Exhibit 10.4
THOR INDUSTRIES, INC.
2006 EQUITY INCENTIVE PLAN

  1.   Purpose; Eligibility.

          1.1 General Purpose. The name of this plan is the Thor Industries,
Inc. 2006 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to
enable Thor Industries, Inc., a Delaware corporation (the “Company”), and any
Affiliate to obtain and retain the services of the types of Employees,
Consultants and Directors who will contribute to the Company’s long range
success and to provide incentives that are linked directly to increases in share
value which will inure to the benefit of all stockholders of the Company.
          1.2 Eligible Award Recipients. The persons eligible to receive Awards
are the Employees, Consultants and Directors of the Company and its Affiliates
and any such parties who are reasonably expected to become Employees,
Consultants and Directors after the receipt of Awards.
          1.3 Available Awards. The purpose of the Plan is to provide a means by
which eligible recipients of Awards may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of one or more of
the following Awards: (a) Incentive Stock Options, (b) Nonstatutory Stock
Options, (c) Restricted Awards, (d) Performance Compensation Awards, (e) Stock
Appreciation Rights and (f) 409A Awards.

  2.   Definitions.

          2.1 “409A Award” means an Award that is considered “nonqualified
deferred compensation” within the meaning of Section 409A of the Code and
Section 8 of this Plan.
          2.2 “Administrator” means the Board or the Committee appointed by the
Board in accordance with Section 3.5.
          2.3 “Affiliate” means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
          2.4 “Award” means any right granted under the Plan, including an
Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Award, a
Performance Compensation Award, a Stock Appreciation Right and a 409A Award.
          2.5 “Award Agreement” means a written agreement between the Company
and a holder of an Award evidencing the terms and conditions of an individual
Award grant. Each Award Agreement shall be subject to the terms and conditions
of the Plan.
          2.6 “Beneficial Owner” has the meaning assigned to such term in
Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular “person” (as that term is used in
Section 13(d)(3) of the Exchange Act), such “person”

 

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shall be deemed to have beneficial ownership of all securities that such
“person” has the right to acquire by conversion or exercise of other securities,
whether such right is currently exercisable or is exercisable only after the
passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a
corresponding meaning.
          2.7 “Board” means the Board of Directors of the Company.
          2.8 “Cause” means (a) with respect to any Participant who is a party
to an employment or service agreement or employment policy manual with the
Company or its Affiliates and such agreement or policy manual provides for a
definition of Cause, as defined therein and (b) with respect to all other
Participants (i) the commission of, or plea of guilty or no contest to, a felony
or a crime involving moral turpitude or the commission of any other act
involving willful malfeasance or material fiduciary breach with respect to the
Company or an Affiliate, (ii) conduct tending to bring the Company into
substantial public disgrace, or disrepute, (iii) gross negligence or willful
misconduct with respect to the Company or an Affiliate or (iv) material
violation of state or federal securities laws. The Administrator, in its
absolute discretion, shall determine the effect of all matters and questions
relating to whether a Participant has been discharged for Cause.
          2.9 “Change in Control” shall mean:
               (a) The direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the properties or assets
of the Company and it Affiliates, taken as a whole, to any “person” (as that
term is used in Section 13(d)(3) of the Exchange Act (a “Person”)) that is not
an Affiliate of the Company;
               (b) The Incumbent Directors cease for any reason to constitute at
least a majority of the Board;
               (c) The adoption of a plan relating to the liquidation or
dissolution of the Company; or
               (d) The acquisition by any Person of Beneficial Ownership of 50%
or more (on a fully diluted basis) of either (A) the then outstanding shares of
Common Stock of the Company, taking into account as outstanding for this purpose
such Common Stock issuable upon the exercise of options or warrants, the
conversion of convertible stock or debt, and the exercise of any similar right
to acquire such Common Stock (the “Outstanding Company Common Stock”) or (B) the
combined voting power of then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of this Plan,
the following acquisitions shall not constitute a Change in Control: (i) any
acquisition by the Company or any Affiliate, (ii) any acquisition by any
employee benefit plan sponsored or maintained by the Company or any Affiliate,
(iii) any acquisition which complies with clauses, (i), (ii) and (iii) of
subsection (e) of this Section 2.9 or (iv) in respect of an Award held by a
particular Participant, any acquisition by the Participant or any group of
persons including the Participant (or any entity controlled by the Participant
or any group of persons including the Participant); or

 

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               (e) The consummation of a reorganization, merger, consolidation,
statutory share exchange or similar form of corporate transaction involving the
Company that requires the approval of the Company’s stockholders, whether for
such transaction or the issuance of securities in the transaction (a “Business
Combination”), unless immediately following such Business Combination: (i) more
than 50% of the total voting power of (x) the entity resulting from such
Business Combination (the “Surviving Company”), or (y) if applicable, the
ultimate parent entity that directly or indirectly has beneficial ownership of
sufficient voting securities eligible to elect a majority of the members of the
board of directors (or the analogous governing body) of the Surviving Company
(the “Parent Company”), is represented by the Outstanding Company Voting
Securities that were outstanding immediately prior to such Business Combination
(or, if applicable, is represented by shares into which the Outstanding Company
Voting Securities were converted pursuant to such Business Combination), and
such voting power among the holders thereof is in substantially the same
proportion as the voting power of the Outstanding Company Voting Securities
among the holders thereof immediately prior to the Business Combination, (ii) no
Person (other than any employee benefit plan sponsored or maintained by the
Surviving Company or the Parent Company) is or becomes the beneficial owner,
directly or indirectly, of 50% or more of the total voting power of the
outstanding voting securities eligible to elect members of the board of
directors of the Parent Company (or the analogous governing body) (or, it there
is no Parent Company, the Surviving Company) and (iii) at least a majority of
the members of the board of directors (or the analogous governing body) of the
Parent Company (or, if there is no Parent Company, the Surviving Company)
following the consummation of the Business Combination were Board members at the
time of the Board’s approval of the execution of the initial agreement providing
for such Business Combination.
          2.10 “Code” means the Internal Revenue Code of 1986, as it may be
amended from time to time.
          2.11 “Committee” means a committee of one or more members of the Board
appointed by the Board to administer the Plan in accordance with Section 3.5.
          2.12 “Common Stock” means the common stock, $0.10 par value per share,
of the Company.
          2.13 “Company” means Thor Industries, Inc. a Delaware corporation.
          2.14 “Consultant” means any person, including an advisor (a) engaged
by the Company or an Affiliate to render consulting or advisory services and who
is compensated for such services or who provides bona fide services to the
Company or an Affiliate pursuant to a written agreement or (b) who is a member
of the Board of Directors of an Affiliate; provided that, except as otherwise
permitted in Section 5.3 hereof, such person is a natural person and such
services are not in connection with the offer or sale of securities in a capital
raising transaction and do not directly or indirectly promote or maintain a
market for the Company’s securities.
          2.15 “Continuous Service” means that the Participant’s service with
the Company or an Affiliate, whether as an Employee, Director or Consultant, is
not interrupted or terminated. The Participant’s Continuous Service shall not be
deemed to have terminated merely

 

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because of a change in the capacity in which the Participant renders service to
the Company or an Affiliate as an Employee, Consultant or Director or a change
in the entity for which the Participant renders such service, provided that
there is no interruption or termination of the Participant’s Continuous Service.
For example, a change in status from an Employee of the Company to a Consultant
of an Affiliate or a Director will not constitute an interruption of Continuous
Service. The Administrator or its delegate, in its sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal or family leave of absence.
          2.16 “Covered Employee” has the same meaning as set forth in
Section 162(m)(3) of the Code.
          2.17 “Date of Grant” means the date on which the Administrator adopts
a resolution, or takes other appropriate action, expressly granting an Award to
a Participant that specifies the key terms and conditions of the Award and from
which the Participant begins to benefit from or be adversely affected by
subsequent changes in the Fair Market Value of the Company Common Stock or, if a
later date is set forth in such resolution, then such date as is set forth in
such resolution.
          2.18 “Detrimental Activity” means: (a) violation of the terms of any
agreement with the Company or any of its Affiliates concerning non-disclosure,
confidentiality, intellectual property, privacy or exclusivity; (b) disclosure
of the Company’s or its Affiliates’ confidential information to anyone outside
the Company or its Affiliates, without prior written authorization from the
Company or its Affiliates, or in conflict with the interests of the Company or
its Affiliates, whether the confidential information was acquired or disclosed
by the Participant during or after employment by the Company or its Affiliates;
(c) failure or refusal to disclose promptly or assign to the Company or its
Affiliates all right, title and interest in any invention, work product or idea,
patentable or not, made or conceived by the Participant during employment by the
Company or its Affiliates, relating in any manner to the interests of the
Company or its Affiliates or the failure or refusal to do anything reasonably
necessary to enable the Company or its Affiliates to secure a patent where
appropriate in the United States and in other countries; (d) activity that is
discovered to be grounds for or results in termination of the Participant’s
employment for Cause; (e) any breach of a restrictive covenant contained in any
employment agreement, Award Agreement or other agreement between the Participant
and the Company or its Affiliates, during any period for which a restrictive
covenant prohibiting Detrimental Activity, or other similar conduct or act, is
applicable to the Participant during or after employment by the Company or its
Affiliates; (f) any attempt directly or indirectly to induce any Employee of the
Company or its Affiliates to be employed or perform services or acts in conflict
with the interests of the Company or its Affiliates; (g) any attempt, in
conflict with the interests of the Company or its Affiliates, directly or
indirectly, to solicit the trade or business of any current or prospective
customer, client, supplier or partner of the Company or its Affiliates; (h) the
conviction of, or guilty plea entered by, the Participant for any felony or a
crime involving moral turpitude whether or not connected with the Company; or
(i) the commission of any other act involving willful malfeasance or material
fiduciary breach with respect to the Company.
          2.19 “Director” means a member of the Board.

 

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          2.20 “Disability” means that the Participant is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment; provided, however, for purposes of determining
the term of an Incentive Stock Option pursuant to Section 6.10 hereof, the term
Disability shall have the meaning ascribed to it under Code Section 22(e)(3).
The determination of whether an individual has a Disability shall be determined
under procedures established by the Administrator. Except in situations where
the Administrator is determining Disability for purposes of the term of an
Incentive Stock Option pursuant to Section 6.10 hereof within the meaning of
Code Section 22(e)(3), the Administrator may rely on any determination that a
Participant is disabled for purposes of benefits under any long-term disability
plan maintained by the Company or any Affiliate in which a Participant
participates.
          2.21 “Effective Date” shall mean October 16, 2006, the date the Board
adopted the Plan.
          2.22 “Employee” means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director’s fee by the
Company or an Affiliate shall not be sufficient to constitute “employment” by
the Company or an Affiliate.
          2.23 “Exchange Act” means the Securities Exchange Act of 1934, as
amended.
          2.24 “Fair Market Value” means, as of any date, the value of the
Common Stock as determined below. The Fair Market Value on any date on which the
Company’s shares of Common Stock are registered under Section 12 of the Exchange
Act and listed on the New York Stock Exchange shall be the closing price of a
share of Common Stock on the New York Stock Exchange on such date, and
thereafter (a) if the Common Stock is admitted to quotation on the over the
counter market or any interdealer quotation system, the Fair Market Value on any
given date shall not be less than the average of the highest bid and lowest
asked prices of the Common Stock reported for such date or, if no bid and asked
prices were reported for such date, for the last day preceding such date for
which such prices were reported, or (b) in the absence of an established market
for the Common Stock, the Fair Market Value determined in good faith by the
Administrator and such determination shall be conclusive and binding on all
persons.
          2.25 “Form S-8” has the meaning set forth in Section 5.3.
          2.26 “Free Standing Rights” has the meaning set forth in
Section 7.3(a).
          2.27 “Incentive Stock Option” means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
          2.28 “Incumbent Directors” means individuals who, on the Effective
Date, constitute the Board, provided that any individual becoming a Director
subsequent to the Effective Date whose election or nomination for election to
the Board was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
Director without objection to such nomination) shall be an Incumbent Director.
No individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election

 

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contest with respect to Directors or as a result of any other actual or
threatened solicitation of proxies by or on behalf of any person other than the
Board shall be an Incumbent Director.
          2.29 “Negative Discretion” means the discretion authorized by the Plan
to be applied by the Administrator to eliminate or reduce the size of a
Performance Compensation Award in accordance with Section 7.2(d)(iv) of the
Plan; provided, that, the exercise of such discretion would not cause the
Performance Compensation Award to fail to qualify as “performance-based
compensation” under Section 162(m) of the Code.
          2.30 “Non-Employee Director” means a Director who is a “non-employee
director” within the meaning of Rule 16b-3.
          2.31 “Nonstatutory Stock Option” means an Option not intended to
qualify as an Incentive Stock Option.
          2.32 “Officer” means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
          2.33 “Option” means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
          2.34 “Option Agreement” means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan and need not be identical.
          2.35 “Optionholder” means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.
          2.36 “Outside Director” means a Director who is an “outside director”
within the meaning of Section 162(m) of the Code and Treasury Regulations
Section 1.162-27(e)(3) or any successor to such statute and regulation.
          2.37 “Participant” means a person to whom an Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Award.
          2.38 “Performance Compensation Award” means any Award designated by
the Administrator as a Performance Compensation Award pursuant to Section 7.2 of
the Plan.
          2.39 “Performance Criteria” means the criterion or criteria that the
Administrator shall select for purposes of establishing the Performance Goal(s)
for a Performance Period with respect to any Performance Compensation Award
under the Plan. The Performance Criteria that will be used to establish the
Performance Goal(s) shall be based on the attainment of specific levels of
performance of the Company (or Affiliate, division or operational unit of the
Company) and shall be limited to the following:
               (a) net earnings or net income (before or after taxes);

 

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               (b) basic or diluted earnings per share (before or after taxes);
               (c) net revenue or net revenue growth;
               (d) gross revenue;
               (e) gross profit or gross profit growth;
               (f) net operating profit (before or after taxes);
               (g) return measures (including, but not limited to, return on
assets, capital, invested capital, equity, or sales);
               (h) cash flow (including, but not limited to, operating cash
flow, free cash flow, and cash flow return on capital);
               (i) earnings before or after taxes, interest, depreciation and/or
amortization;
               (j) gross or operating margins;
               (k) productivity ratios;
               (l) share price (including, but not limited to, growth measures
and total stockholders return);
               (m) expense targets;
               (n) margins;
               (o) operating efficiency;
               (p) objective measures of customer satisfaction;
               (q) working capital targets;
               (r) measures of economic value added;
               (s) inventory control; and
               (t) enterprise value.
Any one or more of the Performance Criteria may be used on an absolute or
relative basis to measure the performance of the Company and/or an Affiliate as
a whole or any business unit of the Company and/or an Affiliate or any
combination thereof, as the Administrator may deem appropriate, or any of the
above Performance Criteria as compared to the performance of a group of
comparable companies, or published or special index that the Administrator, in
its sole discretion, deems appropriate, or the Company may select Performance
Criterion (l) above as compared to various stock market indices. The
Administrator also has the authority to provide

 

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for accelerated vesting of any Award based on the achievement of Performance
Goals pursuant to the Performance Criteria specified in this paragraph. To the
extent required under Section 162(m) of the Code, the Administrator shall,
within the first 90 days of a Performance Period (or, if longer or shorter,
within the maximum period allowed under Section 162(m) of the Code), define in
an objective fashion the manner of calculating the Performance Criteria it
selects to use for such Performance Period. In the event that applicable tax
and/or securities laws change to permit Administrator discretion to alter the
governing Performance Criteria without obtaining stockholder approval of such
changes, the Administrator shall have sole discretion to make such changes
without obtaining stockholder approval.
          2.40 “Performance Formula” means, for a Performance Period, the one or
more objective formulas applied against the relevant Performance Goal to
determine, with regard to the Performance Compensation Award of a particular
Participant, whether all, some portion but less than all, or none of the
Performance Compensation Award has been earned for the Performance Period.
          2.41 “Performance Goals” means, for a Performance Period, the one or
more goals established by the Administrator for the Performance Period based
upon the Performance Criteria. The Administrator is authorized at any time
during the first 90 days of a Performance Period (or, if longer or shorter,
within the maximum period allowed under Section 162(m) of the Code), or at any
time thereafter (but only to the extent the exercise of such authority after
such period would not cause the Performance Compensation Awards granted to any
Participant for the Performance Period to fail to qualify as “performance-based
compensation” under Section 162(m) of the Code), in its sole and absolute
discretion, to adjust or modify the calculation of a Performance Goal for such
Performance Period to the extent permitted under Section 162(m) of the Code in
order to prevent the dilution or enlargement of the rights of Participants based
on the following events:
               (a) asset write-downs;
               (b) litigation or claim judgments or settlements;
               (c) the effect of changes in tax laws, accounting principles, or
other laws or regulatory rules affecting reported results;
               (d) any reorganization and restructuring programs;
               (e) extraordinary nonrecurring items as described in Accounting
Principles Board Opinion No. 30 (or any successor or pronouncement thereto)
and/or in management’s discussion and analysis of financial condition and
results of operations appearing in the Company’s annual report to stockholders
for the applicable year;
               (f) acquisitions or divestitures;
               (g) any other specific unusual or nonrecurring events, or
objectively determinable category thereof;
               (h) foreign exchange gains and losses; and

 

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               (i) a change in the Company’s fiscal year.
          2.42 “Performance Period” means the one or more periods of time not
less than one (1) year in duration, as the Administrator may select, over which
the attainment of one or more Performance Goals will be measured for the purpose
of determining a Participant’s right to and the payment of a Performance
Compensation Award.
          2.43 “Plan” means this Thor Industries, Inc. 2006 Equity Incentive
Plan.
          2.44 “Related Rights” has the meaning set forth in Section 7.3(a).
          2.45 “Restricted Award” means any Award granted pursuant to
Section 7.1(a).
          2.46 “Restricted Period” has the meaning set forth in Section 7.1(a).
          2.47 “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act
or any successor to Rule 16b-3, as in effect from time to time.
          2.48 “SAR Amount” has the meaning set forth in Section 7.3(h).
          2.49 “SAR exercise price” has the meaning set forth in Section 7.3(b).
          2.50 “Securities Act” means the Securities Act of 1933, as amended.
          2.51 “Stock Appreciation Right” means the right pursuant to an award
granted under Section 7.3 to receive an amount equal to the excess, if any, of
(A) the Fair Market Value, as of the date such Stock Appreciation Right or
portion thereof is surrendered, of the shares of stock covered by such right or
such portion thereof, over (B) the aggregate SAR exercise price of such right or
such portion thereof.
          2.52 “Stock for Stock Exchange” has the meaning set forth in
Section 6.4.
          2.53 “Ten Percent Stockholder” means a person who owns (or is deemed
to own pursuant to Section 424(d) of the Code) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates.

  3.   Administration.

          3.1 Administration by Board. The Plan shall be administered by the
Board unless and until the Board delegates administration to a Committee, as
provided in Section 3.5.
          3.2 Powers of Administrator. The Administrator shall have the power
and authority to select and grant to Participants Awards pursuant to the terms
of the Plan.
          3.3 Specific Powers. In particular, the Administrator shall have the
authority: (a) to construe and interpret the Plan and apply its provisions;
(b) to promulgate, amend, and rescind rules and regulations relating to the
administration of the Plan; (c) to authorize any person to execute, on behalf of
the Company, any instrument required to carry out the purposes of the

 

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Plan; (d) to delegate its authority to one or more Officers of the Company with
respect to awards that do not involve Covered Employees or “insiders” within the
meaning of Section 16 of the Exchange Act; (e) to determine when Awards are to
be granted under the Plan and the applicable Date of Grant; (f) from time to
time to select, subject to the limitations set forth in this Plan, those
Participants to whom Awards shall be granted; (g) to determine the number of
shares of Common Stock to be made subject to each Award; (h) to determine
whether each Option is to be an Incentive Stock Option or a Nonstatutory Stock
Option; (i) to prescribe the terms and conditions of each Award, including,
without limitation, the exercise price and medium of payment, vesting provisions
and Right of Repurchase provisions, and to specify the provisions of the Award
Agreement relating to such grant or sale; (j) to amend any outstanding Awards,
including for the purpose of modifying the time or manner of vesting, or the
term of any outstanding Award; provided, however, that if any such amendment
impairs a Participant’s rights or increases a Participant’s obligations under
his or her Award or creates or increases a Participant’s federal income tax
liability with respect to an Award, such amendment shall also be subject to the
Participant’s consent; (k) to determine the duration and purpose of leaves of
absences which may be granted to a Participant without constituting termination
of their employment for purposes of the Plan, which periods shall be no shorter
than the periods generally applicable to Employees under the Company’s
employment policies; (l) to make decisions with respect to outstanding Awards
that may become necessary upon a change in corporate control or an event that
triggers anti-dilution adjustments; and (m) to exercise discretion to make any
and all other determinations which it determines to be necessary or advisable
for administration of the Plan. The Administrator also may modify the purchase
price or the exercise price of any outstanding Award, provided that if the
modification effects a repricing, stockholder approval shall be required before
the repricing is effective.
          3.4 Decisions Final. All decisions made by the Administrator pursuant
to the provisions of the Plan shall be final and binding on the Company and the
Participants, unless such decisions are determined by a court having
jurisdiction to be arbitrary and capricious.
          3.5 The Committee.
               (a) General. The Board may delegate administration of the Plan to
a Committee or Committees of one or more members of the Board, and the term
“Committee” shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board or the Administrator shall thereafter be to
the Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan. The members of the Committee shall be
appointed by and serve at the pleasure of the Board. From time to time, the
Board may increase or decrease the size of the Committee, add additional members
to, remove members (with or without cause) from, appoint new members in
substitution therefor, and fill vacancies, however caused, in the Committee. The
Committee shall act pursuant to a vote of the majority of its members or, in the
case of a committee comprised of only two members, the unanimous consent of its
members, whether present or not,

 

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or by the written consent of the majority of its members and minutes shall be
kept of all of its meetings and copies thereof shall be provided to the Board.
Subject to the limitations prescribed by the Plan and the Board, the Committee
may establish and follow such rules and regulations for the conduct of its
business as it may determine to be advisable.
               (b) Committee Composition when Common Stock is Registered. At
such time as the Common Stock is required to be registered under Section 12 of
the Exchange Act, in the discretion of the Board, a Committee may consist solely
of two or more Non-Employee Directors who are also Outside Directors. The Board
shall have discretion to determine whether or not it intends to comply with the
exemption requirements of Rule 16b-3 and/or Section 162(m) of the Code. However,
if the Board intends to satisfy such exemption requirements, with respect to
Awards to any Covered Employee and with respect to any insider subject to
Section 16 of the Exchange Act, the Committee shall be a compensation committee
of the Board that at all times consists solely of two or more Non-Employee
Directors who are also Outside Directors. Within the scope of such authority,
the Board or the Committee may (i) delegate to a committee of one or more
members of the Board who are not Outside Directors the authority to grant Awards
to eligible persons who are either (A) not then Covered Employees and are not
expected to be Covered Employees at the time of recognition of income resulting
from such Award or (B) not persons with respect to whom the Company wishes to
comply with Section 162(m) of the Code or (ii) delegate to a committee of one or
more members of the Board who are not Non-Employee Directors the authority to
grant Awards to eligible persons who are not then subject to Section 16 of the
Exchange Act. Nothing herein shall create an inference that an option is not
validly granted under the Plan in the event Awards are granted under the Plan by
a compensation committee of the Board that does not at all times consist solely
of two or more Non-Employee Directors who are also Outside Directors.
          3.6 Indemnification. In addition to such other rights of
indemnification as they may have as Directors or members of the Committee, and
to the extent allowed by applicable law, the Administrator shall be indemnified
by the Company against the reasonable expenses, including attorney’s fees,
actually incurred in connection with any action, suit or proceeding or in
connection with any appeal therein, to which the Administrator may be party by
reason of any action taken or failure to act under or in connection with the
Plan or any option granted under the Plan, and against all amounts paid by the
Administrator in settlement thereof (provided, however, that the settlement has
been approved by the Company, which approval shall not be unreasonably withheld)
or paid by the Administrator in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Administrator did not act
in good faith and in a manner which such person reasonably believed to be in the
best interests of the Company, and in the case of a criminal proceeding, had no
reason to believe that the conduct complained of was unlawful; provided,
however, that within 60 days after institution of any such action, suit or
proceeding, such Administrator shall, in writing, offer the Company the
opportunity at its own expense to handle and defend such action, suit or
proceeding.

  4.   Shares Subject to the Plan.

          Subject to adjustment in accordance with Section 12, the total number
of shares of Common Stock that shall be available for the grant of Awards under
the Plan shall not exceed

 

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1,100,000; provided, that, for purposes of this limitation, any Common Stock
subject to an Option or Award that is canceled, forfeited or expires prior to
exercise or realization shall again become available for issuance under the
Plan. Subject to adjustment in accordance with Section 12, no Participant shall
be granted, during any one (1) year period, Options to purchase Common Stock or
any other Awards with respect to more than 1,100,000 shares of Common Stock.
Stock available for distribution under the Plan shall be authorized and unissued
shares, treasury shares or shares reacquired by the Company in any manner.
Notwithstanding anything to the contrary contained herein: (i) shares tendered
in payment of an Option shall not be added to the aggregate plan limit described
above; (ii) shares withheld by the Company to satisfy any tax withholding
obligation shall not be added to the aggregate plan limit described above; and
(iii) all shares covered by a Stock Appreciation Right or other Awards, whether
or not shares of Common Stock are actually issued to the Participant upon
exercise or settlement of the Award, shall be considered issued or transferred
pursuant to the Plan. All shares reserved for issuance under the Plan may be
used for Incentive Stock Options. No fractional shares of Common Stock may be
issued.

  5.   Eligibility.

          5.1 Eligibility for Specific Awards. Incentive Stock Options may be
granted only to Employees. Awards other than Incentive Stock Options may be
granted to Employees, Directors and Consultants and those individuals whom the
Administrator determines are reasonably expected to become Employees, Directors
and Consultants following the Date of Grant.
          5.2 Ten Percent Stockholders. A Ten Percent Stockholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least 110% of the Fair Market Value of the Common Stock at the Date of Grant and
the Option is not exercisable after the expiration of five years from the Date
of Grant.
          5.3 Consultants. A Consultant shall not be eligible for the grant of
an Award if, at the time of grant, a Form S-8 Registration Statement under the
Securities Act (“Form S-8”) is not available to register either the offer or the
sale of the Company’s securities to such Consultant because of the nature of the
services that the Consultant is providing to the Company (i.e., capital
raising), or because the Consultant is not a natural person, or as otherwise
provided by the rules governing the use of Form S-8, unless the Company
determines both (i) that such grant (A) shall be registered in another manner
under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.
          5.4 Directors. Each Director of the Company shall be eligible to
receive discretionary grants of Awards under the Plan.

  6.   Option Provisions.

          Each Option shall be in such form and shall contain such terms and
conditions as the Administrator shall deem appropriate. All Options shall be
separately designated Incentive

 

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Stock Options or Nonstatutory Stock Options at the time of grant, and, if
certificates are issued, a separate certificate or certificates will be issued
for shares of Common Stock purchased on exercise of each type of Option.
Notwithstanding the foregoing, the Company shall have no liability to any
Participant or any other person if an Option designated as an Incentive Stock
Option fails to qualify as such at any time or if an Option is determined to
constitute “nonqualified deferred compensation” within the meaning of
Section 409A of the Code and the terms of such Option do not satisfy the
additional conditions applicable to nonqualified deferred compensation under
Section 409A of the Code and Section 8 of the Plan. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
          6.1 Term. Subject to the provisions of Section 5.2 regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of 10 years from the date it was granted.
          6.2 Exercise Price of an Incentive Stock Option. Subject to the
provisions of Section 5.2 regarding Ten Percent Stockholders, the exercise price
of each Incentive Stock Option shall be not less than 100% of the Fair Market
Value of the Common Stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, an Incentive Stock Option may be granted
with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the Code.
          6.3 Exercise Price of a Nonstatutory Stock Option. The exercise price
of each Nonstatutory Stock Option shall be not less than 100% of the Fair Market
Value of the Common Stock subject to the Option on the date the Option is
granted; provided, however, any Nonstatutory Stock Option may be granted with an
exercise price less than 100% of the Fair Market Value of the Common Stock
subject to the Option on the date the Option is granted if such Option satisfies
the additional conditions applicable to nonqualified deferred compensation under
Section 409A of the Code, in accordance with Section 6.13 and Section 8 hereof.
Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with
an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
          6.4 Consideration. The exercise price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (a) in cash or by certified or bank check at
the time the Option is exercised or (b) in the discretion of the Administrator,
upon such terms as the Administrator shall approve, the exercise price may be
paid: (i) by delivery to the Company of other Common Stock, duly endorsed for
transfer to the Company, with a Fair Market Value on the date of delivery equal
to the exercise price (or portion thereof) due for the number of shares being
acquired, or by means of attestation whereby the Participant identifies for
delivery specific shares of Common Stock that have a Fair Market Value on the
date of attestation equal to the exercise price (or portion thereof) and
receives a number of shares of Common Stock equal to the difference between the
number of shares thereby purchased and the number of identified attestation
shares of Common Stock (a “Stock for Stock

 

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Exchange”); (ii) a “cashless” exercise program established with a broker;
(iii) by reduction in the number of shares of Common Stock otherwise deliverable
upon exercise of such Option with a Fair Market Value equal to the aggregate
exercise price at the time of exercise, or (iv) in any other form of legal
consideration that may be acceptable to the Administrator. Unless otherwise
specifically provided in the Option, the purchase price of Common Stock acquired
pursuant to an Option that is paid by delivery (or attestation) to the Company
of other Common Stock acquired, directly or indirectly from the Company, shall
be paid only by shares of the Common Stock of the Company that have been held
for more than six months (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes). Notwithstanding
the foregoing, during any period for which the Common Stock is publicly traded
(i.e., the Common Stock is listed on any established stock exchange or a
national market system) an exercise by a Director or executive officer that
involves or may involve a direct or indirect extension of credit or arrangement
of an extension of credit by the Company, directly or indirectly, in violation
of Section 402(a) of the Sarbanes-Oxley Act (codified as Section 13(k) of the
Exchange Act) shall be prohibited with respect to any Award under this Plan.
          6.5 Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
          6.6 Transferability of a Nonstatutory Stock Option. A Nonstatutory
Stock Option may, in the sole discretion of the Administrator, be transferable
to a permitted transferee upon written approval by the Administrator to the
extent provided in the Option Agreement. A permitted transferee includes: (a) a
transfer by gift or domestic relations order to a member of the Optionholder’s
immediate family (child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships), any person sharing the Optionholder’s household (other
than a tenant or employee), a trust in which these persons have more than 50% of
the beneficial interest, a foundation in which these persons (or the
Optionholder) control the management of assets, and any other entity in which
these persons (or the Optionholder) own more than 50% of the voting interests;
(b) third parties designated by the Administrator in connection with a program
established and approved by the Administrator pursuant to which Participants may
receive a cash payment or other consideration in consideration for the transfer
of such Nonstatutory Stock Option; and (c) such other transferees as may be
permitted by the Administrator in its sole discretion. If the Nonstatutory Stock
Option does not provide for transferability, then the Nonstatutory Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
          6.7 Vesting Generally. The Option may, but need not, vest and
therefore become exercisable in periodic installments that may, but need not, be
equal. The Option may be

 

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subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the
Administrator may deem appropriate. The vesting provisions of individual Options
may vary. No Option may be exercised for a fraction of a share of Common Stock.
The Administrator may, but shall not be required to, provide for an acceleration
of vesting and exercisability in the terms of any Option Agreement upon the
occurrence of a specified event.
          6.8 Termination of Continuous Service. Unless otherwise provided in an
Option Agreement or in an employment agreement the terms of which have been
approved by the Administrator, in the event an Optionholder’s Continuous Service
terminates (other than upon the Optionholder’s death or Disability or
termination by the Company for Cause), the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such Option
as of the date of termination) but only within such period of time ending on the
earlier of (a) the date three months following the termination of the
Optionholder’s Continuous Service, or (b) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate. Unless otherwise provided in
an Option Agreement or in an employment agreement the terms of which have been
approved by the Administrator, or as otherwise provided in Sections 6.10 and
6.11 of this Plan, outstanding Options that are not exercisable at the time an
Optionholder’s Continuous Service terminates for any reason other than for Cause
(including an Optionholder’s death or Disability) shall be forfeited and expire
at the close of business on the date of such termination. Unless otherwise
provided in an Option Agreement or in an employment agreement the terms of which
have been approved by the Administrator, if the Optionholder’s Continuous
Service terminates for Cause, all outstanding Options shall be forfeited
(whether or not vested) and expire as of the beginning of business on the date
of such termination for Cause.
          6.9 Extension of Termination Date. An Optionholder’s Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder’s Continuous Service for any reason would be prohibited at any
time because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act or any other state or federal
securities law or the rules of any securities exchange or interdealer quotation
system, then the Option shall terminate on the earlier of (a) the expiration of
the term of the Option in accordance with Section 6.1 or (b) the expiration of a
period after termination of the Participant’s Continuous Service that is three
months after the end of the period during which the exercise of the Option would
be in violation of such registration or other securities law requirements.
          6.10 Disability of Optionholder. Unless otherwise provided in an
Option Agreement, in the event that an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s Disability, the Optionholder may
exercise his or her Option (to the extent that the Optionholder was entitled to
exercise such Option as of the date of termination), but only within such period
of time ending on the earlier of (a) the date 12 months following such
termination or (b) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified herein, the Option shall terminate.

 

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          6.11 Death of Optionholder. Unless otherwise provided in an Option
Agreement, in the event an Optionholder’s Continuous Service terminates as a
result of the Optionholder’s death, then the Option may be exercised (to the
extent the Optionholder was entitled to exercise such Option as of the date of
death) by the Optionholder’s estate, by a person who acquired the right to
exercise the Option by bequest or inheritance or by a person designated to
exercise the Option upon the Optionholder’s death, but only within the period
ending on the earlier of (a) the date 12 months following the date of death or
(b) the expiration of the term of such Option as set forth in the Option
Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
          6.12 Incentive Stock Option $100,000 Limitation. To the extent that
the aggregate Fair Market Value (determined at the time of grant) of Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all plans of the
Company and its Affiliates) exceeds $100,000, the Options or portions thereof
which exceed such limit (according to the order in which they were granted)
shall be treated as Nonstatutory Stock Options.
          6.13 Additional Requirements Under Section 409A. Each Option Agreement
shall include a provision whereby, notwithstanding any provision of the Plan or
the Option Agreement to the contrary, the Option shall satisfy the additional
conditions applicable to nonqualified deferred compensation under Section 409A
of the Code, in accordance with Section 8 hereof, in the event any Option under
this Plan is granted with an exercise price less than Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted (regardless
of whether or not such exercise price is intentionally or unintentionally priced
at less than Fair Market Value, or is materially modified at a time when the
Fair Market Value exceeds the exercise price), or is otherwise determined to
constitute “nonqualified deferred compensation” within the meaning of
Section 409A of the Code.

  7.   Provisions of Awards Other Than Options.

          7.1 Restricted Awards
               (a) General.
               A Restricted Award is an Award of actual shares of Common Stock
(“Restricted Stock”) or hypothetical Common Stock units (“Restricted Stock
Units”) having a value equal to the Fair Market Value of an identical number of
shares of Common Stock, which may, but need not, provide that such Restricted
Award may not be sold, assigned, transferred or otherwise disposed of, pledged
or hypothecated as collateral for a loan or as security for the performance of
any obligation or for any other purpose for such period (the “Restricted
Period”) as the Administrator shall determine.
               (b) Restricted Stock and Restricted Stock Units.
                    (i) Each Participant granted Restricted Stock shall execute
and deliver to the Company an Award agreement with respect to the Restricted
Stock setting forth the restrictions and other terms and conditions applicable
to such Restricted Stock. If the

 

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Administrator determines that the Restricted Stock shall be held by the Company
or in escrow rather than delivered to the Participant pending the release of the
applicable restrictions, the Administrator may require the Participant to
additionally execute and deliver to the Company (a) an escrow agreement
satisfactory to the Administrator, if applicable and (b) the appropriate blank
stock power with respect to the Restricted Stock covered by such agreement. If a
Participant shall fail to execute an agreement evidencing an Award of Restricted
Stock and, if applicable, an escrow agreement and stock power, the Award shall
be null and void. Subject to the restrictions set forth in the Award, the
Participant generally shall have the rights and privileges of a stockholder as
to such Restricted Stock, including the right to vote such Restricted Stock. At
the discretion of the Administrator, cash dividends and stock dividends with
respect to the Restricted Stock may be either currently paid to the Participant
or withheld by the Company for the Participant’s account, and interest may be
credited on the amount of the cash dividends withheld at a rate and subject to
such terms as determined by the Administrator. The cash dividends or stock
dividends so withheld by the Administrator and attributable to any particular
share of Restricted Stock (and earnings thereon, if applicable) shall be
distributed to the Participant in cash or, at the discretion of the
Administrator, in shares of Common Stock having a Fair Market Value equal to the
amount of such dividends, if applicable, upon the release of restrictions on
such share and, if such share is forfeited, the Participant shall have no right
to such dividends.
                    (ii) The terms and conditions of a grant of Restricted Stock
Units shall be reflected in a written Award Agreement. No shares of Common Stock
shall be issued at the time a Restricted Stock Unit is granted, and the Company
will not be required to set aside a fund for the payment of any such Award. At
the discretion of the Administrator, each Restricted Stock Unit (representing
one share of Common Stock) may be credited with cash and stock dividends paid by
the Company in respect of one share of Common Stock (“Dividend Equivalents”). At
the discretion of the Administrator, Dividend Equivalents may be either
currently paid to the Participant or withheld by the Company for the
Participant’s account, and interest may be credited on the amount of cash
Dividend Equivalents withheld at a rate and subject to such terms as determined
by the Administrator. Dividend Equivalents credited to a Participant’s account
and attributable to any particular Restricted Stock Unit (and earnings thereon,
if applicable) shall be distributed in cash or, at the discretion of the
Administrator, in shares of Common Stock having a Fair Market Value equal to the
amount of such Dividend Equivalents and earnings, if applicable, to the
Participant upon settlement of such Restricted Stock Unit and, if such
Restricted Stock Unit is forfeited, the Participant shall have no right to such
Dividends Equivalents.
               (c) Restrictions.
                    (i) Restricted Stock awarded to a Participant shall be
subject to the following restrictions until the expiration of the Restricted
Period, and to such other terms and conditions as may be set forth in the
applicable Award Agreement: (A) if an escrow arrangement is used, the
Participant shall not be entitled to delivery of the stock certificate; (B) the
shares shall be subject to the restrictions on transferability set forth in the
Award Agreement; (C) the shares shall be subject to forfeiture to the extent
provided in the applicable Award Agreement; and (D) to the extent such shares
are forfeited, the stock certificates shall be returned to the Company, and all
rights of the Participant to such shares and as a shareholder with respect to
such shares shall terminate without further obligation on the part of the
Company.

 

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                    (ii) Restricted Stock Units awarded to any Participant shall
be subject to (A) forfeiture until the expiration of the Restricted Period, and
satisfaction of any applicable Performance Goals during such period, to the
extent provided in the applicable Award Agreement, and to the extent such
Restricted Stock Units are forfeited, all rights of the Participant to such
Restricted Stock Units shall terminate without further obligation on the part of
the Company and (B) such other terms and conditions as may be set forth in the
applicable Award Agreement.
                    (iii) The Administrator shall have the authority to remove
any or all of the restrictions on the Restricted Stock and Restricted Stock
Units whenever it may determine that, by reason of changes in applicable laws or
other changes in circumstances arising after the date of the Restricted Stock or
Restricted Stock Units are granted, such action is appropriate.
               (d) Restricted Period. With respect to Restricted Stock and
Restricted Stock Units, the Restricted Period shall commence on the Date of
Grant and end at the time or times set forth on a schedule established by the
Administrator in the applicable Award agreement.
               (e) Delivery of Restricted Stock and Settlement of Restricted
Stock Units. Upon the expiration of the Restricted Period with respect to any
shares of Restricted Stock, the restrictions set forth in Section 7.1(c) and the
applicable Award Agreement shall be of no further force or effect with respect
to such shares, except as set forth in the applicable Award Agreement. If an
escrow arrangement is used, upon such expiration, the Company shall deliver to
the Participant, or his beneficiary, without charge, the stock certificate
evidencing the shares of Restricted Stock which have not then been forfeited and
with respect to which the Restricted Period has expired (to the nearest full
share) and any cash dividends or stock dividends credited to the Participant’s
account with respect to such Restricted Stock and the interest thereon, if any.
Upon the expiration of the Restricted Period with respect to any outstanding
Restricted Stock Units, the Company shall deliver to the Participant, or his
beneficiary, without charge, one share of Common Stock for each such outstanding
Restricted Stock Unit (“Vested Unit”) and cash equal to any Dividend Equivalents
credited with respect to each such Vested Unit in accordance with Section
7.1(b)(ii) hereof and the interest thereon or, at the discretion of the
Administrator, in shares of Common Stock having a Fair Market Value equal to
such Dividend Equivalents interest thereon, if any; provided, however, that, if
explicitly provided in the applicable Award Agreement, the Administrator may, in
its sole discretion, elect to pay cash or part cash and part Common Stock in
lieu of delivering only shares of Common Stock for Vested Units. If a cash
payment is made in lieu of delivering shares of Common Stock, the amount of such
payment shall be equal to the Fair Market Value of the Common Stock as of the
date on which the Restricted Period lapsed with respect to such Vested Unit.
               (f) Stock Restrictions. Each certificate representing Restricted
Stock awarded under the Plan shall bear a legend in the form of the Company
deems appropriate.
          7.2 Performance Compensation Awards.

 

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               (a) General. The Administrator shall have the authority, at the
time of grant of any Award described in this Plan (other than Options and Stock
Appreciation Rights granted with an exercise price or grant price, as the case
may be, equal to or greater than the Fair Market Value per share of Stock on the
date of grant), to designate such Award as a Performance Compensation Award in
order to qualify such Award as “performance-based compensation” under Section
162(m) of the Code. In addition, the Administrator shall have the authority to
make an award of a cash bonus to any Participant and designate such Award as a
Performance Compensation Award in order to qualify such Award as
“performance-based compensation” under Section 162(m).
               (b) Eligibility. The Administrator will, in its sole discretion,
designate within the first 90 days of a Performance Period (or, if longer or
shorter, within the maximum period allowed under Section 162(m) of the Code)
which Participants will be eligible to receive Performance Compensation Awards
in respect of such Performance Period. However, designation of a Participant
eligible to receive an Award hereunder for a Performance Period shall not in any
manner entitle the Participant to receive payment in respect of any Performance
Compensation Award for such Performance Period. The determination as to whether
or not such Participant becomes entitled to payment in respect of any
Performance Compensation Award shall be decided solely in accordance with the
provisions of this Section 7.2. Moreover, designation of a Participant eligible
to receive an Award hereunder for a particular Performance Period shall not
require designation of such Participant eligible to receive an Award hereunder
in any subsequent Performance Period and designation of one person as a
Participant eligible to receive an Award hereunder shall not require designation
of any other person as a Participant eligible to receive an Award hereunder in
such period or in any other period.
               (c) Discretion of Administrator with Respect to Performance
Compensation Awards. With regard to a particular Performance Period, the
Administrator shall have full discretion to select the length of such
Performance Period (provided any such Performance Period shall be not less than
one (1) year in duration), the type(s) of Performance Compensation Awards to be
issued, the Performance Criteria that will be used to establish the Performance
Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) that is
(are) to apply to the Company and the Performance Formula. Within the first
90 days of a Performance Period (or, if longer or shorter, within the maximum
period allowed under Section 162(m) of the Code), the Administrator shall, with
regard to the Performance Compensation Awards to be issued for such Performance
Period, exercise its discretion with respect to each of the matters enumerated
in the immediately preceding sentence of this Section 7.2(c) and record the same
in writing.
               (d) Payment of Performance Compensation Awards.
                    (i) Condition to Receipt of Payment. Unless otherwise
provided in the applicable Award Agreement, a Participant must be employed by
the Company on the last day of a Performance Period to be eligible for payment
in respect of a Performance Compensation Award for such Performance Period.
                    (ii) Limitation. A Participant shall be eligible to receive
payment in respect of a Performance Compensation Award only to the extent that:
(A) the Performance

 

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Goals for such period are achieved; and (B) the Performance Formula as applied
against such Performance Goals determines that all or some portion of such
Participant’s Performance Compensation Award has been earned for the Performance
Period.
                    (iii) Certification. Following the completion of a
Performance Period, the Administrator shall review and certify in writing
whether, and to what extent, the Performance Goals for the Performance Period
have been achieved and, if so, calculate and certify in writing that amount of
the Performance Compensation Awards earned for the period based upon the
Performance Formula. The Administrator shall then determine the actual size of
each Participant’s Performance Compensation Award for the Performance Period
and, in so doing, may apply Negative Discretion in accordance with
Section 7.1(d)(iv) hereof, if and when it deems appropriate.
                    (iv) Use of Discretion. In determining the actual size of an
individual Performance Compensation Award for a Performance Period, the
Administrator may reduce or eliminate the amount of the Performance Compensation
Award earned under the Performance Formula in the Performance Period through the
use of Negative Discretion if, in its sole judgment, such reduction or
elimination is appropriate. The Administrator shall not have the discretion to
(a) grant or provide payment in respect of Performance Compensation Awards for a
Performance Period if the Performance Goals for such Performance Period have not
been attained; or (b) increase a Performance Compensation Award above the
maximum amount payable under Section 7.2(d)(vi) of the Plan.
                    (v) Timing of Award Payments. Performance Compensation
Awards granted for a Performance Period shall be paid to Participants as soon as
administratively practicable following completion of the certifications required
by this Section 7.2.
                    (vi) Maximum Award Payable. Notwithstanding any provision
contained in this Plan to the contrary, the maximum Performance Compensation
Award payable to any one Participant under the Plan for a Performance Period is
1,100,000 shares of Common Stock or, in the event such Performance Compensation
Award is paid in cash, the equivalent cash value thereof on the first or last
day of the Performance Period to which such Award relates, as determined by the
Administrator. The maximum amount that can be paid in any calendar year to any
Participant pursuant to a cash bonus Award described in the last sentence of
Section 7.1(a) shall be $10,000,000. Furthermore, any Performance Compensation
Award that has been deferred shall not (between the date as of which the Award
is deferred and the payment date) increase (A) with respect to Performance
Compensation Award that is payable in cash, by a measuring factor for each
fiscal year greater than a reasonable rate of interest set by the Administrator
or (B) with respect to a Performance Compensation Award that is payable in
shares of Common Stock, by an amount greater than the appreciation of a share of
Common Stock from the date such Award is deferred to the payment date.
          7.3 Stock Appreciation Rights.
               (a) General. Stock Appreciation Rights may be granted either
alone (“Free Standing Rights”) or, provided the requirements of Section 7.3(b)
are satisfied, in

 

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tandem with all or part of any Option granted under the Plan (“Related Rights”).
In the case of a Nonstatutory Stock Option, Related Rights may be granted either
at or after the time of the grant of such Option. In the case of an Incentive
Stock Option, Related Rights may be granted only at the time of the grant of the
Incentive Stock Option.
               (b) Grant Requirements. A Stock Appreciation Right may only be
granted if the Stock Appreciation Right: (i) does not provide for the deferral
of compensation within the meaning of Section 409A of the Code; or
(ii) satisfies the requirements of Section 7.3(h) and Section 8 hereof. A Stock
Appreciation Right does not provide for a deferral of compensation if: (A) the
value of the Common Stock the excess over which the right provides for payment
upon exercise (the “SAR exercise price”) may never be less than the Fair Market
Value of the underlying Common Stock on the date the right is granted, (B) the
compensation payable under the Stock Appreciation Right can never be greater
than the difference between the SAR exercise price and the Fair Market Value of
the Common Stock on the date the Stock Appreciation Right is exercised, (C) the
number of shares of Common Stock subject to the Stock Appreciation Right must be
fixed on the date of grant of the Stock Appreciation Right, and (D) the right
does not include any feature for the deferral of compensation other than the
deferral of recognition of income until the exercise of the right.
               (c) Exercise and Payment. Upon exercise thereof, the holder of a
Stock Appreciation Right shall be entitled to receive from the Company, an
amount equal to the product of (i) the excess of the Fair Market Value, on the
date of such written request, of one share of Common Stock over the SAR exercise
price per share specified in such Stock Appreciation Right or its related
Option, multiplied by (ii) the number of shares for which such Stock
Appreciation Right shall be exercised. Payment with respect to the exercise of a
Stock Appreciation Right that satisfies the requirements of Section 7.3(b)(i)
shall be paid on the date of exercise and made in shares of Common Stock (with
or without restrictions as to substantial risk of forfeiture and
transferability, as determined by the Administrator in its sole discretion),
valued at Fair Market Value on the date of exercise. Payment with respect to the
exercise of a Stock Appreciation Right that does not satisfy the requirements of
Section 7.3(b)(i) shall be paid at the time specified in the Award in accordance
with the provisions of Section 7.3(h) and Section 8. Payment may be made in the
form of shares of Common Stock (with or without restrictions as to substantial
risk of forfeiture and transferability, as determined by the Administrator in
its sole discretion), cash or a combination thereof, as determined by the
Administrator.
               (d) Exercise Price. The exercise price of a Free Standing Stock
Appreciation Right shall be determined by the Administrator, but shall not be
less than 100% of the Fair Market Value of one share of Common Stock on the Date
of Grant of such Stock Appreciation Right. A Related Right granted
simultaneously with or subsequent to the grant of an Option and in conjunction
therewith or in the alternative thereto shall have the same exercise price as
the related Option, shall be transferable only upon the same terms and
conditions as the related Option, and shall be exercisable only to the same
extent as the related Option; provided, however, that a Stock Appreciation
Right, by its terms, shall be exercisable only when the Fair Market Value per
share of Common Stock subject to the Stock Appreciation Right and related Option
exceeds the exercise price per share thereof and no Stock Appreciation Rights
may be granted in tandem with an Option unless the Administrator determines that
the requirements of Section 7.3(b)(i) are satisfied.

 

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               (e) Reduction in the Underlying Option Shares. Upon any exercise
of a Stock Appreciation Right, the number of shares of Common Stock for which
any related Option shall be exercisable shall be reduced by the number of shares
for which the Stock Appreciation Right shall have been exercised. The number of
shares of Common Stock for which a Stock Appreciation Right shall be exercisable
shall be reduced upon any exercise of any related Option by the number of shares
of Common Stock for which such Option shall have been exercised.
               (f) Written Request. Unless otherwise determined by the
Administrator in its sole discretion and only if permitted in the Stock
Appreciation Right’s Award Agreement, any exercise of a Stock Appreciation Right
for cash, may be made only by a written request filed with the Corporate
Secretary of the Company. Within 30 days of the receipt by the Company of a
written request to receive cash in full or partial settlement of a Stock
Appreciation Right or to exercise such Stock Appreciation Right for cash, the
Administrator shall, in its sole discretion, either consent to or disapprove, in
whole or in part, such written request. A written request to receive cash in
full or partial settlement of a Stock Appreciation Right or to exercise a Stock
Appreciation Right for cash may provide that, in the event the Administrator
shall disapprove such written request, such written request shall be deemed to
be an exercise of such Stock Appreciation Right for shares of Common Stock.
               (g) Disapproval by Administrator. If the Administrator
disapproves in whole or in part any election by a Participant to receive cash in
full or partial settlement of a Stock Appreciation Right or to exercise such
Stock Appreciation Right for cash, such disapproval shall not affect such
Participant’s right to exercise such Stock Appreciation Right at a later date,
to the extent that such Stock Appreciation Right shall be otherwise exercisable,
or to elect the form of payment at a later date, provided that an election to
receive cash upon such later exercise shall be subject to the approval of the
Administrator. Additionally, such disapproval shall not affect such
Participant’s right to exercise any related Option.
               (h) Additional Requirements under Section 409A. A Stock
Appreciation Right that is not intended to or fails to satisfy the requirements
of Section 7.3(b)(i) shall satisfy the requirements of this Section 7.3(h) and
the additional conditions applicable to nonqualified deferred compensation under
Section 409A of the Code, in accordance with Section 8 hereof. The requirements
herein shall apply in the event any Stock Appreciation Right under this Plan is
granted with an SAR exercise price less than Fair Market Value of the Common
Stock underlying the Award on the date the Stock Appreciation Right is granted
(regardless of whether or not such SAR exercise price is intentionally or
unintentionally priced at less than Fair Market Value, or is materially modified
at a time when the Fair Market Value exceeds the SAR exercise price), provides
that it is settled in cash, or is otherwise determined to constitute
“nonqualified deferred compensation” within the meaning of Section 409A of the
Code. Any such Stock Appreciation Right may provide that it is exercisable at
any time permitted under the governing written instrument, but such exercise
shall be limited to fixing the measurement of the amount, if any, by which the
Fair Market Value of a share of Common Stock on the date of exercise exceeds the
SAR exercise price (the “SAR Amount”). However, once the Stock Appreciation
Right is exercised, the SAR Amount may only be paid on the fixed time, payment
schedule or other event specified in the governing written instrument or in
Section 8.1 hereof.

 

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  8.   Additional Conditions Applicable to Nonqualified Deferred Compensation
Under Section 409A of the Code.

          In the event any Award under this Plan is granted with an exercise
price less than Fair Market Value of the Common Stock subject to the Award on
the Date of Grant (regardless of whether or not such exercise price is
intentionally or unintentionally priced at less than Fair Market Value, or such
Award is materially modified and deemed a new Award at a time when the Fair
Market Value exceeds the exercise price), or is otherwise determined to
constitute a 409A Award, the following additional conditions shall apply and
shall supersede any contrary provisions of this Plan or the terms of any 409A
Award agreement.
          8.1 Exercise and Distribution. No 409A Award shall be exercisable or
distributable earlier than upon one of the following:
               (a) Specified Time. A specified time or a fixed schedule set
forth in the written instrument evidencing the 409A Award, but not later than
after the expiration of 10 years from the Date of Grant. If the written grant
instrument does not specify a fixed time or schedule, such time shall be the
date that is the fifth anniversary of the Date of Grant.
               (b) Separation from Service. Separation from service (within the
meaning of Section 409A of the Code) by the 409A Award recipient; provided,
however, if the 409A Award recipient is a “key employee” (as defined in Section
416(i) of the Code without regard to paragraph (5) thereof) and any of the
Company’s stock is publicly traded on an established securities market or
otherwise, exercise or distribution under this Section 8.1(b) may not be made
before the date which is six months after the date of separation from service.
               (c) Death. The date of death of the 409A Award recipient.
               (d) Disability. The date the 409A Award recipient becomes
disabled (within the meaning of Section 8.4(b) hereof).
               (e) Unforeseeable Emergency. The occurrence of an unforeseeable
emergency (within the meaning of Section 8.4(c) hereof), but only if the net
value (after payment of the exercise price) of the number of shares of Common
Stock that become issuable does not exceed the amounts necessary to satisfy such
emergency plus amounts necessary to pay taxes reasonably anticipated as a result
of the exercise, after taking into account the extent to which the emergency is
or may be relieved through reimbursement or compensation by insurance or
otherwise or by liquidation of the Participant’s other assets (to the extent
such liquidation would not itself cause severe financial hardship).
               (f) Change in Control Event. The occurrence of a Change in
Control Event (within the meaning of Section 8.4(a) hereof), including the
Company’s discretionary exercise of the right to accelerate vesting of such
Award upon a Change in Control Event or to terminate the Plan or any 409A Award
granted hereunder within 12 months of the Change in Control Event.

 

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          8.2 Term. Notwithstanding anything to the contrary in this Plan or the
terms of any 409A Award agreement, the term of any 409A Award shall expire and
such Award shall no longer be exercisable on the date that is the later of:
(a) 2-1/2 months after the end of the Company’s taxable year in which the 409A
Award first becomes exercisable or distributable pursuant to this Section 8 and
is not subject to a substantial risk of forfeiture; or (b) 2-1/2 months after
the end of the 409A Award recipient’s taxable year in which the 409A Award first
becomes exercisable or distributable pursuant to this Section 8 and is not
subject to a substantial risk of forfeiture, but not later than the earlier of
(i) the expiration of 10 years from the date the 409A Award was granted, or
(ii) the term specified in the 409A Award agreement.
          8.3 No Acceleration. A 409A Award may not be accelerated or exercised
prior to the time specified in this Section 8, except in the case of one of the
following events:
               (a) Domestic Relations Order. The 409A Award may permit the
acceleration of the exercise or distribution time or schedule to an individual
other than the Participant as may be necessary to comply with the terms of a
domestic relations order (as defined in Section 414(p)(1)(B) of the Code).
               (b) Conflicts of Interest. The 409A Award may permit the
acceleration of the exercise or distribution time or schedule as may be
necessary to comply with the terms of a certificate of divestiture (as defined
in Section 1043(b)(2) of the Code).
               (c) Change in Control Event. The Administrator may exercise the
discretionary right to accelerate the vesting of such 409A Award upon a Change
in Control Event or to terminate the Plan or any 409A Award granted thereunder
within 12 months of the Change in Control Event and cancel the 409A Award for
compensation. In addition, the Administrator may exercise the discretionary
right to accelerate the vesting of such 409A Award provided that such
acceleration does not change the time or schedule of payment of such Award and
otherwise satisfies the requirements of this Section 8 and the requirements of
Section 409A of the Code.
          8.4 Definitions. Solely for purposes of this Section 8 and not for
other purposes of the Plan, the following terms shall be defined as set forth
below:
               (a) “Change in Control Event” means the occurrence of a change in
the ownership of the Company, a change in effective control of the Company, or a
change in the ownership of a substantial portion of the assets of the Company
(as defined in Proposed Regulations § 1.409A-3(g)(5) and any subsequent guidance
interpreting Code Section 409A).
               (b) “Disabled” means a Participant (i) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, or (ii) is, by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, receiving income replacement benefits for a period
of not less than three months under an accident and health plan covering
Employees.

 

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               (c) “Unforeseeable Emergency” means a severe financial hardship
to the Participant resulting from an illness or accident of the Participant, the
Participant’s spouse, or a dependent (as defined in Section 152(a) of the Code)
of the Participant, loss of the Participant’s property due to casualty, or
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant.

  9.   Covenants of the Company.

          9.1 Availability of Shares. During the terms of the Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Awards.
          9.2 Securities Law Compliance. Each Option Agreement and Award
Agreement shall provide that no shares of Common Stock shall be purchased or
sold thereunder unless and until (a) any then applicable requirements of state
or federal laws and regulatory agencies shall have been fully complied with to
the satisfaction of the Company and its counsel and (b) if required to do so by
the Company, the Participant shall have executed and delivered to the Company a
letter of investment intent in such form and containing such provisions as the
Administrator may require. The Company shall use reasonable efforts to seek to
obtain from each regulatory commission or agency having jurisdiction over the
Plan such authority as may be required to grant Awards and to issue and sell
shares of Common Stock upon exercise of the Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Award or any Common Stock issued or issuable pursuant to any such
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of Common Stock under the Plan,
the Company shall be relieved from any liability for failure to issue and sell
Common Stock upon exercise of such Awards unless and until such authority is
obtained.

  10.   Use of Proceeds from Stock.

          Proceeds from the sale of Common Stock pursuant to Awards, or upon
exercise thereof, shall constitute general funds of the Company.

  11.   Miscellaneous.

          11.1 Acceleration of Exercisability and Vesting. The Administrator
shall have the power to accelerate the time at which an Award may first be
exercised or the time during which an Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Award stating
the time at which it may first be exercised or the time during which it will
vest.
          11.2 Stockholder Rights. Except as provided in the Plan or an Award
Agreement, no Participant shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to
such Award unless and until such Participant has satisfied all requirements for
exercise of the Award pursuant to its terms and no adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or

 

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other property) or distributions of other rights for which the record date is
prior to the date such Common Stock certificate is issued, except as provided in
Section 12 hereof.
          11.3 No Employment or Other Service Rights. Nothing in the Plan or any
instrument executed or Award granted pursuant thereto shall confer upon any
Participant any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Award was granted or shall affect the right
of the Company or an Affiliate to terminate (a) the employment of an Employee
with or without notice and with or without Cause, (b) the service of a
Consultant pursuant to the terms of such Consultant’s agreement with the Company
or an Affiliate or (c) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
          11.4 Transfer, Approved Leave of Absence. For purposes of the Plan, no
termination of employment by an Employee shall be deemed to result from either
(a) a transfer to the employment of the Company from an Affiliate or from the
Company to an Affiliate, or from one Affiliate to another; or (b) an approved
leave of absence for military service or sickness, or for any other purpose
approved by the Company, if the Employee’s right to re-employment is guaranteed
either by a statute or by contract or under the policy pursuant to which the
leave of absence was granted or if the Administrator otherwise so provides in
writing.
          11.5 Investment Assurances. The Company may require a Participant, as
a condition of exercising or acquiring Common Stock under any Award (a) to give
written assurances satisfactory to the Company as to the Participant’s knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Award; and (b) to give written assurances satisfactory
to the Company stating that the Participant is acquiring Common Stock subject to
the Award for the Participant’s own account and not with any present intention
of selling or otherwise distributing the Common Stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares of Common Stock upon the exercise
or acquisition of Common Stock under the Award has been registered under a then
currently effective registration statement under the Securities Act or (ii) as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the Common Stock.
          11.6 Withholding Obligations. To the extent provided by the terms of
an Award Agreement and subject to the discretion of the Administrator, the
Participant may satisfy any federal, state or local tax withholding obligation
relating to the exercise or acquisition of Common Stock under an Award by any of
the following means (in addition to the Company’s right to withhold from any
compensation paid to the Participant by the Company) or by a combination of such
means: (a) tendering a cash payment; (b) authorizing the Company to withhold
shares of Common Stock from the shares of Common Stock otherwise issuable to the

 

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Participant as a result of the exercise or acquisition of Common Stock under the
Award, provided, however, that no shares of Common Stock are withheld with a
value exceeding the minimum amount of tax required to be withheld by law; or
(c) delivering to the Company previously owned and unencumbered shares of Common
Stock of the Company.

  12.   Adjustments Upon Changes in Stock.

          Awards granted under the Plan and any agreements evidencing such
Awards, the maximum number of shares of Common Stock subject to all Awards
stated in Section 4 and the maximum number of shares of Common Stock with
respect to which any one person may be granted Awards during any period stated
in Section 4 and Section 7.2(d)(vi) will be equitably adjusted or substituted,
as to the number, price or kind of a share of Common Stock or other
consideration subject to such Awards to the extent necessary to preserve the
economic intent of such Award in the event of changes in the outstanding Common
Stock or in the capital structure of the Company by reason of stock or
extraordinary cash dividends, stock splits, reverse stock splits,
recapitalization, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the Date
of Grant of any such Award. Any adjustment in Incentive Stock Options under this
Section 12 shall be made only to the extent not constituting a “modification”
within the meaning of Section 424(h)(3) of the Code, and any adjustments under
this Section 12 shall be made in a manner which does not adversely affect the
exemption provided pursuant to Rule 16b-3 under the Exchange Act or otherwise
result in a violation of Section 409A of the Code. Further, with respect to
Awards intended to qualify as “performance-based compensation” under Section
162(m) of the Code, such adjustments or substitutions shall be made only to the
extent that the Administrator determines that such adjustments or substitutions
may be made without causing the Company to be denied a tax deduction on account
of Section 162(m) of the Code. The Company shall give each Participant notice of
an adjustment hereunder and, upon notice, such adjustment shall be conclusive
and binding for all purposes. Notwithstanding the above, in the event of any of
the following: (i) the Company is merged or consolidated with another
corporation or entity and, in connection therewith, consideration is received by
shareholders of the Company in a form other than stock or other equity interests
of the surviving entity or outstanding Awards are not to be assumed upon
consummation of the proposed transaction; (ii) all or substantially all of the
assets of the Company are acquired by another person; (iii) the reorganization
or liquidation of the Company; or (iv) the Company shall enter into a written
agreement to undergo an event described in clause (i), (ii) or (iii) above, then
the Administrator may, in its discretion and upon at least 10 days’ advance
notice to the affected persons, cancel any outstanding Awards and cause the
holders thereof to be paid, in cash or stock, or any combination thereof, the
value of such Awards based upon the price per share of Common Stock received or
to be received by other shareholders of the Company in the event. The terms of
this Section 12 may be varied by the Administrator in any particular Award
agreement.

  13.   Effect of Change in Control

          13.1 Unless otherwise provided in an Award Agreement:
               (a) In the event of a Change in Control, notwithstanding any
provision of the Plan or any applicable Award Agreement to the contrary, and
either in or not in

 

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combination with another event such as a termination of the applicable
Participant’s Continuous Service by the Company without Cause, all Options and
Stock Appreciation Rights subject to such Award shall become immediately
exercisable with respect to 100 percent of the shares subject to such Option or
Stock Appreciation Rights, and/or that the Restricted Period shall expire
immediately with respect to 100 percent of such shares of Restricted Stock or
Restricted Stock Units subject to such Award (including a waiver of any
applicable Performance Goals) and, to the extent practicable, such acceleration
of exercisability and expiration of the Restricted Period (as applicable) shall
occur in a manner and at a time which allows affected Participants the ability
to participate in the Change in Control transaction with respect to the Common
Stock subject to their Awards.
               (b) In the event of a Change in Control, all incomplete
Performance Periods in respect of such Award in effect on the date the Change in
Control occurs shall end on the date of such change, and the Administrator shall
(A) determine the extent to which Performance Goals with respect to each such
Award Period have been met based upon such audited or unaudited financial
information then available as it deems relevant, (B) cause to be paid to the
applicable Participant partial or full Awards with respect to Performance Goals
for each such Award Period based upon the Administrator’s determination of the
degree of attainment of Performance Goals, and (C) cause the Award, if
previously deferred, to be settled in full as soon as possible.
          13.2 In addition, in the event of a Change in Control, the
Administrator may in its discretion and upon at least 10 days’ advance notice to
the affected persons, cancel any outstanding Awards and pay to the holders
thereof, in cash or stock, or any combination thereof, the value of such Awards
based upon the price per share of Common Stock received or to be received by
other shareholders of the Company in the event.
          13.3 The obligations of the Company under the Plan shall be binding
upon any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any successor
corporation or organization succeeding to all or substantially all of the assets
and business of the Company and its Affiliates, taken as a whole.

  14.   Amendment of the Plan and Awards.

          14.1 Amendment of Plan. The Board at any time, and from time to time,
may amend or terminate the Plan. However, except as provided in Section 12
relating to adjustments upon changes in Common Stock and Section 14.3, no
amendment shall be effective unless approved by the stockholders of the Company
to the extent stockholder approval is necessary to satisfy any applicable law or
securities exchange listing requirements. At the time of such amendment, the
Board shall determine, upon advice from counsel, whether such amendment will be
contingent on stockholder approval.
          14.2 Stockholder Approval. The Board may, in its sole discretion,
submit any other amendment to the Plan for stockholder approval, including, but
not limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

 

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          14.3 Contemplated Amendments. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options or to the nonqualified deferred
compensation provisions of Section 409A of the Code and/or to bring the Plan
and/or Awards granted under it into compliance therewith.
          14.4 No Impairment of Rights. Rights under any Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(a) the Company requests the consent of the Participant and (b) the Participant
consents in writing.
          14.5 Amendment of Awards. The Administrator at any time, and from time
to time, may amend the terms of any one or more Awards; provided, however, that
the Administrator may not effect any amendment which would otherwise constitute
an impairment of the rights under any Award unless (a) the Company requests the
consent of the Participant and (b) the Participant consents in writing.

  15.   General Provisions.

          15.1 Other Compensation Arrangements. Nothing contained in this Plan
shall prevent the Board from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases. The Plan is intended to constitute an “unfunded” plan for
incentive compensation and nothing contained in the Plan shall give any
Participant any rights that are greater than those of a general unsecured
creditor of the Company.
          15.2 Recapitalizations. Each Option Agreement and Award Agreement
shall contain provisions required to reflect the provisions of Section 12.
          15.3 Delivery. Upon exercise of a right granted under this Plan, the
Company shall issue Common Stock or pay any amounts due within a reasonable
period of time thereafter. Subject to any statutory or regulatory obligations
the Company may otherwise have, for purposes of this Plan, 30 days shall be
considered a reasonable period of time.
          15.4 Other Provisions. The Option Agreements and Award Agreements
authorized under the Plan may contain such other provisions not inconsistent
with this Plan, including, without limitation, restrictions upon the exercise of
the Awards, as the Administrator may deem advisable.
          15.5 Cancellation and Rescission of Awards for Detrimental Activity.
               (a) Upon exercise, payment or delivery pursuant to an Award, the
Participant shall certify in a manner acceptable to the Company that the
Participant has not engaged in any Detrimental Activity described in
Section 2.18.
               (b) Unless the Award Agreement specifies otherwise, the
Administrator may cancel, rescind, suspend, withhold or otherwise limit or
restrict any

 

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unexpired, unpaid or deferred Awards at any time if the Participant engages in
any Detrimental Activity described in Section 2.18.
               (c) In the event a Participant engages in Detrimental Activity
described in Section 2.18 after any exercise, payment or delivery pursuant to an
Award, during any period for which any restrictive covenant prohibiting such
activity is applicable to the Participant, such exercise, payment or delivery
may be rescinded within one year thereafter. In the event of any such
rescission, the Participant shall pay to the Company the amount of any gain
realized or payment received as a result of the exercise, payment or delivery,
in such manner and on such terms and conditions as may be required by the
Company. The Company shall be entitled to set-off against the amount of any such
gain any amount owed to the Participant by the Company.
          15.6 Disqualifying Dispositions. Any Participant who shall make a
“disposition” (as defined in Section 424 of the Code) of all or any portion of
shares of Common Stock acquired upon exercise of an Incentive Stock Option
within two years from the Date of Grant of such Incentive Stock Option or within
one year after the issuance of the shares of Common Stock acquired upon exercise
of such Incentive Stock Option shall be required to immediately advise the
Company in writing as to the occurrence of the sale and the price realized upon
the sale of such shares of Common Stock.
          15.7 Section 16. It is the intent of the Company that the Plan
satisfy, and be interpreted in a manner that satisfies, the applicable
requirements of Rule 16b-3 as promulgated under Section 16 of the Exchange Act
so that Participants will be entitled to the benefit of Rule 16b-3, or any other
rule promulgated under Section 16 of the Exchange Act, and will not be subject
to short-swing liability under Section 16 of the Exchange Act. Accordingly, if
the operation of any provision of the Plan would conflict with the intent
expressed in this Section 15.7, such provision to the extent possible shall be
interpreted and/or deemed amended so as to avoid such conflict.
          15.8 Section 162(m). To the extent the Administrator issues any Award
that is intended to be exempt from the application of Section 162(m) of the
Code, the Administrator may, without shareholder or grantee approval, amend the
Plan or the relevant Award agreement retroactively or prospectively to the
extent it determines necessary in order to comply with any subsequent
clarification of Section 162(m) of the Code required to preserve the Company’s
Federal income tax deduction for compensation paid pursuant to any such Award.

  16.   Effective Date of Plan.

          The Plan shall become effective as of the Effective Date, but no Award
shall be exercised (or, in the case of a stock Award, shall be granted) unless
and until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.

  17.   Termination or Suspension of the Plan.

          The Plan shall terminate automatically on the day before the 10th
anniversary of the Effective Date. No Award shall be granted pursuant to the
Plan after such date, but Awards

 

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theretofore granted may extend beyond that date. The Board may suspend or
terminate the Plan at any earlier date pursuant to Section 14.1 hereof. No
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated. Unless the Company determines to submit Section 7.2 of the Plan and
the definition of “Performance Goal” and “Performance Criteria” to the Company’s
stockholders at the first stockholder meeting that occurs in the fifth year
following the year in which the Plan was last approved by stockholders (or any
earlier meeting designated by the Board), in accordance with the requirements of
Section 162(m) of the Code, and such stockholder approval is obtained, then no
further Performance Compensation Awards shall be made to Covered Employees under
Section 7.2 after the date of such annual meeting, but the Plan may continue in
effect for Awards to Participants not in accordance with Section 162(m) of the
Code.

  18.   Choice of Law.

          The law of the State of Delaware shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state’s conflict of law rules.