Exhibit 10.2

 

LIQUIDITY SERVICES, INC.

 

2006 OMNIBUS LONG-TERM INCENTIVE PLAN

 

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TABLE OF CONTENTS

 

 

 

 

 

 

Page

1.

PURPOSE

 

1

2.

DEFINITIONS

 

1

3.

ADMINISTRATIONOFTHEPLAN

 

4

 

3.1.

 

Board

 

4

 

3.2.

 

Committee

 

4

 

3.3.

 

TermsofAwards

 

4

 

3.4.

 

DeferralArrangement

 

5

 

3.5.

 

NoLiability

 

5

 

3.6.

 

ShareIssuance

 

5

4.

STOCKSUBJECTTOTHEPLAN

 

6

5.

EFFECTIVEDATE,DURATIONANDAMENDMENTS

 

6

 

5.1.

 

EffectiveDate

 

6

 

5.2.

 

Term

 

6

 

5.3.

 

AmendmentandTerminationofthePlan

 

6

6.

AWARDELIGIBILITYANDLIMITATIONS

 

7

 

6.1.

 

ServiceProvidersandOtherPersons

 

7

 

6.2.

 

SuccessiveAwardsandSubstituteAwards

 

7

 

6.3.

 

LimitationonSharesofStockSubjecttoAwardsandCashAwards

 

7

7.

AWARDAGREEMENT

 

7

8.

TERMSANDCONDITIONSOFOPTIONS

 

7

 

8.1.

 

OptionPrice

 

7

 

8.2.

 

Vesting

 

8

 

8.3.

 

Term

 

8

 

8.4.

 

TerminationofService

 

8

 

8.5.

 

LimitationsonExerciseofOption

 

8

 

8.6.

 

MethodofExercise

 

8

 

8.7.

 

RightsofHoldersofOptions

 

8

 

8.8.

 

DeliveryofStockCertificates

 

9

 

8.9.

 

TransferabilityofOptions

 

9

 

8.10.

 

FamilyTransfers

 

9

 

8.11.

 

LimitationsonIncentiveStockOptions

 

9

9.

TERMSANDCONDITIONSOFSTOCKAPPRECIATIONRIGHTS

 

9

 

9.1.

 

RighttoPaymentandGrantPrice

 

9

 

9.2.

 

OtherTerms

 

10

10.

TERMSANDCONDITIONSOFRESTRICTEDSTOCKANDSTOCKUNITS

 

10

 

10.1.

 

GrantofRestrictedStockorStockUnits

 

10

 

10.2.

 

Restrictions

 

10

 

10.3.

 

RestrictedStockCertificates

 

10

 

10.4.

 

RightsofHoldersofRestrictedStock

 

10

 

10.5.

 

RightsofHoldersofStockUnits

 

11

 

10.5.1

 

VotingandDividendRights

 

11

 

10.5.2

 

Creditor’sRights

 

11

 

10.6.

 

TerminationofService

 

11

 

10.7.

 

PurchaseofRestrictedStock

 

11

 

10.8.

 

DeliveryofStock

 

11

 

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Page

11.

TERMSANDCONDITIONSOFUNRESTRICTEDSTOCKAWARDS

 

11

12.

FORMOFPAYMENTFOROPTIONSANDRESTRICTEDSTOCK

 

12

 

12.1.

 

GeneralRule

 

12

 

12.2.

 

SurrenderofStock

 

12

 

12.3.

 

CashlessExercise

 

12

 

12.4.

 

OtherFormsofPayment

 

12

13.

TERMSANDCONDITIONSOFDIVIDENDEQUIVALENTRIGHTS

 

12

 

13.1.

 

DividendEquivalentRights

 

12

 

13.2.

 

TerminationofService

 

13

14.

TERMSANDCONDITIONSOFPERFORMANCEANDANNUALINCENTIVEAWARDS

 

13

 

14.1.

 

PerformanceConditions

 

13

 

14.2.

 

PerformanceorAnnualIncentiveAwardsGrantedtoDesignatedCoveredEmployees

 

13

 

14.2.1

 

PerformanceGoalsGenerally

 

13

 

14.2.2

 

BusinessCriteria

 

13

 

14.2.3

 

TimingForEstablishingPerformanceGoals

 

14

 

14.2.4

 

SettlementofPerformanceorAnnualIncentiveAwards;OtherTerms

 

14

 

14.3.

 

WrittenDeterminations

 

14

 

14.4.

 

StatusofSection14.2AwardsUnderCodeSection162(m)

 

14

15.

PARACHUTELIMITATIONS

 

15

16.

REQUIREMENTSOFLAW

 

15

 

16.1.

 

General

 

15

 

16.2.

 

Rule16b-3

 

16

17.

EFFECTOFCHANGESINCAPITALIZATION

 

16

 

17.1.

 

ChangesinStock

 

16

 

17.2.

 

ReorganizationinWhichtheCompanyIstheSurvivingEntityWhichdoesnotConstituteaCorporateTransaction

 

16

 

17.3.

 

CorporateTransaction

 

17

 

17.4.

 

Adjustments

 

17

 

17.5.

 

NoLimitationsonCompany

 

18

18.

GENERALPROVISIONS

 

18

 

18.1.

 

DisclaimerofRights

 

18

 

18.2.

 

NonexclusivityofthePlan

 

18

 

18.3.

 

WithholdingTaxes

 

18

 

18.4.

 

Captions

 

19

 

18.5.

 

OtherProvisions

 

19

 

18.6.

 

NumberandGender

 

19

 

18.7.

 

Severability

 

19

 

18.8.

 

GoverningLaw

 

19

 

18.9.

 

Section409AoftheCode

 

19

 

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LIQUIDITY SERVICES, INC.

2006 OMNIBUS LONG-TERM INCENTIVE PLAN

 

Liquidity Services, Inc., a Delaware corporation (the “Company”), sets forth
herein the terms of its 2006 Omnibus Long-Term Incentive Plan (the “Plan”), as
follows:

 

1.                                      PURPOSE

 

The Plan is intended to enhance the Company’s and its Affiliates’ (as defined
herein) ability to attract and retain highly qualified officers, directors, key
employees, and other persons, and to motivate such persons to serve the Company
and its Affiliates and to expend maximum effort to improve the business results
and earnings of the Company, by providing to such persons an opportunity to
acquire or increase a direct proprietary interest in the operations and future
success of the Company. To this end, the Plan provides for the grant of stock
options, stock appreciation rights, restricted stock, stock units, unrestricted
stock, dividend equivalent rights and cash awards. Any of these awards may, but
need not, be made as performance incentives to reward attainment of annual or
long-term performance goals in accordance with the terms hereof. Stock options
granted under the Plan may be non-qualified stock options or incentive stock
options, as provided herein.

 

2.                                      DEFINITIONS

 

For purposes of interpreting the Plan and related documents (including Award
Agreements), the following definitions shall apply:

 

2.1                                 “Affiliate” means, with respect to the
Company, any company or other trade or business that controls, is controlled by
or is under common control with the Company within the meaning of Rule 405 of
Regulation C under the Securities Act, including, without limitation, any
Subsidiary.

 

2.2                                 “Annual Incentive Award” means an Award made
subject to attainment of performance goals (as described in Section 14) over a
performance period of up to one year (the Company’s fiscal year, unless
otherwise specified by the Committee).

 

2.3                                 “Award” means a grant of an Option, Stock
Appreciation Right, Restricted Stock, Unrestricted Stock, Stock Unit, Dividend
Equivalent Rights, or cash award under the Plan.

 

2.4                                 “Award Agreement” means the written
agreement between the Company and a Grantee that evidences and sets out the
terms and conditions of an Award.

 

2.5                                 “Benefit Arrangement” shall have the meaning
set forth in Section 15 hereof.

 

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

 

2.7                                 “Cause” means, as determined by the Board
and unless otherwise provided in an applicable agreement with the Company or an
Affiliate, (i) gross negligence or willful misconduct in connection with the
performance of duties; (ii) conviction of a criminal offense (other than minor
traffic offenses); or (iii) material breach of any term of any employment,
consulting or other services, confidentiality, intellectual property or
non-competition agreements, if any, between the Service Provider and the Company
or an Affiliate.

 

2.8                                 “Code” means the Internal Revenue Code of
1986, as now in effect or as hereafter amended.

 

2.9                                 “Committee” means the Compensation Committee
of the Board.

 

2.10                           “Company” means Liquidity Services, Inc.

 

2.11                           “Corporate Transaction” means (i) the dissolution
or liquidation of the Company or a merger, consolidation, or reorganization of
the Company with one or more other entities in which the Company is not the
surviving entity, (ii) a sale of substantially all of the assets of the Company
to

 

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another person or entity, or (iii) any transaction (including without limitation
a merger or reorganization in which the Company is the surviving entity) which
results in any person or entity (other than persons who are stockholders or
Affiliates immediately prior to the transaction) owning 50% or more of the
combined voting power of all classes of stock of the Company.

 

2.12                           “Covered Employee” means a Grantee who is a
covered employee within the meaning of Section 162(m)(3) of the Code.

 

2.13                           “Disability” means the Grantee is unable to
perform each of the essential duties of such Grantee’s position by reason of a
medically determinable physical or mental impairment which is potentially
permanent in character or which can be expected to last for a continuous period
of not less than 12 months; provided, however, that, with respect to
rules regarding expiration of an Incentive Stock Option following termination of
the Grantee’s Service, Disability shall mean the Grantee is unable to engage in
any substantial gainful activity by reason of a medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than
12 months.

 

2.14                           “Dividend Equivalent Right” means a right,
granted to a Grantee under Section 13 hereof, to receive cash, Stock, other
Awards or other property equal in value to dividends paid with respect to a
specified number of shares of Stock, or other periodic payments.

 

2.15                           “Effective Date” means the date of closing of the
Company’s initial public offering.

 

2.16                           “Exchange Act” means the Securities Exchange Act
of 1934, as now in effect or as hereafter amended.

 

2.17                           “Fair Market Value” means the value of a share of
Stock, determined as follows: if on the Grant Date or other determination date
the Stock is listed on an established national or regional stock exchange, is
admitted to quotation on The Nasdaq Stock Market, Inc. or is publicly traded on
an established securities market, the Fair Market Value of a share of Stock
shall be the closing price of the Stock on such exchange or in such market (if
there is more than one such exchange or market the Board shall determine the
appropriate exchange or market) on the Grant Date or such other determination
date (or if there is no such reported closing price, the Fair Market Value shall
be the mean between the highest bid and lowest asked prices or between the high
and low sale prices on such trading day) or, if no sale of Stock is reported for
such trading day, on the next preceding day on which any sale shall have been
reported. If the Stock is not listed on such an exchange, quoted on such system
or traded on such a market, Fair Market Value shall be the value of the Stock as
determined by the Board in good faith.

 

2.18                           “Family Member” means a person who is a spouse,
former spouse, child, stepchild, grandchild, parent, stepparent, grandparent,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother, sister, brother-in-law, or sister-in-law, including adoptive
relationships, of the Grantee, any person sharing the Grantee’s household (other
than a tenant or employee), a trust in which any one or more of these persons
have more than fifty percent of the beneficial interest, a foundation in which
any one or more of these persons (or the Grantee) control the management of
assets, and any other entity in which one or more of these persons (or the
Grantee) own more than fifty percent of the voting interests.

 

2.19                           “Grant Date” means, as determined by the Board,
the latest to occur of (i) the date as of which the Board approves an Award,
(ii) the date on which the recipient of an Award first becomes eligible to
receive an Award under Section 6 hereof, or (iii) such other date as may be
specified by the Board.

 

2.20                           “Grantee” means a person who receives or holds an
Award under the Plan.

 

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2.21                           “Incentive Stock Option” means an “incentive
stock option” within the meaning of Section 422 of the Code, or the
corresponding provision of any subsequently enacted tax statute, as amended from
time to time.

 

2.22                           “Non-qualified Stock Option” means an Option that
is not an Incentive Stock Option.

 

2.23                           “Option” means an option to purchase one or more
shares of Stock pursuant to the Plan.

 

2.24                           “Option Price” means the exercise price for each
share of Stock subject to an Option.

 

2.25                           “Other Agreement” shall have the meaning set
forth in Section 15 hereof.

 

2.26                           “Outside Director” means a member of the Board
who is not an officer or employee of the Company.

 

2.27                           “Performance Award” means an Award made subject
to the attainment of performance goals (as described in Section 14) over a
performance period of up to ten (10) years.

 

2.28                           “Plan” means this Liquidity Services, Inc. 2006
Omnibus Long-Term Incentive Plan.

 

2.29                           “Purchase Price” means the purchase price for
each share of Stock pursuant to a grant of Restricted Stock or Unrestricted
Stock.

 

2.30                           “Reporting Person” means a person who is required
to file reports under Section 16(a) of the Exchange Act.

 

2.31                           “Restricted Stock” means shares of Stock, awarded
to a Grantee pursuant to Section 10 hereof.

 

2.32                           “SAR Exercise Price” means the per share exercise
price of a SAR granted to a Grantee under Section 9 hereof.

 

2.33                           “Securities Act” means the Securities Act of
1933, as now in effect or as hereafter amended.

 

2.34                           “Service” means service as a Service Provider to
the Company or an Affiliate. Unless otherwise stated in the applicable Award
Agreement, a Grantee’s change in position or duties shall not result in
interrupted or terminated Service, so long as such Grantee continues to be a
Service Provider to the Company or an Affiliate. Subject to the preceding
sentence, whether a termination of Service shall have occurred for purposes of
the Plan shall be determined by the Board, which determination shall be final,
binding and conclusive.

 

2.35                           “Service Provider” means an employee, officer or
director of the Company or an Affiliate, or a consultant or adviser currently
providing services to the Company or an Affiliate.

 

2.36                           “Stock” means the common stock, par value $.001
per share, of the Company.

 

2.37                           “Stock Appreciation Right” or “SAR” means a right
granted to a Grantee under Section 9 hereof.

 

2.38                           “Stock Unit” means a bookkeeping entry
representing the equivalent of one share of Stock awarded to a Grantee pursuant
to Section 10 hereof.

 

2.39                           “Subsidiary” means any “subsidiary corporation”
of the Company within the meaning of Section 424(f) of the Code.

 

2.40                           “Substitute Awards” means Awards granted upon
assumption of, or in substitution for, outstanding awards previously granted by
a company or other entity acquired by the Company or any Affiliate or with which
the Company or any Affiliate combines.

 

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2.41                           “Termination Date” means the date upon which an
Option shall terminate or expire, as set forth in Section 8.3 hereof.

 

2.42                           “Ten Percent Stockholder” means an individual who
owns more than ten percent (10%) of the total combined voting power of all
classes of outstanding stock of the Company, its parent or any of its
Subsidiaries. In determining stock ownership, the attribution rules of
Section 424(d) of the Code shall be applied.

 

2.43                           “Unrestricted Stock” means an Award pursuant to
Section 11 hereof.

 

3.                                      ADMINISTRATION OF THE PLAN

 

3.1.         Board

 

The Board shall have such powers and authorities related to the administration
of the Plan as are consistent with the Company’s certificate of incorporation
and by-laws and applicable law. The Board shall have full power and authority to
take all actions and to make all determinations required or provided for under
the Plan, any Award or any Award Agreement, and shall have full power and
authority to take all such other actions and make all such other determinations
not inconsistent with the specific terms and provisions of the Plan that the
Board deems to be necessary or appropriate to the administration of the Plan,
any Award or any Award Agreement. All such actions and determinations shall be
by the affirmative vote of a majority of the members of the Board present at a
meeting or by unanimous consent of the Board executed in writing in accordance
with the Company’s certificate of incorporation and by-laws and applicable law.
The interpretation and construction by the Board of any provision of the Plan,
any Award or any Award Agreement shall be final, binding and conclusive.

 

3.2.                            Committee.

 

The Board from time to time may delegate to the Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in Section 3.1 above and other applicable provisions, as the Board shall
determine, consistent with the certificate of incorporation and by-laws of the
Company and applicable law.

 

The Board may also appoint one or more separate committees of the Board, each
composed of one or more directors of the Company who need not be Outside
Directors, who may administer the Plan with respect to employees or other
Service Providers who are not officers or directors of the Company, may grant
Awards under the Plan to such employees or other Service Providers, and may
determine all terms of such Awards. In the event that the Plan, any Award or any
Award Agreement entered into hereunder provides for any action to be taken by or
determination to be made by the Board, such action may be taken or such
determination may be made by the Committee if the power and authority to do so
has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final, binding and conclusive. To the
extent permitted by law, the Committee may delegate its authority under the Plan
to a member of the Board.

 

3.3.                            Terms of Awards.

 

Subject to the other terms and conditions of the Plan, the Board shall have full
and final authority to:

 

(i)            designate Grantees,

 

(ii)                                  determine the type or types of Awards to
be made to a Grantee,

 

(iii)                               determine the number of shares of Stock to
be subject to an Award,

 

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(iv)                              establish the terms and conditions of each
Award (including, but not limited to, the exercise price of any Option, the
nature and duration of any restriction or condition (or provision for lapse
thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award
or the shares of Stock subject thereto, and any terms or conditions that may be
necessary to qualify Options as Incentive Stock Options),

 

(v)                                 prescribe the form of each Award Agreement
evidencing an Award, and

 

(vi)                              amend, modify, or supplement the terms of any
outstanding Award. Such authority specifically includes the authority, in order
to effectuate the purposes of the Plan but without amending the Plan, to modify
Awards to eligible individuals who are foreign nationals or are individuals who
are employed outside the United States to recognize differences in local law,
tax policy, or custom. Notwithstanding the foregoing, no amendment, modification
or supplement of any Award shall, without the consent of the Grantee, impair the
Grantee’s rights under such Award and no amendment or modification to an Award
that would treated as a repricing under the rules of the stock exchange or
market on which the Stock is listed or quoted shall be made without approval of
the Company’s stockholders.

 

The Company may retain the right in an Award Agreement to cause a forfeiture of
the gain realized by a Grantee on account of actions taken by the Grantee in
violation or breach of or in conflict with any employment agreement,
non-competition agreement, any agreement prohibiting solicitation of employees
or clients of the Company or any Affiliate thereof or any confidentiality
obligation with respect to the Company or any Affiliate thereof or otherwise in
competition with the Company or any Affiliate thereof, to the extent specified
in such Award Agreement applicable to the Grantee. Furthermore, the Company may
annul an Award if the Grantee is an employee of the Company or an Affiliate
thereof and is terminated for Cause as defined in the applicable Award Agreement
or the Plan, as applicable. The grant of any Award shall be contingent upon the
Grantee executing the appropriate Award Agreement.

 

Notwithstanding the foregoing, no amendment or modification may be made to an
outstanding Option or SAR which reduces the Option Price or SAR Exercise Price,
either by lowering the Option Price or SAR Exercise Price or by canceling the
outstanding Option or SAR and granting a replacement Option or SAR with a lower
exercise price without the approval of the stockholders of the Company,
provided, that, appropriate adjustments may be made to outstanding Options and
SARs pursuant to Section 17.

 

3.4.                            Deferral Arrangement.

 

The Board may permit or require the deferral of any award payment into a
deferred compensation arrangement, subject to such rules and procedures as it
may establish, which may include provisions for the payment or crediting of
interest or dividend equivalents, including converting such credits into
deferred Stock equivalents, restricting deferrals to comply with hardship
distribution rules affecting 401(k) plans. Any such deferrals shall be made in a
manner that complies with Code Section 409A.

 

3.5.                            No Liability.

 

No member of the Board or of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award or Award
Agreement.

 

3.6.                            Share Issuance

 

Notwithstanding any provision of this Plan to the contrary, the issuance of the
Stock under the Plan may be evidenced in such a manner as the Board, in its
discretion, deems appropriate, including, without limitation, book-entry
registration or issuance of one or more Stock certificates.

 

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4.                                      STOCK SUBJECT TO THE PLAN

 

Subject to adjustment as provided in Section 17 hereof, the number of shares of
Stock available for issuance under the Plan shall be ten million (10,000,000).
Notwithstanding the preceding sentence and also subject to adjustment as
provided in Section 17 hereof, the aggregate number of shares of Stock which
cumulatively may be available for issuance pursuant to Awards other than Awards
of Options or SARs shall not exceed three million five hundred thousand
(3,500,000) and the number of shares that may be issued as Incentive Stock
Options shall not exceed ten million (10,000,000). Stock issued or to be issued
under the Plan shall be authorized but unissued shares; or, to the extent
permitted by applicable law, issued shares that have been reacquired by the
Company. If any shares covered by an Award are not purchased or are forfeited,
or if an Award otherwise terminates without delivery of any Stock subject
thereto, then the number of shares of Stock counted against the aggregate number
of shares available under the Plan with respect to such Award shall, to the
extent of any such forfeiture or termination, again be available for making
Awards under the Plan.

 

The Board shall have the right to substitute or assume Awards in connection with
mergers, reorganizations, separations, or other transactions to which
Section 424(a) of the Code applies. The number of shares of Stock reserved
pursuant to Section 4 may be increased by the corresponding number of Awards
assumed and, in the case of a substitution, by the net increase in the number of
shares of Stock subject to Awards before and after the substitution.

 

5.                                      EFFECTIVE DATE, DURATION AND AMENDMENTS

 

5.1.                            Effective Date.

 

The Plan shall be effective as of the Effective Date, subject to approval of the
Plan by the Company’s stockholders within one year of the Effective Date. Upon
approval of the Plan by the stockholders of the Company as set forth above, all
Awards made under the Plan on or after the Effective Date shall be fully
effective as if the stockholders of the Company had approved the Plan on the
Effective Date. If the stockholders fail to approve the Plan within one year of
the Effective Date, any Awards made hereunder shall be null and void and of no
effect.

 

5.2.                            Term.

 

The Plan shall terminate automatically ten (10) years after its adoption by the
Board and may be terminated on any earlier date as provided in Section 5.3.

 

5.3.                            Amendment and Termination of the Plan

 

The Board may, at any time and from time to time, amend, suspend, or terminate
the Plan as to any shares of Stock as to which Awards have not been made. An
amendment shall be contingent on approval of the Company’s stockholders to the
extent stated by the Board, required by applicable law or required by applicable
stock exchange or market listing requirements. No Awards shall be made after
termination of the Plan. No amendment, suspension, or termination of the Plan
shall, without the consent of the Grantee, impair rights or obligations under
any Award theretofore awarded under the Plan.

 

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6.             AWARD ELIGIBILITY AND LIMITATIONS

 

6.1.         Service Providers and Other Persons

 

Subject to this Section 6, Awards may be made under the Plan to: (i) any Service
Provider to the Company or of any Affiliate, including any Service Provider who
is an officer or director of the Company, or of any Affiliate, as the Board
shall determine and designate from time to time, (ii) any Outside Director, and
(iii) any other individual whose participation in the Plan is determined to be
in the best interests of the Company by the Board.

 

6.2.         Successive Awards and Substitute Awards.

 

An eligible person may receive more than one Award, subject to such restrictions
as are provided herein. Notwithstanding Sections 8.1 and 9.1, the Option Price
of an Option or the grant price of a SAR that is a Substitute Award may be less
than 100% of the Fair Market Value of a share of Common Stock on the original
date of grant provided that the Option Price or grant price in determined in
accordance with the principles of Code Section 424 and the regulations
thereunder.

 

6.3.         Limitation on Shares of Stock Subject to Awards and Cash Awards.

 

During any time when the Company has a class of equity security registered under
Section 12 of the Exchange Act:

 

(i)            the maximum number of shares of Stock subject to Options or SARs
that can be awarded under the Plan to any person eligible for an Award under
Section 6 hereof is one million (1,000,000) per calendar year;

 

(ii)           the maximum number of shares that can be awarded under the Plan,
other than pursuant to an Option or SARs, to any person eligible for an Award
under Section 6 hereof is seven hundred thousand (700,000) per calendar year;
and

 

(iii)          the maximum amount that may be earned as an Annual Incentive
Award or other cash Award in any calendar year by any one Grantee shall be
$3,000,000 and the maximum amount that may be earned as a Performance Award or
other cash Award in respect of a performance period by any one Grantee shall be
$5,000,000.

 

The preceding limitations in this Section 6.3 are subject to adjustment as
provided in Section 17 hereof.

 

7.             AWARD AGREEMENT

 

Each Award granted pursuant to the Plan shall be evidenced by an Award
Agreement, in such form or forms as the Board shall from time to time determine.
Award Agreements granted from time to time or at the same time need not contain
similar provisions but shall be consistent with the terms of the Plan. Each
Award Agreement evidencing an Award of Options shall specify whether such
Options are intended to be Non-qualified Stock Options or Incentive Stock
Options, and in the absence of such specification such options shall be deemed
Non-qualified Stock Options.

 

8.             TERMS AND CONDITIONS OF OPTIONS

 

8.1.         Option Price

 

The Option Price of each Option shall be fixed by the Board and stated in the
Award Agreement evidencing such Option. The Option Price of each Option shall be
at least the Fair Market Value on the Grant Date of a share of Stock; provided,
however, that in the event that a Grantee is a Ten Percent Stockholder, the
Option Price of an Option granted to such Grantee that is intended to be an
Incentive

 

7

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Stock Option shall be not less than 110 percent of the Fair Market Value of a
share of Stock on the Grant Date. In no case shall the Option Price of any
Option be less than the par value of a share of Stock.

 

8.2.         Vesting.

 

Subject to Sections 8.3 and 17.3 hereof, each Option granted under the Plan
shall become exercisable at such times and under such conditions as shall be
determined by the Board and stated in the Award Agreement. For purposes of this
Section 8.2, fractional numbers of shares of Stock subject to an Option shall be
rounded down to the next nearest whole number. No Option shall be exercisable in
whole or in part prior to the date the Plan is approved by the Stockholders of
the Company as provided in Section 5.1 hereof.

 

8.3.         Term.

 

Each Option granted under the Plan shall terminate, and all rights to purchase
shares of Stock thereunder shall cease, upon the expiration of ten years from
the date such Option is granted, or under such circumstances and on such date
prior thereto as is set forth in the Plan or as may be fixed by the Board and
stated in the Award Agreement relating to such Option (the “Termination Date”);
provided, however, that in the event that the Grantee is a Ten Percent
Stockholder, an Option granted to such Grantee that is intended to be an
Incentive Stock Option shall not be exercisable after the expiration of five
years from its Grant Date.

 

8.4.         Termination of Service.

 

Each Award Agreement shall set forth the extent to which the Grantee shall have
the right to exercise the Option following termination of the Grantee’s Service.
Such provisions shall be determined in the sole discretion of the Board, need
not be uniform among all Options issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of Service.

 

8.5.         Limitations on Exercise of Option.

 

Notwithstanding any other provision of the Plan, in no event may any Option be
exercised, in whole or in part, prior to the date the Plan is approved by the
stockholders of the Company as provided herein or after the occurrence of an
event referred to in Section 17 hereof which results in termination of the
Option.

 

8.6.         Method of Exercise.

 

An Option that is exercisable may be exercised by the Grantee’s delivery to the
Company of written notice of exercise on any business day, at the Company’s
principal office, on the form specified by the Company. Such notice shall
specify the number of shares of Stock with respect to which the Option is being
exercised and shall be accompanied by payment in full of the Option Price of the
shares for which the Option is being exercised plus the amount (if any) of
federal and/or other taxes which the Company may, in its judgment, be required
to withhold with respect to an Award. The minimum number of shares of Stock with
respect to which an Option may be exercised, in whole or in part, at any time
shall be the lesser of (i) 100 shares or such lesser number set forth in the
applicable Award Agreement and (ii) the maximum number of shares available for
purchase under the Option at the time of exercise.

 

8.7.         Rights of Holders of Options

 

Unless otherwise stated in the applicable Award Agreement, an individual holding
or exercising an Option shall have none of the rights of a stockholder (for
example, the right to receive cash or

 

8

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dividend payments or distributions attributable to the subject shares of Stock
or to direct the voting of the subject shares of Stock) until the shares of
Stock covered thereby are fully paid and issued to him. Except as provided in
Section 17 hereof, no adjustment shall be made for dividends, distributions or
other rights for which the record date is prior to the date of such issuance.

 

8.8.         Delivery of Stock Certificates.

 

Promptly after the exercise of an Option by a Grantee and the payment in full of
the Option Price, such Grantee shall be entitled to the issuance of a stock
certificate or certificates evidencing his or her ownership of the shares of
Stock subject to the Option.

 

8.9.         Transferability of Options

 

Except as provided in Section 8.10, during the lifetime of a Grantee, only the
Grantee (or, in the event of legal incapacity or incompetency, the Grantee’s
guardian or legal representative) may exercise an Option. Except as provided in
Section 8.10, no Option shall be assignable or transferable by the Grantee to
whom it is granted, other than by will or the laws of descent and distribution.

 

8.10.       Family Transfers.

 

If authorized in the applicable Award Agreement, a Grantee may transfer, not for
value, all or part of an Option which is not an Incentive Stock Option to any
Family Member. For the purpose of this Section 8.10, a “not for value” transfer
is a transfer which is (i) a gift, (ii) a transfer under a domestic relations
order in settlement of marital property rights; or (iii) a transfer to an entity
in which more than fifty percent of the voting interests are owned by Family
Members (or the Grantee) in exchange for an interest in that entity. Following a
transfer under this Section 8.10, any such Option shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer. Subsequent transfers of transferred Options are prohibited except to
Family Members of the original Grantee in accordance with this Section 8.10 or
by will or the laws of descent and distribution. The events of termination of
Service of Section 8.4 hereof shall continue to be applied with respect to the
original Grantee, following which the Option shall be exercisable by the
transferee only to the extent, and for the periods specified, in Section 8.4.

 

8.11.       Limitations on Incentive Stock Options.

 

An Option shall constitute an Incentive Stock Option only (i) if the Grantee of
such Option is an employee of the Company or any Subsidiary of the Company;
(ii) to the extent specifically provided in the related Award Agreement; and
(iii) to the extent that the aggregate Fair Market Value (determined at the time
the Option is granted) of the shares of Stock with respect to which all
Incentive Stock Options held by such Grantee become exercisable for the first
time during any calendar year (under the Plan and all other plans of the
Grantee’s employer and its Affiliates) does not exceed $100,000. This limitation
shall be applied by taking Options into account in the order in which they were
granted.

 

9.             TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

 

9.1.         Right to Payment and Grant Price.

 

A SAR shall confer on the Grantee to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of one share of Stock
on the date of exercise over (B) the grant price of the SAR as determined by the
Board. The Award Agreement for a SAR shall specify the grant price of the SAR,
which shall be at least the Fair Market Value of a share of Stock on the date of
grant. SARs may be granted in conjunction with all or part of an Option granted
under the Plan or at any subsequent time during the term of such Option, in
conjunction with all or part of any other Award or without regard to any Option
or other Award; provided that a SAR that is granted

 

9

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subsequent to the Grant Date of a related Option must have a SAR Price that is
no less than the Fair Market Value of one share of Stock on the SAR Grant Date.

 

9.2.         Other Terms.

 

The Board shall determine at the date of grant or thereafter, the time or times
at which and the circumstances under which a SAR 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 SARs shall cease to be or become
exercisable following termination of Service or upon other conditions, the
method of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed to be
delivered to Grantees, whether or not a SAR shall be in tandem or in combination
with any other Award, and any other terms and conditions of any SAR.

 

10.          TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS

 

10.1.       Grant of Restricted Stock or Stock Units.

 

Awards of Restricted Stock or Stock Units may be made for no consideration
(other than par value of the shares which is deemed paid by Services already
rendered).

 

10.2.       Restrictions.

 

At the time a grant of Restricted Stock or Stock Units is made, the Board may,
in its sole discretion, establish a period of time (a “restricted period”)
applicable to such Restricted Stock or Stock Units. Each Award of Restricted
Stock or Stock Units may be subject to a different restricted period. The Board
may, in its sole discretion, at the time a grant of Restricted Stock or Stock
Units is made, prescribe restrictions in addition to or other than the
expiration of the restricted period, including the satisfaction of corporate or
individual performance objectives, which may be applicable to all or any portion
of the Restricted Stock or Stock Units in accordance with Section 14.1 and 14.2.
Neither Restricted Stock nor Stock Units may be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the restricted period or
prior to the satisfaction of any other restrictions prescribed by the Board with
respect to such Restricted Stock or Stock Units.

 

10.3.       Restricted Stock Certificates.

 

The Company shall issue, in the name of each Grantee to whom Restricted Stock
has been granted, stock certificates representing the total number of shares of
Restricted Stock granted to the Grantee, as soon as reasonably practicable after
the Grant Date. The Board may provide in an Award Agreement that either (i) the
Secretary of the Company shall hold such certificates for the Grantee’s benefit
until such time as the Restricted Stock is forfeited to the Company or the
restrictions lapse, or (ii) such certificates shall be delivered to the Grantee,
provided, however, that such certificates shall bear a legend or legends that
comply with the applicable securities laws and regulations and makes appropriate
reference to the restrictions imposed under the Plan and the Award Agreement.

 

10.4.       Rights of Holders of Restricted Stock.

 

Unless the Board otherwise provides in an Award Agreement, holders of Restricted
Stock shall have the right to vote such Stock and the right to receive any
dividends declared or paid with respect to such Stock. The Board may provide
that any dividends paid on Restricted Stock must be reinvested in shares of
Stock, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Stock. All distributions, if any,
received by a Grantee with respect to Restricted Stock as a result of any stock
split, stock dividend, combination of shares, or other similar transaction shall
be subject to the restrictions applicable to the original Grant.

 

10

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10.5.       Rights of Holders of Stock Units.

 

10.5.1.    Voting and Dividend Rights.

 

Holders of Stock Units shall have no rights as stockholders of the Company. The
Board may provide in an Award Agreement evidencing a grant of Stock Units that
the holder of such Stock Units shall be entitled to receive, upon the Company’s
payment of a cash dividend on its outstanding Stock, a cash payment for each
Stock Unit held equal to the per-share dividend paid on the Stock. Such Award
Agreement may also provide that such cash payment will be deemed reinvested in
additional Stock Units at a price per unit equal to the Fair Market Value of a
share of Stock on the date that such dividend is paid.

 

10.5.2.    Creditor’s Rights.

 

A holder of Stock Units shall have no rights other than those of a general
creditor of the Company. Stock Units represent an unfunded and unsecured
obligation of the Company, subject to the terms and conditions of the applicable
Award Agreement.

 

10.6.       Termination of Service.

 

Unless the Board otherwise provides in an Award Agreement or in writing after
the Award Agreement is issued, upon the termination of a Grantee’s Service, any
Restricted Stock or Stock Units held by such Grantee that have not vested, or
with respect to which all applicable restrictions and conditions have not
lapsed, shall immediately be deemed forfeited. Upon forfeiture of Restricted
Stock or Stock Units, the Grantee shall have no further rights with respect to
such Award, including but not limited to any right to vote Restricted Stock or
any right to receive dividends with respect to shares of Restricted Stock or
Stock Units.

 

10.7.       Purchase of Restricted Stock.

 

The Grantee shall be required, to the extent required by applicable law, to
purchase the Restricted Stock from the Company at a Purchase Price equal to the
greater of (i) the aggregate par value of the shares of Stock represented by
such Restricted Stock or (ii) the Purchase Price, if any, specified in the Award
Agreement relating to such Restricted Stock. The Purchase Price shall be payable
in a form described in Section 12 or, in the discretion of the Board, in
consideration for past Services rendered to the Company or an Affiliate.

 

10.8.       Delivery of Stock.

 

Upon the expiration or termination of any restricted period and the satisfaction
of any other conditions prescribed by the Board, the restrictions applicable to
shares of Restricted Stock or Stock Units settled in Stock shall lapse, and,
unless otherwise provided in the Award Agreement, a stock certificate for such
shares shall be delivered, free of all such restrictions, to the Grantee or the
Grantee’s beneficiary or estate, as the case may be. Neither the Grantee, nor
the Grantee’s beneficiary or estate, shall have any further rights with regard
to a Stock Unit once the share of Stock represented by the Stock Unit has been
delivered.

 

11.          TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS

 

The Board may, in its sole discretion, grant (or sell at par value or such other
higher purchase price determined by the Board) an Unrestricted Stock Award to
any Grantee pursuant to which such Grantee may receive shares of Stock free of
any restrictions (“Unrestricted Stock”) under the Plan. Unrestricted Stock
Awards may be granted or sold as described in the preceding sentence in respect
of

 

11

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past Services and other valid consideration, or in lieu of, or in addition to,
any cash compensation due to such Grantee.

 

12.          FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK

 

12.1.       General Rule.

 

Payment of the Option Price for the shares purchased pursuant to the exercise of
an Option or the Purchase Price for Restricted Stock shall be made in cash or in
cash equivalents acceptable to the Company.

 

12.2.       Surrender of Stock.

 

To the extent the Award Agreement so provides, payment of the Option Price for
shares purchased pursuant to the exercise of an Option or the Purchase Price for
Restricted Stock may be made all or in part through the tender to the Company of
shares of Stock, which shares, if acquired from the Company and if so required
by the Company, shall have been held for at least six months at the time of
tender and which shall be valued, for purposes of determining the extent to
which the Option Price or Purchase Price has been paid thereby, at their Fair
Market Value on the date of exercise or surrender.

 

12.3.       Cashless Exercise.

 

With respect to an Option only (and not with respect to Restricted Stock), to
the extent permitted by law and to the extent the Award Agreement so provides,
payment of the Option Price for shares purchased pursuant to the exercise of an
Option may be made all or in part by delivery (on a form acceptable to the
Board) of an irrevocable direction to a licensed securities broker acceptable to
the Company to sell shares of Stock and to deliver all or part of the sales
proceeds to the Company in payment of the Option Price and any withholding taxes
described in Section 18.3.

 

12.4.  Other Forms of Payment.

 

To the extent the Award Agreement so provides, payment of the Option Price for
shares purchased pursuant to exercise of an Option or the Purchase Price for
Restricted Stock may be made in any other form that is consistent with
applicable laws, regulations and rules.

 

13.          TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS

 

13.1.       Dividend Equivalent Rights.

 

A Dividend Equivalent Right is an Award entitling the recipient to receive
credits based on cash distributions that would have been paid on the shares of
Stock specified in the Dividend Equivalent Right (or other award to which it
relates) if such shares had been issued to and held by the recipient. A Dividend
Equivalent Right may be granted hereunder to any Grantee. The terms and
conditions of Dividend Equivalent Rights shall be specified in the grant.
Dividend equivalents credited to the holder of a Dividend Equivalent Right may
be paid currently or may be deemed to be reinvested in additional shares of
Stock, which may thereafter accrue additional equivalents. Any such reinvestment
shall be at Fair Market Value on the date of reinvestment. Dividend Equivalent
Rights may be settled in cash or Stock or a combination thereof, in a single
installment or installments, all determined in the sole discretion of the Board.
A Dividend Equivalent Right granted as a component of another Award may provide
that such Dividend Equivalent Right shall be settled upon exercise, settlement,
or payment of, or lapse of restrictions on, such other award, and that such
Dividend Equivalent Right shall expire or be forfeited or annulled under the
same conditions as such other award. A Dividend Equivalent Right

 

12

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granted as a component of another Award may also contain terms and conditions
different from such other award.

 

13.2.       Termination of Service.

 

Except as may otherwise be provided by the Board either in the Award Agreement
or in writing after the Award Agreement is issued, a Grantee’s rights in all
Dividend Equivalent Rights or interest equivalents shall automatically terminate
upon the Grantee’s termination of Service for any reason.

 

14.          TERMS AND CONDITIONS OF PERFORMANCE AND ANNUAL INCENTIVE AWARDS

 

14.1.       Performance Conditions

 

The right of a Grantee to exercise or receive a grant or settlement of any
Award, and the timing thereof, may be subject to such performance conditions as
may be specified by the Board. The Board may use such business criteria and
other measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts
payable under any Award subject to performance conditions, except as limited
under Sections 14.2 hereof in the case of a Performance Award or Annual
Incentive Award intended to qualify under Code Section 162(m). If and to the
extent required under Code Section 162(m), any power or authority relating to a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m), shall be exercised by the Committee and not the Board.

 

14.2.       Performance or Annual Incentive Awards Granted to Designated Covered
Employees

 

If and to the extent that the Committee determines that a Performance or Annual
Incentive Award to be granted to a Grantee who is designated by the Committee as
likely to be a Covered Employee should qualify as “performance-based
compensation” for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Performance or Annual Incentive Award shall be contingent
upon achievement of pre-established performance goals and other terms set forth
in this Section 14.2.

 

14.2.1.    Performance Goals Generally.

 

The performance goals for such Performance or Annual Incentive Awards shall
consist of one or more business criteria and a targeted level or levels of
performance with respect to each of such criteria, as specified by the Committee
consistent with this Section 14.2. Performance goals shall be objective and
shall otherwise meet the requirements of Code Section 162(m) 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.” The Committee may determine that such Performance or
Annual Incentive Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the performance
goals must be achieved as a condition to grant, exercise and/or settlement of
such Performance or Annual Incentive Awards. Performance goals may differ for
Performance or Annual Incentive Awards granted to any one Grantee or to
different Grantees.

 

14.2.2.    Business Criteria.

 

One or more of the following business criteria for the Company, on a
consolidated basis, and/or specified subsidiaries or business units of the
Company (except with respect to the total stockholder return and earnings per
share criteria), shall be used exclusively by the Committee in establishing
performance goals for such Performance or Annual Incentive Awards: (1) total
stockholder return; (2) such total stockholder return as compared to total
return (on a comparable basis) of a publicly available index such as, but not
limited to, the Standard & Poor’s 500 Stock Index; (3) net income;

 

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(4) pretax earnings; (5) earnings before interest expense, taxes, depreciation
and amortization; (6) pretax operating earnings after interest expense and
before bonuses, service fees, and extraordinary or special items; (7) operating
margin; (8) earnings per share; (9) return on equity; (10) return on capital;
(11) return on investment; (12) operating earnings; (13) working capital;
(14) ratio of debt to stockholders’ equity; (15) revenue; and (16) gross
merchandise value. Business criteria may be measured on an absolute basis or on
a relative basis (i.e., performance relative to peer companies) and on a GAAP or
non-GAAP basis.

 

14.2.3.    Timing For Establishing Performance Goals.

 

Performance goals shall be established not later than 90 days after the
beginning of any performance period applicable to such Performance or Annual
Incentive Awards, or at such other date as may be required or permitted for
“performance-based compensation” under Code Section 162(m).

 

14.2.4.    Settlement of Performance or Annual Incentive Awards; Other Terms.

 

Settlement of such Performance or Annual Incentive Awards shall be in cash,
Stock, other Awards or other property, in the discretion of the Committee. The
Committee may, in its discretion, reduce the amount of a settlement otherwise to
be made in connection with such Performance or Annual Incentive Awards. The
Committee shall specify the circumstances in which such Performance or Annual
Incentive Awards shall be paid or forfeited in the event of termination of
Service by the Grantee prior to the end of a performance period or settlement of
Performance Awards.

 

14.3.       Written Determinations.

 

All determinations by the Committee as to the establishment of performance
goals, the amount of any potential Performance Awards and as to the achievement
of performance goals relating to Performance Awards, and the amount of any
potential individual Annual Incentive Awards and the amount of final Annual
Incentive Awards, shall be made in writing in the case of any Award intended to
qualify under Code Section 162(m). To the extent permitted by Section 162(m),
the Committee may delegate any responsibility relating to such Performance
Awards or Annual Incentive Awards.

 

14.4.       Status of Section 14.2 Awards Under Code Section 162(m)

 

It is the intent of the Company that Performance Awards and Annual Incentive
Awards under Section 14.2 hereof granted to persons who are designated by the
Committee as likely to be Covered Employees within the meaning of Code
Section 162(m) and regulations thereunder shall, if so designated by the
Committee, constitute “qualified performance-based compensation” within the
meaning of Code Section 162(m) and regulations thereunder. Accordingly, the
terms of Section 14.2, including the definitions of Covered Employee and other
terms used therein, shall be interpreted in a manner consistent with Code
Section 162(m) and regulations thereunder. The foregoing notwithstanding,
because the Committee cannot determine with certainty whether a given Grantee
will be a Covered Employee with respect to a fiscal year that has not yet been
completed, the term Covered Employee as used herein shall mean only a person
designated by the Committee, at the time of grant of Performance Awards or an
Annual Incentive Award, as likely to be a Covered Employee with respect to that
fiscal year. If any provision of the Plan or any agreement relating to such
Performance Awards or Annual Incentive Awards does not comply or is inconsistent
with the requirements of Code Section 162(m) or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.

 

14

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15.                               PARACHUTE LIMITATIONS

 

Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Company or any Affiliate, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an “Other Agreement”), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
Grantees or beneficiaries of which the Grantee is a member), whether or not such
compensation is deferred, is in cash, or is in the form of a benefit to or for
the Grantee (a “Benefit Arrangement”), if the Grantee is a “disqualified
individual,” as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Stock Unit held by that Grantee and any right to receive any payment or
other benefit under this Plan shall not become exercisable or vested (i) to the
extent that such right to exercise, vesting, payment, or benefit, taking into
account all other rights, payments, or benefits to or for the Grantee under this
Plan, all Other Agreements, and all Benefit Arrangements, would cause any
payment or benefit to the Grantee under this Plan to be considered a “parachute
payment” within the meaning of Section 280G(b)(2) of the Code as then in effect
(a “Parachute Payment”) and (ii) if, as a result of receiving a Parachute
Payment, the aggregate after-tax amounts received by the Grantee from the
Company under this Plan, all Other Agreements, and all Benefit Arrangements
would be less than the maximum after-tax amount that could be received by the
Grantee without causing any such payment or benefit to be considered a Parachute
Payment. In the event that the receipt of any such right to exercise, vesting,
payment, or benefit under this Plan, in conjunction with all other rights,
payments, or benefits to or for the Grantee under any Other Agreement or any
Benefit Arrangement would cause the Grantee to be considered to have received a
Parachute Payment under this Plan that would have the effect of decreasing the
after-tax amount received by the Grantee as described in clause (ii) of the
preceding sentence, then the Grantee shall have the right, in the Grantee’s sole
discretion, to designate those rights, payments, or benefits under this Plan,
any Other Agreements, and any Benefit Arrangements that should be reduced or
eliminated so as to avoid having the payment or benefit to the Grantee under
this Plan be deemed to be a Parachute Payment.

 

16.                               REQUIREMENTS OF LAW

 

16.1.       General.

 

The Company shall not be required to sell or issue any shares of Stock under any
Award if the sale or issuance of such shares would constitute a violation by the
Grantee, any other individual exercising an Option, or the Company of any
provision of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations. If at
any time the Company shall determine, in its discretion, that the listing,
registration or qualification of any shares subject to an Award upon any
securities exchange or under any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the issuance or purchase of
shares hereunder, no shares of Stock may be issued or sold to the Grantee or any
other individual exercising an Option pursuant to such Award unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company, and
any delay caused thereby shall in no way affect the date of termination of the
Award. Specifically, in connection with the Securities Act, upon the exercise of
any Option or the delivery of any shares of Stock underlying an Award, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered by such Award, the Company shall not be required to sell or issue
such shares unless the Board has received evidence satisfactory to it that the
Grantee or any other individual exercising an Option may acquire such shares
pursuant to an exemption from registration under the Securities Act. Any
determination in this connection by the Board shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act. The Company shall not
be obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares of Stock pursuant to the

 

15

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Plan to comply with any law or regulation of any governmental authority. As to
any jurisdiction that expressly imposes the requirement that an Option shall not
be exercisable until the shares of Stock covered by such Option are registered
or are exempt from registration, the exercise of such Option (under
circumstances in which the laws of such jurisdiction apply) shall be deemed
conditioned upon the effectiveness of such registration or the availability of
such an exemption.

 

16.2.       Rule 16b-3.

 

During any time when the Company has a class of equity security registered under
Section 12 of the Exchange Act, it is the intent of the Company that Awards
pursuant to the Plan and the exercise of Options granted hereunder will qualify
for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent
that any provision of the Plan or action by the Board does not comply with the
requirements of Rule 16b-3, it shall be deemed inoperative to the extent
permitted by law and deemed advisable by the Board, and shall not affect the
validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the
Board may exercise its discretion to modify this Plan in any respect necessary
to satisfy the requirements of, or to take advantage of any features of, the
revised exemption or its replacement.

 

17.                               EFFECT OF CHANGES IN CAPITALIZATION

 

17.1.       Changes in Stock.

 

If the number of outstanding shares of Stock is increased or decreased or the
shares of Stock are changed into or exchanged for a different number or kind of
shares or other securities of the Company on account of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration by
the Company occurring after the Effective Date, the number and kinds of shares
for which grants of Options and other Awards may be made under the Plan shall be
adjusted proportionately and accordingly by the Company. In addition, the number
and kind of shares for which Awards are outstanding shall be adjusted
proportionately and accordingly so that the proportionate interest of the
Grantee immediately following such event shall, to the extent practicable, be
the same as immediately before such event. Any such adjustment in outstanding
Options or SARs shall not change the aggregate Option Price or SAR Exercise
Price payable with respect to shares that are subject to the unexercised portion
of an outstanding Option or SAR, as applicable, but shall include a
corresponding proportionate adjustment in the Option Price or SAR Exercise Price
per share. The conversion of any convertible securities of the Company shall not
be treated as an increase in shares effected without receipt of consideration.
Notwithstanding the foregoing, in the event of any distribution to the Company’s
stockholders of securities of any other entity or other assets (including an
extraordinary dividend but excluding a non-extraordinary dividend of the
Company) without receipt of consideration by the Company, the Company may, in
such manner as the Company deems appropriate, adjust (i) the number and kind of
shares subject to outstanding Awards and/or (ii) the exercise price of
outstanding Options and Stock Appreciation Rights to reflect such distribution.

 

17.2.       Reorganization in Which the Company Is the Surviving Entity Which
does not Constitute a Corporate Transaction.

 

Subject to Section 17.3 hereof, if the Company shall be the surviving entity in
any reorganization, merger, or consolidation of the Company with one or more
other entities which does not constitute a Corporate Transaction, any Option or
SAR theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option or SAR would have been entitled immediately following such
reorganization, merger, or consolidation, with a corresponding proportionate
adjustment of the Option Price or SAR Exercise Price per share so that the
aggregate Option Price or SAR Exercise Price thereafter shall be the same as the
aggregate

 

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Option Price or SAR Exercise Price of the shares remaining subject to the Option
or SAR immediately prior to such reorganization, merger, or consolidation.
Subject to any contrary language in an Award Agreement evidencing an Award, any
restrictions applicable to such Award shall apply as well to any replacement
shares received by the Grantee as a result of the reorganization, merger or
consolidation. In the event of a transaction described in this Section 17.2,
Stock Units shall be adjusted so as to apply to the securities that a holder of
the number of shares of Stock subject to the Stock Units would have been
entitled to receive immediately following such transaction.

 

17.3.       Corporate Transaction.

 

Subject to the exceptions set forth in the last sentence of this Section 17.3
and the last sentence of Section 17.4, upon the occurrence of a Corporate
Transaction:

 

(i)  all outstanding shares of Restricted Stock shall be deemed to have vested,
and all Stock Units shall be deemed to have vested and the shares of Stock
subject thereto shall be delivered, immediately prior to the occurrence of such
Corporate Transaction, and

 

(ii) either of the following two actions shall be taken:

 

(A) fifteen days prior to the scheduled consummation of a Corporate Transaction,
all Options and SARs outstanding hereunder shall become immediately exercisable
and shall remain exercisable for a period of fifteen days, or

 

(B) the Board may elect, in its sole discretion, to cancel any outstanding
Awards of Options, Restricted Stock, Stock Units, and/or SARs and pay or
deliver, or cause to be paid or delivered, to the holder thereof an amount in
cash or securities having a value (as determined by the Board acting in good
faith), in the case of Restricted Stock or Stock Units, equal to the formula or
fixed price per share paid to holders of shares of Stock and, in the case of
Options or SARs, equal to the product of the number of shares of Stock subject
to the Option or SAR (the “Award Shares”) multiplied by the amount, if any, by
which (I) the formula or fixed price per share paid to holders of shares of
Stock pursuant to such transaction exceeds (II) the Option Price or SAR Exercise
Price applicable to such Award Shares.

 

With respect to the Company’s establishment of an exercise window, (i) any
exercise of an Option or SAR during such fifteen-day period shall be conditioned
upon the consummation of the event and shall be effective only immediately
before the consummation of the event, and (ii) upon consummation of any
Corporate Transaction the Plan, and all outstanding but unexercised Options and
SARs shall terminate. The Board shall send written notice of an event that will
result in such a termination to all individuals who hold Options and SARs not
later than the time at which the Company gives notice thereof to its
stockholders. This Section 17.3 shall not apply to any Corporate Transaction to
the extent that provision is made in writing in connection with such Corporate
Transaction for the assumption or continuation of the Options, SARs, Stock Units
and Restricted Stock theretofore granted, or for the substitution for such
Options, SARs, Stock Units and Restricted Stock for new common stock options and
stock appreciation rights and new common stock stock units and restricted stock
relating to the stock of a successor entity, or a parent or subsidiary thereof,
with appropriate adjustments as to the number of shares (disregarding any
consideration that is not common stock) and option and stock appreciation right
exercise prices, in which event the Plan, Options, SARs, Stock Units and
Restricted Stock theretofore granted shall continue in the manner and under the
terms so provided.

 

17.4.       Adjustments.

 

Adjustments under this Section 17 related to shares of Stock or securities of
the Company shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. No fractional shares or other securities
shall be issued pursuant to any such adjustment, and any fractions resulting
from any such adjustment shall be eliminated in each case by rounding downward
to the

 

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nearest whole share. The Board shall determine the effect of a Corporate
Transaction upon Awards other than Options, SARs, Stock Units and Restricted
Stock, and such effect shall be set forth in the appropriate Award Agreement.
The Board may provide in the Award Agreements at the time of grant, or any time
thereafter with the consent of the Grantee, for different provisions to apply to
an Award in place of those described in Sections 17.1, 17.2 and 17.3.

 

17.5.       No Limitations on Company.

 

The making of Awards pursuant to the Plan shall not affect or limit in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets.

 

18.                               GENERAL PROVISIONS

 

18.1.       Disclaimer of Rights

 

No provision in the Plan or in any Award or Award Agreement shall be construed
to confer upon any individual the right to remain in the employ or service of
the Company or any Affiliate, or to interfere in any way with any contractual or
other right or authority of the Company either to increase or decrease the
compensation or other payments to any individual at any time, or to terminate
any employment or other relationship between any individual and the Company. In
addition, notwithstanding anything contained in the Plan to the contrary, unless
otherwise stated in the applicable Award Agreement, no Award granted under the
Plan shall be affected by any change of duties or position of the Grantee, so
long as such Grantee continues to be a director, officer, consultant or employee
of the Company or an Affiliate. The obligation of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual obligation
to pay only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be interpreted to require
the Company to transfer any amounts to a third party trustee or otherwise hold
any amounts in trust or escrow for payment to any Grantee or beneficiary under
the terms of the Plan.

 

18.2.       Nonexclusivity of the Plan

 

Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.

 

18.3.       Withholding Taxes

 

The Company or an Affiliate, as the case may be, shall have the right to deduct
from payments of any kind otherwise due to a Grantee any federal, state, or
local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to an Award or upon the
issuance of any shares of Stock upon the exercise of an Option or pursuant to an
Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay to
the Company or the Affiliate, as the case may be, any amount that the Company or
the Affiliate may reasonably determine to be necessary to satisfy such
withholding obligation. Subject to the prior approval of the Company or the
Affiliate, which may be withheld by the Company or the Affiliate, as the case
may be, in its sole discretion, the Grantee may elect to satisfy such
obligations, in whole or in part, (i) by causing the Company or the Affiliate to
withhold shares of Stock otherwise issuable to the Grantee or (ii) by delivering
to the Company or the Affiliate shares of Stock already owned by the Grantee.
The shares of Stock so

 

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delivered or withheld shall have an aggregate Fair Market Value equal to such
withholding obligations. The Fair Market Value of the shares of Stock used to
satisfy such withholding obligation shall be determined by the Company or the
Affiliate as of the date that the amount of tax to be withheld is to be
determined. A Grantee who has made an election pursuant to this Section 18.3 may
satisfy his or her withholding obligation only with shares of Stock that are not
subject to any repurchase, forfeiture, unfulfilled vesting, or other similar
requirements.

 

18.4.       Captions

 

The use of captions in this Plan or any Award Agreement is for the convenience
of reference only and shall not affect the meaning of any provision of the Plan
or such Award Agreement.

 

18.5.       Other Provisions

 

Each Award granted under the Plan may contain such other terms and conditions
not inconsistent with the Plan as may be determined by the Board, in its sole
discretion.

 

18.6.       Number and Gender

 

With respect to words used in this Plan, the singular form shall include the
plural form, the masculine gender shall include the feminine gender, etc., as
the context requires.

 

18.7.       Severability

 

If any provision of the Plan or any Award Agreement shall be determined to be
illegal or unenforceable by any court of law in any jurisdiction, the remaining
provisions hereof and thereof shall be severable and enforceable in accordance
with their terms, and all provisions shall remain enforceable in any other
jurisdiction.

 

18.8.       Governing Law

 

The validity and construction of this Plan and the instruments evidencing the
Awards hereunder shall be governed by the laws of the State of Delaware, other
than any conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this Plan and the instruments evidencing the
Awards granted hereunder to the substantive laws of any other jurisdiction.

 

Section 409A of the Code (“Section 409A”), or an exemption to Section 409A, with
regard to Awards hereunder that constitute nonqualified deferred compensation
within the meaning of Section 409A. To the extent that the Board determines that
a Grantee would be subject to the additional 20% tax imposed on certain
nonqualified deferred compensation plans pursuant to Section 409A as a result of
any provision of any Award granted under this Plan, such provision shall be
deemed amended to the minimum extent necessary to avoid application of such
additional tax. The nature of any such amendment shall be determined by the
Board.

 

18.9.       Section 409A of the Code

 

The Board intends to comply with Section 409A of the Code (“Section 409A”), or
an exemption to Section 409A, with regard to Awards hereunder that constitute
nonqualified deferred compensation within the meaning of Section 409A. To the
extent that the Board determines that a Grantee would be subject to the
additional 20% tax imposed on certain nonqualified deferred compensation plans
pursuant to Section 409A as a result of any provision of any Award granted under
this Plan, such provision shall be deemed amended to the minimum extent
necessary to avoid application of such additional tax. The nature of any such
amendment shall be determined by the Board.

 

***

 

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