Exhibit 10.1

 

AUDIOEYE, INC.

 

2015 INCENTIVE COMPENSATION PLAN

 

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AUDIOEYE, INC.

 

2015 INCENTIVE COMPENSATION PLAN

 

1.

Purpose

1

 

 

 

2.

Definitions

1

 

 

 

3.

Administration

6

 

 

 

4.

Shares Subject to Plan

7

 

 

 

5.

Eligibility; Per-Person Award Limitations

8

 

 

 

6.

Specific Terms of Awards

8

 

 

 

7.

Certain Provisions Applicable to Awards

14

 

 

 

8.

Code Section 162(m) Provisions

16

 

 

 

9.

Change in Control

18

 

 

 

10.

General Provisions

19

 

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AUDIOEYE, INC.

 

2015 INCENTIVE COMPENSATION PLAN

 

1.                                      Purpose.  The purpose of this
AUDIOEYE, INC. 2015 INCENTIVE COMPENSATION PLAN (the “Plan”) is to assist
AudioEye, Inc., a Delaware corporation (the “Company”) and its Related Entities
(as hereinafter defined) in attracting, motivating, retaining and rewarding
high-quality executives and other employees, officers, directors, consultants
and other persons who provide services to the Company or its Related Entities by
enabling such persons to acquire or increase a proprietary interest in the
Company in order to strengthen the mutuality of interests between such persons
and the Company’s stockholders, and providing such persons with annual and long
term performance incentives to expend their maximum efforts in the creation of
stockholder value.

 

2.                                      Definitions.  For purposes of the Plan,
the following terms shall be defined as set forth below, in addition to such
terms defined in Section 1 hereof and elsewhere herein.

 

(a)                                 “Award” means any Option, Stock Appreciation
Right, Restricted Stock Award, Deferred Stock Award, Share granted as a bonus or
in lieu of another Award, Dividend Equivalent, Other Stock-Based Award or
Performance Award, together with any other right or interest, granted to a
Participant under the Plan.

 

(b)                                 “Award Agreement” means any written
agreement, contract or other instrument or document evidencing any Award granted
by the Committee hereunder.

 

(c)                                  “Beneficiary” means the person, persons,
trust or trusts that have been designated by a Participant in his or her most
recent written beneficiary designation filed with the Committee to receive the
benefits specified under the Plan upon such Participant’s death or to which
Awards or other rights are transferred if and to the extent permitted under
Section 10(b) hereof.  If, upon a Participant’s death, there is no designated
Beneficiary or surviving designated Beneficiary, then the term Beneficiary means
the person, persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.

 

(d)                                 “Beneficial Owner” and “Beneficial
Ownership” shall have the meaning ascribed to such term in Rule 13d-3 under the
Exchange Act and any successor to such Rule.

 

(e)                                  “Board” means the Company’s Board of
Directors.

 

(f)                                   “Cause” shall, with respect to any
Participant, have the meaning specified in the Award Agreement.  In the absence
of any definition in the Award Agreement, “Cause” shall have the equivalent
meaning or the same meaning as “cause” or “for cause” set forth in any
employment, consulting, or other agreement for the performance of services
between the Participant and the Company or a Related Entity or, in the absence
of any such agreement or any such definition in such agreement, such term shall
mean (i) the failure by the Participant to perform, in a reasonable manner, his
or her duties as assigned by the Company or a Related Entity, (ii) any violation
or breach by the Participant of his or her employment, consulting or other
similar agreement with the Company or a Related Entity, if any, (iii) any
violation or

 

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breach by the Participant of any non-competition, non-solicitation,
non-disclosure and/or other similar agreement with the Company or a Related
Entity, (iv) any act by the Participant of dishonesty or bad faith with respect
to the Company or a Related Entity, (v) use of alcohol, drugs or other similar
substances in a manner that adversely affects the Participant’s work
performance, or (vi) the commission by the Participant of any act, misdemeanor,
or crime reflecting unfavorably upon the Participant or the Company or any
Related Entity.  The good faith determination by the Committee of whether the
Participant’s Continuous Service was terminated by the Company for “Cause” shall
be final and binding for all purposes hereunder.

 

(g)                                  “Change in Control” means a Change in
Control as defined in Section 9(b) of the Plan.

 

(h)                                 “Code” means the Internal Revenue Code of
1986, as amended from time to time, including regulations thereunder and
successor provisions and regulations thereto.

 

(i)                                     “Committee” means a committee designated
by the Board to administer the Plan; provided, however, that if the Board fails
to designate a committee or if there are no longer any members on the committee
so designated by the Board, or for any other reason determined by the Board,
then the Board shall serve as the Committee.  While it is intended that the
Committee shall consist of at least two directors, each of whom shall be (i) a
“non-employee director” within the meaning of Rule 16b-3 (or any successor rule)
under the Exchange Act, unless administration of the Plan by “non-employee
directors” is not then required in order for exemptions under Rule 16b-3 to
apply to transactions under the Plan, (ii) an “outside director” within the
meaning of Section 162(m) of the Code, and (iii) “Independent,” the failure of
the Committee to be so comprised shall not invalidate any Award that otherwise
satisfies the terms of the Plan.

 

(j)                                    “Consultant” means any Person (other than
an Employee or a Director, solely with respect to rendering services in such
Person’s capacity as a director) who is engaged by the Company or any Related
Entity to render consulting or advisory services to the Company or such Related
Entity.

 

(k)                                 “Continuous Service” means the uninterrupted
provision of services to the Company or any Related Entity in any capacity of
Employee, Director, Consultant or other service provider.  Continuous Service
shall not be considered to be interrupted in the case of (i) any approved leave
of absence, (ii) transfers among the Company, any Related Entities, or any
successor entities, in any capacity of Employee, Director, Consultant or other
service provider, or (iii) any change in status as long as the individual
remains in the service of the Company or a Related Entity in any capacity of
Employee, Director, Consultant or other service provider (except as otherwise
provided in the Award Agreement).  An approved leave of absence shall include
sick leave, military leave, or any other authorized personal leave.

 

(l)                                     “Covered Employee” means the Person who,
as of the end of the taxable year, either is the principal executive officer of
the Company or is serving as the acting principal executive officer of the
Company, and each other Person whose compensation is required to be disclosed in
the Company’s filings with the Securities and Exchange Commission by reason of
that person being among the three highest compensated officers of the Company as
of the end of

 

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a taxable year, or such other person as shall be considered a “covered employee”
for purposes of Section 162(m) of the Code.

 

(m)                             “Deferred Stock” means a right to receive
Shares, including Restricted Stock, cash measured based upon the value of Shares
or a combination thereof, at the end of a specified deferral period.

 

(n)                                 “Deferred Stock Award” means an Award of
Deferred Stock granted to a Participant under Section 6(e) hereof.

 

(o)                                 “Director” means a member of the Board or
the board of directors of any Related Entity.

 

(p)                                 “Disability” means a permanent and total
disability (within the meaning of Section 22(e) of the Code), as determined by a
medical doctor satisfactory to the Committee.

 

(q)                                 “Dividend Equivalent” means a right, granted
to a Participant under Section 6(g) hereof, to receive cash, Shares, other
Awards or other property equal in value to dividends paid with respect to a
specified number of Shares, or other periodic payments.

 

(r)                                    “Effective Date” means the effective date
of the Plan, which shall be September 5, 2014.

 

(s)                                   “Eligible Person” means each officer,
Director, Employee, Consultant and other person who provides services to the
Company or any Related Entity.  The foregoing notwithstanding, only Employees of
the Company, or any parent corporation or subsidiary corporation of the Company
(as those terms are defined in Sections 424(e) and (f) of the Code,
respectively), shall be Eligible Persons for purposes of receiving any Incentive
Stock Options.  An Employee on leave of absence may, in the discretion of the
Committee, be considered as still in the employ of the Company or a Related
Entity for purposes of eligibility for participation in the Plan.

 

(t)                                    “Employee” means any person, including an
officer or Director, who is an employee of the Company or any Related Entity. 
The payment of a director’s fee by the Company or a Related Entity shall not be
sufficient to constitute “employment” by the Company.

 

(u)                                 “Exchange Act” means the Securities Exchange
Act of 1934, as amended from time to time, including rules thereunder and
successor provisions and rules thereto.

 

(v)                                 “Fair Market Value” means the fair market
value of Shares, Awards or other property as determined by the Committee, or
under procedures established by the Committee.  Unless otherwise determined by
the Committee, the Fair Market Value of a Share as of any given date shall be
the closing sale price per Share reported on a consolidated basis for stock
listed on the principal stock exchange or market on which Shares are traded on
the date immediately preceding the date as of which such value is being
determined (or as of such later measurement date as determined by the Committee
on the date the Award is authorized by the Committee), or, if there is no sale
on that date, then on the last previous day on which a sale was reported.

 

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(w)                               “Good Reason” shall, with respect to any
Participant, have the meaning specified in the Award Agreement.  In the absence
of any definition in the Award Agreement, “Good Reason” shall have the
equivalent meaning or the same meaning as “good reason” or “for good reason” set
forth in any employment, consulting or other agreement for the performance of
services between the Participant and the Company or a Related Entity or, in the
absence of any such agreement or any such definition in such agreement, such
term shall mean (i) the assignment to the Participant of any duties inconsistent
in any material respect with the Participant’s duties or responsibilities as
assigned by the Company or a Related Entity, or any other action by the Company
or a Related Entity which results in a material diminution in such duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
or a Related Entity promptly after receipt of notice thereof given by the
Participant; (ii) any material failure by the Company or a Related Entity to
comply with its obligations to the Participant as agreed upon, other than an
isolated, insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company or a Related Entity promptly after receipt of
notice thereof given by the Participant; or (iii) the Company’s or Related
Entity’s requiring the Participant to be based at any office or location outside
of fifty (50) miles from the location of employment or service as of the date of
Award, except for travel reasonably required in the performance of the
Participant’s responsibilities.

 

(x)                                 “Incentive Stock Option” means any Option
intended to be designated as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.

 

(y)                                 “Independent,” when referring to either the
Board or members of the Committee, shall have the same meaning as used in the
rules of the Listing Market.

 

(z)                                  “Incumbent Board” means the Incumbent Board
as defined in Section 9(b)(ii) hereof.

 

(aa)                          “Listing Market” means the OTC Bulletin Board or
any other national securities exchange on which any securities of the Company
are listed for trading, and if not listed for trading, by the rules of the
Nasdaq Market.

 

(bb)                          “Non-Qualified Stock Option” means any option that
is not an Incentive Stock Option.

 

(cc)                            “Option” means a right granted to a Participant
under Section 6(b) hereof, to purchase Shares or other Awards at a specified
price during specified time periods.

 

(dd)                          “Optionee” means a person to whom an Option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan.

 

(ee)                            “Other Stock-Based Awards” means Awards granted
to a Participant under Section 6(i) hereof.

 

(ff)                              “Participant” means a person who has been
granted an Award under the Plan which remains outstanding, including a person
who is no longer an Eligible Person.

 

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(gg)                            “Performance Award” means any Award of
Performance Shares or Performance Units granted pursuant to Section 6(h) hereof.

 

(hh)                          “Performance Period” means that period established
by the Committee at the time any Performance Award is granted or at any time
thereafter during which any performance goals specified by the Committee with
respect to such Award are to be measured.

 

(ii)                                  “Performance Share” means any grant
pursuant to Section 6(h) hereof of a unit valued by reference to a designated
number of Shares, which value may be paid to the Participant by delivery of such
property as the Committee shall determine, including cash, Shares, other
property, or any combination thereof, upon achievement of such performance goals
during the Performance Period as the Committee shall establish at the time of
such grant or thereafter.

 

(jj)                                “Performance Unit” means any grant pursuant
to Section 6(h) hereof of a unit valued by reference to a designated amount of
property (including cash) other than Shares, which value may be paid to the
Participant by delivery of such property as the Committee shall determine,
including cash, Shares, other property, or any combination thereof, upon
achievement of such performance goals during the Performance Period as the
Committee shall establish at the time of such grant or thereafter.

 

(kk)                          “Person” shall have the meaning ascribed to such
term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and
14(d) thereof, and shall include a “group” as defined in Section 13(d) thereof.

 

(ll)                                  “Related Entity” means any Subsidiary, and
any business, corporation, partnership, limited liability company or other
entity designated by the Board, in which the Company or a Subsidiary holds a
substantial ownership interest, directly or indirectly.

 

(mm)                  “Restriction Period” means the period of time specified by
the Committee that Restricted Stock Awards shall be subject to such restrictions
on transferability, risk of forfeiture and other restrictions, if any, as the
Committee may impose.

 

(nn)                          “Restricted Stock” means any Share issued with the
restriction that the holder may not sell, transfer, pledge or assign such Share
and with such risks of forfeiture and other restrictions as the Committee, in
its sole discretion, may impose (including any restriction on the right to vote
such Share and the right to receive any dividends), which restrictions may lapse
separately or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.

 

(oo)                          “Restricted Stock Award” means an Award granted to
a Participant under Section 6(d) hereof.

 

(pp)                          “Rule 16b-3” means Rule 16b-3, as from time to
time in effect and applicable to the Plan and Participants, promulgated by the
Securities and Exchange Commission under Section 16 of the Exchange Act.

 

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(qq)                          “Shares” means the shares of common stock of the
Company, par value $.00001 per share, and such other securities as may be
substituted (or resubstituted) for Shares pursuant to Section 10(c) hereof.

 

(rr)                                “Stock Appreciation Right” means a right
granted to a Participant under Section 6(c) hereof.

 

(ss)                              “Subsidiary” means any corporation or other
entity in which the Company has a direct or indirect ownership interest of 50%
or more of the total combined voting power of the then outstanding securities or
interests of such corporation or other entity entitled to vote generally in the
election of directors or in which the Company has the right to receive 50% or
more of the distribution of profits or 50% or more of the assets on liquidation
or dissolution.

 

(tt)                                “Substitute Awards” means Awards granted or
Shares issued by the Company in assumption of, or in substitution or exchange
for, Awards previously granted, or the right or obligation to make future
Awards, by a company (i) acquired by the Company or any Related Entity,
(ii) which becomes a Related Entity after the date hereof, or (iii) with which
the Company or any Related Entity combines.

 

3.                                      Administration.

 

(a)                                 Authority of the Committee.  The Plan shall
be administered by the Committee except to the extent (and subject to the
limitations imposed by Section 3(b) hereof) the Board elects to administer the
Plan, in which case the Plan shall be administered by only those members of the
Board who are Independent members of the Board, in which case references herein
to the “Committee” shall be deemed to include references to the Independent
members of the Board.  The Committee shall have full and final authority,
subject to and consistent with the provisions of the Plan, to select Eligible
Persons to become Participants, grant Awards, determine the type, number and
other terms and conditions of, and all other matters relating to, Awards,
prescribe Award Agreements (which need not be identical for each Participant)
and rules and regulations for the administration of the Plan, construe and
interpret the Plan and Award Agreements and correct defects, supply omissions or
reconcile inconsistencies therein, and to make all other decisions and
determinations as the Committee may deem necessary or advisable for the
administration of the Plan.  In exercising any discretion granted to the
Committee under the Plan or pursuant to any Award, the Committee shall not be
required to follow past practices, act in a manner consistent with past
practices, or treat any Eligible Person or Participant in a manner consistent
with the treatment of any other Eligible Persons or Participants.

 

(b)                                 Manner of Exercise of Committee Authority. 
The Committee, and not the Board, shall exercise sole and exclusive discretion
(i) on any matter relating to a Participant then subject to Section 16 of the
Exchange Act with respect to the Company to the extent necessary in order that
transactions by such Participant shall be exempt under Rule 16b-3 under the
Exchange Act, (ii) with respect to any Award that is intended to qualify as
“performance-based compensation” under Section 162(m), to the extent necessary
in order for such Award to so qualify; and (iii) with respect to any Award to an
Independent Director.  Any action of the Committee shall be final, conclusive
and binding on all persons, including the Company, its

 

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Related Entities, Eligible Persons, Participants, Beneficiaries, transferees
under Section 10(b) hereof or other persons claiming rights from or through a
Participant, and stockholders.  The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be construed
as limiting any power or authority of the Committee.  The Committee may delegate
to officers or managers of the Company or any Related Entity, or committees
thereof, the authority, subject to such terms and limitations as the Committee
shall determine, to perform such functions, including administrative functions
as the Committee may determine to the extent that such delegation will not
result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to
Participants subject to Section 16 of the Exchange Act in respect of the Company
and will not cause Awards intended to qualify as “performance-based
compensation” under Code Section 162(m) to fail to so qualify.  The Committee
may appoint agents to assist it in administering the Plan.

 

(c)                                  Limitation of Liability.  The Committee and
the Board, and each member thereof, shall be entitled to, in good faith, rely or
act upon any report or other information furnished to him or her by any officer
or Employee, the Company’s independent auditors, Consultants or any other agents
assisting in the administration of the Plan.  Members of the Committee and the
Board, and any officer or Employee acting at the direction or on behalf of the
Committee or the Board, shall not be personally liable for any action or
determination taken or made in good faith with respect to the Plan, and shall,
to the extent permitted by law, be fully indemnified and protected by the
Company with respect to any such action or determination.

 

4.                                      Shares Subject to Plan.

 

(a)                                 Limitation on Overall Number of Shares
Available for Delivery Under Plan.  Subject to adjustment as provided in
Section 10(c) hereof, the total number of Shares reserved and available for
delivery under the Plan shall be five million (5,000,000).  Any Shares delivered
under the Plan may consist, in whole or in part, of authorized and unissued
shares or treasury shares.

 

(b)                                 Application of Limitation to Grants of
Awards.  No Award may be granted if the number of Shares to be delivered in
connection with such an Award exceeds the number of Shares remaining available
for delivery under the Plan, minus the number of Shares deliverable in
settlement of or relating to then outstanding Awards.  The Committee may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of Shares actually delivered differs from the number
of Shares previously counted in connection with an Award.

 

(c)                                  Availability of Shares Not Delivered under
Awards and Adjustments to Limits.

 

(i)                                     If any Awards are forfeited, expire or
otherwise terminate without issuance of such Shares, or any Award is settled for
cash or otherwise does not result in the issuance of all or a portion of the
Shares subject to such Award, the Shares to which those Awards were subject,
shall, to the extent of such forfeiture, expiration, termination, cash

 

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settlement or non-issuance, again be available for delivery with respect to
Awards under the Plan, subject to Section 4(c)(iv) below.

 

(ii)                                  In the event that any Option or other
Award granted hereunder is exercised through the tendering of Shares (either
actually or by attestation) or by the withholding of Shares by the Company, or
withholding tax liabilities arising from such option or other award are
satisfied by the tendering of Shares (either actually or by attestation) or by
the withholding of Shares by the Company, then only the number of Shares issued
net of the Shares tendered or withheld shall be counted for purposes of
determining the maximum number of Shares available for grant under the Plan.

 

(iii)                               Substitute Awards shall not reduce the
Shares authorized for delivery under the Plan or authorized for delivery to a
Participant in any period.  Additionally, in the event that a company acquired
by the Company or any Related Entity or with which the Company or any Related
Entity combines has shares available under a pre-existing plan approved by its
stockholders, the shares available for delivery 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 delivery
under the Plan; if and to the extent that the use of such Shares would not
require approval of the Company’s stockholders under the rules of the Listing
Market.

 

(iv)                              Any Share that again becomes available for
delivery pursuant to this Section 4(c) shall be added back as one (1) Share.

 

(v)                                 Notwithstanding anything in this
Section 4(c) to the contrary but subject to adjustment as provided in
Section 10(c) hereof, the maximum aggregate number of Shares that may be
delivered under the Plan as a result of the exercise of the Incentive Stock
Options shall be five million (5,000,000) Shares.

 

5.                                      Eligibility; Per-Person Award
Limitations.  Awards may be granted under the Plan only to Eligible Persons. 
Subject to adjustment as provided in Section 10(c), in any fiscal year of the
Company during any part of which the Plan is in effect, no Participant may be
granted (i) Options or Stock Appreciation Rights with respect to more than
500,000 Shares or (ii) Restricted Stock, Deferred Stock, Performance Shares
and/or Other Stock-Based Awards with respect to more than 500,000 Shares.  In
addition, the maximum dollar value payable to any one Participant with respect
to Performance Units is (x) $250,000 with respect to any 12 month Performance
Period and (y) with respect to any Performance Period that is more than 12
months, $500,000.

 

6.                                      Specific Terms of Awards.

 

(a)                                 General.  Awards may be granted on the terms
and conditions set forth in this Section 6.  In addition, the Committee may
impose on any Award or the exercise thereof, at the date of grant or thereafter
(subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall determine,
including

 

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terms requiring forfeiture of Awards in the event of termination of the
Participant’s Continuous Service and terms permitting a Participant to make
elections relating to his or her Award.  Except as otherwise expressly provided
herein, the Committee shall retain full power and discretion to accelerate,
waive or modify, at any time, any term or condition of an Award that is not
mandatory under the Plan.  Except in cases in which the Committee is authorized
to require other forms of consideration under the Plan, or to the extent other
forms of consideration must be paid to satisfy the requirements of Delaware law,
no consideration other than services may be required for the grant (as opposed
to the exercise) of any Award.

 

(b)                                 Options.  The Committee is authorized to
grant Options to any Eligible Person on the following terms and conditions:

 

(i)                                     Exercise Price.  Other than in
connection with Substitute Awards, the exercise price per Share purchasable
under an Option shall be determined by the Committee, provided that such
exercise price shall not be less than 100% of the Fair Market Value of a Share
on the date of grant of the Option and shall not, in any event, be less than the
par value of a Share on the date of grant of the Option.  If an Employee owns or
is deemed to own (by reason of the attribution rules applicable under
Section 424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company (or any parent corporation or subsidiary
corporation of the Company, as those terms are defined in Sections 424(e) and
(f) of the Code, respectively) and an Incentive Stock Option is granted to such
Employee, the exercise price of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no less than 110% of the
Fair Market Value of a Share on the date such Incentive Stock Option is granted.

 

(ii)                                  Time and Method of Exercise.  The
Committee shall determine the time or times at which or the circumstances under
which an Option may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the time
or times at which Options shall cease to be or become exercisable following
termination of Continuous Service or upon other conditions, the methods by which
the exercise price may be paid or deemed to be paid (including in the discretion
of the Committee a cashless exercise procedure), the form of such payment,
including, without limitation, cash, Shares (including without limitation the
withholding of Shares otherwise deliverable pursuant to the Award), other Awards
or awards granted under other plans of the Company or a Related Entity, or other
property (including notes or other contractual obligations of Participants to
make payment on a deferred basis provided that such deferred payments are not in
violation of Section 13(k) of the Exchange Act, or any rule or regulation
adopted thereunder or any other applicable law), and the methods by or forms in
which Shares will be delivered or deemed to be delivered to Participants.

 

(iii)                               Incentive Stock Options.  The terms of any
Incentive Stock Option granted under the Plan shall comply in all respects with
the provisions of Section 422 of the Code.  Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options
(including any Stock Appreciation Right issued in tandem therewith) shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be exercised, so as to disqualify either the Plan or any
Incentive Stock Option under Section 422 of the Code, unless the Participant has
first requested, or consents to, the change that will

 

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result in such disqualification.  Thus, if and to the extent required to comply
with Section 422 of the Code, Options granted as Incentive Stock Options shall
be subject to the following special terms and conditions:

 

(A)                               the Option shall not be exercisable for more
than ten years after the date such Incentive Stock Option is granted; provided,
however, that if a Participant owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company (or any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f) of the Code, respectively) and the Incentive Stock Option is
granted to such Participant, the term of the Incentive Stock Option shall be (to
the extent required by the Code at the time of the grant) for no more than five
years from the date of grant; and

 

(B)                               The aggregate Fair Market Value (determined as
of the date the Incentive Stock Option is granted) of the Shares with respect to
which Incentive Stock Options granted under the Plan and all other option plans
of the Company (and any parent corporation or subsidiary corporation of the
Company, as those terms are defined in Sections 424(e) and (f) of the Code,
respectively) that become exercisable for the first time by the Participant
during any calendar year shall not (to the extent required by the Code at the
time of the grant) exceed $100,000.

 

(c)                                  Stock Appreciation Rights.  The Committee
may grant Stock Appreciation Rights to any Eligible Person in conjunction with
all or part of any Option granted under the Plan or at any subsequent time
during the term of such Option (a “Tandem Stock Appreciation Right”), or without
regard to any Option (a “Freestanding Stock Appreciation Right”), in each case
upon such terms and conditions as the Committee may establish in its sole
discretion, not inconsistent with the provisions of the Plan, including the
following:

 

(i)                                     Right to Payment.  A Stock Appreciation
Right shall confer on the Participant to whom it is granted a right to receive,
upon exercise thereof, the excess of (A) the Fair Market Value of one Share on
the date of exercise over (B) the grant price of the Stock Appreciation Right as
determined by the Committee.  The grant price of a Stock Appreciation Right
shall not be less than 100% of the Fair Market Value of a Share on the date of
grant, in the case of a Freestanding Stock Appreciation Right, or less than the
associated Option exercise price, in the case of a Tandem Stock Appreciation
Right.

 

(ii)                                  Other Terms.  The Committee shall
determine at the date of grant or thereafter, the time or times at which and the
circumstances under which a Stock Appreciation Right may be exercised in whole
or in part (including based on achievement of performance goals and/or future
service requirements), the time or times at which Stock Appreciation Rights
shall cease to be or become exercisable following termination of Continuous
Service or upon other conditions, the method of exercise, method of settlement,
form of consideration payable in settlement, method by or forms in which Shares
will be delivered or deemed to be delivered to Participants, whether or not a
Stock Appreciation Right shall be in tandem or in combination with any other
Award, and any other terms and conditions of any Stock Appreciation Right.

 

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(iii)                               Tandem Stock Appreciation Rights. Any Tandem
Stock Appreciation Right may be granted at the same time as the related Option
is granted or, for Options that are Non-Qualified Stock Options, at any time
thereafter before exercise or expiration of such Option.  Any Tandem Stock
Appreciation Right related to an Option may be exercised only when the related
Option would be exercisable and the Fair Market Value of the Shares subject to
the related Option exceeds the exercise price at which Shares can be acquired
pursuant to the Option.  In addition, if a Tandem Stock Appreciation Right
exists with respect to less than the full number of Shares covered by a related
Option, then an exercise or termination of such Option shall not reduce the
number of Shares to which the Tandem Stock Appreciation Right applies until the
number of Shares then exercisable under such Option equals the number of Shares
to which the Tandem Stock Appreciation Right applies. Any Option related to a
Tandem Stock Appreciation Right shall no longer be exercisable to the extent the
Tandem Stock Appreciation Right has been exercised, and any Tandem Stock
Appreciation Right shall no longer be exercisable to the extent the related
Option has been exercised.

 

(d)                                 Restricted Stock Awards.  The Committee is
authorized to grant Restricted Stock Awards to any Eligible Person on the
following terms and conditions:

 

(i)                                     Grant and Restrictions.  Restricted
Stock Awards shall be subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee may impose, or as
otherwise provided in this Plan during the Restriction Period.  The terms of any
Restricted Stock Award granted under the Plan shall be set forth in a written
Award Agreement which shall contain provisions determined by the Committee and
not inconsistent with the Plan.  The restrictions may lapse separately or in
combination at such times, under such circumstances (including based on
achievement of performance goals and/or future service requirements), in such
installments or otherwise, as the Committee may determine at the date of grant
or thereafter.  Except to the extent restricted under the terms of the Plan and
any Award Agreement relating to a Restricted Stock Award, a Participant granted
Restricted Stock shall have all of the rights of a stockholder, including the
right to vote the Restricted Stock and the right to receive dividends thereon
(subject to any mandatory reinvestment or other requirement imposed by the
Committee).  During the period that the Restriction Stock Award is subject to a
risk of forfeiture, subject to Section 10(b) below and except as otherwise
provided in the Award Agreement, the Restricted Stock may not be sold,
transferred, pledged, hypothecated, margined or otherwise encumbered by the
Participant.

 

(ii)                                  Forfeiture.  Except as otherwise
determined by the Committee, upon termination of a Participant’s Continuous
Service during the applicable Restriction Period, the Participant’s Restricted
Stock that is at that time subject to a risk of forfeiture that has not lapsed
or otherwise been satisfied shall be forfeited and reacquired by the Company;
provided that, subject to the limitations set forth in Section 6(j)(ii) hereof,
the Committee may provide, by rule or regulation or in any Award Agreement, or
may determine in any individual case, that forfeiture conditions relating to
Restricted Stock Awards shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in other
cases waive in whole or in part the forfeiture of Restricted Stock.

 

(iii)                               Certificates for Stock.  Restricted Stock
granted under the Plan may be evidenced in such manner as the Committee shall
determine.  If certificates representing

 

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Restricted Stock are registered in the name of the Participant, the Committee
may require that such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Restricted Stock, that the
Company retain physical possession of the certificates, and that the Participant
deliver a stock power to the Company, endorsed in blank, relating to the
Restricted Stock.

 

(iv)                              Dividends and Splits.  As a condition to the
grant of a Restricted Stock Award, the Committee may require or permit a
Participant to elect that any cash dividends paid on a Share of Restricted Stock
be automatically reinvested in additional Shares of Restricted Stock or applied
to the purchase of additional Awards under the Plan.  Unless otherwise
determined by the Committee, Shares distributed in connection with a stock split
or stock dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Shares or other property have been
distributed.

 

(e)                                  Deferred Stock Award.  The Committee is
authorized to grant Deferred Stock Awards to any Eligible Person on the
following terms and conditions:

 

(i)                                     Award and Restrictions.  Satisfaction of
a Deferred Stock Award shall occur upon expiration of the deferral period
specified for such Deferred Stock Award by the Committee (or, if permitted by
the Committee, as elected by the Participant).  In addition, a Deferred Stock
Award shall be subject to such restrictions (which may include a risk of
forfeiture) as the Committee may impose, if any, which restrictions may lapse at
the expiration of the deferral period or at earlier specified times (including
based on achievement of performance goals and/or future service requirements),
separately or in combination, in installments or otherwise, as the Committee may
determine.  A Deferred Stock Award may be satisfied by delivery of Shares, cash
equal to the Fair Market Value of the specified number of Shares covered by the
Deferred Stock, or a combination thereof, as determined by the Committee at the
date of grant or thereafter.  Prior to satisfaction of a Deferred Stock Award, a
Deferred Stock Award carries no voting or dividend or other rights associated
with Share ownership.

 

(ii)                                  Forfeiture.  Except as otherwise
determined by the Committee, upon termination of a Participant’s Continuous
Service during the applicable deferral period or portion thereof to which
forfeiture conditions apply (as provided in the Award Agreement evidencing the
Deferred Stock Award), the Participant’s Deferred Stock Award that is at that
time subject to a risk of forfeiture that has not lapsed or otherwise been
satisfied shall be forfeited; provided that, subject to the limitations set
forth in Section 6(j)(ii) hereof, the Committee may provide, by rule or
regulation or in any Award Agreement, or may determine in any individual case,
that forfeiture conditions relating to a Deferred Stock Award shall be waived in
whole or in part in the event of terminations resulting from specified causes,
and the Committee may in other cases waive in whole or in part the forfeiture of
any Deferred Stock Award.

 

(iii)                               Dividend Equivalents.  Unless otherwise
determined by the Committee at the date of grant, any Dividend Equivalents that
are granted with respect to any Deferred Stock Award shall be either (A) paid
with respect to such Deferred Stock Award at the dividend payment date in cash
or in Shares of unrestricted stock having a Fair Market Value

 

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equal to the amount of such dividends, or (B) deferred with respect to such
Deferred Stock Award and the amount or value thereof automatically deemed
reinvested in additional Deferred Stock, other Awards or other investment
vehicles, as the Committee shall determine or permit the Participant to elect. 
The applicable Award Agreement shall specify whether any Dividend Equivalents
shall be paid at the dividend payment date, deferred or deferred at the election
of the Participant.  If the Participant may elect to defer the Dividend
Equivalents, such election shall be made within 30 days after the grant date of
the Deferred Stock Award, but in no event later than 12 months before the first
date on which any portion of such Deferred Stock Award vests.

 

(f)                                   Bonus Stock and Awards in Lieu of
Obligations.  The Committee is authorized to grant Shares to any Eligible
Persons as a bonus, or to grant Shares or other Awards in lieu of obligations to
pay cash or deliver other property under the Plan or under other plans or
compensatory arrangements, provided that, in the case of Eligible Persons
subject to Section 16 of the Exchange Act, the amount of such grants remains
within the discretion of the Committee to the extent necessary to ensure that
acquisitions of Shares or other Awards are exempt from liability under
Section 16(b) of the Exchange Act.  Shares or Awards granted hereunder shall be
subject to such other terms as shall be determined by the Committee.

 

(g)                                  Dividend Equivalents.  The Committee is
authorized to grant Dividend Equivalents to any Eligible Person entitling the
Eligible Person to receive cash, Shares, other Awards, or other property equal
in value to the dividends paid with respect to a specified number of Shares, or
other periodic payments.  Dividend Equivalents may be awarded on a free-standing
basis or in connection with another Award.  The Committee may provide that
Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Shares, Awards, or other investment
vehicles, and subject to such restrictions on transferability and risks of
forfeiture, as the Committee may specify.  Any such determination by the
Committee shall be made at the grant date of the applicable Award.

 

(h)                                 Performance Awards.  The Committee is
authorized to grant Performance Awards to any Eligible Person payable in cash,
Shares, or other Awards, on terms and conditions established by the Committee,
subject to the provisions of Section 8 if and to the extent that the Committee
shall, in its sole discretion, determine that an Award shall be subject to those
provisions.  The performance criteria to be achieved during any Performance
Period and the length of the Performance Period shall be determined by the
Committee upon the grant of each Performance Award; provided, however, that a
Performance Period shall not be shorter than twelve (12) months nor longer than
five (5) years.  Except as provided in Section 9 or as may be provided in an
Award Agreement, Performance Awards will be distributed only after the end of
the relevant Performance Period.  The performance goals to be achieved for each
Performance Period shall be conclusively determined by the Committee and may be
based upon the criteria set forth in Section 8(b), or in the case of an Award
that the Committee determines shall not be subject to Section 8 hereof, any
other criteria that the Committee, in its sole discretion, shall determine
should be used for that purpose.  The amount of the Award to be distributed
shall be conclusively determined by the Committee.  Performance Awards may be
paid in a lump sum or in installments following the close of the Performance
Period or, in accordance with procedures established by the Committee, on a
deferred basis.

 

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(i)                                     Other Stock-Based Awards.  The Committee
is authorized, subject to limitations under applicable law, to grant to any
Eligible Person such other Awards that may be denominated or payable in, valued
in whole or in part by reference to, or otherwise based on, or related to,
Shares, as deemed by the Committee to be consistent with the purposes of the
Plan.  Other Stock-Based Awards may be granted to Participants either alone or
in addition to other Awards granted under the Plan, and such Other Stock-Based
Awards shall also be available as a form of payment in the settlement of other
Awards granted under the Plan.  The Committee shall determine the terms and
conditions of such Awards.  Shares delivered pursuant to an Award in the nature
of a purchase right granted under this Section 6(i) shall be purchased for such
consideration, (including without limitation loans from the Company or a Related
Entity provided that such loans are not in violation of Section 13(k) of the
Exchange Act, or any rule or regulation adopted thereunder or any other
applicable law) paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Shares, other Awards or other property, as
the Committee shall determine.

 

7.                                      Certain Provisions Applicable to Awards.

 

(a)                                 Stand-Alone, Additional, Tandem, and
Substitute Awards.  Awards granted under the Plan may, in the discretion of the
Committee, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under another
plan of the Company, any Related Entity, or any business entity to be acquired
by the Company or a Related Entity, or any other right of a Participant to
receive payment from the Company or any Related Entity.  Such additional,
tandem, and substitute or exchange Awards may be granted at any time.  If an
Award is granted in substitution or exchange for another Award or award, the
Committee shall require the surrender of such other Award or award in
consideration for the grant of the new Award.  In addition, Awards may be
granted in lieu of cash compensation, including in lieu of cash amounts payable
under other plans of the Company or any Related Entity, in which the value of
Shares subject to the Award is equivalent in value to the cash compensation (for
example, Deferred Stock or Restricted Stock), or in which the exercise price,
grant price or purchase price of the Award in the nature of a right that may be
exercised is equal to the Fair Market Value of the underlying Shares minus the
value of the cash compensation surrendered (for example, Options or Stock
Appreciation Right granted with an exercise price or grant price “discounted” by
the amount of the cash compensation surrendered), provided that any such
determination to grant an Award in lieu of cash compensation must be made in
compliance with Section 409A of the Code.

 

(b)                                 Term of Awards.  The term of each Award
shall be for such period as may be determined by the Committee; provided that in
no event shall the term of any Option or Stock Appreciation Right exceed a
period of ten years (or in the case of an Incentive Stock Option such shorter
term as may be required under Section 422 of the Code).

 

(c)                                  Form and Timing of Payment Under Awards;
Deferrals.  Subject to the terms of the Plan and any applicable Award Agreement,
payments to be made by the Company or a Related Entity upon the exercise of an
Option or other Award or settlement of an Award may be made in such forms as the
Committee shall determine, including, without limitation, cash, Shares, other
Awards or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis, provided that any determination to pay in
installments or

 

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on a deferred basis shall be made by the Committee at the date of grant.  Any
installment or deferral provided for in the preceding sentence shall, however,
be subject to the Company’s compliance with applicable law and all applicable
rules of the Listing Market, and in a manner intended to be exempt from or
otherwise satisfy the requirements of Section 409A of the Code.  Subject to
Section 7(e) hereof, the settlement of any Award may be accelerated, and cash
paid in lieu of Shares in connection with such settlement, in the sole
discretion of the Committee or upon occurrence of one or more specified events
(in addition to a Change in Control).  Any such settlement shall be at a value
determined by the Committee in its sole discretion, which, without limitation,
may in the case of an Option or Stock Appreciation Right be limited to the
amount if any by which the Fair Market Value of a Share on the settlement date
exceeds the exercise or grant price.  Installment or deferred payments may be
required by the Committee (subject to Section 7(e) of the Plan, including the
consent provisions thereof in the case of any deferral of an outstanding Award
not provided for in the original Award Agreement) or permitted at the election
of the Participant on terms and conditions established by the Committee.  The
Committee may, without limitation, make provision for the payment or crediting
of a reasonable interest rate on installment or deferred payments or the grant
or crediting of Dividend Equivalents or other amounts in respect of installment
or deferred payments denominated in Shares.

 

(d)                                 Exemptions from Section 16(b) Liability.  It
is the intent of the Company that the grant of any Awards to or other
transaction by a Participant who is subject to Section 16 of the Exchange Act
shall be exempt from Section 16 pursuant to an applicable exemption (except for
transactions acknowledged in writing to be non-exempt by such Participant). 
Accordingly, if any provision of this Plan or any Award Agreement does not
comply with the requirements of Rule 16b-3 then applicable to any such
transaction, such provision shall be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule 16b-3 so that such
Participant shall avoid liability under Section 16(b).

 

(e)                                  Code Section 409A.

 

(i)                                     The Award Agreement for any Award that
the Committee reasonably determines to constitute a Section 409A Plan, and the
provisions of the Plan applicable to that Award, shall be construed in a manner
consistent with the applicable requirements of Section 409A, and the Committee,
in its sole discretion and without the consent of any Participant, may amend any
Award Agreement (and the provisions of the Plan applicable thereto) if and to
the extent that the Committee determines that such amendment is necessary or
appropriate to comply with the requirements of Section 409A of the Code.

 

(ii)                                  If any Award constitutes a “nonqualified
deferred compensation plan” under Section 409A of the Code (a “Section 409A
Plan”), then the Award shall be subject to the following additional
requirements, if and to the extent required to comply with Section 409A of the
Code:

 

(A)                               Payments under the Section 409A Plan may not
be made earlier than the first to occur of (u) the Participant’s “separation
from service,” (v) the date the Participant becomes “disabled,” (w) the
Participant’s death, (x) a “specified time (or pursuant to a fixed schedule)”
specified in the Award Agreement at the date of the deferral of such

 

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compensation, (y) a “change in the ownership or effective control of the
corporation, or in the ownership of a substantial portion of the assets” of the
Company, or (z) the occurrence of an “unforeseeble emergency;”

 

(B)                               The time or schedule for any payment of the
deferred compensation may not be accelerated, except to the extent provided in
applicable Treasury Regulations or other applicable guidance issued by the
Internal Revenue Service;

 

(C)                               Any elections with respect to the deferral of
such compensation or the time and form of distribution of such deferred
compensation shall comply with the requirements of Section 409A(a)(4) of the
Code; and

 

(D)                               In the case of any Participant who is
“specified employee,” a distribution on account of a “separation from service”
may not be made before the date which is six months after the date of the
Participant’s “separation from service” (or, if earlier, the date of the
Participant’s death).

 

For purposes of the foregoing, the terms in quotations shall have the same
meanings as those terms have for purposes of Section 409A of the Code, and the
limitations set forth herein shall be applied in such manner (and only to the
extent) as shall be necessary to comply with any requirements of Section 409A of
the Code that are applicable to the Award.  The Company does not make any
representation to the Participant that any Awards awarded under this Plan will
be exempt from, or satisfy, the requirements of Section 409A, and the Company
shall have no liability or other obligation to indemnify or hold harmless any
Participant or Beneficiary for any tax, additional tax, interest or penalties
that any Participant or Beneficiary may incur in the event that any provision of
this Plan, any Award Agreement, or any amendment or modification thereof, or any
other action taken with respect thereto, is deemed to violate any of the
requirements of Section 409A.

 

(iii)                               Notwithstanding the foregoing, the Company
does not make any representation to any Participant or Beneficiary that any
Awards made pursuant to this Plan are exempt from, or satisfy, the requirements
of Section 409A, and the Company shall have no liability or other obligation to
indemnify or hold harmless the Participant or any Beneficiary for any tax,
additional tax, interest or penalties that the Participant or any Beneficiary
may incur in the event that any provision of this Plan, or any Award Agreement,
or any amendment or modification thereof, or any other action taken with respect
thereto, is deemed to violate any of the requirements of Section 409A.

 

8.                                      Code Section 162(m) Provisions.

 

(a)                                 Covered Employees.  Unless otherwise
specified by the Committee, the provisions of this Section 8 shall be applicable
to any Performance Award granted to an Eligible Person who is, or is likely to
be, as of the end of the tax year in which the Company would claim a tax
deduction in connection with such Award, a Covered Employee.

 

(b)                                 Performance Criteria.  If a Performance
Award is subject to this Section 8, then the payment or distribution thereof or
the lapsing of restrictions thereon and the distribution of cash, Shares or
other property pursuant thereto, as applicable, shall be contingent

 

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upon achievement of one or more objective performance goals.  Performance goals
shall be objective and shall otherwise meet the requirements of
Section 162(m) of the Code and regulations thereunder including the requirement
that the level or levels of performance targeted by the Committee result in the
achievement of performance goals being “substantially uncertain.”  One or more
of the following business criteria for the Company, on a consolidated basis,
and/or for Related Entities, or for business or geographical units of the
Company and/or a Related Entity (except with respect to the total stockholder
return and earnings per share criteria), shall be used by the Committee in
establishing performance goals for such Awards: (1) earnings per share;
(2) revenues or margins; (3) cash flow; (4) operating margin; (5) return on net
assets, investment, capital, or equity; (6) economic value added; (7) direct
contribution; (8) net income; pretax earnings; earnings before interest and
taxes; earnings before interest, taxes, depreciation and amortization; earnings
after interest expense and before extraordinary or special items; operating
income or income from operations; income before interest income or expense,
unusual items and income taxes, local, state or federal and excluding budgeted
and actual bonuses which might be paid under any ongoing bonus plans of the
Company; (9) working capital; (10) management of fixed costs or variable costs;
(11) identification or consummation of investment opportunities or completion of
specified projects in accordance with corporate business plans, including
strategic mergers, acquisitions or divestitures; (12) total stockholder return;
(13) debt reduction; (14) market share; (15) entry into new markets, either
geographically or by business unit; (16) customer retention and satisfaction;
(17) strategic plan development and implementation, including turnaround plans;
and/or (18) the Fair Market Value of a Share.  Any of the above goals may be
determined on an absolute or relative basis or as compared to the performance of
a published or special index deemed applicable by the Committee including, but
not limited to, the Standard & Poor’s 500 Stock Index or a group of companies
that are comparable to the Company.  In determining the achievement of the
performance goals, the Committee shall exclude the impact of any
(i) restructurings, discontinued operations, extraordinary items, and other
unusual or non-recurring charges, (ii) event either not directly related to the
operations of the Company or not within the reasonable control of the Company’s
management, or (iii) change in accounting standards required by generally
accepted accounting principles.

 

(c)                                  Performance Period; Timing For Establishing
Performance Goals.  Achievement of performance goals in respect of Performance
Awards shall be measured over a Performance Period no shorter than twelve (12)
months and no longer than five (5) years, as specified by the Committee. 
Performance goals shall be established not later than 90 days after the
beginning of any Performance Period applicable to such Performance Awards, or at
such other date as may be required or permitted for “performance-based
compensation” under Section 162(m) of the Code.

 

(d)                                 Adjustments.  The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in connection
with Awards subject to this Section 8, but may not exercise discretion to
increase any such amount payable to a Covered Employee in respect of an Award
subject to this Section 8.  The Committee shall specify the circumstances in
which such Awards shall be paid or forfeited in the event of termination of
Continuous Service by the Participant prior to the end of a Performance Period
or settlement of Awards.

 

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(e)                                  Committee Certification.  No Participant
shall receive any payment under the Plan that is subject to this Section 8
unless the Committee has certified, by resolution or other appropriate action in
writing, that the performance criteria and any other material terms previously
established by the Committee or set forth in the Plan, have been satisfied to
the extent necessary to qualify as “performance based compensation” under
Section 162(m) of the Code.

 

9.                                      Change in Control.

 

(a)                                 Effect of “Change in Control.”  If and only
to the extent provided in any employment or other agreement between the
Participant and the Company or any Related Entity, or in any Award Agreement, or
to the extent otherwise determined by the Committee in its sole discretion and
without any requirement that each Participant be treated consistently, upon the
occurrence of a “Change in Control,” as defined in Section 9(b):

 

(i)                                     Any Option or Stock Appreciation Right
that was not previously vested and exercisable as of the time of the Change in
Control, shall become immediately vested and exercisable, subject to applicable
restrictions set forth in Section 10(a) hereof.

 

(ii)                                  Any restrictions, deferral of settlement,
and forfeiture conditions applicable to a Restricted Stock Award, Deferred Stock
Award or an Other Stock-Based Award subject only to future service requirements
granted under the Plan shall lapse and such Awards shall be deemed fully vested
as of the time of the Change in Control, except to the extent of any waiver by
the Participant and subject to applicable restrictions set forth in
Section 10(a) hereof.

 

(iii)                               With respect to any outstanding Award
subject to achievement of performance goals and conditions under the Plan, the
Committee may, in its discretion, deem such performance goals and conditions as
having been met as of the date of the Change in Control.

 

(b)                                 Definition of “Change in Control.”  Unless
otherwise specified in any employment agreement between the Participant and the
Company or any Related Entity, or in an Award Agreement, a “Change in Control”
shall mean the occurrence of any of the following:

 

(i)                                     The acquisition by any Person of
Beneficial Ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than fifty percent (50%) of either (A) the value of then
outstanding equity securities of the Company (the “Outstanding Company Stock”)
or (B) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
“Outstanding Company Voting Securities) (the foregoing Beneficial Ownership
hereinafter being referred to as a “Controlling Interest”); provided, however,
that for purposes of this Section 9(b), the following acquisitions shall not
constitute or result in a Change in Control:  (v) any acquisition directly from
the Company; (w) any acquisition by the Company; (x) any acquisition by any
Person that as of the Effective Date owns Beneficial Ownership of a Controlling
Interest; (y) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Related Entity; or (z) any
acquisition by any entity pursuant to a transaction which complies with clauses
(A), (B) and (C) of subsection (iii) below; or

 

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(ii)                                  During any period of two (2) consecutive
years (not including any period prior to the Effective Date) individuals who
constitute the Board on the Effective Date (the “Incumbent Board”) cease for any
reason to constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the Effective Date whose
election, or nomination for election by the Company’s stockholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or

 

(iii)                               Consummation of a reorganization, merger,
statutory share exchange or consolidation or similar transaction involving the
Company or any of its Related Entities, a sale or other disposition of all or
substantially all of the assets of the Company, or the acquisition of assets or
equity of another entity by the Company or any of its Related Entities (each a
“Business Combination”), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities who
were the Beneficial Owners, respectively, of the Outstanding Company Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than fifty percent
(50%) of the value of the then outstanding equity securities and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of members of the board of directors (or comparable
governing body of an entity that does not have such a board), as the case may
be, of the entity resulting from such Business Combination (including, without
limitation, an entity which as a result of such transaction owns the Company or
all or substantially all of the Company’s assets either directly or through one
or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Stock
and Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding any employee benefit plan (or related trust) of the Company or such
entity resulting from such Business Combination or any Person that as of the
Effective Date owns Beneficial Ownership of a Controlling Interest) beneficially
owns, directly or indirectly, fifty percent (50%) or more of the value of the
then outstanding equity securities of the entity resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such entity except to the extent that such ownership existed prior
to the Business Combination and (C) at least a majority of the members of the
Board of Directors or other governing body of the entity resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or

 

(iv)                              Approval by the stockholders of the Company of
a complete liquidation or dissolution of the Company.

 

10.                               General Provisions.

 

(a)                                 Compliance With Legal and Other
Requirements.  The Company may, to the extent deemed necessary or advisable by
the Committee, postpone the issuance or delivery of Shares or payment of other
benefits under any Award until completion of such registration or

 

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qualification of such Shares or other required action under any federal or state
law, rule or regulation, listing or other required action with respect to the
Listing Market, or compliance with any other obligation of the Company, as the
Committee, may consider appropriate, and may require any Participant to make
such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the
issuance or delivery of Shares or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations.

 

(b)                                 Limits on Transferability; Beneficiaries. 
No Award or other right or interest granted under the Plan shall be pledged,
hypothecated or otherwise encumbered or subject to any lien, obligation or
liability of such Participant to any party, or assigned or transferred by such
Participant otherwise than by will or the laws of descent and distribution or to
a Beneficiary upon the death of a Participant, and such Awards or rights that
may be exercisable shall be exercised during the lifetime of the Participant
only by the Participant or his or her guardian or legal representative, except
that Awards and other rights (other than Incentive Stock Options and Stock
Appreciation Rights in tandem therewith) may be transferred to one or more
Beneficiaries or other transferees during the lifetime of the Participant, and
may be exercised by such transferees in accordance with the terms of such Award,
but only if and to the extent such transfers are permitted by the Committee
pursuant to the express terms of an Award Agreement (subject to any terms and
conditions which the Committee may impose thereon).  A Beneficiary, transferee,
or other person claiming any rights under the Plan from or through any
Participant shall be subject to all terms and conditions of the Plan and any
Award Agreement applicable to such Participant, except as otherwise determined
by the Committee, and to any additional terms and conditions deemed necessary or
appropriate by the Committee.

 

(c)                                  Adjustments.

 

(i)                                     Adjustments to Awards.  In the event
that any extraordinary dividend or other distribution (whether in the form of
cash, Shares, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or
event affects the Shares and/or such other securities of the Company or any
other issuer such that a substitution, exchange, or adjustment is determined by
the Committee to be appropriate, then the Committee shall, in such manner as it
may deem equitable, substitute, exchange or adjust any or all of (A) the number
and kind of Shares which may be delivered in connection with Awards granted
thereafter, (B) the number and kind of Shares by which annual per-person Award
limitations are measured under Section 4 hereof, (C) the number and kind of
Shares subject to or deliverable in respect of outstanding Awards, (D) the
exercise price, grant price or purchase price relating to any Award and/or make
provision for payment of cash or other property in respect of any outstanding
Award, and (E) any other aspect of any Award that the Committee determines to be
appropriate.

 

(ii)                                  Adjustments in Case of Certain
Transactions.  In the event of any merger, consolidation or other reorganization
in which the Company does not survive, or in the event of any Change in Control,
any outstanding Awards may be dealt with in accordance with any of the following
approaches, without the requirement of obtaining any consent or agreement of a
Participant as such, as determined by the agreement effectuating the transaction
or, if and to

 

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the extent not so determined, as determined by the Committee: (a) the
continuation of the outstanding Awards by the Company, if the Company is a
surviving entity, (b) the assumption or substitution for, as those terms are
defined in Section 9(a)(iv) hereof, the outstanding Awards by the surviving
entity or its parent or subsidiary, (c) full exercisability or vesting and
accelerated expiration of the outstanding Awards, or (d) settlement of the value
of the outstanding Awards in cash or cash equivalents or other property followed
by cancellation of such Awards (which value, in the case of Options or Stock
Appreciation Rights, shall be measured by the amount, if any, by which the Fair
Market Value of a Share exceeds the exercise or grant price of the Option or
Stock Appreciation Right as of the effective date of the transaction).  The
Committee shall give written notice of any proposed transaction referred to in
this Section 10(c)(ii) at a reasonable period of time prior to the closing date
for such transaction (which notice may be given either before or after the
approval of such transaction), in order that Participants may have a reasonable
period of time prior to the closing date of such transaction within which to
exercise any Awards that are then exercisable (including any Awards that may
become exercisable upon the closing date of such transaction).  A Participant
may condition his exercise of any Awards upon the consummation of the
transaction.

 

(iii)                               Other Adjustments.  The Committee (and the
Board if and only to the extent such authority is not required to be exercised
by the Committee to comply with Section 162(m) of the Code) is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards, or performance goals and conditions
relating thereto) in recognition of unusual or nonrecurring events (including,
without limitation, acquisitions and dispositions of businesses and assets)
affecting the Company, any Related Entity or any business unit, or the financial
statements of the Company or any Related Entity, or in response to changes in
applicable laws, regulations, accounting principles, tax rates and regulations
or business conditions or in view of the Committee’s assessment of the business
strategy of the Company, any Related Entity or business unit thereof,
performance of comparable organizations, economic and business conditions,
personal performance of a Participant, and any other circumstances deemed
relevant; provided that no such adjustment shall be authorized or made if and to
the extent that such authority or the making of such adjustment would cause
Options, Stock Appreciation Rights, Performance Awards granted pursuant to
Section 8(b) hereof to Participants designated by the Committee as Covered
Employees and intended to qualify as “performance-based compensation” under Code
Section 162(m) and the regulations thereunder to otherwise fail to qualify as
“performance-based compensation” under Code Section 162(m) and regulations
thereunder.  Adjustments permitted hereby may include, without limitation,
increasing the exercise price of Options and Stock Appreciation Rights,
increasing performance goals, or other adjustments that may be adverse to the
Participant.

 

(d)                                 Taxes.  The Company and any Related Entity
are authorized to withhold from any Award granted, any payment relating to an
Award under the Plan, including from a distribution of Shares, or any payroll or
other payment to a Participant, amounts of withholding and other taxes due or
potentially payable in connection with any transaction involving an Award, and
to take such other action as the Committee may deem advisable to enable the
Company or any Related Entity and Participants to satisfy obligations for the
payment of withholding taxes and other tax obligations relating to any Award. 
This authority shall include authority to withhold or receive Shares or other
property and to make cash payments in respect

 

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thereof in satisfaction of a Participant’s tax obligations, either on a
mandatory or elective basis in the discretion of the Committee.

 

(e)                                  Changes to the Plan and Awards.  The Board
may amend, alter, suspend, discontinue or terminate the Plan, or the Committee’s
authority to grant Awards under the Plan, without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company’s stockholders not later than the annual
meeting next following such Board action if such stockholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of the Listing
Market, and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to stockholders for approval; provided that,
except as otherwise permitted by the Plan or Award Agreement, without the
consent of an affected Participant, no such Board action may materially and
adversely affect the rights of such Participant under the terms of any
previously granted and outstanding Award.  The Committee may waive any
conditions or rights under, or amend, alter, suspend, discontinue or terminate
any Award theretofore granted and any Award Agreement relating thereto, except
as otherwise provided in the Plan; provided that, except as otherwise permitted
by the Plan or Award Agreement, without the consent of an affected Participant,
no such Committee or the Board action may materially and adversely affect the
rights of such Participant under terms of such Award.  Notwithstanding anything
to the contrary, the Committee shall be authorized to amend any outstanding
Option and/or Stock Appreciation Right to reduce the exercise price or grant
price without the prior approval of the stockholders of the Company.  In
addition, the Committee shall be authorized to cancel outstanding Options and/or
Stock Appreciation Rights replaced with Awards having a lower exercise price
without the prior approval of the stockholders of the Company.

 

(f)                                   Limitation on Rights Conferred Under
Plan.  Neither the Plan nor any action taken hereunder or under any Award shall
be construed as (i) giving any Eligible Person or Participant the right to
continue as an Eligible Person or Participant or in the employ or service of the
Company or a Related Entity; (ii) interfering in any way with the right of the
Company or a Related Entity to terminate any Eligible Person’s or Participant’s
Continuous Service at any time, (iii) giving an Eligible Person or Participant
any claim to be granted any Award under the Plan or to be treated uniformly with
other Participants and Employees, or (iv) conferring on a Participant any of the
rights of a stockholder of the Company including, without limitation, any right
to receive dividends or distributions, any right to vote or act by written
consent, any right to attend meetings of stockholders or any right to receive
any information concerning the Company’s business, financial condition, results
of operation or prospects, unless and until such time as the Participant is duly
issued Shares on the stock books of the Company in accordance with the terms of
an Award.  None of the Company, its officers or its directors shall have any
fiduciary obligation to the Participant with respect to any Awards unless and
until the Participant is duly issued Shares pursuant to the Award on the stock
books of the Company in accordance with the terms of an Award.  Neither the
Company nor any of the Company’s officers, directors, representatives or agents
is granting any rights under the Plan to the Participant whatsoever, oral or
written, express or implied, other than those rights expressly set forth in this
Plan or the Award Agreement.

 

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(g)                                  Unfunded Status of Awards; Creation of
Trusts.  The Plan is intended to constitute an “unfunded” plan for incentive and
deferred compensation.  With respect to any payments not yet made to a
Participant or obligation to deliver Shares pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Participant any rights
that are greater than those of a general creditor of the Company; provided that
the Committee may authorize the creation of trusts and deposit therein cash,
Shares, other Awards or other property, or make other arrangements to meet the
Company’s obligations under the Plan.  Such trusts or other arrangements shall
be consistent with the “unfunded” status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant.  The trustee
of such trusts may be authorized to dispose of trust assets and reinvest the
proceeds in alternative investments, subject to such terms and conditions as the
Committee may specify and in accordance with applicable law.

 

(h)                                 Nonexclusivity of the Plan.  Neither the
adoption of the Plan by the Board nor its submission to the stockholders of the
Company for approval shall be construed as creating any limitations on the power
of the Board or a committee thereof to adopt such other incentive arrangements
as it may deem desirable including incentive arrangements and awards which do
not qualify under Section 162(m) of the Code.

 

(i)                                     Payments in the Event of Forfeitures;
Fractional Shares.  Unless otherwise determined by the Committee, in the event
of a forfeiture of an Award with respect to which a Participant paid cash or
other consideration, the Participant shall be repaid the amount of such cash or
other consideration.  No fractional Shares shall be issued or delivered pursuant
to the Plan or any Award.  The Committee shall determine whether cash, other
Awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.

 

(j)                                    Governing Law.  The validity,
construction and effect of the Plan, any rules and regulations under the Plan,
and any Award Agreement shall be determined in accordance with the laws of the
State of Delaware without giving effect to principles of conflict of laws, and
applicable federal law.

 

(k)                                 Non-U.S. Laws.  The Committee shall have the
authority to adopt such modifications, procedures, and subplans as may be
necessary or desirable to comply with provisions of the laws of foreign
countries in which the Company or its Related Entities may operate to assure the
viability of the benefits from Awards granted to Participants performing
services in such countries and to meet the objectives of the Plan.

 

(l)                                     Plan Effective Date and Stockholder
Approval; Termination of Plan.  The Plan shall become effective on the Effective
Date, subject to subsequent approval, within 12 months of its adoption by the
Board, by stockholders of the Company eligible to vote in the election of
directors, by a vote sufficient to meet the requirements of Code Sections
162(m) (if applicable) and 422, Rule 16b-3 under the Exchange Act (if
applicable), applicable requirements under the rules of any stock exchange or
automated quotation system on which the Shares may be listed or quoted, and
other laws, regulations, and obligations of the Company applicable to the Plan. 
Awards may be granted subject to stockholder approval, but may not be exercised
or otherwise settled in the event the stockholder approval is not obtained.  The
Plan shall terminate

 

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at the earliest of (a) such time as no Shares remain available for issuance
under the Plan, (b) termination of this Plan by the Board, or (c) the tenth
anniversary of the Effective Date.  Awards outstanding upon expiration of the
Plan shall remain in effect until they have been exercised or terminated, or
have expired.

 

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