Exhibit 10.1

Movie Gallery, Inc.

2008 Omnibus Equity Incentive Plan

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Table of Contents

 

          Page Article 1. Effective Date, Objectives and Duration    1 1.1     
Effective Date of the Plan    1 1.2      Objectives of the Plan    1 1.3     
Duration of the Plan    1 Article 2. Definitions    1 2.1      “Affiliate”    1
2.2      “Award”    1 2.3      “Award Agreement”    2 2.4      “Board”    2
2.5      “Change of Control”    2 2.6      “Code”    2 2.7      “Committee”    2
2.8      “Common Stock”    2 2.9      “Covered Employee”    2 2.10   
“Disability”    2 2.11    “Dividend Equivalent”    2 2.12    “Eligible Person”
   2 2.13    “Exchange Act”    3 2.14    “Fair Market Value”    3 2.15    “Grant
Date”    3 2.16    “Grantee”    3 2.17    “Incentive Stock Option”    3 2.18   
“including” or “includes”    3 2.19    “Mature Shares”    3 2.20   
“Non-Statutory Stock Option”    3 2.21    “Option”    3 2.22    “Option Price”
   3 2.23    “Option Term”    4 2.24    “Other Stock-Based Award”    4 2.25   
“Performance-Based Exception”    4 2.26    “Performance Measures”    4 2.27   
“Performance Period”    4 2.28    “Performance Share” and “Performance Unit”   
4 2.29    “Period of Restriction”    4 2.30    “Person”    4 2.31    “Restricted
Shares”    4 2.32    “Rule 16b-3”    4 2.33    “SEC”    4 2.34    “Section 16
Non-Employee Director”    4 2.35    “Section 16 Person”    4 2.36    “Share”   
4 2.37    “Stock Appreciation Right” or “SAR”    5 2.38    “Subsidiary”    5

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2.39    “Surviving Company”    5 2.40    “Termination of Affiliation”    5
Article 3. Administration    5 3.1      Committee    5 3.2      Powers of
Committee    5 Article 4. Shares Subject to the Plan, Maximum Awards, and 162(m)
Compliance    8 4.1      Number of Shares Available for Grants    8 4.2     
Adjustments in Authorized Shares and Awards; Liquidation, Dissolution or Change
of Control    8 4.3      Compliance with Section 162(m) of the Code    9 4.4  
   Performance-Based Exception Under Section 162(m)    10 Article 5. Eligibility
and General Conditions of Awards    11 5.1      Eligibility    11 5.2      Award
Agreement    11 5.3      General Terms and Termination of Affiliation    12
5.4      Nontransferability of Awards    13 5.5      Stand-Alone, Tandem and
Substitute Awards    14 5.6      Compliance with Rule 16b-3    14 Article 6.
Stock Options    15 6.1      Grant of Options    15 6.2      Award Agreement   
15 6.3      Option Price    15 6.4      Grant of Incentive Stock Options    15
6.5      Payment    17 Article 7. Stock Appreciation Rights    17 7.1     
Issuance    17 7.2      Award Agreements    18 7.3      Grant Price    18 7.4  
   Exercise and Payment    18 7.5      Grant Limitations    18 Article 8.
Restricted Shares    18 8.1      Grant of Restricted Shares    18 8.2      Award
Agreement    18 8.3      Consideration for Restricted Shares    18 8.4     
Effect of Forfeiture    19 8.5      Escrow; Legends    19 Article 9. Performance
Units and Performance Shares    19 9.1      Grant of Performance Units and
Performance Shares    19 9.2      Value/Performance Goals    19 9.3      Earning
of Performance Units and Performance Shares    19 Article 10. Dividend
Equivalents    20 Article 11. Other Stock-Based Awards    20 Article 12.
Amendment, Modification, and Termination    21 12.1      Amendment,
Modification, and Termination    21 12.2      Awards Previously Granted    21

 

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Article 13. Withholding    21 13.1      Required Withholding    21 13.2     
Notification under Code Section 83(b)    22 Article 14. Additional Provisions   
22 14.1      Successors    22 14.2      Gender and Number    22 14.3     
Severability    22 14.4      Requirements of Law    22 14.5      Securities Law
Compliance    23 14.6      No Rights as a Stockholder    23 14.7      Nature of
Payments    23 14.8      Non-Exclusivity of Plan    23 14.9      Governing Law
   24 14.10    Share Certificates    24 14.11    Unfunded Status of Awards;
Creation of Trusts    24 14.12    Affiliation    24 14.13    Participation    24
14.14    Leave of Absence    24 14.15    Construction    24 14.16    Headings   
25 14.17    Obligations    25 14.18    Stockholder Approval    25

 

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MOVIE GALLERY, INC.

2008 OMNIBUS EQUITY INCENTIVE PLAN

Article 1.

Effective Date, Objectives and Duration

1.1 Effective Date of the Plan. Movie Gallery, Inc., a Delaware corporation (the
“Company”), hereby establishes the Movie Gallery, Inc. 2008 Omnibus Equity
Incentive Plan (the “Plan”) as set forth herein effective May 20, 2008
(“Effective Date”), subject to approval by the Company’s stockholders before
May 20, 2009.

1.2 Objectives of the Plan. The Plan is intended (a) to allow selected employees
and officers of and consultants to the Company and its Affiliates to acquire or
increase equity ownership in the Company, thereby strengthening their commitment
to the success of the Company and stimulating their efforts on behalf of the
Company, and to assist the Company and its Affiliates in attracting new
employees, officers and consultants and retaining existing employees, officers
and consultants, (b) to optimize the profitability and growth of the Company and
its Affiliates through incentives which are consistent with the Company’s goals,
(c) to provide Grantees with an incentive for excellence in individual
performance, (d) to promote teamwork among employees, officers, consultants and
non-employee directors, and (e) to attract and retain highly qualified persons
to serve as non-employee directors and to promote ownership by such non-employee
directors of a greater proprietary interest in the Company, thereby aligning
such non-employee directors’ interests more closely with the interests of the
Company’s stockholders.

1.3 Duration of the Plan. The Plan shall commence on the Effective Date and
shall remain in effect, subject to the right of the Board of Directors of the
Company (“Board”) to amend or terminate the Plan at any time pursuant to Article
12 hereof, until the earlier of May 20, 2018, or the date all Shares subject to
the Plan shall have been purchased or acquired and the restrictions on all
Restricted Shares granted under the Plan shall have lapsed, according to the
Plan’s provisions. The termination of the Plan shall not adversely affect any
Awards outstanding on the date of termination.

Article 2.

Definitions

Whenever used in the Plan, the following terms shall have the meanings set forth
below:

2.1 “Affiliate” means any Person that directly or indirectly, through one or
more intermediaries, controls, or is controlled by or is under common control
with the Company.

2.2 “Award” means Options (including Non-Statutory Stock Options and Incentive
Stock Options), Stock Appreciation Rights, Restricted Shares, Performance Units
(which may be paid in cash or Shares), Performance Shares, Dividend Equivalents,
or Other Stock-Based Awards granted under the Plan.

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2.3 “Award Agreement” means the written agreement by which an Award shall be
evidenced.

2.4 “Board” means the Board of Directors of the Company.

2.5 “Change of Control” means the consummation and completion of any fundamental
transaction by which a change in control of the Company occurs as follows:

(a) the consummation and completion of a sale of all the equity securities of
the Company to an unrelated entity;

(b) the consummation and completion of a sale of substantially all the assets of
the Company to an unrelated entity; or

(c) the consummation and completion of a merger, consolidation or reorganization
with an unrelated business organization where less than forty percent (40%) of
the voting power and economic interest of the Company or the Surviving Company,
are retained by the shareholders of the Company immediately prior to such
merger, consolidation or reorganization.

2.6 “Code” means the Internal Revenue Code of 1986 (and any successor Internal
Revenue Code), as amended from time to time. References to a particular section
of the Code include references to regulations and rulings thereunder and to
successor provisions.

2.7 “Committee” has the meaning set forth in Section 3.1(a).

2.8 “Common Stock” means the common stock, $0.001 par value per share, of the
Company.

2.9 “Covered Employee” means a Grantee who, as of the last day of the fiscal
year in which the value of an Award is recognizable as income for federal income
tax purposes, is one of the group of “covered employees,” within the meaning of
Code Section 162(m), with respect to the Company.

2.10 “Disability” means with respect to any Award, unless otherwise defined in
an Award Agreement, or as otherwise determined under procedures established by
the Committee for purposes of the Plan, a disability within the meaning of
Section 22(e)(3) of the Code.

2.11 “Dividend Equivalent” means a right to receive payments equal to dividends
or property, if and when paid or distributed, on Shares.

2.12 “Eligible Person” means any employee (including any officer) or
non-employee director of, or non-employee consultant to, the Company or any
Subsidiary. Solely for purposes of Section 5.5(b), the term Eligible Person
includes any current or former employee or non-employee director of, or
consultant to, an Acquired Entity (as defined in Section 5.5(b)) who holds
Acquired Entity Awards (as defined in Section 5.5(b)) immediately prior to the
Acquisition Date (as defined in Section 5.5(b)).

 

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2.13 “Exchange Act” means the Securities Exchange Act of 1934, as amended from
time to time. References to a particular section of the Exchange Act include
references to successor provisions.

2.14 “Fair Market Value” means (a) with respect to any property other than
Shares, the fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee, and
(b) with respect to Shares, unless otherwise determined in the good faith
discretion of the Committee, as of any date, (i) the closing price on the date
of determination reported in the table entitled “New York Stock Exchange
Composite Transactions” contained in The Wall Street Journal (or an equivalent
successor table) (or, if no sale of Shares was reported for such date, on the
most recent trading day prior to such date on which a sale of Shares was
reported); (ii) if the Shares are not listed on the New York Stock Exchange, the
closing sales price of the Shares on such other national exchange on which the
Shares are principally traded, or as reported by the National Market System, or
similar organization, as reported in the appropriate table or listing contained
in The Wall Street Journal, or if no such quotations are available, the average
of the high bid and low asked quotations in the over-the-counter market as
reported by the National Quotation Bureau Incorporated or similar organizations;
or (iii) in the event that there shall be no public market for the Shares, the
fair market value of the Shares as determined (which determination shall be
conclusive) in good faith by the Committee.

2.15 “Grant Date” means the date on which an Award is granted or, in the case of
a grant to an Eligible Person, such later date as specified in advance by the
Committee.

2.16 “Grantee” means a person who has been granted an Award.

2.17 “Incentive Stock Option” means an Option that is intended to meet the
requirements of Section 422 of the Code.

2.18 “including” or “includes” means “including, without limitation,” or
“includes, without limitation,” respectively.

2.19 “Mature Shares” means Shares for which the holder thereof has good title,
free and clear of all liens and encumbrances, and which such holder either
(i) has held for at least six months or (ii) has purchased on the open market.

2.20 “Non-Statutory Stock Option” means an Option that is not or is not intended
to be an Incentive Stock Option.

2.21 “Option” means an option to purchase Shares at the Option Price per Share
granted under Article 6 of the Plan.

2.22 “Option Price” means the price at which a Share may be purchased by a
Grantee pursuant to an Option.

 

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2.23 “Option Term” means the period beginning on the Grant Date of an Option and
ending on the date such Option expires, terminates or is cancelled.

2.24 “Other Stock-Based Award” means a right, granted under Article 11 hereof,
that relates to or is valued by reference to Shares or other Awards relating to
Shares.

2.25 “Performance-Based Exception” means the performance-based exception from
the tax deductibility limitations of Code Section 162(m) contained in Code
Section 162(m)(4)(C) (including the special provisions for options thereunder).

2.26 “Performance Measures” has the meaning set forth in Section 4.4.

2.27 “Performance Period” means the time period during which performance goals
must be met.

2.28 “Performance Share” and “Performance Unit” have the respective meanings set
forth in Article 9.

2.29 “Period of Restriction” means the period during which Restricted Shares are
subject to forfeiture if the conditions specified in the Award Agreement are not
satisfied.

2.30 “Person” means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity or
government instrumentality, division, agency, body or department.

2.31 “Restricted Shares” means Shares that are both subject to forfeiture and
are nontransferable if the Grantee does not satisfy the conditions specified in
the Award Agreement applicable to such Shares.

2.32 “Rule 16b-3” means Rule 16b-3 promulgated by the SEC under the Exchange
Act, as amended from time to time, together with any successor rule.

2.33 “SEC” means the United States Securities and Exchange Commission, or any
successor thereto.

2.34 “Section 16 Non-Employee Director” means a member of the Board who
satisfies the requirements to qualify as a “non-employee director” under Rule
16b-3.

2.35 “Section 16 Person” means a person who is subject to potential liability
under Section 16(b) of the Exchange Act with respect to transactions involving
equity securities of the Company.

2.36 “Share” means a share of Common Stock, and such other securities of the
Company as may be substituted or resubstituted for Shares pursuant to
Section 4.2 hereof.

 

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2.37 “Stock Appreciation Right” or “SAR” means a right granted to an Eligible
Person pursuant to Article 7 to receive, upon exercise by the Grantee, an amount
equal to the number of Shares with respect to which the SAR is granted
multiplied by the excess of (i) the Fair Market Value of one Share on the date
of exercise, over (ii) the grant price of the right as specified by the
Committee.

2.38 “Subsidiary” has the meaning set forth in Section 6.4.

2.39 “Surviving Company” means the Company or the surviving corporation in any
merger or reorganization, including the Company if the Company is the surviving
corporation, or the direct or indirect parent company of the Company or such
surviving corporation following a Change of Control.

2.40 “Termination of Affiliation” occurs on the first day on which an individual
is for any reason no longer providing services to the Company or an Affiliate in
the capacity of an employee, officer, consultant or non-employee director or
with respect to an individual who is an employee, officer or non-employee
director of or a consultant to an Affiliate, the first day on which such entity
ceases to be an Affiliate of the Company.

Article 3.

Administration

3.1 Committee.

(a) Subject to Section 3.2, the Plan shall be administered by a committee
(“Committee”), the members of which shall be appointed by the Board from time to
time and may be removed by the Board from time to time; provided that for
purposes of Awards to non-employee directors, “Committee” shall mean the full
Board. To the extent the Board considers it desirable to comply with Rule 16b-3
or meet the Performance-Based Exception, the Committee shall consist of two or
more directors of the Company, all of whom qualify as “outside directors” within
the meaning of Code Section 162(m) and Section 16 Non-Employee Directors. The
number of members of the Committee shall from time to time be increased or
decreased, and shall be subject to such conditions, in each case if and to the
extent the Board deems it appropriate to permit transactions in Shares pursuant
to the Plan to satisfy such conditions of Rule 16b-3 and the Performance-Based
Exception as then in effect.

(b) The Committee may delegate to the Chief Executive Officer of the Company any
or all of the authority of the Committee with respect to Awards to Grantees,
other than Grantees who are non-employee directors, executive officers, or are
(or are expected to be) Covered Employees and/or are Section 16 Persons at the
time any such delegated authority is exercised.

3.2 Powers of Committee. Subject to and consistent with the provisions of the
Plan, the Committee has full and final authority and sole discretion as follows:

(a) to determine when, to whom and in what types and amounts Awards should be
granted;

 

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(b) to grant Awards to Eligible Persons in any number, and to determine the
terms and conditions applicable to each Award (including the number of Shares or
the amount of cash or other property to which an Award will relate, any exercise
price, grant price or purchase price, any limitation or restriction, any
schedule for or performance conditions relating to the earning of the Award or
the lapse of limitations, forfeiture restrictions, restrictions on
exercisability or transferability, any performance goals including those
relating to the Company and/or an Affiliate and/or any division thereof and/or
an individual, and/or vesting based on the passage of time, based in each case
on such considerations as the Committee shall determine);

(c) to determine the benefit payable under any Performance Unit, Performance
Share, Dividend Equivalent, or Other Stock-Based Award and to determine whether
any performance or vesting conditions have been satisfied;

(d) to determine whether or not specific Awards shall be granted in connection
with other specific Awards, and if so, whether they shall be exercisable
cumulatively with, or alternatively to, such other specific Awards and all other
matters to be determined in connection with an Award;

(e) to determine the Option Term and the SAR term;

(f) to determine the amount, if any, that a Grantee shall pay for Restricted
Shares, whether to permit or require the payment of cash dividends thereon and
the terms related thereto, when Restricted Shares (including Restricted Shares
acquired upon the exercise of an Option) shall be forfeited and whether such
shares shall be held in escrow;

(g) to determine whether, to what extent and under what circumstances an Award
may be settled in, or the exercise price of an Award may be paid in, cash,
Shares, other Awards or other property, or an Award may be accelerated, vested,
canceled, forfeited or surrendered or any terms of the Award may be waived, and
to accelerate the exercisability of, and to accelerate or waive any or all of
the terms and conditions applicable to, any Award or any group of Awards for any
reason and at any time or to extend the period subsequent to the Termination of
Affiliation within which an Award may be exercised;

(h) to offer to exchange or buy out any previously granted Award for a payment
in cash, Shares or other Award;

(i) to construe and interpret the Plan and to make all determinations, including
factual determinations, necessary or advisable for the administration of the
Plan;

(j) to make, amend, suspend, waive and rescind rules and regulations relating to
the Plan;

(k) to appoint such agents as the Committee may deem necessary or advisable to
administer the Plan;

(l) to determine the terms and conditions of all Award Agreements applicable to
Eligible Persons (which need not be identical) and, with the consent of the
Grantee, to amend any such Award Agreement at any time, among other things, to
change the Option Price or grant

 

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price for an SAR or to permit transfers of such Awards to the extent permitted
by the Plan; provided that the consent of the Grantee shall not be required for
any amendment (i) which does not adversely affect the rights of the Grantee, or
(ii) which is necessary or advisable (as determined by the Committee) to carry
out the purpose of the Award as a result of any new applicable law or change in
an existing applicable law, or (iii) to the extent the Plan or Award Agreement
specifically permits amendment without consent;

(m) to cancel, with the consent of the Grantee, outstanding Awards and to grant
new Awards in substitution therefor;

(n) to impose such additional terms and conditions upon the grant, exercise or
retention of Awards as the Committee may, before or concurrently with the grant
thereof, deem appropriate, including limiting the percentage of Awards which may
from time to time be exercised by a Grantee;

(o) to make adjustments in the terms and conditions of, and the criteria in,
Awards in recognition of unusual or nonrecurring events (including events
described in Section 4.2) affecting the Company or an Affiliate or the financial
statements of the Company or an Affiliate, or in response to changes in
applicable laws, regulations or accounting principles; provided, however, that
in no event shall such adjustment increase the value of an Award for a person
expected to be a Covered Employee for whom the Committee desires to have the
Performance-Based Exception apply;

(p) to correct any defect or supply any omission or reconcile any inconsistency,
and to construe and interpret the Plan, the rules and regulations, and Award
Agreement or any other instrument entered into or relating to an Award under the
Plan; and

(q) to take any other action with respect to any matters relating to the Plan
for which it is responsible and to make all other decisions and determinations
as may be required under the terms of the Plan or as the Committee may deem
necessary or advisable for the administration of the Plan.

Any action of the Committee with respect to the Plan shall be final, conclusive
and binding on all persons, including the Company, its Affiliates, any Grantee,
any person claiming any rights under the Plan from or through any Grantee, and
stockholders, except to the extent the Committee may subsequently modify, or
take further action not consistent with, its prior action. If not specified in
the Plan, the time at which the Committee must or may make any determination
shall be determined by the Committee, and any such determination may thereafter
be modified by the Committee. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be construed
as limiting any power or authority of the Committee. The Committee may delegate
to officers or managers of the Company or any Affiliate the authority, subject
to such terms as the Committee shall determine, to perform specified functions
under the Plan (subject to Sections 4.3 and 5.6(c)).

 

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Article 4.

Shares Subject to the Plan, Maximum Awards, and 162(m) Compliance

4.1 Number of Shares Available for Grants. The Plan authorizes the issuance of
ten percent (10%) of the Common Stock on a fully-diluted basis on the Effective
Date, which equals 2,828,226 Shares, subject to adjustments in accordance with
Section 4.2. Shares issued pursuant Awards made pursuant to Section 5.5(b) will
not be charged against the Shares authorized for issuance under the Plan.

Only Shares actually issued shall be charged against the Shares authorized for
issuance under the Plan. If any Shares subject to an Award granted hereunder are
forfeited or such Award otherwise terminates without the delivery of such
Shares, the Shares subject to such Award, to the extent of any such forfeiture
or termination, shall again be available for grant under the Plan. If any Shares
subject to an Award granted hereunder are withheld or applied as payment in
connection with the exercise of an Award or the withholding or payment of taxes
related thereto (“Returned Shares”), such Returned Shares, shall again be
available for grant under the Plan.

The Committee shall from time to time determine the appropriate methodology for
calculating the number of Shares to which an Award relates pursuant to the Plan.

Shares delivered pursuant to the Plan may be, in whole or in part, authorized
and unissued Shares, or treasury Shares, including Shares repurchased by the
Company for purposes of the Plan.

4.2 Adjustments in Authorized Shares and Awards; Liquidation, Dissolution or
Change of Control.

(a) Adjustment in Authorized Shares and Awards. In the event that the Committee
determines that any dividend or other distribution (whether in the form of cash,
Shares, or other property), recapitalization, forward or reverse stock split,
subdivision, consolidation or reduction of capital, reorganization, merger,
consolidation, scheme of arrangement, split-up, spin-off or combination
involving the Company or repurchase or exchange of Shares or other securities of
the Company or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that any adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (a) the number and type of Shares
(or other securities or property) with respect to which Awards may be granted,
(b) the number and type of Shares (or other securities or property) subject to
outstanding Awards, (c) the grant or exercise price with respect to any Award
or, if deemed appropriate, make provision for a cash payment to the holder of an
outstanding Award, (d) the number and kind of Shares of outstanding Restricted
Shares or relating to any other outstanding Award in connection with which
Shares are subject, and (e) the number of Shares with respect to which Awards
may be granted to a Grantee, as set forth in Section 4.3; provided, in each
case, that with respect to Stock Options and SARs, no such adjustment shall be
authorized to the extent that such adjustment would cause the Option or SAR
(determined as if such Option or SAR was an Incentive Stock Option) to violate
Section 424(a) of the Code; and provided further that the number of Shares
subject to any Award denominated in Shares shall always be a whole number.

 

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(b) Liquidation, Dissolution or Change of Control. In the case of any
liquidation, dissolution or Change of Control of the Company, the Committee, in
its sole discretion, shall (i) cancel any or all outstanding Awards of Options,
SARs, Performance Shares and Performance Units in exchange for a payment (in
cash, or in securities or other property) in the amount that the Grantee would
have received if such Performance Shares and Performance Units were vested and
settled and if such Options and SARs were fully vested and exercised immediately
prior to the liquidation, dissolution or Change of Control but only to the
extent that the Option Price with respect to any Option or the grant price with
respect to any SAR exceeds the Fair Market Value of the Shares at that time, and
(ii) accelerate the vesting of any Restricted Shares immediately prior to the
Change of Control; unless provision is made in connection with a Change of
Control transaction for the continuation or assumption of such Awards by, or for
the substitution of the equivalent awards of, the surviving or successor entity
or a parent thereof in accordance with Section 4.2(a). Any payment made pursuant
to this Section 4.2(b) shall be reduced in each case by any applicable federal,
state and local taxes required to be withheld by the Company. Notwithstanding
the foregoing, in the event that any payment of cash or other securities or
property pursuant to this Section 4.2(b) would subject the Grantee to taxes and
penalties under Section 409A(a)(1) of the Code, such payment shall be deferred
until the earliest date on which such payment may be made without subjecting the
Grantee to taxes and penalties under Code Section 409A(a)(1).

4.3 Compliance with Section 162(m) of the Code.

(a) Section 162(m) Compliance. To the extent the Committee determines that
compliance with the Performance-Based Exception is desirable with respect to an
Award, this section 4.3(a) shall apply. Each Award that is intended to meet the
Performance-Based Exception and is granted to a person the Committee believes is
likely to be a Covered Employee at the time such Award is settled shall comply
with the requirements of the Performance-Based Exception; provided, however,
that to the extent Code Section 162(m) requires periodic shareholder approval of
Performance Measures, such approval shall not be required for the continuation
of the Plan or as a condition to grant any Award hereunder after such approval
is required. In addition, in the event that changes are made to Code
Section 162(m) to permit flexibility with respect to the Award or Awards
available under the Plan, the Committee may, subject to this Section 4.3, make
any adjustments to such Awards as it deems appropriate.

(b) Annual Individual Limitations. No Grantee may be granted Awards for Options,
SARs, Restricted Shares or Performance Shares (or any other Award which is
determined by reference to the value of Shares or appreciation in the value of
Shares) in any calendar year with respect to more than four percent (4%) of the
Common Stock on a fully-diluted basis on the Effective Date, which equals
1,131,290 Shares; provided, however, that these Awards are subject to adjustment
as provided in Section 4.2 and except as otherwise provided in Section 5.5(b).

 

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4.4 Performance-Based Exception Under Section 162(m). Unless and until the
Committee proposes for stockholder vote and stockholders approve a change in the
general Performance Measures set forth in this Section 4.4, for Awards (other
than Options and SARs) designed to qualify for the Performance-Based Exception,
the objective Performance Measure(s) shall be chosen from among the following:

(a) Earnings (either in the aggregate or on a per-share basis);

(b) Net income or loss (either in the aggregate or on a per-share basis);

(c) Operating income or loss;

(d) Operating profit;

(e) Annual cash flow provided by operations;

(f) Costs;

(g) Gross revenues;

(h) Reductions in expense levels in each case, where applicable, determined
either on a Company-wide basis or in respect of any one or more business units;

(i) Operating and maintenance cost management and employee productivity;

(j) Stockholder returns (including return on assets, investments, equity, or
gross sales);

(k) Return measures (including return on assets, equity, or sales);

(l) Share price (including growth measures and total stockholder return or
attainment by the Shares of a specified value for a specified period of time);

(m) Net economic value;

(n) Economic value added;

(o) Aggregate product unit and pricing targets;

(p) Strategic business criteria, consisting of one or more objectives based on
meeting specified revenue, market share, market penetration, geographic business
expansion goals, objectively identified project milestones, production volume
levels, cost targets, and goals relating to acquisitions or divestitures;

(q) Achievement of business or operational goals such as market share and/or
business development;

(r) Results of customer satisfaction surveys;

(s) Safety record;

 

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(t) Network and service reliability; and/or

(u) Debt ratings, debt leverage and debt service;

provided that applicable Performance Measures may be applied on a pre- or
post-tax basis; and provided further that the Committee may, on the Grant Date
of an Award intended to comply with the Performance-Based Exception, and in the
case of other grants, at any time, provide that the formula for such Award may
include or exclude items to measure specific objectives, such as losses from
discontinued operations, extraordinary gains or losses, the cumulative effect of
accounting changes, acquisitions or divestitures, foreign exchange impacts and
any unusual, nonrecurring gain or loss. For Awards intended to comply with the
Performance-Based Exception, the Committee shall set the Performance Measures
within the time period prescribed by Section 162(m) of the Code. The levels of
performance required with respect to Performance Measures may be expressed in
absolute or relative levels and may be based upon a set increase, set positive
result, maintenance of the status quo, set decrease or set negative result.
Performance Measures may differ for Awards to different Grantees. The Committee
shall specify the weighting (which may be the same or different for multiple
objectives) to be given to each performance objective for purposes of
determining the final amount payable with respect to any such Award. Any one or
more of the Performance Measures may apply to the Grantee, a department, unit,
division or function within the Company or any one or more Affiliates; and may
apply either alone or relative to the performance of other businesses or
individuals (including industry or general market indices).

The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the pre-established performance goals; provided,
however, that Awards which are designed to qualify for the Performance-Based
Exception may not (unless the Committee determines to amend the Award so that it
no longer qualified for the Performance-Based Exception) be adjusted upward (the
Committee shall retain the discretion to adjust such Awards downward). The
Committee may not, unless the Committee determines to amend the Award so that it
no longer qualifies for the Performance-Based Exception, delegate any
responsibility with respect to Awards intended to qualify for the
Performance-Based Exception. All determinations by the Committee as to the
achievement of the Performance Measure(s) shall be in writing prior to payment
of the Award.

In the event that applicable laws change to permit Committee discretion to alter
the governing Performance Measures without obtaining stockholder approval of
such changes, and still qualify for the Performance-Based Exception, the
Committee shall have sole discretion to make such changes without obtaining
stockholder approval.

Article 5.

Eligibility and General Conditions of Awards

5.1 Eligibility. The Committee may in its discretion grant Awards to any
Eligible Person, whether or not he or she has previously received an Award.

5.2 Award Agreement. To the extent not set forth in the Plan, the terms and
conditions of each Award shall be set forth in an Award Agreement.

 

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5.3 General Terms and Termination of Affiliation. Except as provided in an Award
Agreement or as otherwise provided below in this Section 5.3, all Options or
SARs that have not been exercised, or any other Awards that remain subject to a
risk of forfeiture or which are not otherwise vested, or which have outstanding
Performance Periods, at the time of a Termination of Affiliation shall be
forfeited to the Company.

(a) Options and SARs. Except as otherwise provided in an Award Agreement:

(i) If Termination of Affiliation occurs for a reason other than death,
Disability or cause, Options and SARs which were vested and exercisable
immediately before such Termination of Affiliation shall remain exercisable for
a period of ninety (90) calendar days following such Termination of Affiliation
(but not for more than ten (10) years from the Grant Date of the Award or
expiration of the Option Term, if earlier) and shall then terminate.

(ii) If Termination of Affiliation occurs by reason of death or Disability,
Options and SARs will become immediately vested and exercisable upon such
Termination of Affiliation and shall remain exercisable for a period of 365
calendar days following such Termination of Affiliation (but not for more than
ten (10) years from the Grant Date of the Award or expiration of the Option
Term, if earlier) and shall then terminate.

(iii) Ninety (90) calendar days after a Grantee ceases to be an employee of the
Company and all Subsidiaries without having had a Termination of Affiliation,
any Incentive Stock Option granted to such Grantee shall cease to be treated as
an Incentive Stock Option and shall be treated as a Non-Statutory Stock Option.

(b) Restricted Shares. Except as otherwise provided in an Award Agreement:

(i) If Termination of Affiliation occurs by reason of death or Disability,
Restricted Shares will become immediately vested.

(ii) If Termination of Affiliation occurs for any reason other than death or
Disability, all Restricted Shares that are unvested or still subject to
restrictions shall be forfeited by the Grantee and reacquired by the Company,
and the Grantee shall sign any document and take any other action required to
assign such Shares back to the Company.

(c) Performance Shares and Performance Units. Except as otherwise provided in an
Award Agreement:

(i) If Termination of Affiliation occurs during a Performance Period for a
reason other than Disability or death, all Performance Shares and Performance
Units shall be forfeited upon such Termination of Affiliation.

(ii) If Termination of Affiliation occurs during a Performance Period by reason
of Disability or death, the Grantee shall be entitled to payment at or after
conclusion of the Performance Period in accordance with the terms of the Award
of that portion of the Performance Share or Unit Award equal to the amount that
would be payable if the

 

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Grantee continued in employment for the remainder of the Performance Period
multiplied by a fraction, the numerator of which is the number of days in the
Performance Period preceding such Termination of Affiliation and the denominator
of which is the total number of days in the Performance Period.

(d) Dividend Equivalents. If Dividend Equivalents have been credited with
respect to any Award and such Award (in whole or in part) is forfeited, all
Dividend Equivalents issued in connection with such forfeited Award (or portion
of an Award) shall also be forfeited to the Company.

(e) Waiver by Committee. Notwithstanding the foregoing provisions of this
Section 5.3, the Committee may in its sole discretion as to all or part of any
Award as to any Grantee, at the time the Award is granted or thereafter,
determine that Awards shall become exercisable or vested upon a Termination of
Affiliation, determine that Awards shall continue to become exercisable or
vested in full or in installments after Termination of Affiliation, extend the
period for exercise of Options or SARs following Termination of Affiliation (but
not beyond the earlier of ten (10) years from the date of grant of the Option or
SAR or the original Option Term or SAR term), or provide that any Restricted
Share Award, Performance Share or Unit Award shall in whole or in part not be
forfeited upon such Termination of Affiliation. Unless the Award Agreement
specifies otherwise, the Committee may cancel, rescind, suspend, withhold or
otherwise limit or restrict any unexercised Award at any time if the Grantee is
not in compliance with all applicable provisions of the Award Agreement and the
Plan.

5.4 Nontransferability of Awards.

(a) No Award (prior to the time, if applicable, Shares are delivered in respect
of such Award), and no right under any Award, may be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by a Grantee
otherwise than by will or by the laws of descent and distribution (or in the
case of Restricted Shares, to the Company), and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Affiliate; provided that the
designation of a beneficiary to receive benefits in the event of the Grantee’s
death shall not constitute an assignment, alienation, pledge, attachment, sale,
transfer or encumbrance.

(b) Notwithstanding subsection (a) above, to the extent provided in the Award
Agreement, Awards other than Incentive Stock Options, may be transferred,
without consideration, to a Permitted Transferee. For this purpose, a “Permitted
Transferee” in respect of any Grantee means any member of the Immediate Family
of such Grantee, any trust of which all of the primary beneficiaries are such
Grantee or members of his or her Immediate Family, or any partnership (including
limited liability companies and similar entities) of which all of the partners
or members are such Grantee or members of his or her Immediate Family; and the
“Immediate Family” of a Grantee means the Grantee’s spouse, children,
stepchildren, grandchildren, parents, stepparents, siblings, grandparents,
nieces and nephews or the spouse of any of the foregoing individuals. Such Award
may be exercised by such transferee in accordance with the terms of such Award.
If so determined by the Committee, a Grantee may, in the manner established by
the Committee, designate a beneficiary or beneficiaries to exercise the rights
of the Grantee, and to receive any distribution with respect to any Award upon
the death of

 

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the Grantee. A transferee, beneficiary, guardian, legal representative or other
person claiming any rights under the Plan from or through any Grantee shall be
subject to the provisions of the Plan and any applicable Award Agreement, except
to the extent the Plan and Award Agreement otherwise provide with respect to
such persons, and to any additional restrictions or limitations deemed necessary
or appropriate by the Committee.

5.5 Stand-Alone, Tandem and Substitute Awards.

(a) Awards granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in substitution for,
any other Award granted under the Plan or any award or benefit granted by the
Company or any Affiliate under any other plan, program, arrangement, contract or
agreement (a “Non-Plan Award”); provided that if the stand-alone, tandem or
substitute Award is intended to qualify for the Performance-Based Exception, it
must separately satisfy the requirements of the Performance-Based Exception. If
an Award is granted in substitution for another Award or any Non-Plan Award, the
Committee shall require the surrender of such other Award or Non-Plan Award in
consideration for the grant of the new Award. Awards granted in addition to or
in tandem with other Awards or Non-Plan Awards may be granted either at the same
time as or at a different time from the grant of such other Awards or Non-Plan
Awards.

(b) The Committee may, in its discretion and on such terms and conditions as the
Committee considers appropriate in the circumstances, grant Awards under the
Plan (“Substitute Awards”) in substitution for stock and stock-based awards
(“Acquired Entity Awards”) held by current and former employees or non-employee
directors of, or consultants to, another corporation or entity who become
Eligible Persons as the result of a merger or consolidation of the employing
corporation or other entity (the “Acquired Entity”) with the Company or an
Affiliate or the acquisition by the Company or an Affiliate of property or stock
of the Acquired Entity immediately prior to such merger, consolidation or
acquisition (“Acquisition Date”) in order to preserve for the Grantee the
economic value of all or a portion of such Acquired Entity Award at such price
as the Committee determines necessary to achieve preservation of economic value.
The limitations of Sections 4.1 and 4.3 on the number of Shares reserved or
available for grants, and the limitations under Sections 6.3 and 7.3 with
respect to Option Prices and grant prices for SARs, shall not apply to
Substitute Awards granted under this subsection (b).

5.6 Compliance with Rule 16b-3.

(a) Six-Month Holding Period Advice. Unless a Grantee could otherwise dispose of
or exercise a derivative security or dispose of Shares delivered under the Plan
without incurring liability under Section 16(b) of the Exchange Act, the
Committee may advise or require a Grantee to comply with the following in order
to avoid incurring liability under Section 16(b): (i) at least six months must
elapse from the date of acquisition of a derivative security under the Plan to
the date of disposition of the derivative security (other than upon exercise or
conversion) or its underlying equity security, and (ii) Shares granted or
awarded under the Plan other than upon exercise or conversion of a derivative
security must be held for at least six months from the date of grant of an
Award.

 

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(b) Reformation to Comply with Exchange Act Rules. To the extent the Committee
determines that a grant or other transaction by a Section 16 Person should
comply with applicable provisions of Rule 16b-3 (except for transactions
exempted under alternative Exchange Act rules), the Committee shall take such
actions as necessary to make such grant or other transaction to comply, and if
any provision of this Plan or any Award Agreement relating to a given Award does
not comply with the requirements of Rule 16b-3 as then applicable to any such
grant or transaction, such provision will be construed or deemed amended, if the
Committee so determines, to the extent necessary to conform to the then
applicable requirements of Rule 16b-3.

(c) Rule 16b-3 Administration. Any function relating to a Section 16 Person
shall be performed solely by the Committee if necessary to ensure compliance
with applicable requirements of Rule 16b-3, to the extent the Committee
determines that such compliance is desired. Each member of the Committee or
person acting on behalf of the Committee shall be entitled to, in good faith,
rely or act upon any report or other information furnished to him by any
officer, manager or other employee of the Company or any Affiliate, the
Company’s independent certified public accountants or any executive compensation
consultant or attorney or other professional retained by the Company to assist
in the administration of the Plan.

Article 6.

Stock Options

6.1 Grant of Options. Subject to and consistent with the provisions of the Plan,
Options may be granted to any Eligible Person in such number, and upon such
terms, and at any time and from time to time as shall be determined by the
Committee.

6.2 Award Agreement. Each Option grant shall be evidenced by an Award Agreement
that shall specify the Option Price, the Option Term (not to exceed ten
(10) years from its Grant Date), the number of Shares to which the Option
pertains, the time or times at which such Option shall be exercisable and such
other provisions as the Committee shall determine.

6.3 Option Price. The Option Price of an Option under this Plan shall be
determined in the sole discretion of the Committee, but in no case shall the
Option Price be less than 100% of the Fair Market Value of a Share on the Grant
Date. Subject to adjustment pursuant to Section 4.2, neither the Committee nor
the Board shall have the authority or discretion to change the Option Price of
any outstanding Option.

6.4 Grant of Incentive Stock Options. At the time of the grant of any Option,
the Committee may in its discretion designate that such Option shall be made
subject to additional restrictions to permit it to qualify as an Incentive Stock
Option. Any Option designated as an Incentive Stock Option:

(a) shall be granted only to an employee of the Company or a Subsidiary (as
defined below);

 

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(b) shall have an Option Price of not less than 100% of the Fair Market Value of
a Share on the Grant Date, and, if granted to a person who owns capital stock
(including stock treated as owned under Section 424(d) of the Code) possessing
more than 10% of the total combined voting power of all classes of capital stock
of the Company or any Subsidiary (a “10% Owner”), have an Option Price not less
than 110% of the Fair Market Value of a Share on its Grant Date;

(c) shall have an Option Term of not more than ten (10) years (five years if the
Grantee is a 10% Owner) from its Grant Date, and shall be subject to earlier
termination as provided herein or in the applicable Award Agreement;

(d) shall not have an aggregate Fair Market Value (as of the Grant Date) of the
Shares with respect to which Incentive Stock Options (whether granted under the
Plan or any other stock option plan of the Grantee’s employer or any parent or
Subsidiary (“Other Plans”)) are exercisable for the first time by such Grantee
during any calendar year (“Current Grant”), determined in accordance with the
provisions of Section 422 of the Code, which exceeds $100,000 (the “$100,000
Limit”);

(e) shall, if the aggregate Fair Market Value of the Shares (determined on the
Grant Date) with respect to the Current Grant and all Incentive Stock Options
previously granted under the Plan and any Other Plans which are exercisable for
the first time during a calendar year would exceed the $100,000 Limit, be, as to
the portion in excess of the $100,000 Limit, exercisable as a separate option
that is not an Incentive Stock Option at such date or dates as are provided in
the Current Grant;

(f) shall require the Grantee to notify the Committee of any disposition of any
Shares delivered pursuant to the exercise of the Incentive Stock Option under
the circumstances described in Section 421(b) of the Code (relating to holding
periods and certain disqualifying dispositions) (“Disqualifying Disposition”),
within 10 days of such a Disqualifying Disposition;

(g) shall by its terms not be assignable or transferable other than by will or
the laws of descent and distribution and may be exercised, during the Grantee’s
lifetime, only by the Grantee; provided, however, that the Grantee may, to the
extent provided in the Plan in any manner specified by the Committee, designate
in writing a beneficiary to exercise his or her Incentive Stock Option after the
Grantee’s death; and

(h) shall, if such Option nevertheless fails to meet the foregoing requirements,
or otherwise fails to meet the requirements of Section 422 of the Code for an
Incentive Stock Option, be treated for all purposes of this Plan, except as
otherwise provided in subsections (d) and (e) above, as an Option that is not an
Incentive Stock Option.

“Subsidiary” means a corporation, a limited liability company or another entity,
other than the Company in an unbroken chain of corporations beginning with the
Company if, at the time of granting the Option, each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. Notwithstanding the foregoing and Section 3.2,
the Committee may, without the consent of the Grantee, at any time before the
exercise of an Option (whether or not an Incentive Stock Option), take any
action necessary to prevent such Option from being treated as an Incentive Stock
Option.

 

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6.5 Payment. Except as otherwise provided by the Committee in an Award
Agreement, Options shall be exercised by the delivery of a written notice of
exercise to the Company, setting forth the number of Shares with respect to
which the Option is to be exercised, accompanied by full payment for the Shares
made by any one or more of the following means:

(a) cash, personal check or wire transfer;

(b) Mature Shares, valued at their Fair Market Value on the date of exercise;

(c) with the approval of the Committee, Restricted Shares held by the Grantee
for at least six months prior to the exercise of the Option, each such share
valued at the Fair Market Value of a Share on the date of exercise; or

(d) subject to applicable law (including the prohibited loan provisions of
Section 402 of the Sarbanes-Oxley Act of 2002), through the sale of the Shares
acquired on exercise of the Option through a broker-dealer to whom the Grantee
has submitted an irrevocable notice of exercise and irrevocable instructions to
deliver promptly to the Company the amount of sale or loan proceeds sufficient
to pay for such Shares, together with, if requested by the Company, the amount
of federal, state, local or other withholding taxes payable by Grantee by reason
of such exercise.

The Committee may in its discretion specify that, if any Restricted Shares
(“Tendered Restricted Shares”) are used to pay the Option Price, (x) all the
Shares acquired on exercise of the Option shall be subject to the same
restrictions as the Tendered Restricted Shares, determined as of the date of
exercise of the Option, or (y) a number of Shares acquired on exercise of the
Option equal to the number of Tendered Restricted Shares shall be subject to the
same restrictions as the Tendered Restricted Shares, determined as of the date
of exercise of the Option.

At the discretion of the Committee and subject to applicable law (including the
prohibited loan provisions of Section 402 of the Sarbanes-Oxley Act of 2002),
the Company may loan a Grantee all or any portion of the amount payable by the
Grantee to the Company upon exercise of the Option.

Article 7.

Stock Appreciation Rights

7.1 Issuance. Subject to and consistent with the provisions of the Plan, the
Committee, at any time and from time to time, may grant SARs to any Eligible
Person either alone or in addition to other Awards granted under the Plan. Such
SARs may, but need not, be granted in connection with a specific Option granted
under Article 6. Any SAR related to a Non-Statutory Stock Option may be granted
at the same time such Option is granted or at any time thereafter before
exercise or expiration of such Option. Any SAR related to an Incentive Stock
Option must be granted at the same time such Option is granted. The Committee
may impose such conditions or restrictions on the exercise of any SAR as it
shall deem appropriate.

 

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7.2 Award Agreements. Each SAR grant shall be evidenced by an Award Agreement in
such form as the Committee may approve and shall contain such terms and
conditions not inconsistent with other provisions of the Plan as shall be
determined from time to time by the Committee; provided that no SAR grant shall
have a term of more than ten (10) years from the date of grant of the SAR.

7.3 Grant Price. The grant price of a SAR shall be determined by the Committee
in its sole discretion; provided that the grant price shall not be less than
100% of the Fair Market Value of a Share on the date of the grant of the SAR.

7.4 Exercise and Payment. Upon the exercise of SARs, the Grantee shall be
entitled to receive the value thereof. The Fair Market Value of a Share on the
date of exercise of SARs shall be determined in the same manner as the Fair
Market Value of a Share on the date of grant of an Option is determined. SARs
shall be deemed exercised on the date written notice of exercise in a form
acceptable to the Committee is received by the Secretary of the Company. Unless
the Award Agreement provides otherwise or reserves to the Committee or the
Grantee or both the right to defer payment, the Company shall make payment in
respect of any SAR within five (5) business days of the date the SAR is
exercised. Any payment by the Company in respect of a SAR may be made in cash,
Shares, other property, or any combination thereof, as the Committee, in its
sole discretion, shall determine.

7.5 Grant Limitations. The Committee may at any time impose any other
limitations upon the exercise of SARs which, in the Committee’s sole discretion,
are necessary or desirable in order for Grantees to qualify for an exemption
from Section 16(b) of the Exchange Act.

Article 8.

Restricted Shares

8.1 Grant of Restricted Shares. Subject to and consistent with the provisions of
the Plan, the Committee, at any time and from time to time, may grant Restricted
Shares to any Eligible Person in such amounts as the Committee shall determine.

8.2 Award Agreement. Each grant of Restricted Shares shall be evidenced by an
Award Agreement that shall specify the Period(s) of Restriction, the number of
Restricted Shares granted, and such other provisions as the Committee shall
determine. The Committee may impose such conditions and/or restrictions on any
Restricted Shares granted pursuant to the Plan as it may deem advisable,
including restrictions based upon the achievement of specific performance goals,
time-based restrictions on vesting following the attainment of the performance
goals, and/or restrictions under applicable securities laws.

8.3 Consideration for Restricted Shares. The Committee shall determine the
amount, if any, that a Grantee shall pay for Restricted Shares.

 

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8.4 Effect of Forfeiture. If Restricted Shares are forfeited, and if the Grantee
was required to pay for such shares or acquired such Restricted Shares upon the
exercise of an Option, the Grantee shall be deemed to have resold such
Restricted Shares to the Company at a price equal to the lesser of (x) the
amount paid by the Grantee for such Restricted Shares, or (y) the Fair Market
Value of a Share on the date of such forfeiture. The Company shall pay to the
Grantee the deemed sale price as soon as is administratively practical. Such
Restricted Shares shall cease to be outstanding, and shall no longer confer on
the Grantee thereof any rights as a stockholder of the Company, from and after
the date of the event causing the forfeiture, whether or not the Grantee accepts
the Company’s tender of payment for such Restricted Shares.

8.5 Escrow; Legends. The Committee may provide that the certificates for any
Restricted Shares (x) shall be held (together with a stock power executed in
blank by the Grantee) in escrow by the Secretary of the Company until such
Restricted Shares become nonforfeitable or are forfeited and/or (y) shall bear
an appropriate legend restricting the transfer of such Restricted Shares under
the Plan. If any Restricted Shares become nonforfeitable, the Company shall
cause certificates for such shares to be delivered without such legend.

Article 9.

Performance Units and Performance Shares

9.1 Grant of Performance Units and Performance Shares. Subject to and consistent
with the provisions of the Plan, Performance Units or Performance Shares may be
granted to any Eligible Person in such amounts and upon such terms, and at any
time and from time to time, as shall be determined by the Committee.

9.2 Value/Performance Goals. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the number or value of Performance Units or Performance Shares that will be paid
to the Grantee. With respect to Covered Employees and to the extent the
Committee deems it appropriate to comply with Section 162(m) of the Code, all
performance goals shall be objective Performance Measures satisfying the
requirements for the Performance-Based Exception, and shall be set by the
Committee within the time period prescribed by Section 162(m) of the Code and
related regulations.

(a) Performance Unit. Each Performance Unit shall have an initial value that is
established by the Committee at the time of grant.

(b) Performance Share. Each Performance Share shall have an initial value equal
to the Fair Market Value of a Share on the date of grant.

9.3 Earning of Performance Units and Performance Shares. After the applicable
Performance Period has ended, the holder of Performance Units or Performance
Shares shall be entitled to payment based on the level of achievement of
performance goals set by the Committee. If a Performance Unit or Performance
Share Award is intended to comply with the Performance-Based Exception, the
Committee shall certify the level of achievement of the performance goals in
writing before the Award is settled.

 

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At the discretion of the Committee, the settlement of Performance Units or
Performance Shares may be in cash, Shares of equivalent value, or in some
combination thereof, as set forth in the Award Agreement.

If a Grantee is promoted, demoted or transferred to a different business unit of
the Company during a Performance Period, then, to the extent the Committee
determines that the Award, the performance goals, or the Performance Period are
no longer appropriate, the Committee may adjust, change, eliminate or cancel the
Award, the performance goals, or the applicable Performance Period, as it deems
appropriate in order to make them appropriate and comparable to the initial
Award, the performance goals, or the Performance Period.

At the discretion of the Committee, a Grantee may be entitled to receive any
dividends or Dividend Equivalents declared with respect to Shares deliverable in
connection with grants of Performance Units or Performance Shares which have
been earned, but not yet delivered to the Grantee. A Grantee shall not have the
right to vote Shares deliverable in connection with grants of Performance Units
or Performance Shares until such Shares have been delivered to the Grantee.

Article 10.

Dividend Equivalents

The Committee is authorized to grant Awards of Dividend Equivalents alone or in
conjunction with other Awards. The Committee may provide that Dividend
Equivalents shall be paid or distributed when accrued or shall be deemed to have
been reinvested in additional Shares or additional Awards or otherwise
reinvested.

Article 11.

Other Stock-Based Awards

The Committee is authorized, subject to limitations under applicable law, to
grant such other Awards that are denominated or payable in, valued in whole or
in part by reference to, or otherwise based on, or related to, Shares, as deemed
by the Committee to be consistent with the purposes of the Plan including Shares
awarded which are not subject to any restrictions or conditions and Awards
valued by reference to the value of securities of, or the performance of,
specified Affiliates. Subject to and consistent with the provisions of the Plan,
the Committee shall determine the terms and conditions of such Awards. Except as
provided by the Committee, Shares delivered pursuant to a purchase right granted
under this Article 11 shall be purchased for such consideration, paid for by
such methods and in such forms, including cash, Shares, outstanding Awards or
other property, as the Committee shall determine.

 

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Article 12.

Amendment, Modification, and Termination

12.1 Amendment, Modification, and Termination. Subject to Section 12.2, the
Board may, at any time and from time to time, alter, amend, suspend, discontinue
or terminate the Plan in whole or in part without the approval of the Company’s
stockholders, except that (a) any amendment or alteration shall be subject to
the approval of the Company’s stockholders if such stockholder approval is
required by any federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Shares may then be listed or
quoted, and (b) the Board may otherwise, in its discretion, determine to submit
other such amendments or alterations to stockholders for approval. Without
limiting the generality of the foregoing, the number of Shares available for
grant hereunder shall not be increased without the approval of the Company’s
stockholders.

12.2 Awards Previously Granted. Except as otherwise specifically permitted in
the Plan or an Award Agreement, no termination, amendment, or modification of
the Plan shall adversely affect in any material way any Award previously granted
under the Plan, without the written consent of the Grantee of such Award;
provided that the consent of the Grantee shall not be required for any amendment
that is necessary or advisable (as determined by the Committee) to carry out the
purpose of the Award as a result of any new applicable law or change in an
existing applicable law.

Article 13.

Withholding

13.1 Required Withholding.

(a) The Committee in its sole discretion may provide that when taxes are to be
withheld in connection with the exercise of an Option or SAR, or upon the lapse
of restrictions on Restricted Shares, or upon payment of any other benefit or
right under this Plan (the date on which such exercise occurs or such
restrictions lapse or such payment of any other benefit or right occurs
hereinafter referred to as the “Tax Date”), the Grantee may elect to make
payment for the withholding of federal, state and local taxes, including Social
Security and Medicare (“FICA”) taxes by one or a combination of the following
methods:

(i) payment of an amount in cash equal to the amount to be withheld;

(ii) delivering part or all of the amount to be withheld in the form of Mature
Shares valued at their Fair Market Value on the Tax Date;

(iii) requesting the Company to withhold from those Shares that which would
otherwise be received upon exercise of the Option or SAR, upon the lapse of
restrictions on Restricted Shares, a number of Shares having a Fair Market Value
on the Tax Date equal to the amount to be withheld; or

(iv) withholding from any compensation otherwise due to the Grantee.

The Committee in its sole discretion may provide that the maximum amount of tax
withholding upon exercise of an Option to be satisfied by withholding Shares
upon exercise of such Option pursuant to clause (iii) above shall not exceed the
minimum amount of taxes, including FICA taxes, required to be withheld under
federal, state and local law. An election by Grantee under this subsection is
irrevocable. Any fractional share amount and any additional withholding not paid
by the withholding or surrender of Shares or delivery of Mature Shares must be
paid in cash. If no timely election is made, the Grantee must deliver cash to
satisfy all tax withholding requirements.

 

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(b) Any Grantee who makes a Disqualifying Disposition (as defined in
Section 6.4(f)) or an election under Section 83(b) of the Code shall remit to
the Company an amount sufficient to satisfy all resulting tax withholding
requirements in the same manner as set forth in subsection (a).

13.2 Notification under Code Section 83(b). If the Grantee, in connection with
the exercise of any Option, or the grant of Restricted Shares, makes the
election permitted under Section 83(b) of the Code to include in such Grantee’s
gross income in the year of transfer the amounts specified in Section 83(b) of
the Code, then such Grantee shall notify the Company of such election within ten
(10) calendar days of filing the notice of the election with the Internal
Revenue Service, in addition to any filing and notification required pursuant to
regulations issued under Section 83(b) of the Code. The Committee may, in
connection with the grant of an Award or at any time thereafter, prohibit a
Grantee from making the election described above.

Article 14.

Additional Provisions

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

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

14.3 Severability. If any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not invalidate any other part of the Plan. Any Section or part
of a Section so declared to be unlawful or invalid shall, if possible, be
construed in a manner which will give effect to the terms of such Section or
part of a Section to the fullest extent possible while remaining lawful and
valid.

14.4 Requirements of Law. The granting of Awards and the delivery of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required. Notwithstanding any provision of the Plan or any
Award, Grantees shall not be entitled to exercise, or receive benefits under,
any Award, and the Company (and any Affiliate) shall not be obligated to deliver
any Shares or deliver benefits to a Grantee, if such exercise or delivery would
constitute a violation by the Grantee or the Company of any applicable law or
regulation.

 

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14.5 Securities Law Compliance.

(a) If the Committee deems it necessary to comply with any applicable securities
law, or the requirements of any stock exchange upon which Shares may be listed,
the Committee may impose any restriction on Awards or Shares acquired pursuant
to Awards under the Plan as it may deem advisable. All certificates for Shares
delivered under the Plan pursuant to any Award or the exercise thereof shall be
subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations and other requirements of the SEC,
any stock exchange upon which Shares are then listed, any applicable securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions. If so requested
by the Company, the Grantee shall make a written representation to the Company
that he or she will not sell or offer to sell any Shares unless a registration
statement shall be in effect with respect to such Shares under the Securities
Act of 1933, as amended, and any applicable state securities law or unless he or
she shall have furnished to the Company, in form and substance satisfactory to
the Company, that such registration is not required.

(b) If the Committee determines that the exercise or nonforfeitability of, or
delivery of benefits pursuant to, any Award would violate any applicable
provision of securities laws or the listing requirements of any national
securities exchange or national market system on which are listed any of the
Company’s equity securities, then the Committee may postpone any such exercise,
nonforfeitability or delivery, as applicable, but the Company shall use all
reasonable efforts to cause such exercise, nonforfeitability or delivery to
comply with all such provisions at the earliest practicable date.

14.6 No Rights as a Stockholder. No Grantee shall have any rights as a
stockholder of the Company with respect to the Shares (other than Restricted
Shares) which may be deliverable upon exercise or payment of such Award until
such Shares have been delivered to him or her. Restricted Shares, whether held
by a Grantee or in escrow by the Secretary of the Company, shall confer on the
Grantee all rights of a stockholder of the Company, except as otherwise provided
in the Plan or Award Agreement. Dividends issued with respect to Restricted
Shares shall be subject to the same restrictions and other terms as apply to the
Restricted Shares with respect to which such dividends are issued.

14.7 Nature of Payments. Unless otherwise specified in the Award Agreement,
Awards shall be special incentive payments to the Grantee and shall not be taken
into account in computing the amount of salary or compensation of the Grantee
for purposes of determining any pension, retirement, death or other benefit
under (a) any pension, retirement, profit-sharing, bonus, insurance or other
employee benefit plan of the Company or any Affiliate, except as such plan shall
otherwise expressly provide, or (b) any agreement between (i) the Company or any
Affiliate and (ii) the Grantee, except as such agreement shall otherwise
expressly provide.

14.8 Non-Exclusivity of Plan. Neither the adoption of the Plan by the Board nor
its submission to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board to adopt such
other compensatory arrangements for employees as it may deem desirable.

 

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14.9 Governing Law. The Plan, and all agreements hereunder, shall be construed
in accordance with and governed by the laws of the State of Delaware, other than
its laws respecting choice of law.

14.10 Share Certificates. All certificates for Shares delivered under the terms
of the Plan shall be subject to such stop-transfer orders and other restrictions
as the Committee may deem advisable under federal or state securities laws,
rules and regulations thereunder, and the rules of any national securities laws,
rules and regulations thereunder, and the rules of any national securities
exchange or automated quotation system on which Shares are listed or quoted. The
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions or any other restrictions or
limitations that may be applicable to Shares. In addition, during any period in
which Awards or Shares are subject to restrictions or limitations under the
terms of the Plan or any Award Agreement, the Committee may require any Grantee
to enter into an agreement providing that certificates representing Shares
deliverable or delivered pursuant to an Award shall remain in the physical
custody of the Company or such other person as the Committee may designate.

14.11 Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an “unfunded” plan for incentive compensation. With respect to any
payments not yet made to a Grantee pursuant to an Award, nothing contained in
the Plan or any Award Agreement shall give any such Grantee any rights that are
greater than those of a general creditor of the Company; provided, however, that
the Committee may authorize the creation of trusts or make other arrangements to
meet the Company’s obligations under the Plan to deliver cash, Shares or other
property pursuant to any Award which trusts or other arrangements shall be
consistent with the “unfunded” status of the Plan unless the Committee otherwise
determines.

14.12 Affiliation. Nothing in the Plan or an Award Agreement shall interfere
with or limit in any way the right of the Company or any Affiliate to terminate
any Grantee’s employment or consulting contract at any time, nor confer upon any
Grantee the right to continue in the employ of or as an officer of or as a
consultant to the Company or any Affiliate.

14.13 Participation. No employee or officer shall have the right to be selected
to receive an Award under this Plan or, having been so selected, to be selected
to receive a future Award.

14.14 Leave of Absence. An Eligible Person who is an employee shall not cease to
be an employee during a leave of absence approved by the Company and, provided
that, no such leave may exceed ninety (90) calendar 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 such Eligible Person shall be deemed to have incurred a
Termination of Affiliation ninety (90) days following the first day of such
leave.

14.15 Construction. The following rules of construction will apply to the Plan:
(a) the word “or” is disjunctive but not necessarily exclusive, and (b) words in
the singular include the plural, words in the plural include the singular, and
words in the neuter gender include the masculine and feminine genders and words
in the masculine or feminine gender include the other neuter genders.

 

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14.16 Headings. The headings of articles and sections are included solely for
convenience of reference, and if there is any conflict between such headings and
the text of this Plan, the text shall control.

14.17 Obligations. Unless otherwise specified in the Award Agreement, the
obligation to deliver, pay or transfer any amount of money or other property
pursuant to Awards under this Plan shall be the sole obligation of a Grantee’s
employer; provided that the obligation to deliver or transfer any Shares
pursuant to Awards under this Plan shall be the sole obligation of the Company.

14.18 Stockholder Approval. All Awards granted on or after the Effective Date
and prior to the date the Company’s stockholders approve the Plan are expressly
conditioned upon and subject to approval of the Plan by the Company’s
stockholders.

 

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