Exhibit 10.56
KB HOME
2010 EQUITY INCENTIVE PLAN
Effective April 1, 2010

 

 

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

 

TABLE OF CONTENTS

              Page    
ARTICLE 1. PURPOSE
    1  
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
    1  
ARTICLE 3. SHARES SUBJECT TO THE PLAN
    8  
3.1 Number of Shares
    8  
3.2 Stock Distributed
    9  
ARTICLE 4. GRANTING OF AWARDS
    9  
4.1 Participation
    9  
4.2 Award Agreement
    9  
4.3 Programs
    9  
4.4 Limitations Applicable to Section 16 Persons
    9  
4.5 Fiscal Year Award Limit
    9  
4.6 Minimum Vesting
    9  
4.7 At-Will Employment
    10  
4.8 Stand-Alone and Tandem Awards
    10  
ARTICLE 5. PERFORMANCE-BASED COMPENSATION
    10  
5.1 Purpose
    10  
5.2 Applicability
    10  
5.3 Types of Awards
    10  
5.4 Procedures with Respect to Performance-Based Awards
    11  
5.5 Payment of Performance-Based Awards
    11  
5.6 Additional Limitations
    11  
ARTICLE 6. GRANTING OF OPTIONS
    11  
6.1 Granting of Options to Eligible Individuals
    11  
6.2 Qualification of Incentive Stock Options
    11  
6.3 Option Exercise Price
    12  
6.4 Option Term
    12  
6.5 Option Vesting
    12  
6.6 Substitute Awards
    12  
6.7 Substitution of Stock Appreciation Rights
    13  

 

-i-

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

 

TABLE OF CONTENTS
(continued)

              Page    
ARTICLE 7. EXERCISE OF OPTIONS
    13  
7.1 Partial Exercise
    13  
7.2 Manner of Exercise
    13  
7.3 Notification Regarding Disposition
    13  
ARTICLE 8. AWARD OF RESTRICTED STOCK
    14  
8.1 Award of Restricted Stock
    14  
8.2 Rights as Stockholders
    14  
8.3 Restrictions
    14  
8.4 Repurchase or Forfeiture of Restricted Stock
    15  
8.5 Certificates for Restricted Stock
    15  
8.6 Section 83(b) Election
    15  
ARTICLE 9. AWARD OF PERFORMANCE AWARDS, STOCK PAYMENTS AND RESTRICTED STOCK
UNITS
    15  
9.1 Performance Awards
    15  
9.2 Stock Payments
    16  
9.3 Restricted Stock Units
    16  
9.4 Term
    16  
9.5 Exercise or Purchase Price
    16  
ARTICLE 10. AWARD OF STOCK APPRECIATION RIGHTS
    16  
10.1 Grant of Stock Appreciation Rights
    16  
10.2 Stock Appreciation Right Term
    17  
10.3 Stock Appreciation Right Vesting
    17  
10.4 Manner of Exercise
    17  
10.5 Payment
    18  
ARTICLE 11. ADDITIONAL TERMS OF AWARDS
    18  
11.1 Payment
    18  
11.2 Tax Withholding
    18  
11.3 Transferability of Awards
    19  
11.4 Conditions to Issuance of Shares
    20  
11.5 Forfeiture Provisions
    21  

 

-ii-

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

 

TABLE OF CONTENTS
(continued)

              Page    
11.6 Prohibition on Repricing
    21  
11.7 Permitted Replacement Awards
    21  
11.8 Shareholder Approval of Certain Accelerations
    21  
ARTICLE 12. ADMINISTRATION
    21  
12.1 Committee
    21  
12.2 Duties and Powers of Committee
    21  
12.3 Action by the Committee
    22  
12.4 Authority of Committee
    22  
12.5 Decisions Binding
    23  
12.6 Delegation of Authority
    23  
ARTICLE 13. MISCELLANEOUS PROVISIONS
    23  
13.1 Amendment, Suspension or Termination of the Plan
    23  
13.2 Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events
    24  
13.3 No Stockholder Rights
    26  
13.4 Paperless Administration
    26  
13.5 Effect of Plan upon Other Compensation Plans
    27  
13.6 Compliance with Laws
    27  
13.7 Titles and Headings, References to Sections of the Code, the Securities Act
or Exchange Act
    27  
13.8 Governing Law
    27  
13.9 Section 409A
    27  
13.10 No Rights to Awards
    28  
13.11 Unfunded Status of Awards
    28  
13.12 Indemnification
    28  
13.13 Term
    29  

 

-iii-

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

 

KB HOME
2010 EQUITY INCENTIVE PLAN
ARTICLE 1.
PURPOSE
The purpose of the KB Home 2010 Equity Incentive Plan (the “Plan”) is to
attract, motivate and retain the services of Employees, Non-Employee Directors
and Consultants by enabling them to participate in the growth and financial
success of KB Home (the “Company”) and to align their individual interests to
those of the Company’s stockholders.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings
specified below:
1. “Affiliate” shall mean a person or entity that directly or indirectly
controls or is controlled by, or is under common control with, the Company.
2. “Award” shall mean, as the case may be, a grant under the Plan of Options,
Restricted Stock, Restricted Stock Units, Performance Awards, Stock Payments or
Stock Appreciation Rights.
3. “Award Agreement” shall mean any written notice, terms and conditions,
contract or other instrument or document evidencing an Award, including in
electronic form, which shall contain any terms and conditions with respect to
the Award as the Committee shall determine consistent with the Plan and any
applicable Program.
4. “Award Limit” shall mean with respect to Awards payable in Shares or in cash,
as the case may be, the respective limit set forth in Section 4.5.
5. “Board” shall mean the Board of Directors of the Company.
6. A “Change of Ownership” shall be deemed to have occurred if any of the
following has occurred: (a) any one person, or more than one person acting as a
group, acquires ownership of stock of the Company that, together with stock held
by such person or group, constitutes more than 50% of the total fair market
value or total voting power of the stock of the Company, as determined in
accordance with Section 1.409A-3(i)(5)(v) of the Treasury Regulations; provided,
that if a person or group is considered either to own more than 50% of the total
fair market value or total voting power of the stock of the Company, or to own
more than the market value or total voting power specified in (b) below, and
such person or group acquires additional stock of the Company, the acquisition
of additional stock by such person or group shall not be considered to cause a
“Change of Ownership”; (b) any one person, or more than one person acting as a
group, acquires (or has acquired during the 12-month period ending on the date
of the most recent acquisition by such person or persons) ownership of stock of
the Company possessing 30% or more of the total voting power of the stock of the
Company, as determined in accordance with Section 1.409A-3(i)(5)(vi) of the
Treasury Regulations; provided,

 

1

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

 

that if a person or group is considered to possess 30% or more of the total
voting power of the stock of the Company, and such person or group acquires
additional stock of the Company, the acquisition of additional stock by such
person or group shall not be considered to cause a “Change of Ownership”; (c) a
majority of the members of the Board is replaced during any 12-month period by
directors whose appointment or election is not endorsed by a majority of the
members of the Board before the date of the appointment or election, as
determined in accordance with Section 1.409A-3(i)(5)(vi) of the Treasury
Regulations; or (d) any one person, or more than one person acting as a group,
acquires (or has acquired during the 12-month period ending on the date of the
most recent acquisition by such person or persons) assets from the Company that
have a total gross fair market value equal to or more than 40% of the total
gross fair market value of all of the assets of the Company immediately before
such acquisition or acquisitions, as determined in accordance with
Section 1.409A-3(i)(5)(vii) of the Treasury Regulations; provided, that a
transfer of assets shall not be treated as a “Change of Ownership” when such
transfer is made to an entity that is controlled by the stockholders of the
Company, as determined in accordance with Section 1.409A-3(i)(5)(vii)(B) of the
Treasury Regulations.
7. “Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time, together with the Treasury Regulations and official guidance promulgated
by the U.S. Department of Treasury.
8. “Committee” shall mean the Management Development and Compensation Committee
of the Board or another committee of the Board designated by the Board that
consists solely of Directors meeting the qualifications described in
Section 12.1.
9. “Common Stock” shall mean the common stock of the Company, par value $1.00
per share.
10. “Company Stock Administrator” shall mean the stock administrator of the
Company, or such other person or entity designated by the Committee, or his, her
or its office, as applicable, whether or not employed by the Company.
11. “Consultant” shall mean any consultant or advisor engaged to provide
services to the Company or any Affiliate that qualifies as a consultant or
advisor under the instructions for use of a Form S-8 Registration Statement.
12. “Covered Employee” shall mean any Employee who is, or who the Committee
believes may become, a “covered employee” within the meaning of Section 162(m)
of the Code.
13. “Director” shall mean a member of the Board.
14. “Effective Date” shall mean the date the Plan is first approved by the
Company’s stockholders in accordance with the requirements of the Company’s
by-laws, the applicable Securities Exchange and Sections 162(m) and 422 of the
Code.
15. “Eligible Individual” shall mean any person who is an Employee, a Consultant
or a Non-Employee Director, as determined by the Committee or the Board.

 

2

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

 

16. “Employee” shall mean any officer or other employee (as determined in
accordance with Section 3401(c) of the Code) of the Company or of any Affiliate.
17. “Equity Restructuring” shall mean a nonreciprocal transaction between the
Company and its stockholders, such as a stock dividend, stock split, spin-off,
rights offering or recapitalization through a large, nonrecurring cash dividend,
that affects the Shares (or other securities of the Company) or the Share price
(or the price of other securities), and results upon its implementation in a
change in the per-Share value of the Shares underlying outstanding Awards.
18. “Exchange Act” shall mean the Securities Exchange Act of 1934.
19. “Fair Market Value” shall mean, as of any given date, the value of a Share
determined as follows:
(1) If the Common Stock is listed on any Securities Exchange, its Fair Market
Value shall be the closing sales price for a Share as quoted on such Securities
Exchange for such date or, if there is no closing sales price for a Share on the
date in question, the closing sales price for a Share on the last preceding date
for which such quotation exists, as reported by The Wall Street Journal or such
other source (whether in print or electronic) as the Committee deems reliable;
(2) If the Common Stock is not listed on any Securities Exchange, but the Common
Stock is regularly quoted by a recognized securities dealer, its Fair Market
Value shall be the mean of the high bid and low asked prices for such date or,
if there are no high bid and low asked prices for a Share on such date, the high
bid and low asked prices for a Share on the last preceding date for which such
information exists, as reported by The Wall Street Journal or such other source
(whether in print or electronic) as the Committee deems reliable; or
(3) If the Common Stock is neither listed on any Securities Exchange nor
regularly quoted by a recognized securities dealer, its Fair Market Value shall
be established by the Committee in good faith.
20. “Full Value Award” shall mean any Award other than (i) an Option, (ii) a
Stock Appreciation Right or (iii) any other Award for which the Holder must pay
the intrinsic value existing as of the date of grant (whether directly or by
forgoing a right to receive a payment from the Company or any Affiliate) as a
condition to exercising or receiving payment under it.
21. “Greater Than 10% Stockholder” shall mean an individual then owning (within
the meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any subsidiary
corporation (as defined in Section 424(f) of the Code) or parent corporation (as
defined in Section 424(e) of the Code) thereof.
22. “Holder” shall mean a person who has been granted an Award.
23. “Incentive Stock Option” shall mean an Option that is intended to qualify as
an incentive stock option and conforms to the applicable provisions of
Section 422 of the Code.

 

3

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

 

24. “Non-Employee Director” shall mean a Director of the Company who is not an
Employee.
25. “Non-Qualified Stock Option” shall mean an Option that is not an Incentive
Stock Option.
26. “Option” shall mean a right to purchase Shares at a specified exercise
price, granted under Article 6. An Option shall be either a Non-Qualified Stock
Option or an Incentive Stock Option; provided, however, that Options granted to
Non-Employee Directors and Consultants shall only be Non-Qualified Stock
Options.
27. “Performance Award” shall mean a cash bonus award, stock bonus award,
performance award or incentive award that is paid in cash, Shares or a
combination of both, awarded under Section 9.1.
28. “Performance-Based Compensation” shall mean any compensation that is
intended to qualify as “performance-based compensation” as described in
Section 162(m)(4)(C) of the Code.
29. “Performance Criteria” shall mean the criteria that the Committee selects
for an Award for purposes of establishing the Performance Goal or Performance
Goals for a Performance Period. The Performance Criteria that shall be used to
establish Performance Goals are limited to the following: (i) income/loss (e.g.,
operating income/loss, EBIT or similar measures, net income/loss, earnings/loss
per share, residual or economic earnings), (ii) cash flow (e.g., operating cash
flow, total cash flow, EBITDA, cash flow in excess of cost of capital or
residual cash flow, cash flow return on investment and cash flow sufficient to
achieve financial ratios or a specified cash balance), (iii) returns (e.g., on
revenues, investments, assets, capital and equity), (iv) working capital (e.g.,
working capital divided by revenues), (v) margins (e.g., variable margin,
profits divided by revenues, gross margins and margins divided by revenues),
(vi) liquidity (e.g., total or net debt, debt reduction, debt-to-capital,
debt-to-EBITDA and other liquidity ratios), (vii) revenues, cost initiative and
stock price metrics (e.g., revenues, stock price, total shareholder return,
expenses, cost structure improvements and costs divided by revenues or other
metrics) and (viii) strategic metrics (e.g., market share, customer
satisfaction, employee satisfaction, service quality, unit volume, orders,
backlog, traffic, deliveries, cancellation rates, productivity, operating
efficiency, inventory management, community count, goals related to
acquisitions, divestitures or other transactions and goals related to KBnxt
operational business model principles, including goals based on a per-employee,
per-delivery or other basis).
30. “Performance Goals” shall mean, for a Performance Period, one or more goals
established in writing by the Committee for the Performance Period based upon
one or more Performance Criteria. Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance, either independently or as compared to one
or more companies, performance of specific subsidiaries or business units,
either independently or as compared to one or more companies’ subsidiaries or
business units, or otherwise as determined by the Committee. If the Committee
believes, in its sole discretion, that an equitable adjustment to any
Performance Goal is advisable

 

4

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

 

in light of new developments or circumstances, the Committee may provide for one
or more objectively determinable adjustments. Such adjustments may include or
arise from one or more of the following: (i) items related to a change in
accounting principle; (ii) items relating to financing activities;
(iii) expenses for restructuring or productivity initiatives; (iv) other
non-operating items; (v) items related to acquisitions; (vi) items attributable
to the business operations of any entity acquired by the Company during the
Performance Period; (vii) items related to the disposal of a business or segment
of a business; (viii) items related to discontinued operations that do not
qualify as a segment of a business under applicable accounting standards;
(ix) items attributable to any stock dividend, stock split, combination or
exchange of stock occurring during the Performance Period; (x) any other items
of significant income or expense which are determined to be appropriate
adjustments; (xi) items relating to unusual or extraordinary corporate
transactions, events or developments, (xii) items related to amortization of
acquired intangible assets; (xiii) items that are outside the scope of the
Company’s core, on-going business activities; (xiv) items related to acquired
in-process research and development; (xv) items relating to changes in tax laws;
(xvi) items relating to major licensing or partnership arrangements;
(xvii) items relating to asset impairment charges; (xviii) items relating to
gains or losses for litigation, arbitration and contractual settlements; or
(xix) items relating to any other unusual or nonrecurring events or changes in
applicable laws or business conditions. For all Awards intended to qualify as
Performance-Based Compensation, such determinations shall be made within the
time prescribed by, and otherwise in compliance with, Section 162(m) of the
Code.
31. “Performance Period” shall mean one or more periods of time, which may be of
varying and overlapping durations, as the Committee may select, over which the
attainment of one or more Performance Goals will be measured for the purpose of
determining a Holder’s right to, and the payment of, a Performance Award.
32. “Permitted Transferee” shall mean, with respect to a Holder, any person
entitled to use a Form S-8 Registration Statement to exercise Awards originally
granted to the Holder and to sell Shares issued pursuant to Awards originally
granted to the Holder.
33. “Program” shall mean any program adopted by the Committee pursuant to the
Plan containing terms and conditions intended to govern one or more specific
types of Awards and/or the manner in which they may be granted.
34. “QDRO” shall mean a domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act of 1974, as amended from time
to time, or the regulations or official guidance promulgated thereunder.
35. “Restricted Stock” shall mean Shares awarded under Article 8 that are
subject to certain restrictions and may be subject to risk of forfeiture or
repurchase.
36. “Restricted Stock Units” shall mean the right to receive Shares or the value
of Shares awarded under Section 9.3.
37. “Retirement” shall mean an Employee’s severance from employment with the
Company and its Affiliates for any reason other than a leave of absence,
termination for cause,

 

5

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

 

death or disability, at such time as the Employee’s age and years of service
with the Company and its Affiliates equals at least 65 or more, provided that
the Employee is then at least 55 years of age. The Company shall have the sole
right to determine whether an Employee’s severance from employment constitutes a
Retirement.
38. “Securities Act” shall mean the Securities Act of 1933.
39. “Securities Exchange” shall mean the New York Stock Exchange or any other
securities exchange, national market system or automated quotation system on
which the Shares are listed, quoted or traded.
40. “Shares” shall mean shares of Common Stock.
41. “Stock Appreciation Right” shall mean a stock appreciation right as
described and granted under Article 10.
42. “Stock Payment” shall mean (a) a payment in the form of Shares or (b) a
right to purchase Shares, however denominated or described, as part of a bonus,
deferred compensation or other arrangement, in any such case awarded under
Section 9.2.
43. “Substitute Award” shall mean an Award granted under the Plan upon the
assumption of, or in substitution for, outstanding equity awards previously
granted by a company or other entity, in connection with a corporate
transaction, such as a merger, combination, consolidation or acquisition of
property or stock; provided, however, that in no event shall the term
“Substitute Award” be construed to refer to an Award made in connection with the
cancellation and repricing of an Option or Stock Appreciation Right.
44. “Termination of Service” shall mean,
(1) As to a Consultant, the time when the engagement of a Holder as a Consultant
to the Company or an Affiliate is terminated for any reason, with or without
cause, including, without limitation, by resignation, discharge, death or
retirement, but excluding terminations where the Consultant simultaneously
commences or remains in employment or service with the Company or any Affiliate.
(2) As to a Non-Employee Director, the time when a Holder who is a Non-Employee
Director ceases to be a Director for any reason, with or without cause,
including, without limitation, a termination by resignation, failure to be
elected, death or retirement, but excluding terminations where the Holder
simultaneously commences employment or service with the Company or any
Affiliate.
(3) As to an Employee, the time when the employee-employer relationship between
a Holder and the Company or any Affiliate is terminated for any reason, with or
without cause, including, without limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding terminations where the
Holder simultaneously commences or remains in employment or service with the
Company or any Affiliate.

 

6

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

 

The Committee, in its sole discretion, shall determine the effect of all matters
and questions relating to Terminations of Service, including, without
limitation, the question of whether a Termination of Service resulted from a
discharge for cause and all questions of whether particular leaves of absence
constitute a Termination of Service; provided, however, that, with respect to
Incentive Stock Options, unless the Committee otherwise provides in the terms of
the Program, Award Agreement or otherwise, a leave of absence, change in status
from an employee to an independent contractor or other change in the
employee-employer relationship shall constitute a Termination of Service only if
and to the extent that any such event interrupts employment for the purposes of
Section 422(a)(2) of the Code. For purposes of the Plan, a Holder’s
employee-employer relationship or consultancy relationship shall be deemed to be
terminated in the event that the Affiliate employing or contracting with such
Holder ceases to remain an Affiliate following any merger, sale of stock or
other corporate transaction or event (including, without limitation, a
spin-off).
Notwithstanding the foregoing, with respect to any Award that constitutes
“deferred compensation” subject to the requirements of Section 409A of the Code,
a Termination of Service shall not be deemed to have occurred until there also
has been a “separation from service” within the meaning of Section 409A of the
Code, as determined in accordance with Section 1.409A-1(h) of the Treasury
Regulations; provided that (i) for a Holder who provides services to the Company
as an Employee, a separation from service shall be deemed to occur when the
Holder has experienced a termination of employment with the Company and the
facts and circumstances indicate that the Holder and the Company reasonably
anticipate that either (A) no further services will be performed by the Holder
for the Company after a certain date or (B) the level of bona fide services the
Holder will perform for the Company after a certain date (whether as an Employee
or as an independent contractor) will permanently decrease to no more than 20%
of the average level of bona fide services performed by the Holder (whether as
an Employee or an independent contractor) over the immediately preceding
36-month period (or the full period of services performed for the Company if the
Holder has been performing services for less than 36 months); and (ii) for a
Holder who provides services to the Company as an independent contractor, a
separation from service shall be deemed to occur upon expiration or termination
of all contracts under which services are performed by the Holder for the
Company, provided that such expiration or termination constitutes a good-faith
and complete severing of the contractual relationship between the Holder and the
Company, and provided, further, that for a Holder who provides services to the
Company as both an Employee and an independent contractor, a separation from
service shall generally not occur until the Holder has ceased providing services
for the Company as both an Employee and an independent contractor pursuant to
clauses (i) and (ii) of this sentence. For purposes of determining whether a
separation from service has occurred, services performed for the Company shall
include services performed both for the Company and for any other corporation
that is a member of the same “controlled group” as the Company under Section
414(b) of the Code or any other trade or business (such as a partnership) that
is under common control with the Company as determined under Section 414(c) of
the Code, in each case as modified by Section 1.409A-1(h)(3) of the Treasury
Regulations and substituting “at least 50 percent” for “at least 80 percent”
each place it appears in Section 1563(a) of the Code or Section 1.414(c)-2 of
the Treasury Regulations.

 

7

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

 

45. “Treasury Regulations” shall mean the final, temporary and proposed
regulations promulgated by the U.S. Department of the Treasury under the Code,
as such regulations may be amended from time to time.
ARTICLE 3.
SHARES SUBJECT TO THE PLAN
3.1 Number of Shares.
(a) Subject to adjustment as provided in Section 3.1(b) and Section 13.2, a
total of Three Million Five Hundred Thousand (3,500,000) Shares shall be
authorized for grant under the Plan. This limit includes Shares that were
authorized for grant under the Company’s 2001 Stock Incentive Plan but that were
not issued or subject to outstanding awards as of the Effective Date. Any Share
that is subject to an Award that could be settled with Shares and is not a Full
Value Award shall be deducted from this limit at the ratio of one (1) Share for
every one (1) Share subject to the Award. Any Share that is subject to a Full
Value Award that could be settled with Shares shall be deducted from this limit
at the ratio of 1.78 Shares for every one (1) Share subject to the Award. After
the Effective Date, no new awards may be granted under the 2001 Stock Incentive
Plan, but any awards under the 2001 Stock Incentive Plan that are outstanding as
of the Effective Date shall continue to be subject to the terms and conditions
of the 2001 Stock Incentive Plan.
(b) If an Award expires or is canceled, forfeited or settled for cash (in whole
or in part), the Shares subject to such Award shall, to the extent of such
expiration, cancellation, forfeiture or cash settlement, again be available as
Shares authorized for grant under the Plan, in accordance with Section 3.1(d)
below. Notwithstanding anything to the contrary contained herein, Shares
tendered by a Holder or withheld by the Company in payment of the exercise price
of an Award or to satisfy any tax withholding obligation with respect to an
Award shall not be available as Shares authorized for grant under the Plan.
(c) Substitute Awards shall not reduce the Shares authorized for grant under the
Plan. Additionally, in the event that a company acquired by the Company or any
Affiliate or with which the Company or any Affiliate combines has shares
available under a pre-existing plan approved by stockholders and not adopted in
contemplation of such acquisition or combination, the shares available for grant
pursuant to the terms of such pre-existing plan (as adjusted, to the extent
appropriate, using the exchange ratio or other adjustment or valuation ratio or
formula used in such acquisition or combination to determine the consideration
payable to the holders of common stock of the entities party to such acquisition
or combination) may be used for Awards under the Plan and shall not reduce the
Shares authorized for grant under the Plan; provided, that Awards using such
available shares shall not be made after the date awards could have been made
under the terms of the pre-existing plan, absent the acquisition or combination,
and shall only be made to individuals who were not employed by or providing
services to the Company or its Affiliates immediately prior to such acquisition
or combination.
(d) Each Share that again becomes available for grant pursuant to this
Section 3.1 shall be added back as (i) one (1) Share if such Share was subject
to an Award other than a Full Value Award, and (ii) as 1.78 Share if such Share
was subject to a Full Value Award.

 

8

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

 

3.2 Stock Distributed. Any Shares distributed pursuant to an Award may consist,
in whole or in part, of authorized and unissued Common Stock, treasury Common
Stock or Common Stock purchased on the open market.
ARTICLE 4.
GRANTING OF AWARDS
4.1 Participation. The Committee may, from time to time, select from among all
Eligible Individuals, those to whom an Award shall be granted.
4.2 Award Agreement. Each Award shall be evidenced by an Award Agreement. Award
Agreements shall contain such terms and conditions as may be determined by the
Committee that are not inconsistent with the Plan, including any terms and
conditions that are necessary for Awards to comply with, or be exempt from, the
requirements of Section 409A of the Code. Award Agreements evidencing Awards
intended to qualify as Performance-Based Compensation shall contain such terms
and conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Award Agreements evidencing Incentive Stock Options shall
contain such terms and conditions as may be necessary to meet the applicable
provisions of Section 422 of the Code.
4.3 Programs. The Board or the Committee may from time to time establish
Programs pursuant to the Plan. An Award Agreement evidencing an Award granted
pursuant to any Program shall comply with the terms and conditions of such
Program and the Plan.
4.4 Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan, the Plan, any Award granted to any individual who is then
subject to Section 16 of the Exchange Act, and any applicable Program, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act
and any amendments thereto) that are requirements for the application of such
exemptive rule. To the extent permitted by applicable law, the Plan and each
Program and Award shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.
4.5 Fiscal Year Award Limit. Notwithstanding any provision in the Plan to the
contrary, and subject to Section 13.2, the maximum aggregate number of Shares
with respect to one or more Awards that may be granted to any one person during
any fiscal year of the Company shall be One Million (1,000,000) and the maximum
aggregate amount of cash that may be paid to any one person during any fiscal
year of the Company with respect to one or more Performance Awards payable in
cash shall be Five Million Dollars ($5,000,000). To the extent required by
Section 162(m) of the Code, Shares subject to Awards that are canceled shall
continue to be counted against the Award Limit specified in the preceding
sentence.
4.6 Minimum Vesting. The minimum time-based vesting period for an Award that is
subject to the satisfaction of one or more Performance Goals or other
performance-based criteria shall be one (1) year. With the exception of Stock
Payments that are not subject to vesting, each other Award shall be subject to a
minimum three (3) year time-based vesting period; provided, however, the
Committee may provide for (a) an equal portion of each such Award to vest in

 

9

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

 

annual installments during such three (3) year period, (b) a longer (but not
shorter) time-based vesting period for an Award so long as the vesting schedule
is not more favorable to the Holder than the default schedule specified above or
(c) the acceleration of vesting to the extent permitted by Section 11.8.
4.7 At-Will Employment. Nothing in the Plan, any Program or any Award Agreement
shall confer upon any Holder any right to be employed by or to serve as a
Director or Consultant for the Company or any Affiliate, or to continue in such
employment or service, or shall interfere with or restrict in any way the rights
of the Company and any Affiliate, which rights are hereby expressly reserved, to
discharge any Holder at any time for any reason whatsoever, with or without
cause, and with or without notice, or to terminate or change all other terms and
conditions of employment or engagement, except to the extent expressly provided
otherwise in a written agreement between the Holder and the Company or any
Affiliate.
4.8 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in
the sole discretion of the Committee, be granted either alone, in addition to,
or in tandem with, any other Award granted pursuant to the Plan. Awards granted
in addition to or in tandem with other Awards may be granted either at the same
time as or (subject to the requirements of Section 409A of the Code) at a
different time from the grant of such other Awards.
ARTICLE 5.
PERFORMANCE-BASED COMPENSATION
5.1 Purpose. The Committee, in its sole discretion, may determine at the time an
Award is granted whether such Award is intended to qualify as Performance-Based
Compensation. If the Committee, in its sole discretion, decides to grant such an
Award to an Eligible Individual that is intended to qualify as Performance-Based
Compensation, then the provisions of this Article 5 shall control over any
contrary provision contained in the Plan. The Committee may in its sole
discretion grant Awards to other Eligible Individuals that are based on
Performance Criteria or Performance Goals but that do not satisfy the
requirements of this Article 5 and that are not intended to qualify as
Performance-Based Compensation.
5.2 Applicability. The grant of an Award to an Eligible Individual for a
particular Performance Period shall not require the grant of an Award to such
Eligible Individual in any subsequent Performance Period (or entitle such
Eligible Individual to any such grant) and the grant of an Award to any one
Eligible Individual shall not require the grant of an Award to any other
Eligible Individual in such period or in any other period (or entitle any such
other Eligible Individual to any such grant).
5.3 Types of Awards. Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Award to a Covered Employee in a manner intended to
qualify as Performance-Based Compensation, including, without limitation,
Restricted Stock for which the restrictions lapse upon the attainment of
specified Performance Goals, and any Performance Awards described in Article 9
that vest or become exercisable or payable upon the attainment of one or more
specified Performance Goals.

 

10

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

 

5.4 Procedures with Respect to Performance-Based Awards. To the extent necessary
to comply with the requirements of Section 162(m)(4)(C) of the Code, with
respect to any Award granted one or more Covered Employees and that is intended
to qualify as Performance-Based Compensation, no later than 90 days following
the commencement of any Performance Period (or such earlier time as may be
required under Section 162(m) of the Code), the Committee shall, in writing,
(a) designate one or more Eligible Individuals, (b) select the Performance
Criteria applicable to the Performance Period, (c) establish objective
Performance Goals, and amounts of such Awards, as applicable, which may be
earned for such Performance Period based on the Performance Criteria, and
(d) specify an objective relationship between the Performance Criteria and the
Performance Goals and the amounts of such Awards, as applicable, to be earned by
each Covered Employee for such Performance Period. Following the completion of
each Performance Period, the Committee shall certify in writing whether and the
extent to which the applicable Performance Goals have been achieved for such
Performance Period. In determining the amount earned or payable under such
Awards, to the extent provided under any applicable Program or Award Agreement,
the Committee shall have the right to reduce or eliminate (but not to increase)
the amount earned or payable at a given level of performance to take into
account additional factors that the Committee may deem relevant, including,
without limitation, the assessment of individual or Company performance for the
Performance Period.
5.5 Payment of Performance-Based Awards. Unless otherwise provided in the
applicable Program or Award Agreement, as to an Award that is intended to
qualify as Performance-Based Compensation, the Holder must be employed by the
Company or an Affiliate throughout the Performance Period. Unless otherwise
provided in the applicable Performance Goals, Program or Award Agreement, a
Holder shall be eligible to receive payment pursuant to such Awards for a
Performance Period only if and to the extent the Performance Goals for such
period are achieved.
5.6 Additional Limitations. Notwithstanding any other provision of the Plan and
except as otherwise determined by the Committee, any Award that is granted to a
Covered Employee and is intended to qualify as Performance-Based Compensation
shall be subject to any additional limitations set forth in Section 162(m) of
the Code that are requirements for qualification as Performance-Based
Compensation, and the Plan, any applicable Program and the Award Agreement shall
be deemed amended to the extent necessary to conform to such requirements.
ARTICLE 6.
GRANTING OF OPTIONS
6.1 Granting of Options to Eligible Individuals. The Committee is authorized to
grant Options to Eligible Individuals on such terms and conditions as it may
determine that are not inconsistent with the Plan; provided, however, that no
Option shall be granted to any Employee or Consultant of an Affiliate unless the
Company is an “eligible issuer of service recipient stock” with respect to such
person within the meaning of Section 409A of the Code.
6.2 Qualification of Incentive Stock Options. No Incentive Stock Option shall be
granted to any person who is not an Employee of the Company or any subsidiary
corporation of the Company (as defined in Section 424(f) of the Code). No person
who is a Greater Than 10%

 

11

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

 

Stockholder may be granted an Incentive Stock Option unless such Incentive Stock
Option conforms to the applicable provisions of Section 422 of the Code. Any
Incentive Stock Option granted under the Plan may be modified by the Committee,
with the consent of the Holder, to disqualify such Option from treatment as an
“incentive stock option” under Section 422 of the Code. To the extent that the
aggregate Fair Market Value of Shares with respect to which “incentive stock
options” (within the meaning of Section 422 of the Code, but without regard to
Section 422(d) of the Code) are exercisable for the first time by a Holder
during any calendar year under the Plan, and all other plans of the Company and
any subsidiary or parent corporation thereof (each as defined in Section 424(f)
and (e) of the Code, respectively), exceeds $100,000, the Options shall be
treated as Non-Qualified Stock Options to the extent required by Section 422 of
the Code. The requirements set forth in the preceding sentence shall be applied
by taking Options and other “incentive stock options” into account in the order
in which they were granted and the Fair Market Value of Shares shall be
determined as of the time the respective instruments were granted. Subject to
adjustment as provided in Section 3.1(b) and Section 13.2, no more than One
Million Seven Hundred and Fifty Thousand (1,750,000) Shares may be issued
pursuant to the exercise of Incentive Stock Options granted under the Plan.
6.3 Option Exercise Price. The exercise price per Share subject to each Option
shall be set by the Committee, but shall not be less than 100% of the Fair
Market Value of a Share on the date the Option is granted (or on the date the
Option is modified, extended or renewed for purposes of Section 409A of the Code
or, as to an Incentive Stock Option, Section 424(h) of the Code). In addition,
in the case of Incentive Stock Options granted to a Greater Than 10%
Stockholder, such price shall not be less than 110% of the Fair Market Value of
a Share on the date the Option is granted (or the date the Option is modified,
extended or renewed for purposes of Section 424(h) of the Code).
6.4 Option Term. The term of each Option shall be set by the Committee in its
sole discretion; provided, however, that the term shall not be more than ten
(10) years from the date the Option is granted, or five (5) years from the date
an Incentive Stock Option is granted to a Greater Than 10% Stockholder. The
Committee shall determine the time period, including the time period following a
Termination of Service, during which a Holder has the right to exercise the
vested Options, which time period may not extend beyond the term of the Option.
6.5 Option Vesting. Subject to Section 4.6, the Committee shall determine the
period of time and other conditions that must be satisfied before the Holder’s
right to exercise an Option, in whole or in part, shall vest. Such vesting may
be based on service with the Company or an Affiliate, any of the Performance
Criteria, or any other criterion or condition determined by the Committee. No
portion of an Option that cannot be exercised at the Holder’s Termination of
Service shall thereafter become exercisable.
6.6 Substitute Awards. Notwithstanding the foregoing provisions of this
Article 6 to the contrary, in the case of an Option that is a Substitute Award,
the price per share of the shares subject to such Option may be less than the
Fair Market Value per share on the date of grant; provided, that the excess of:
(a) the aggregate Fair Market Value (as of the date such Substitute Award is
granted) of the shares subject to the Substitute Award, over (b) the aggregate
exercise price thereof does not exceed the excess of: (x) the aggregate Fair
Market Value (as of the time immediately preceding the transaction giving rise
to the Substitute Award, such Fair Market

 

12

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

 

Value to be determined by the Committee) of the shares of the predecessor entity
that were subject to the grant assumed or substituted for by the Company, over
(y) the aggregate exercise price of such shares, and that the grant of the
Substitute Award otherwise satisfies the requirements of
Section 1.409A-1(b)(5)(v)(D) of the Treasury Regulations or, in the case of an
Incentive Stock Option, Section 1.424-1(a) of the Treasury Regulations.
6.7 Substitution of Stock Appreciation Rights. The Committee may provide in the
applicable Program or the Award Agreement evidencing the grant of an Option that
the Committee, in its sole discretion, shall have the right to substitute a
Stock Appreciation Right for such Option at any time prior to or upon exercise
of such Option; provided, that such Stock Appreciation Right shall be
exercisable with respect to the same number of Shares for which such substituted
Option would have been exercisable and such Stock Appreciation Right shall have
the same exercise price and the same remaining vesting schedule and term as such
Option.
ARTICLE 7.
EXERCISE OF OPTIONS
7.1 Partial Exercise. An exercisable Option may be exercised in whole or in
part. However, an Option shall not be exercisable with respect to fractional
shares and the Committee may require that, by the terms of the Option, a partial
exercise must be with respect to a minimum number of Shares.
7.2 Manner of Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Company Stock
Administrator:
(a) A written or electronic notice complying with the applicable rules
established by the Company Stock Administrator stating that the Option, or a
portion thereof, is exercised. The notice must be signed in writing or
electronically by the Holder or other person then entitled to exercise the
Option or such portion of the Option;
(b) Such representations and documents as the Company Stock Administrator, in
its sole discretion, deems necessary or advisable to effect compliance with all
applicable laws and regulations, and the rules of any applicable Securities
Exchange. The Company Stock Administrator may, in its sole discretion, also take
whatever additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and issuing
stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised by any person other than the
Holder who is permitted to exercise the Option in accordance with Section 11.3,
appropriate proof of the right of such person to exercise the Option, as
determined in the sole discretion of the Company Stock Administrator; and
(d) Full payment of the exercise price and applicable withholding taxes to the
Company for the Shares with respect to which the Option, or portion thereof, is
exercised, in a manner permitted by Section 11.1 and 11.2.
7.3 Notification Regarding Disposition. The Holder shall give the Company Stock
Administrator prompt written or electronic notice of any disposition of Shares
acquired by

 

13

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

 

exercise of an Incentive Stock Option which occurs within (a) two years from the
date of granting (including the date the Option is modified, extended or renewed
for purposes of Section 424(h) of the Code) such Option to such Holder, or
(b) one year after the transfer of such shares to such Holder.
ARTICLE 8.
AWARD OF RESTRICTED STOCK
8.1 Award of Restricted Stock.
(a) The Committee is authorized to grant Restricted Stock to Eligible
Individuals, and shall determine such terms and conditions, including the
restrictions applicable to each Award of Restricted Stock, that are not
inconsistent with the Plan, and may impose such conditions on the issuance of
such Restricted Stock, as it deems appropriate.
(b) The Committee shall establish the purchase price, if any, and form of
payment for Restricted Stock; provided, however, that if a purchase price is
charged, such purchase price shall be no less than the par value of the Shares
to be purchased, unless otherwise permitted by applicable state law. In all
cases, legal consideration shall be required for each issuance of Restricted
Stock.
8.2 Rights as Stockholders. Subject to Section 8.4, upon the grant of a
Restricted Stock Award, the Holder shall have, unless otherwise provided in the
terms of the applicable Award Agreement, all the rights of a stockholder with
respect to the Shares subject to the Award, subject to the restrictions in the
applicable Program or in his or her Award Agreement, including the right to
receive all dividends and other distributions paid or made with respect to the
Shares; provided, however, that if the lifting or lapsing of the restrictions on
an Award of Restricted Stock is subject to satisfaction of one or more
Performance Goals, the Holder shall not be entitled to receive dividends or
other distributions with respect to the Shares subject to the Award unless and
until each of the applicable Performance Goals has been satisfied, at which time
declared and accrued but unpaid dividends and distributions from and after the
date of grant of the Award shall become payable to the Holder as soon as
practicable. Notwithstanding anything in the foregoing to the contrary,
dividends and other distributions made with respect to the Shares subject to an
Award shall only be payable to the Holder of the Award to the extent provided by
the Committee under the applicable Program or Award Agreement.
8.3 Restrictions. All Shares of Restricted Stock (including any Shares received
by Holders thereof with respect to Shares of Restricted Stock as a result of
stock dividends, stock splits or any other form of recapitalization) shall,
under the terms of the applicable Program or Award Agreement, be subject to such
restrictions and vesting requirements as the Committee shall provide. Such
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and such restrictions may lapse separately or in
combination at such times and pursuant to such circumstances or based on such
criteria as selected by the Committee, including, without limitation, criteria
based on the Holder’s duration of employment or service with the Company or its
Affiliates, applicable Performance Criteria, Company performance or individual
performance. Restricted Stock may not be sold or encumbered until all applicable
restrictions are satisfied, terminated or expire.

 

14

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

 

8.4 Repurchase or Forfeiture of Restricted Stock. If no purchase price was paid
by a Holder in cash or property for a grant of Restricted Stock, upon a
Termination of Service the Holder’s rights in any Shares of Restricted Stock
then subject to restrictions shall terminate, and such Shares of Restricted
Stock shall be surrendered to the Company and cancelled without consideration.
If a purchase price was paid by a Holder in cash or property for a grant of
Restricted Stock, upon a Termination of Service the Company shall have the right
to repurchase from the Holder the Shares of Restricted Stock then subject to
restrictions at a cash price per Share equal to the purchase price paid by the
Holder in cash or property for such Shares of Restricted Stock or such other
amount as may be specified under the applicable Program or in the applicable
Award Agreement.
8.5 Certificates for Restricted Stock. Restricted Stock granted pursuant to the
Plan may be evidenced in such manner as the Company Stock Administrator shall
determine. Certificates, book entries or electronic registration evidencing
shares of Restricted Stock must include an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Stock, and the
Company may, in it sole discretion, retain physical possession of any stock
certificate until such time as all applicable restrictions lapse.
8.6 Section 83(b) Election. If a Holder makes an election under Section 83(b) of
the Code to be taxed with respect to the Restricted Stock as of the date of
transfer of the Restricted Stock rather than as of the date or dates upon which
the Holder would otherwise be taxable under Section 83(a) of the Code, the
Holder shall be required to deliver a copy of such election to the Company
promptly after filing such election with the Internal Revenue Service.
ARTICLE 9.
AWARD OF PERFORMANCE AWARDS, STOCK
PAYMENTS AND RESTRICTED STOCK UNITS
9.1 Performance Awards.
(a) The Committee is authorized to grant Performance Awards to any Eligible
Individual and to determine whether such Performance Awards shall be
Performance-Based Compensation. The number of Shares subject to a Performance
Award and the value of a Performance Award may be linked to any one or more of
the Performance Criteria or other specific criteria determined by the Committee,
in each case on a specified date or dates or over any period or periods
determined by the Committee. Performance Awards may be paid in cash, Shares, or
both, as determined by the Committee.
(b) Without limiting Section 9.1(a), the Committee may grant Performance Awards
to any Eligible Individual in the form of a cash bonus payable upon the
attainment of objective Performance Goals, or such other criteria, whether or
not objective, which are established by the Committee, in each case on a
specified date or dates or over any period or periods determined by the
Committee. Any such bonuses paid to a Holder that are intended to be
Performance-Based Compensation shall be based upon objectively determinable
bonus formulas established in accordance with the provisions of Article 5.

 

15

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

 

9.2 Stock Payments. The Committee is authorized to make Stock Payments to any
Eligible Individual. The number or value of Shares of any Stock Payment shall be
determined by the Committee and may be based upon one or more Performance
Criteria or any other specific criteria, including service to the Company or any
Affiliate, determined by the Committee. Shares underlying a Stock Payment that
is subject to a vesting schedule or other restrictions, conditions or criteria
set by the Committee will not be issued until the restrictions, conditions or
criteria have been satisfied. Unless otherwise provided in the applicable Award
Agreement, a Holder of a Stock Payment shall have no rights as a Company
stockholder with respect to such Stock Payment until such time as the Stock
Payment has vested and the Shares underlying the Award have been issued to the
Holder. Stock Payments may, but are not required to, be made in lieu of base
salary, bonus, fees or other cash compensation otherwise payable to such
Eligible Individual.
9.3 Restricted Stock Units. The Committee is authorized to grant Restricted
Stock Units to any Eligible Individual. The number and terms and conditions of
Restricted Stock Units shall be determined by the Committee. The Committee shall
specify the date or dates on which the Restricted Stock Units shall become fully
vested and nonforfeitable, and may specify such vesting restrictions, conditions
or criteria as it deems appropriate, including, without limitation, conditions
based on one or more Performance Criteria or other specific criteria, including
service to the Company or any Affiliate, in each case on a specified date or
dates or over any period or periods, as the Committee determines. The Company
Stock Administrator shall specify, or permit the Holder to elect, the conditions
and dates upon which the Shares underlying the Restricted Stock Units that shall
be issued, if applicable, subject to the requirements of Section 409A of the
Code. Restricted Stock Units may be paid in cash, Shares, or both, as determined
by the Committee. On the distribution dates, the Company shall issue to the
Holder one unrestricted, fully transferable Share (or the Fair Market Value of
one such Share in cash) for each vested and nonforfeitable Restricted Stock
Unit.
9.4 Term. The term of a Performance Award, Stock Payment award and/or Restricted
Stock Unit award shall be set by the Committee in its sole discretion.
9.5 Exercise or Purchase Price. The Committee may establish an exercise or
purchase price for a Performance Award, Shares distributed as a part of a Stock
Payment or Shares distributed pursuant to a Restricted Stock Unit Award.
ARTICLE 10.
AWARD OF STOCK APPRECIATION RIGHTS
10.1 Grant of Stock Appreciation Rights.
(a) The Committee is authorized to grant Stock Appreciation Rights to Eligible
Individuals on such terms and conditions as it may determine that are not
inconsistent with the Plan; provided, however, that no Stock Appreciation Right
shall be granted to any Employee or Consultant of an Affiliate unless the
Company is an “eligible issuer of service recipient stock” with respect to such
person within the meaning of Section 409A of the Code.

 

16

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

 

(b) A Stock Appreciation Right shall entitle the Holder (or other person
entitled to exercise the Stock Appreciation Right) to exercise all or a
specified portion of the Stock Appreciation Right (to the extent then
exercisable pursuant to its terms) and to receive from the Company an amount
determined by multiplying the difference obtained by subtracting the exercise
price of the Stock Appreciation Right from the Fair Market Value of a Share on
the date of exercise of the Stock Appreciation Right, and multiplying the
difference, if positive, by the number of Shares with respect to which the Stock
Appreciation Right shall have been exercised, subject to any limitations the
Committee may impose. Except as described in Section 10.1(c) below, the exercise
price of each Stock Appreciation Right shall be set by the Committee, but shall
not be less than 100% of the Fair Market Value of a Share on the date the Stock
Appreciation Right is granted (or on the date the Stock Appreciation Right is
modified, extended or renewed for purposes of Section 409A of the Code).
(c) Notwithstanding the foregoing provisions of Section 10.1(b) to the contrary,
in the case of a Stock Appreciation Right that is a Substitute Award, the
exercise price of such Stock Appreciation Right may be less than 100% of the
Fair Market Value of a Share on the date of grant; provided, that the excess of:
(a) the aggregate Fair Market Value (as of the date such Substitute Award is
granted) of the Shares subject to the Substitute Award, over (b) the aggregate
exercise price thereof does not exceed the excess of: (x) the aggregate fair
market value (as of the time immediately preceding the transaction giving rise
to the Substitute Award, such fair market value to be determined by the
Committee) of the shares of the predecessor entity that were subject to the
grant assumed or substituted for by the Company, over (y) the aggregate exercise
price of such shares, and that the grant of the Substitute Award otherwise
satisfies the requirements of Section 1.409A-1(b)(5)(v)(D) of the Treasury
Regulations.
10.2 Stock Appreciation Right Term. The term of each Stock Appreciation Right
shall be set by the Committee in its sole discretion; provided, however, that
the term shall not be more than ten (10) years from the date the Stock
Appreciation Right is granted. The Committee shall determine the time period,
including the time period following a Termination of Service, during which the
Holder has the right to exercise a vested Stock Appreciation Right, which time
period may not extend beyond the term of the Stock Appreciation Right.
10.3 Stock Appreciation Right Vesting. Subject to Section 4.6, the Committee
shall determine the period of time and other conditions that must be satisfied
before the Holder’s right to exercise a Stock Appreciation Right, in whole or in
part, shall vest. Such vesting may be based on service with the Company or an
Affiliate, any of the Performance Criteria, or any other criterion or condition
determined by the Committee. No portion of a Stock Appreciation Right that
cannot be exercised at the Holder’s Termination of Service shall thereafter
become exercisable.
10.4 Manner of Exercise. All or a portion of an exercisable Stock Appreciation
Right shall be deemed exercised upon delivery of all of the following to the
Company Stock Administrator, or such other person or entity designated by the
Committee, or his, her or its office, as applicable:
(a) A written or electronic notice complying with the applicable rules
established by the Company Stock Administrator stating that the Stock
Appreciation Right, or a

 

17

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

 

portion thereof, is exercised. The notice must be signed in writing or
electronically by the Holder or other person then entitled to exercise the Stock
Appreciation Right or such portion of the Stock Appreciation Right;
(b) Such representations and documents as the Company Stock Administrator, in
its sole discretion, deems necessary or advisable to effect compliance with
applicable laws and regulations. The Company Stock Administrator may, in its
sole discretion, also take whatever additional actions it deems appropriate to
effect such compliance; and
(c) In the event that the Stock Appreciation Right shall be exercised pursuant
to this Section 10.4 by any person or persons other than the Holder, appropriate
proof of the right of such person or persons to exercise the Stock Appreciation
Right.
10.5 Payment. Payment of the amounts payable with respect to Stock Appreciation
Rights pursuant to this Article 10 shall be in cash, Shares (based on their Fair
Market Value as of the date the Stock Appreciation Right is exercised), or a
combination of both, as determined by the Committee.
ARTICLE 11.
ADDITIONAL TERMS OF AWARDS
11.1 Payment. The Committee shall determine the methods by which payments by any
Holder with respect to any Awards granted under the Plan shall be made,
including, without limitation: (a) cash or check, (b) Shares (including, in the
case of payment of the exercise price of an Award, Shares issuable pursuant to
the exercise of the Award) or Shares not subject to any pledge or security
interest and held for such period of time as may be required by the Committee,
in each case, having a Fair Market Value on the date of delivery equal to the
aggregate payments required, (c) delivery of a written or electronic notice that
the Holder has placed a market sell order with a broker with respect to Shares
then issuable upon exercise or vesting of an Award, and that the broker has been
directed to pay a sufficient portion of the net proceeds of the sale to the
Company in satisfaction of the aggregate payments required; provided, that
payment of such proceeds is then made to the Company upon settlement of such
sale, or (d) other property or legal consideration acceptable to the Committee.
The Committee shall also determine the methods by which Shares shall be
delivered or deemed to be delivered to Holders. Notwithstanding any other
provision of the Plan to the contrary, no Holder who is a Director or an
“executive officer” of the Company within the meaning of Section 13(k) of the
Exchange Act shall be permitted to make payment with respect to any Awards
granted under the Plan, or continue any extension of credit with respect to such
payment, with a loan from the Company or a loan arranged by the Company to the
extent it would violate Section 13(k) of the Exchange Act.
11.2 Tax Withholding. The Company and any Affiliate shall have the authority and
the right to deduct or withhold, or require a Holder to remit to the Company, an
amount sufficient to satisfy federal, state, local and foreign taxes (including
the Holder’s FICA or employment tax obligation) required by law to be withheld
with respect to any taxable event concerning a Holder arising as a result of the
Plan. The Committee may, in its sole discretion and in satisfaction of the
foregoing requirement, allow a Holder to elect to have the Company withhold
Shares

 

18

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

 

otherwise issuable under an Award (or allow the surrender of Shares). The number
of Shares which may be so withheld or surrendered shall be limited to the number
of Shares which have a Fair Market Value on the date of withholding or
repurchase equal to the aggregate amount of such liabilities not to exceed the
minimum statutory withholding rates for federal, state, local and foreign income
tax and payroll tax purposes that are applicable to such supplemental taxable
income. The Company Stock Administrator shall determine the Fair Market Value of
the Shares, consistent with applicable provisions of the Code, for tax
withholding obligations due in connection with a broker-assisted cashless Option
exercise or a Stock Appreciation Right exercise involving the sale of Shares to
pay the Option or Stock Appreciation Right exercise price or any tax withholding
obligation.
11.3 Transferability of Awards.
(a) Except as otherwise provided in Section 11.3(b):
(i) No Award under the Plan may be sold, pledged, assigned or transferred in any
manner other than to a Permitted Transferee by will or the laws of descent and
distribution or, subject to the consent of the Committee, pursuant to a QDRO,
unless and until and to the extent such Award has been exercised, or the Shares
underlying such Award have been issued, and all restrictions applicable to such
Shares have lapsed;
(ii) No Award or interest or right therein shall be liable for the debts,
contracts or engagements of the Holder or the Holder’s successors in interest or
shall be subject to disposition by transfer, alienation, anticipation, pledge,
hypothecation, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted imposition of liability thereon or
disposition thereof shall be null and void and of no effect, except to the
extent that such disposition is permitted hereunder; and
(iii) During the lifetime of the Holder, only the Holder (or the personal
representative of an incompetent Holder) may exercise an Award (or any portion
thereof) granted to such Holder under the Plan, unless it has been disposed of
pursuant to a QDRO, in which case the beneficiary of the QDRO may exercise the
Award; after the death of the Holder, any exercisable portion of an Award may be
exercised by a Permitted Transferee, but only prior to the time when such
portion expires or becomes unexercisable under the Plan or the applicable
Program or Award Agreement.
(b) Notwithstanding Section 11.3(a), the Committee, in its sole discretion and
subject to such terms and conditions as it may impose, may permit a Holder to
transfer an Award other than an Incentive Stock Option to any one or more
Permitted Transferees, subject to any state, federal, local or foreign tax and
securities laws applicable to transferable Awards.
(c) A Holder may, in the manner determined by the Committee, designate a
Permitted Transferee to exercise the rights of the Holder as his or her
beneficiary and to receive any distribution with respect to any Award upon the
Holder’s death. Such person shall be subject to all terms and conditions of the
Plan and any Program or Award Agreement applicable to the

 

19

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

 

Holder, except to the extent the Plan, the Program, the Award Agreement or
applicable law otherwise provide, and to any additional restrictions deemed
necessary or appropriate by the Committee. If the Holder is married and resides
in a community property state, a designation of a person other than the Holder’s
spouse as his or her beneficiary with respect to more than 50% of the Holder’s
interest in the Award shall not be effective without the prior written or
electronic consent of the Holder’s spouse. Subject to the foregoing, a
beneficiary designation may be changed or revoked by a Holder at any time
provided the change or revocation is filed with the Committee prior to the
Holder’s death. If no beneficiary has been designated in this manner or the
beneficiary does not survive the Holder, the rights of the Holder shall be
exercisable by the Holder’s executor or administrator.
11.4 Conditions to Issuance of Shares.
(a) Notwithstanding anything herein to the contrary, the Company shall not be
required to issue or deliver any certificates or make any book entries
evidencing Shares pursuant to the exercise or vesting of any Award, unless and
until the Board or the Committee has determined, with advice of counsel, that
the issuance of such Shares is in compliance with all applicable laws and
regulations and, if applicable, the requirements of any Securities Exchange, and
the Shares are covered by an effective registration statement or applicable
exemption from registration. In addition to the terms and conditions provided
herein, the Board or the Committee may require that a Holder make such
reasonable covenants, agreements, and representations as the Board or the
Committee, in its discretion, deems advisable in order to comply with any such
laws, regulations, or requirements.
(b) All certificates evidencing Shares delivered pursuant to the Plan and all
Shares issued pursuant to book entry procedures are subject to any stop-transfer
orders and other restrictions as the Committee or the Company Stock
Administrator deems necessary or advisable to comply with applicable laws and
regulations and the rules of any Securities Exchange.
(c) The Company Stock Administrator shall have the right to require any Holder
to comply with any timing or other restrictions with respect to the settlement,
vesting, distribution or exercise of any Award, including a window-period
limitation, as may be imposed in the sole discretion of the Company Stock
Administrator, or because of any other requirement arising from compliance with
any applicable laws or regulations, as determined by the Company Stock
Administrator, in its sole discretion.
(d) No fractional Shares shall be issued and the Company Stock Administrator
shall determine, in its sole discretion, whether cash shall be given in lieu of
fractional Shares or whether such fractional Shares shall be eliminated by
rounding.
(e) Notwithstanding any other provision of the Plan, unless otherwise determined
by the Company Stock Administrator or required by any applicable laws or
regulations, the Company shall not deliver to any Holder certificates evidencing
Shares issued in connection with any Award and instead such Shares shall be
recorded in the books of the Company (or, as applicable, its transfer agent or
the Company Stock Administrator).

 

20

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

 

11.5 Forfeiture Provisions. Pursuant to its general authority to determine the
terms and conditions applicable to Awards under the Plan, the Committee shall
have the right to provide, in the terms or conditions of Programs or Awards made
under the Plan or in any policy with respect to the recovery or recoupment of
compensation or benefits in the event of financial restatements or the
occurrence of other events that are inconsistent with the payment of
compensation, as determined by the Committee, or to require a Holder to agree by
separate written or electronic instrument, that: (a)(i) any proceeds, gains or
other economic benefit actually or constructively received by the Holder upon
any receipt or exercise of the Award, or upon the receipt or resale of any
Shares underlying the Award, must be paid to the Company, and (ii) the Award
shall terminate and any unexercised portion of the Award (whether or not vested)
shall be forfeited, if (b)(i) a Termination of Service occurs prior to a
specified date, or within a specified time period following receipt or exercise
of the Award, (ii) the Holder at any time, or during a specified time period,
engages in any activity in competition with the Company, or which is inimical,
contrary or harmful to the interests of the Company, as further defined by the
Committee, (iii) the Holder incurs a Termination of Service for “cause” (as such
term is defined in the sole discretion of the Committee, or as set forth in a
written agreement relating to such Award between the Company and the Holder) or
(iv) the Company’s financial results are restated and such proceeds, gains or
other economic benefit actually or constructively received by the Holder would
have been lower had they been calculated based on such restated results.
11.6 Prohibition on Repricing. Except as provided in Section 13.2, the Committee
shall not, without the approval of the stockholders of the Company,
(i) authorize the amendment of any outstanding Option or Stock Appreciation
Right to reduce its exercise price, except with respect to any Substitute Award,
or (ii) cancel any outstanding Option or Stock Appreciation Right in exchange
for cash or another Award that has a lower exercise price or that provides
additional value to the Holder, except with respect to any Substitute Award.
11.7 Permitted Replacement Awards. The Committee shall have the authority,
without the approval of the stockholders of the Company, to amend any
outstanding Award (or any award granted under another Company plan, subject to
the terms of such other plan) to increase the exercise price or to cancel and
replace an Award (or any award granted under another Company plan, subject to
the terms of such other plan) with the grant of an Award having an exercise
price that is greater than or equal to the original price per share and having
vesting schedule and term equal to the remaining vesting schedule and term of
the Award (or award granted under another Company plan) being replaced.
11.8 Shareholder Approval of Certain Accelerations. The Committee shall not,
without the approval of the stockholders of the Company, accelerate the vesting
of any Awards except (a) in connection with the death or disability of a Holder
or the Retirement of a Holder who is an Employee, or (b) in accordance with
Section 13.2(h).
ARTICLE 12.
ADMINISTRATION
12.1 Committee. The Committee shall administer the Plan (except as otherwise
permitted herein) and shall consist solely of two or more Non-Employee Directors
appointed by and holding office at the pleasure of the Board, each of whom is
intended to qualify as a “non-

 

21

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

 

employee director” as defined by Rule 16b-3 of the Exchange Act or any successor
rule, an “outside director” for purposes of Section 162(m) of the Code and an
“independent director” under the rules of any Securities Exchange; provided,
that any action taken by the Committee shall be valid and effective, whether or
not members of the Committee at the time of such action are later determined not
to have satisfied the requirements for membership set forth in this Section 12.1
or otherwise provided in any charter of the Committee.
12.2 Duties and Powers of Committee. It shall be the duty of the Committee to
conduct the general administration of the Plan in accordance with its
provisions, subject to the Committee’s power to delegate duties under
Section 12.6. The Committee shall have the power to interpret the Plan, the
Program and any Award Agreement, and to adopt such rules for the administration,
interpretation and application of the Plan as are not inconsistent therewith, to
interpret, amend or revoke any such rules and to amend any Program or Award
Agreement in any manner not inconsistent with the Plan; provided that the rights
of the Holder of an Award that is the subject of any such Program or Award
Agreement are not affected adversely by such amendment, unless the consent of
the Holder is obtained or such amendment is otherwise permitted under
Section 13.9. Any such Award under the Plan need not be the same with respect to
each Holder. Any such interpretations and rules with respect to Incentive Stock
Options shall be consistent with the provisions of Section 422 of the Code. In
its sole discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan except with
respect to matters which under Rule 16b-3 under the Exchange Act, Section 162(m)
of the Code or the rules of any Securities Exchange require otherwise.
12.3 Action by the Committee. Unless otherwise established by the Board or in
any charter of the Committee, a majority of the Committee shall constitute a
quorum and the acts of a majority of the members present at any meeting at which
a quorum is present, and acts approved in writing by all members of the
Committee in lieu of a meeting, shall be deemed the acts of the Committee for
purposes of the Plan. Each member of the Committee is entitled to, in good
faith, rely or act upon any report or other information furnished to that member
by any officer or other employee of the Company or any Affiliate, the Company’s
independent certified public accountants, or any compensation consultant,
attorney or other professional retained by the Company to assist in the
administration of the Plan.
12.4 Authority of Committee. Subject to any specific designation in the Plan or
any applicable Program, the Committee has the exclusive power, authority and
sole discretion to:
(a) Designate Eligible Individuals to receive Awards;
(b) Determine the type or types of Awards to be granted to each Eligible
Individual;
(c) Determine the number of Awards to be granted and the number of Shares to
which an Award will relate;
(d) Determine the terms and conditions of any Award granted pursuant to the
Plan, including, but not limited to: the exercise price, grant price, or
purchase price; any Performance Criteria; any restrictions or limitations on the
Award; any schedule for vesting;

 

22

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

 

lapse of forfeiture restrictions or restrictions on the exercisability of an
Award and accelerations or waivers thereof; and any provisions related to
non-competition and recapture of gain on an Award, based in each case on such
considerations as the Committee in its sole discretion determines;
(e) Determine whether, to what extent, and pursuant to what circumstances (i) an
Award may be settled in, or the exercise price of an Award may be paid in cash,
Shares, other Awards, or other property (subject to the requirements of
Section 409A of the Code), or (ii) an Award may be canceled, forfeited, or
surrendered;
(f) Prescribe the form of each Award Agreement, which need not be identical for
each Holder;
(g) Decide all other matters that must be determined in connection with an
Award;
(h) Establish, adopt, or revise any rules and regulations as it may deem
necessary or advisable to administer the Plan;
(i) Interpret the terms of, and any matter arising pursuant to, the Plan, any
Program or any Award Agreement; and
(j) Make all other decisions and determinations that may be required pursuant to
the Plan or as the Committee deems necessary or advisable to administer the
Plan.
12.5 Decisions Binding. The Committee’s interpretation of the Plan, any Awards
granted pursuant to the Plan, any Program, any Award Agreement and all decisions
and determinations by the Committee with respect to the Plan are final, binding,
and conclusive on all parties.
12.6 Delegation of Authority. The Board or Committee may from time to time
delegate (a) to a committee of one or more members of the Board the authority to
grant or amend Awards and (b) to a committee of one or more members of the Board
or to one or more officers of the Company the authority to take administrative
actions pursuant to Article 12; provided that any delegation of authority shall
only be permitted to the extent it is permissible under Section 162(m) of the
Code, applicable securities laws, the rules of any applicable Securities
Exchange and any Company policy governing the grant of equity-based awards. Any
delegation hereunder shall be subject to the restrictions and limits that the
Board or Committee specifies at the time of such delegation, and the Board may
at any time rescind the authority so delegated or appoint a new delegate. At all
times, the delegatee appointed under this Section 12.6 shall serve in such
capacity at the pleasure of the Board and the Committee.
ARTICLE 13.
MISCELLANEOUS PROVISIONS
13.1 Amendment, Suspension or Termination of the Plan. Except as otherwise
provided in this Section 13.1, the Plan and any Award Agreement may be wholly or
partially amended or otherwise modified, suspended or terminated at any time or
from time to time by the

 

23

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

 

Board or the Committee. However, without approval of the Company’s stockholders,
no action of the Committee may, except as provided in Section 13.2, (i) increase
the limits imposed in Section 3.1 on the maximum number of Shares that may be
issued under the Plan, (ii) take any action described in Section 11.6 above,
(iii) materially modify the requirements for eligibility to participate in the
Plan, (iv) materially increase the benefits accruing to participants in the
Plan, or (v) take any other action that requires the approval of the Company’s
stockholders under the rules of any applicable Securities Exchange. Except as
provided in Section 13.9, no amendment, suspension or termination of the Plan
shall, without the consent of the Holder, adversely affect the rights of the
Holder under any Award theretofore granted to such Holder, unless the Award
itself otherwise expressly so provides.
13.2 Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
(a) In the event of any stock dividend, stock split, combination or exchange of
shares, merger, consolidation or other distribution (other than normal cash
dividends) of Company assets to stockholders, or any other change affecting the
Shares or the Share price other than an Equity Restructuring, the Committee
shall make equitable adjustments, if any, to reflect such change with respect to
(i) the aggregate number and kind of securities that may be issued under the
Plan (including, but not limited to, adjustments of the limitations in
Section 3.1 on the maximum number and kind of securities that may be issued
under the Plan, adjustments of the Award Limit, and adjustments of the manner in
which securities subject to Full Value Awards will be counted); (ii) the number
and kind of securities (or other property) subject to outstanding Awards;
(iii) the terms and conditions of any outstanding Awards (including, without
limitation, any applicable performance targets or criteria with respect
thereto); and (iv) the grant or exercise price per share for any outstanding
Awards under the Plan.
(b) In the event of any transaction or event described in Section 13.2(a) or any
unusual or nonrecurring transactions or events affecting the Company, any
Affiliate of the Company, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations or accounting
principles, the Committee, in its sole discretion, and on such terms and
conditions as it deems appropriate, either by the terms of the Award or by
action taken prior to the occurrence of such transaction or event and either
automatically or upon the Holder’s request, is hereby authorized to take any one
or more of the following actions whenever the Committee determines that such
action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any Award under the Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:
(i) To provide for either (A) termination of any such Award in exchange for an
amount of cash, if any, equal to the amount that would have been attained upon
the exercise of such Award or realization of the Holder’s rights (and, for the
avoidance of doubt, if as of the date of the occurrence of the transaction or
event described in this Section 13.2 the Committee determines in good faith that
no amount would have been attained upon the exercise of such Award or
realization of the Holder’s rights, then such Award may be terminated by the
Company without payment) or (B) the replacement of such Award with other rights
or property selected by the Committee in its sole discretion having an aggregate
value not exceeding the

 

24

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

 

amount that could have been attained upon the exercise of such Award or
realization of the Holder’s rights had such Award been currently exercisable or
payable or fully vested;
(ii) To provide that such Award be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be substituted for by
similar options, rights or awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices;
(iii) To make adjustments in the number and type of securities (or other
property) subject to outstanding Awards, and in the number and kind of
outstanding Restricted Stock and/or in the terms and conditions of (including
the grant or exercise price), and the criteria included in, outstanding Awards
and Awards which may be granted in the future;
(iv) To provide that such Award shall be exercisable or payable or fully vested
with respect to all Shares covered thereby, notwithstanding anything to the
contrary in the Plan or the applicable Program or Award Agreement; and/or
(v) To provide that the Award cannot vest, be exercised or become payable after
such event.
(c) In connection with the occurrence of any Equity Restructuring, and
notwithstanding anything to the contrary in Sections 13.2(a) and 13.2(b):
(i) The number and type of securities subject to each outstanding Award and the
exercise price or grant price thereof, if applicable, shall be equitably
adjusted; and/or
(ii) The number and kind of securities that may be issued under the Plan
pursuant to new Awards shall be equitably adjusted.
(d) The Committee may, in its sole discretion, include such further provisions
and limitations in any Award, Program, Award Agreement or certificate or
book-entry evidencing Shares, as it may deem equitable and in the best interests
of the Company that are not inconsistent with the provisions of the Plan.
(e) No adjustment or action described in this Section 13.2 or in any other
provision of the Plan, any applicable Program or the Award Agreement shall be
authorized to the extent that such adjustment or action would cause such Award
to violate the requirements of Section 409A of the Code. With respect to any
Award which is granted to a Covered Employee and is intended to qualify as
Performance-Based Compensation, no adjustment or action described in this
Section 13.2 or in any other provision of the Plan, any applicable Program or
the Award Agreement shall be authorized to the extent that such adjustment or
action would cause such Award to fail to so qualify as Performance-Based
Compensation, unless the Committee determines that the Award should not so
qualify. No adjustment or action described in this Section 13.2 or in any other
provision of the Plan shall be authorized to the extent that such adjustment or
action would cause the Plan to violate Section 422(b)(1) of the Code, unless the
Committee determines that Options granted under the Plan are not to qualify as
“incentive

 

25

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

 

stock options”. Furthermore, no such adjustment or action shall be authorized to
the extent such adjustment or action could result in short-swing profits
liability under Section 16 or violate the exemptive conditions of Rule 16b-3
unless the Committee determines that the Award is not to comply with such
exemptive conditions.
(f) The existence of the Plan, any Program, any Award Agreement and any Awards
granted hereunder shall not affect or restrict in any way the right or power of
the Company or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company’s
capital structure or its business, any merger or consolidation of the Company,
any issue of stock or of options, warrants or rights to purchase stock or of
bonds, debentures, preferred or prior preference stocks whose rights are
superior to or affect the Common Stock or the rights thereof or which are
convertible into or exchangeable for Common Stock, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
(g) In the event of any pending stock dividend, stock split, combination or
exchange of shares, merger, consolidation or other distribution (other than
normal cash dividends) of Company assets to stockholders, or any other change
affecting the Shares or the Share price, including any Equity Restructuring, for
reasons of administrative convenience, the Company in its sole discretion may
refuse to permit the exercise of any Award during a period of thirty (30) days
prior to the consummation of any such transaction.
(h) Without limiting the generality of the foregoing, the vesting of an Award
will not automatically accelerate upon the occurrence of a Change of Ownership;
provided, however, the Committee may determine that upon the occurrence of a
Change of Ownership, (i) the acquirer or surviving entity shall be required to
assume an Award or substitute a comparable award with respect to the equity of
the acquirer or surviving entity, (ii) the vesting of all or any portion of the
Award will accelerate to the time immediately prior to the consummation of the
Change of Ownership, or, in the case of an Option or Stock Appreciation Right,
all or any portion of the Award shall become immediately exercisable so that the
Holder will have the opportunity to exercise the Award (or portion thereof)
immediately prior to consummation of the Change of Ownership, and/or (iii) all
or any portion of the Award, including any unvested portion should the Committee
so determine, shall be purchased for (x) in the case of an Option or Stock
Appreciation Right, cash in an amount equal to the excess of the aggregate Fair
Market Value of the Shares subject to the Award to be purchased over the
aggregate exercise price for such Shares, net of tax withholding, and (y) in the
case of any other Award, such consideration as the Committee may in good faith
determine to be equitable under the circumstances; provided, further, that any
determination of the Committee in this regard shall comply with Sections 409A
and 424 of the Code.
13.3 No Stockholder Rights. Except as otherwise provided herein, a Holder shall
have none of the rights of a stockholder with respect to Shares subject to any
Award until the Holder becomes the record owner of such Shares.
13.4 Paperless Administration. In the event that the Company Stock Administrator
establishes, for the Company or using the services of a third party, an
automated system for the

 

26

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

 

documentation, granting or exercise of Awards, such as a system using an
internet website or interactive voice response, then the paperless
documentation, granting or exercise of Awards by a Holder may be permitted
through the use of such an automated system.
13.5 Effect of Plan upon Other Compensation Plans. The adoption of the Plan
shall not affect any other compensation or incentive plans in effect for the
Company or any Affiliate, except as described in Section 3.1(a) above with
respect to the Company’s 2001 Stock Incentive Plan. Nothing in the Plan shall be
construed to limit the right of the Company or any Affiliate: (a) to establish
any other forms of incentives or compensation for Employees, Directors or
Consultants of the Company or any Affiliate, or (b) to grant or assume options
or other rights or awards otherwise than under the Plan in connection with any
proper corporate purpose including without limitation, the grant or assumption
of options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
partnership, limited liability company, firm or association.
13.6 Compliance with Laws. The Plan, the granting and vesting of Awards under
the Plan and the issuance and delivery of Shares and the payment of money under
the Plan or under Awards granted or awarded under the Plan are subject to
compliance with all applicable laws and regulations, the rules of any Securities
Exchange, and to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be necessary or
advisable in connection therewith. Any securities delivered under the Plan shall
be subject to such restrictions, and the person acquiring such securities shall,
if requested by the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure compliance with
all applicable legal requirements. To the extent permitted by applicable law,
the Plan, any Program and any Awards granted or awarded hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
13.7 Titles and Headings, References to Sections of the Code, the Securities Act
or Exchange Act. The titles and headings of the Sections in the Plan are for
convenience of reference only and, in the event of any conflict, the text of the
Plan, rather than such titles or headings, shall control. References to sections
of the Code, the Securities Act or the Exchange Act shall include any amendment
or successor thereto.
13.8 Governing Law. The Plan, any Program and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
13.9 Section 409A.
(a) To the extent that the Committee determines that any Award granted under the
Plan is subject to Section 409A of the Code, the Program pursuant to which such
Award is granted and the Award Agreement evidencing such Award shall incorporate
the terms and conditions required by Section 409A of the Code. To the extent
applicable, the Plan, the Program and any Award Agreements shall be interpreted
in accordance with Section 409A of the Code. Notwithstanding any provision of
the Plan or the applicable Program or Award Agreement to the contrary, in the
event that following the Effective Date the Committee

 

27

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

 

determines that any Award may be subject to Section 409A of the Code, the
Committee may adopt such amendments to the Plan and the applicable Program and
Award Agreement or adopt other policies and procedures (including amendments,
policies and procedures with retroactive effect), or take any other actions,
that the Administrator determines are necessary or appropriate to (i) exempt the
Award from Section 409A of the Code and/or preserve the intended tax treatment
of the benefits provided with respect to the Award, or (ii) comply with the
requirements of Section 409A of the Code and related Department of Treasury
guidance and thereby avoid the application of any penalty taxes under such
Section.
(b) If, at the time of a Holder’s “separation from service” (within the meaning
of Section 409A of the Code), (i) such Holder is a “specified employee” (within
the meaning of Section 409A of the Code as determined annually by the Committee
in accordance with the methodology specified by resolution of the Board or the
Committee and in accordance with Section 1.409A-1(i) of the Treasury
Regulations) and (ii) the Committee shall make a good-faith determination that
an amount payable pursuant to an Option or Award constitutes “deferred
compensation” (within the meaning of Section 409A of the Code) the payment of
which is required to be delayed pursuant to the six-month delay rule set forth
in Section 409A of the Code in order to preserve the tax treatment intended for
such payment or to avoid additional tax, interest, or penalties under
Section 409A of the Code, then the Company shall not pay such amount on the
otherwise scheduled payment date but shall instead pay it on the first business
day after such six-month period. Such amount shall be paid without interest,
unless otherwise determined by the Committee, in its sole discretion, or as
otherwise provided in any applicable agreement between the Company and the
relevant Holder.
(c) The Holder shall be solely responsible and liable for the satisfaction of
all taxes, interest, and penalties that may be imposed on such Holder or for
such Holder’s account in connection with any Award (including any taxes,
interest, and penalties under Section 409A of the Code), and neither the Company
nor its Affiliates shall have any obligation to reimburse, indemnify or
otherwise hold such Holder harmless from any or all of such taxes, interest, or
penalties.
13.10 No Rights to Awards. No Eligible Individual or other person shall have any
claim to be granted any Award pursuant to the Plan, and neither the Company nor
the Committee is obligated to treat Eligible Individuals, Holders or any other
persons uniformly.
13.11 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan
for incentive compensation. With respect to any payments not yet made to a
Holder pursuant to an Award, nothing contained in the Plan or any Program or
Award Agreement shall give the Holder any rights that are greater than those of
a general creditor of the Company or any Affiliate.
13.12 Indemnification. To the extent allowable pursuant to applicable law, each
member of the Committee or of the Board shall be indemnified and held harmless
by the Company from any loss, cost, liability, or expense that may be imposed
upon or reasonably incurred by such member in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action or failure to act
pursuant to the Plan and against and from any and all amounts paid by him or her
in satisfaction of judgment in such action, suit, or proceeding against him or
her. The

 

28

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

 

foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled pursuant to the Company’s
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.
13.13 Term. The ability to grant new awards under this Plan shall terminate on
the tenth (10th) anniversary of the Effective Date.
# # #

 

29