenever Shares are issued to a Participant
pursuant to Section 9(c) above, such Participant shall also be entitled to
receive, with respect to each Share issued, a cash amount equal to any cash
dividends (plus simple interest at a rate of five percent per annum, or such
other reasonable rate as the Committee may determine), and a number of Shares
equal to any stock dividends which were declared and paid to the holders of
Shares between the Grant Date and the date such Share is issued.
     (e) Emergency Withdrawals. In the event a Participant suffers an
unforeseeable emergency within the contemplation of this Section and
Section 409A of the Code, the Participant may apply to the Company for an
immediate distribution of all or a portion of the Participant’s Deferred Share
Units. The unforeseeable emergency must result from a sudden and unexpected
illness or accident of the Participant, the Participant’s spouse, or a dependent
(within the meaning of Section 152(a) of the Code) of the Participant, casualty
loss of the Participant’s property, or other similar extraordinary and
unforeseeable conditions beyond the control of the Participant. Examples of
purposes which are not considered unforeseeable emergencies include
post-secondary school expenses or the desire to purchase a residence. In no
event will a distribution be made to the extent the unforeseeable emergency
could be relieved through reimbursement or compensation by insurance or
otherwise, or by liquidation of the Participant’s nonessential assets to the
extent such liquidation would not itself cause a severe financial hardship. The
amount of any distribution hereunder shall be limited to the amount necessary to
relieve the Participant’s unforeseeable emergency plus amounts necessary to pay
taxes reasonably anticipated as a result of the distribution. The Committee
shall determine whether a Participant has a qualifying unforeseeable emergency
and the amount which qualifies for distribution, if any. The Committee may
require evidence of the purpose and amount of the need, and may establish such
application or other procedures as it deems appropriate.
     (f) Unsecured Rights to Deferred Compensation. A Participant’s right to
Deferred Share Units shall at all times constitute an unsecured promise of the
Company to pay benefits as they come due. The right of the Participant or the
Participant’s duly-authorized transferee to receive benefits hereunder shall be
solely an unsecured claim against the general assets of the Company. Neither the
Participant nor the Participant’s duly-authorized transferee shall have any
claim against or rights in any specific assets, shares, or other funds of the
Company.

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10. Performance Awards
     (a) Performance Units. Subject to the limitations set forth in paragraph
(c) hereof, the Committee may in its discretion grant Performance Units to any
Eligible Person and shall evidence such grant in an Award Agreement that is
delivered to the Participant which sets forth the terms and conditions of the
Award.
     (b) Performance Compensation Awards. Subject to the limitations set forth
in paragraph (c) hereof, the Committee may, at the time of grant of a
Performance Unit, designate such Award as a “Performance Compensation Award” in
order that such Award constitutes “qualified performance-based compensation”
under Code Section 162(m), in which event the Committee shall have the power to
grant such Performance Compensation Award upon terms and conditions that qualify
it as “qualified performance-based compensation” within the meaning of Code
Section 162(m). With respect to each such Performance Compensation Award, the
Committee shall establish, in writing within the time required under Code
Section 162(m), a “Performance Period,” “Performance Measure(s)”, and
“Performance Formula(e)” (each such term being hereinafter defined).
     A Participant shall be eligible to receive payment in respect of a
Performance Compensation Award only to the extent that the Performance
Measure(s) for such Award is achieved and the Performance Formula(e) as applied
against such Performance Measure(s) determines that all or some portion of such
Participant’s Award has been earned for the Performance Period. As soon as
practicable after the close of each Performance Period, the Committee shall
review and certify in writing whether, and to what extent, the Performance
Measure(s) for the Performance Period have been achieved and, if so, determine
and certify in writing the amount of the Performance Compensation Award to be
paid to the Participant and, in so doing, may use negative discretion to
decrease, but not increase, the amount of the Award otherwise payable to the
Participant based upon such performance.
     (c) Limitations on Awards. The maximum Performance Unit Award including any
performance Compensation Award, that Participants may receive in the aggregate
for any one Performance Period shall not exceed 100,000 Shares. The Committee
shall have the discretion to provide in any Award Agreement that any amounts
earned in excess of these limitations will be credited as Deferred Share Units.
Any amounts for which payment to the Participant is deferred pursuant to the
preceding sentence shall be paid to the Participant in a future year or years
not earlier than, and only to the extent that, the Participant is either not
receiving compensation in excess of these limits for a Performance Period, or is
not subject to the restrictions set forth under Section 162(b) of the Code.
     (d) Definitions.
     (i) “Performance Formula” means, for a Performance Period, one or more
objective formulas or standards established by the Committee for purposes of
determining whether or the extent to which an Award has been earned based on the
level of performance attained or to be attained with respect to one or more
Performance Measure(s). Performance Formulae may vary from Performance Period to
Performance Period and from Participant to Participant and may be established on
a stand-alone basis, in tandem or in the alternative.
     (ii) “Performance Measure” means one or more of the following selected by
the Committee to measure Company, Affiliate, and/or business unit performance
for a Performance Period, whether in absolute or relative terms (including,
without limitation, terms relative to a peer group or index): basic, diluted, or
adjusted earnings per share; sales or revenue; earnings before interest, taxes,
and other adjustments (in total or on a per share basis); basic or adjusted net
income; returns on equity, assets, capital, revenue or similar measure; economic
value added; working capital; total stockholder return; and product development,
product market share, research, licensing, litigation, human resources,
information services, mergers, acquisitions, sales of assets of Affiliates or
business units. Each such measure shall be, to the extent applicable, determined
in accordance with generally accepted accounting principles as consistently
applied by the Company (or such other standard applied by the Committee) and, if
so determined by the Committee, and in the case of a Performance Compensation
Award, to the extent permitted under Code

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Section 162(m), adjusted to omit the effects of extraordinary items, gain or
loss on the disposal of a business segment, unusual or infrequently occurring
events and transactions and cumulative effects of changes in accounting
principles. Performance Measures may vary from Performance Period to Performance
Period and from Participant to Participant, and may be established on a
stand-alone basis, in tandem or in the alternative.
     (iii) “Performance Period” means one or more periods of time (of not less
than one fiscal year of the Company), as the Committee may designate, over which
the attainment of one or more Performance Measure(s) will be measured for the
purpose of determining a Participant’s rights in respect of an Award.
     (e) Deferral Elections. At any time prior to the date that is at least six
months before the close of a Performance Period (or shorter or longer period
that the Committee selects) with respect to an Award of either Performance Units
or Performance Compensation, the Committee may permit a Participant who is a
member of a select group of management or highly compensated employees (within
the meaning of the Code) to irrevocably elect, on a form provided by and
acceptable to the Committee, to defer the receipt of all or a percentage of the
Shares that would otherwise be transferred to the Participant upon the vesting
of such Award. If the Participant makes this election, the Shares subject to the
election, and any associated interest and dividends, shall be credited to an
account established pursuant to Section 9 hereof on the date such Shares would
otherwise have been released or issued to the Participant pursuant to Section
10(a) or Section 10(b) above.
11. Taxes
     (a) General. As a condition to the issuance or distribution of Shares
pursuant to the Plan, the Participant (or in the case of the Participant’s
death, the person who succeeds to the Participant’s rights) shall make such
arrangements as the Company may require for the satisfaction of any applicable
federal, state, local or foreign withholding tax obligations that may arise in
connection with the Award and the issuance of Shares. The Company shall not be
required to issue any Shares until such obligations are satisfied. If the
Committee allows the withholding or surrender of Shares to satisfy a
Participant’s tax withholding obligations, the Committee shall not allow Shares
to be withheld in an amount that exceeds the minimum statutory withholding rates
for federal and state tax purposes, including payroll taxes.
     (b) Default Rule for Employees. In the absence of any other arrangement, an
Employee shall be deemed to have directed the Company to withhold or collect
from his or her cash compensation an amount sufficient to satisfy such tax
obligations from the next payroll payment otherwise payable after the date of
the exercise of an Award.
     (c) Special Rules. In the case of a Participant other than an Employee (or
in the case of an Employee where the next payroll payment is not sufficient to
satisfy such tax obligations, with respect to any remaining tax obligations), in
the absence of any other arrangement and to the extent permitted under
Applicable Law, the Participant shall be deemed to have elected to have the
Company withhold from the Shares or cash to be issued pursuant to an Award that
number of Shares having a Fair Market Value determined as of the applicable Tax
Date (as defined below) or cash equal to the amount required to be withheld. For
purposes of this Section 11, 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 under the Applicable Law (the “Tax Date”).
     (d) Surrender of Shares. If permitted by the Committee, in its discretion,
a Participant may satisfy the minimum applicable tax withholding and employment
tax obligations associated with an Award by surrendering Shares to the Company
(including Shares that would otherwise be issued pursuant to the Award) that
have a Fair Market Value determined as of the applicable Tax Date equal to the
amount required to be withheld. In the case of Shares previously acquired from
the Company that are surrendered under this Section 11, such Shares must have
been owned by the Participant for more than six months on the date of surrender
(or such longer period of time the Company may in its discretion require).

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     (e) Income Taxes and Deferred Compensation. Participants are solely
responsible and liable for the satisfaction of all taxes and penalties that may
arise in connection with Awards (including any taxes arising under Section 409A
of the Code), and the Company shall not have any obligation to indemnify or
otherwise hold any Participant harmless from any or all of such taxes. The
Administrator shall have the discretion to organize any deferral program, to
require deferral election forms, and to grant or to unilaterally modify any
Award in a manner that (i) conforms with the requirements of Section 409A of the
Code with respect to compensation that is deferred and that vests after
December 31, 2004, (ii) that voids any Participant election to the extent it
would violate Section 409A of the Code, and (iii) for any distribution election
that would violate Section 409A of the Code, to make distributions pursuant to
the Award at the earliest to occur of a distribution event that is allowable
under Section 409A of the Code or any distribution event that is both allowable
under Section 409A of the Code and is elected by the Participant, subject to any
valid second election to defer, provided that the Administrator permits second
elections to defer in accordance with Section 409A(a)(4)(C). The Administrator
shall have the sole discretion to interpret the requirements of the Code,
including Section 409A, for purposes of the Plan and all Awards.
12. Non-Transferability of Awards
     (a) General. Except as set forth in this Section 12, or as otherwise
approved by the Committee, Awards 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. The designation of a beneficiary by a
Participant will not constitute a transfer. An Award may be exercised, during
the lifetime of the holder of an Award, only by such holder, the duly-authorized
legal representative of a Participant who is Disabled, or a transferee permitted
by this Section 12.
     (b) Limited Transferability Rights. Notwithstanding anything else in this
Section 12, the Committee may in its discretion provide in an Award Agreement
that an Award other than an ISO may be transferred, on such terms and conditions
as the Committee deems appropriate, either (i) by instrument to the
Participant’s “Immediate Family” (as defined below), (ii) by instrument to an
inter vivos or testamentary trust (or other entity) in which the Award is to be
passed to the Participant’s designated beneficiaries, or (iii) by gift to
charitable institutions. Any transferee of the Participant’s rights shall
succeed and be subject to all of the terms of this Award Agreement and the Plan.
“Immediate Family” means 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,
and shall include adoptive relationships.
13. Adjustments Upon Changes in Capitalization, Merger or Certain Other
Transactions
     (a) Changes in Capitalization. The Committee shall equitably adjust the
number of Shares covered by each outstanding Award, and the number of Shares
that have been authorized for issuance under the Plan but as to which no Awards
have yet been granted or that have been returned to the Plan upon cancellation,
forfeiture, or expiration of an Award, as well as the price per Share covered by
each such outstanding Award, to reflect any increase or decrease in the number
of issued Shares resulting from a stock-split, reverse stock-split, stock
dividend, combination, recapitalization 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. In the event of any such transaction or
event, the Committee may provide in substitution for any or all outstanding
Options under the Plan such alternative consideration (including securities of
any surviving entity) as it may in good faith determine to be equitable under
the circumstances and may require in connection therewith the surrender of all
Options so replaced. In any case, such substitution of securities shall not
require the consent of any person who is granted Options pursuant to the Plan.
Except as expressly provided herein, or in an Award Agreement, if the Company
issues for consideration shares of stock of any class or securities convertible
into shares of stock of any class, the issuance shall not affect, and no
adjustment by reason thereof shall be required to be made with respect to the
number or price of Shares subject to any award.
     (b) Dissolution or Liquidation. In the event of the dissolution or
liquidation of the Company other than as part of a Change of Control, each Award
will terminate immediately prior to the consummation of such action, subject to
the ability of the Committee to exercise any discretion authorized in the case
of a Change in Control.

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     (c) Change in Control. In the event of a Change in Control, the Committee
may in its sole and absolute discretion and authority, without obtaining the
approval or consent of the Company’s stockholders or any Participant with
respect to his or her outstanding Awards, take one or more of the following
actions:
     (i) arrange for or otherwise provide that each outstanding Award shall be
assumed or a substantially similar award shall be substituted by a successor
corporation or a parent or subsidiary of such successor corporation (the
“Successor Corporation”);
     (ii) accelerate the vesting of Awards so that Awards shall vest (and, to
the extent applicable, become exercisable) as to the Shares that otherwise would
have been unvested and provide that repurchase rights of the Company with
respect to Shares issued upon exercise of an Award shall lapse as to the Shares
subject to such repurchase right;
     (iii) arrange or otherwise provide for the payment of cash or other
consideration to Participants in exchange for the satisfaction and cancellation
of outstanding Awards; or
     (iv) make such other modifications, adjustments or amendments to
outstanding Awards or this Plan as the Committee deems necessary or appropriate,
subject however to the terms of Section 15(a) below.
     Notwithstanding the above, in the event a Participant holding an Award
assumed or substituted by the Successor Corporation in a Change in Control is
Involuntarily Terminated by the Successor Corporation in connection with, or
within 12 months following consummation of, the Change in Control, then any
assumed or substituted Award held by the terminated Participant at the time of
termination shall accelerate and become fully vested (and exercisable in full in
the case of Options and SARs), and any repurchase right applicable to any Shares
shall lapse in full, unless an Award Agreement provides for a more restrictive
acceleration or vesting schedule or more restrictive limitations on the lapse of
repurchase rights or otherwise places additional restrictions, limitations and
conditions on an Award. The acceleration of vesting and lapse of repurchase
rights provided for in the previous sentence shall occur immediately prior to
the effective date of the Participant’s termination, unless an Award Agreement
provides otherwise.
     (d) Certain Distributions. In the event of any distribution to the
Company’s stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Committee may, in its discretion,
appropriately adjust the price per Share covered by each outstanding Award to
reflect the effect of such distribution.
14. Time of Granting Awards.
     The date of grant (“Grant Date”) of an Award shall be the date on which the
Committee makes the determination granting such Award or such other date as is
determined by the Committee, provided that in the case of an ISO, the Grant Date
shall be the later of the date on which the Committee makes the determination
granting such ISO or the date of commencement of the Participant’s employment
relationship with the Company.
15. Modification of Awards and Substitution of Options.
     (a) Modification, Extension, and Renewal of Awards. Within the limitations
of the Plan, the Committee may modify an Award to accelerate the rate at which
an Option or SAR may be exercised (including without limitation permitting an
Option or SAR to be exercised in full without regard to the installment or
vesting provisions of the applicable Award Agreement or whether the Option or
SAR is at the time exercisable, to the extent it has not previously been
exercised), to accelerate the vesting of any Award, to extend or renew
outstanding Awards or to accept the cancellation of outstanding Awards to the
extent not previously exercised. However, the Committee may not cancel an
outstanding option that is underwater for the purpose of reissuing the option to
the participant at a lower exercise price or granting a replacement Award of a
different type, without stockholder approval.

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Notwithstanding the foregoing provision, no modification of an outstanding Award
shall materially and adversely affect such Participant’s rights thereunder,
unless either the Participant provides written consent or there is an express
Plan provision permitting the Committee to act unilaterally to make the
modification.
     (b) Substitution of Options. Notwithstanding any inconsistent provisions or
limits under the Plan, in the event the Company or an Affiliate acquires
(whether by purchase, merger or otherwise) all or substantially all of
outstanding capital stock or assets of another corporation or in the event of
any reorganization or other transaction qualifying under Section 424 of the
Code, the Committee may, in accordance with the provisions of that Section,
substitute Options for options under the plan of the acquired company provided
(i) the excess of the aggregate fair market value of the shares subject to an
option immediately after the substitution over the aggregate option price of
such shares is not more than the similar excess immediately before such
substitution and (ii) the new option does not give persons additional benefits,
including any extension of the exercise period.
16. Term of Plan.
     The Plan shall continue in effect for a term of ten (10) years from its
effective date as determined under Section 20 below, unless the Plan is sooner
terminated under Section 17 below.
17. Amendment and Termination of the Plan.
     (a) Authority to Amend or Terminate. Subject to Applicable Laws, the Board
may from time to time amend, alter, suspend, discontinue, or terminate the Plan.
     (b) Effect of Amendment or Termination. No amendment, suspension, or
termination of the Plan shall materially and adversely affect Awards already
granted unless either it relates to an adjustment pursuant to Section 13 above,
or it is otherwise mutually agreed between the Participant and the Committee,
which agreement must be in writing and signed by the Participant and the
Company. Notwithstanding the foregoing, the Committee may amend the Plan to
eliminate provisions which are no longer necessary as a result of changes in tax
or securities laws or regulations, or in the interpretation thereof.
18. Conditions Upon Issuance of Shares.
     Notwithstanding any other provision of the Plan or any agreement entered
into by the Company pursuant to the Plan, the Company shall not be obligated,
and shall have no liability for failure, to issue or deliver any Shares under
the Plan unless such issuance or delivery would comply with Applicable Law, with
such compliance determined by the Company in consultation with its legal
counsel.
19. Reservation of Shares.
     The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
20. Effective Date.
     This Plan shall become effective on the date of its approval by the Board;
provided that this Plan shall be submitted to the Company’s stockholders for
approval, and if not approved by the stockholders in accordance with Applicable
Laws (as determined by the Committee in its discretion) within one year from the
date of approval by the Board, this Plan and any Awards shall be null, void, and
of no force and effect. Awards granted under this Plan before approval of this
Plan by the stockholders shall be granted subject to such approval, and no
Shares shall be distributed before such approval.

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21. Controlling Law.
     All disputes relating to or arising from the Plan shall be governed by the
internal substantive laws (and not the laws of conflicts of laws) of the State
of Virginia, to the extent not preempted by United States federal law. If any
provision of this Plan is held by a court of competent jurisdiction to be
invalid and unenforceable, the remaining provisions shall continue to be fully
effective.
22. Laws And Regulations.
     (a) U.S. Securities Laws. This Plan, the grant of Awards, and the exercise
of Options and SARs under this Plan, and the obligation of the Company to sell
or deliver any of its securities (including, without limitation, Options,
Restricted Shares, Restricted Share Units, Deferred Share Units, and Shares)
under this Plan shall be subject to all Applicable Law. In the event that the
Shares are not registered under the Securities Act of 1933, as amended (the
“Act”), or any applicable state securities laws prior to the delivery of such
Shares, the Company may require, as a condition to the issuance thereof, that
the persons to whom Shares are to be issued represent and warrant in writing to
the Company that such Shares are being acquired by him or her for investment for
his or her own account and not with a view to, for resale in connection with, or
with an intent of participating directly or indirectly in, any distribution of
such Shares within the meaning of the Act, and a legend to that effect may be
placed on the certificates representing the Shares.
     (b) Other Jurisdictions. To facilitate the making of any grant of an Award
under this Plan, the Committee may provide for such special terms for Awards to
Participants who are foreign nationals or who are employed by the Company or any
Affiliate outside of the United States of America as the Committee may consider
necessary or appropriate to accommodate differences in local law, tax policy or
custom. The Company may adopt rules and procedures relating to the operation and
administration of this Plan to accommodate the specific requirements of local
laws and procedures of particular countries. Without limiting the foregoing, the
Company is specifically authorized to adopt rules and procedures regarding the
conversion of local currency, taxes, withholding procedures and handling of
stock certificates which vary with the customs and requirements of particular
countries. The Company may adopt sub-plans and establish escrow accounts and
trusts as may be appropriate or applicable to particular locations and
countries.
     23.  No Stockholder Rights. Neither a Participant nor any transferee of a
Participant shall have any rights as a stockholder of the Company with respect
to any Shares underlying any Award until the date of issuance of a share
certificate to a Participant or a transferee of a Participant for such Shares in
accordance with the Company’s governing instruments and Applicable Law. Prior to
the issuance of Shares pursuant to an Award, a Participant shall not have the
right to vote or to receive dividends or any other rights as a stockholder with
respect to the Shares underlying the Award, notwithstanding its exercise in the
case of Options and SARs. No adjustment will be made for a dividend or other
right that is determined based on a record date prior to the date the stock
certificate is issued, except as otherwise specifically provided for in this
Plan.
     24.  No Employment Rights. The Plan shall not confer upon any Participant
any right to continue an employment, service or consulting relationship with the
Company, nor shall it affect in any way a Participant’s right or the Company’s
right to terminate the Participant’s employment, service, or consulting
relationship at any time, with or without Cause.
25. Termination, Rescission and Recapture.
     (a) Each Award under the Plan is intended to align the Participant’s
long-term interest with those of the Company. If the Participant engages in
certain activities discussed below, either during employment or after employment
with the Company terminates for any reason, the Participant is acting contrary
to the long-term interests of the Company. Accordingly, except as otherwise
expressly provided in the Award Agreement, the Company may terminate any
outstanding, unexercised, unexpired, unpaid, or deferred Awards (“Termination”),
rescind any exercise, payment or delivery pursuant to the Award

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(“Rescission”), or recapture any Common Stock (whether restricted or
unrestricted) or proceeds from the Participant’s sale of Shares issued pursuant
to the Award (“Recapture”), if the Participant does not comply with the
conditions of subsections (b) and (c) hereof (collectively, the “Conditions”).
     (b) A Participant shall not, without the Company’s prior written
authorization, disclose to anyone outside the Company, or use in other than the
Company’s business, any proprietary or confidential information or material, as
those or other similar terms are used in any applicable patent, confidentiality,
inventions, secrecy, or other agreement between the Participant and the Company
with regard to any such proprietary or confidential information or material.
     (c) Pursuant to any agreement between the Participant and the Company with
regard to intellectual property (including but not limited to patents,
trademarks, copyrights, trade secrets, inventions, developments, improvements,
proprietary information, confidential business and personnel information), a
Participant shall promptly disclose and assign to the Company or its designee
all right, title, and interest in such intellectual property, and shall take all
reasonable steps necessary to enable the Company to secure all right, title and
interest in such intellectual property in the United States and in any foreign
country.
     (d) Upon exercise, payment, or delivery of cash or Common Stock pursuant to
an Award, the Participant shall certify on a form acceptable to the Company that
he or she is in compliance with the terms and conditions of the Plan and, if a
severance of Continuous Service has occurred for any reason, shall state the
name and address of the Participant’s then-current employer or any entity for
which the Participant performs business services and the Participant’s title,
and shall identify any organization or business in which the Participant owns a
greater-than-five-percent equity interest.
     (e) If the Company determines, in its sole and absolute discretion, that
(i) a Participant has violated any of the Conditions or (ii) during his or her
Continuous Service, or within one year after its termination for any reason, a
Participant (a) has rendered services to or otherwise directly or indirectly
engaged in or assisted, any organization or business that, in the judgment of
the Company in its sole and absolute discretion, is or is working to become
competitive with the Company; (b) has solicited any non-administrative employee
of the Company to terminate employment with the Company; or (c) has engaged in
activities which are materially prejudicial to or in conflict with the interests
of the Company, including any breaches of fiduciary duty or the duty of loyalty,
or material breach or failure to comply with any Company policy applicable to
Participant, then the Company may, in its sole and absolute discretion, impose a
Termination, Rescission, and/or Recapture with respect to any or all of the
Participant’s relevant Awards, Shares, and the proceeds thereof.
     (f) Within ten days after receiving notice from the Company of any such
activity, the Participant shall deliver to the Company the Shares acquired
pursuant to the Award, or, if Participant has sold the Shares, the gain
realized, or payment received as a result of the rescinded exercise, payment, or
delivery; provided, that if the Participant returns Shares that the Participant
purchased pursuant to the exercise of an Option (or the gains realized from the
sale of such Common Stock), the Company shall promptly refund the exercise
price, without earnings, that the Participant paid for the Shares. Any payment
by the Participant to the Company pursuant to this Section 25 shall be made
either in cash or by returning to the Company the number of Shares that the
Participant received in connection with the rescinded exercise, payment, or
delivery. It shall not be a basis for Termination, Rescission or Recapture if
after termination of a Participant’s Continuous Service, the Participant
purchases, as an investment or otherwise, stock or other securities of such an
organization or business, so long as (i) such stock or other securities are
listed upon a recognized securities exchange or traded over-the-counter, and
(ii) such investment does not represent more than a five percent (5%) equity
interest in the organization or business.
     (g) Notwithstanding the foregoing provisions of this Section, the Company
has sole and absolute discretion not to require Termination, Rescission and/or
Recapture, and its determination not to require Termination, Rescission and/or
Recapture with respect to any particular act by a particular Participant or
Award shall not in any way reduce or eliminate the Company’s authority to
require Termination, Rescission and/or Recapture with respect to any other act
or Participant or Award. Nothing in this Section shall be construed to impose
obligations on the Participant to refrain from engaging in lawful competition
with the Company after the termination of employment

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that does not violate subsections (b) or (c) of this Section, other than any
obligations that are part of any separate agreement between the Company and the
Participant or that arise under applicable law.
     (h) All administrative and discretionary authority given to the Company
under this Section shall be exercised by the most senior human resources
executive of the Company or such other person or committee (including without
limitation the Committee) as the Committee may designate from time to time.
     (i) Notwithstanding any provision of this Section, if any provision of this
Section is determined to be unenforceable or invalid under any applicable law,
such provision will be applied to the maximum extent permitted by applicable
law, and shall automatically be deemed amended in a manner consistent with its
objectives to the extent necessary to conform to any limitations required under
applicable law. Furthermore, if any provision of this Section is illegal under
any applicable law, such provision shall be null and void to the extent
necessary to comply with applicable law.
     Notwithstanding the foregoing, but subject to any contrary terms set forth
in any Award Agreement, this Section shall not be applicable: (i) to any
Participant who is not, on the Award Date, an Employee of the Company or its
Affiliates; and (ii) to any Participant from and after his or her termination of
Continuous Service after a Change in Control.

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Versar, Inc.
2005 Stock Incentive Plan
 
Appendix A: Definitions
 
As used in the Plan, the following definitions shall apply:
     “Affiliate” means, with respect to any Person (as defined below), any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, “control,” when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person or the power to elect directors, whether through the ownership of
voting securities, by contract or otherwise; and the terms “affiliated,”
“controlling” and “controlled” have meanings correlative to the foregoing.
     “Applicable Law” means the legal requirements relating to the
administration of options and share-based plans under applicable U.S. federal
and state laws, the Code, any applicable stock exchange or automated quotation
system (including the American Stock Exchange) rules or regulations, and the
applicable laws of any other country or jurisdiction where Awards are granted,
as such laws, rules, regulations and requirements shall be in place from time to
time.
     “Award” means any award made pursuant to the Plan, including awards made in
the form of an Option, an SAR, a Restricted Share, a Restricted Share Unit, a
Deferred Share Unit and a Performance Award, or any combination thereof, whether
alternative or cumulative, authorized by and granted under this Plan.
     “Award Agreement” means any written document setting forth the terms of an
Award that has been authorized by the Committee. The Committee shall determine
the form or forms of documents to be used, and may change them from time to time
for any reason.
     “Board” means the Board of Directors of the Company.
     “Cause” for termination of a Participant’s Continuous Service will exist if
the Participant is terminated from employment or other service with the Company
or an Affiliate for any of the following reasons: (i) the Participant’s willful
failure to substantially perform his or her duties and responsibilities to the
Company or deliberate violation of a material Company policy; (ii) the
Participant’s commission of any material act or acts of fraud, embezzlement,
dishonesty, or other willful misconduct; (iii) the Participant’s material
unauthorized use or disclosure of any proprietary information or trade secrets
of the Company or any other party to whom the Participant owes an obligation of
nondisclosure as a result of his or her relationship with the Company; or
(iv) Participant’s willful and material breach of any of his or her obligations
under any written agreement or covenant with the Company.
     The Committee shall in its discretion determine whether or not a
Participant is being terminated for Cause. The Committee’s determination shall,
unless arbitrary and capricious, be final and binding on the Participant, the
Company, and all other affected persons. The foregoing definition does not in
any way limit the Company’s ability to terminate a Participant’s employment or
consulting relationship at any time, and the term “Company” will be interpreted
herein to include any Affiliate or successor thereto, if appropriate.

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     “Change in Control” means any of the following:
     (j) The acquisition in one or more transactions by any “Person” (as the
term person is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the “1934 Act”)), of “Beneficial Ownership”
(within the meaning of Rule 13d-3 promulgated under the 1934 Act) of forty
percent (40%) or more of the combined voting power of the Company’s then
outstanding voting securities (the “Voting Securities”), provided, however, that
for purposes of this definition, Voting Securities acquired directly from the
Company by any Person shall be excluded from the determination of such Person’s
Beneficial Ownership of Voting Securities (but such Voting Securities shall be
included in the calculation of the total number of Voting Securities then
outstanding); or
     (k) The individuals who are members of the Incumbent Board, cease for any
reason to constitute at least two-thirds of the Board; or
     (l) Approval by the stockholders of the Company of (i) a merger or
consolidation involving the Company if the stockholders of the Company
immediately before such merger or consolidation do not own, directly or
indirectly, immediately following such merger or consolidation, more than sixty
percent (60%) of the combined voting power of the outstanding voting securities
of the corporation resulting from such merger or consolidation in substantially
the same proportion as their ownership of the Voting Securities immediately
before such merger or consolidation, or (ii) a complete liquidation or
dissolution of the Company or an agreement for the sale or other disposition of
all or subsequently all of the assets of the Company.
     Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because forty percent (40%) or more of the then outstanding Voting
Securities is acquired by (i) a trustee or other fiduciary holding securities
under one or more employee benefit plans maintained by the Company or any of its
Affiliates, or (ii) any corporation, which, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of the Company
in the same proportion as their ownership of stock in the Company immediately
prior to such acquisition.
     Moreover, notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the “Subject Person”) acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person,
provided, that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of Voting Securities by the Company,
and after such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional Voting Securities which increases the
percentage of the then outstanding Voting Security Beneficially Owned by the
Subject Person, then a Change in Control shall occur.
     “Code” means the U.S. Internal Revenue Code of 1986, as amended.
     “Committee” means the Compensation Committee or one or more other
committees or subcommittees comprised of at least three directors of the Board
appointed by the Board to administer the Plan in accordance with Section 4
above. With respect to any decision involving an Award intended to satisfy the
requirements of Section 162(m) of the Code, the Committee shall consist of
Directors of the Company who are “outside directors” within the meaning of
Section 162(m) of the Code. With respect to any decision relating to a Reporting
Person, the Committee shall consist of Directors who are non-employee directors
within the meaning of Rule 16b-3.
     “Company” means Versar, Inc., a Delaware corporation; provided, however,
that in the event the Company reincorporates to another jurisdiction, all
references to the term “Company” shall refer to the Company in such new
jurisdiction.
     “Consultant” means any person, including an advisor, who is engaged by the
Company or any Affiliate to render services and is compensated for such
services.

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     “Continuous Service” means the absence of any interruption or termination
of service as an Employee, Director, or Consultant. Continuous Service shall not
be considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Committee, provided that such
leave is for a period of not more than 90 days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time;
(iv) changes in status from Director to advisory director or emeritus status; or
(iv) in the case of transfers between locations of the Company or between the
Company, its Affiliates or their respective successors. Changes in status
between service as an Employee, Director, and a Consultant will not constitute
an interruption of Continuous Service.
     “Deferred Share Units” mean Awards pursuant to Section 9 of the Plan.
     “Director” means a member of the Board, or a member of the board of
directors of an Affiliate.
     “Disabled” means a condition under which a Participant —
     (a) is unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not
less than 12 months, or
     (b) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, received income replacement
benefits for a period of not less than 3 months under an accident or health plan
covering employees of the Company.
     “Eligible Person” means any Consultant, Director or Employee and includes
non-Employees to whom an offer of employment has been extended.
     “Employee” means any person whom the Company or any Affiliate classifies as
an employee (including an officer) for employment tax purposes. The payment by
the Company of a director’s fee to a Director shall not be sufficient to
constitute “employment” of such Director by the Company.
     “Exchange Act” means the Securities Exchange Act of 1934, as amended.
     “Fair Market Value” means, as of any date (the “Determination Date”) means:
(i) the closing price of a Share on the American Stock Exchange (the
“Exchange”), on the Determination Date, or, if shares were not traded on the
Determination Date, then on the nearest preceding trading day during which a
sale occurred; or (ii) if such stock is not traded on the Exchange but is quoted
on NASDAQ or a successor quotation system, (A) the last sales price (if the
stock is then listed as a National Market Issue under The Nasdaq National Market
System) or (B) the mean between the closing representative bid and asked prices
(in all other cases) for the stock on the Determination Date as reported by
NASDAQ or such successor quotation system; or (iii) if such stock is not traded
on the Exchange or quoted on NASDAQ but is otherwise traded in the
over-the-counter, the mean between the representative bid and asked prices on
the Determination Date; or (iv) if subsections (i)-(iii) do not apply, the fair
market value established in good faith by the Board.
     “Grant Date” has the meaning set forth in Section 14 of the Plan.
     “Incentive Share Option or ISO” hereinafter means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code, as designated in the applicable Award Agreement.
     “Incumbent Board” shall mean the individuals who as of September 7, 2005
are members of the Board and any individual becoming a director subsequent to
September 7, 2005 whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board; provided, however, that any individual who
is not a member of the Incumbent Board at the time he or she becomes a member of
the Board shall become a member of the Incumbent Board upon the completion of

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two full years as a member of the Board; provided, further, however, that
notwithstanding the foregoing, no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office (i) as a result of
either an actual or threatened “election contest” (within the meaning of
Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board (a “Proxy Contest”), or (ii) with the approval of the other Board members,
but by reason of any agreement intended to avoid or settle a Proxy Contest.
     “Involuntary Termination” means termination of a Participant’s Continuous
Service under the following circumstances occurring on or after a Change in
Control: (i) termination without Cause by the Company or an Affiliate or
successor thereto, as appropriate; or (ii) voluntary termination by the
Participant within 60 days following (A) a material reduction in the
Participant’s job responsibilities, provided that neither a mere change in title
alone nor reassignment to a substantially similar position shall constitute a
material reduction in job responsibilities; (B) an involuntary relocation of the
Participant’s work site to a facility or location more than 50 miles from the
Participant’s principal work site at the time of the Change in Control; or (C) a
material reduction in Participant’s total compensation other than as part of an
reduction by the same percentage amount in the compensation of all other
similarly-situated Employees, Directors or Consultants.
     “Non-ISO” means an Option not intended to qualify as an ISO, as designated
in the applicable Award Agreement.
     “Option” means any stock option granted pursuant to Section 6 of the Plan.
     “Participant” means any holder of one or more Awards, or the Shares
issuable or issued upon exercise of such Awards, under the Plan.
     “Performance Awards” mean Performance Units and Performance Compensation
Awards granted pursuant to Section 10.
     “Performance Compensation Awards” mean Awards granted pursuant to Section
10(b) of the Plan.
     “Performance Unit” means Awards granted pursuant to Section 10(a) of the
Plan which may be paid in cash, in Shares, or such combination of cash and
Shares as the Committee in its sole discretion shall determine.
     “Person” means any natural person, association, trust, business trust,
cooperative, corporation, general partnership, joint venture, joint-stock
company, limited partnership, limited liability company, real estate investment
trust, regulatory body, governmental agency or instrumentality, unincorporated
organization or organizational entity.
     “Plan” means this Versar, Inc. 2005 Stock Incentive Plan.
     “Reporting Person” means an officer, Director, or greater than ten percent
stockholder of the Company within the meaning of Rule 16a-2 under the Exchange
Act, who is required to file reports pursuant to Rule 16a-3 under the Exchange
Act.
     “Restricted Shares” mean Shares subject to restrictions imposed pursuant to
Section 8 of the Plan.
     “Restricted Share Units” mean Awards pursuant to Section 8 of the Plan.
     “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act, as
amended from time to time, or any successor provision.
     “SAR” or “Share Appreciation Right” means Awards granted pursuant to
Section 7 of the Plan.
     “Share” means a share of common stock of the Company, as adjusted in
accordance with Section 13 of the Plan.

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     “Ten Percent Holder” means a person who owns stock representing more than
ten percent (10%) of the combined voting power of all classes of stock of the
Company or any Affiliate.

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