Exhibit 10.1

 

RED HAT, INC.

 

2004 LONG-TERM INCENTIVE PLAN

 

Red Hat, Inc., a corporation existing under the laws of the State of Delaware
(the “Company”), hereby establishes and adopts the following 2004 Long-Term
Incentive Plan (the “Plan”).

 

1. PURPOSE OF THE PLAN

 

1.1. Purpose.    The purpose of the Plan is to assist the Company and its
Affiliates in attracting and retaining selected individuals to serve as
directors, employees, consultants and/or advisors of the Company who are
expected to contribute to the Company’s success and to achieve long-term
objectives which will inure to the benefit of all shareholders of the Company
through the additional incentives inherent in the Awards hereunder.

 

2. DEFINITIONS

 

2.1. “Affiliate” shall mean (i) any person or entity that directly, or through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Company (including any Subsidiary) or (ii) any entity in which
the Company has a significant equity interest, as determined by the Committee.

 

2.2. “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock
Award, Restricted Stock Unit Award, Performance Award, Dividend Equivalent,
Other Stock-Based Award or any other right, interest or option relating to
Shares or other property (including cash) granted pursuant to the provisions of
the Plan.

 

2.3. “Award Agreement” shall mean any written agreement, contract or other
instrument or document evidencing any Award granted by the Committee hereunder.

 

2.4. “Board” shall mean the board of directors of the Company.

 

2.5. “Code” shall mean the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto. All citations to Sections of the Code are to
such Sections as they may from time to time be amended or renumbered.

 

2.6. “Committee” shall mean the Compensation Committee of the Board or such
other committee appointed by the Board to administer the Plan, consisting of no
fewer than two Directors, each of whom is (i) a “Non-Employee Director” within
the meaning of Rule 16b-3 (or any successor rule) of the Exchange Act, (ii) an
“outside director” within the meaning of Section 162(m)(4)(C)(i) of the Code,
and (iii) an “independent director” for purpose of the rules and regulations of
the NASDAQ stock market.

 

2.7. “Covered Employee” shall mean a “covered employee” within the meaning of
Section 162(m)(3) of the Code.

 

2.8. “Director” shall mean a non-employee member of the Board.

 

2.9. “Dividend Equivalents” shall have the meaning set forth in Section 12.5.

 

2.10. “Employee” shall mean any employee (including an officer) of the Company
or any Affiliate. Solely for purposes of the Plan, an Employee shall also mean
any other natural person, including a consultant or advisor, who provides
services to the Company or any Affiliate, so long as such person (i) renders
bona fide services that are not in connection with the offer and sale of the
Company’s securities in a capital-raising transaction and (ii) does not directly
or indirectly promote or maintain a market for the Company’s securities.

 

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2.11. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended,
and any successor thereto. All citations to Sections of the Exchange Act are to
such Sections as they may from time to time be amended or renumbered.

 

2.12. “Fair Market Value” shall mean, with respect to any property other than
Shares, the market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee. The Fair
Market Value of Shares as of any date shall be the per Share closing price of
the Shares as reported on the Nasdaq Stock Market (“Nasdaq”) on that date (or if
there was no reported closing price on such date, on the last preceding date on
which the closing price was reported) or, if the Company is not then listed on
Nasdaq, the Fair Market Value of Shares shall be determined by the Committee in
its sole discretion using appropriate criteria.

 

2.13. “Freestanding Stock Appreciation Right” shall have the meaning set forth
in Section 6.1(a).

 

2.14. “Limitations” shall have the meaning set forth in Section 10.5.

 

2.15. “Option” shall mean any right granted to a Participant under the Plan
allowing such Participant to purchase Shares at such price or prices and during
such period or periods as the Committee shall determine.

 

2.16. “Option Proceeds” shall mean the cash actually received by the Company for
the option price in connection with the exercise of Options or options granted
under the Prior Plans that are exercised after the effective date of the Plan,
plus the maximum tax benefit that could be realized by the Company as a result
of the exercise of such Options or options granted under the Prior Plans, which
tax benefit shall be determined by multiplying (a) the amount that is deductible
for Federal income tax purposes as a result of any such option exercise
(currently, equal to the amount upon which the Participant’s withholding tax
obligation is calculated), times (b) the maximum federal corporate income tax
rate for the year of exercise. With respect to Options or options granted under
the Prior Plans, to the extent that a Participant pays the option price and/or
withholding taxes with Shares, Option Proceeds shall not be calculated with
respect to the amounts so paid in Shares.

 

2.17. “Other Stock-Based Award” shall have the meaning set forth in Section 8.1.

 

2.18. “Participant” shall mean an Employee or Director to whom the Committee has
granted an Award under the Plan.

 

2.19. “Payee” shall have the meaning set forth in Section 13.1.

 

2.20. “Performance Award” shall mean any Award of Performance Shares or
Performance Units granted pursuant to Section 9.

 

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

 

2.22. “Performance Share” shall mean any grant pursuant to Section 9 of a unit
valued by reference to a designated number of Shares, which value may be paid to
the Participant by delivery of such property as the Committee shall determine,
including cash, Shares, other property, or any combination thereof, upon
achievement of such performance goals during the Performance Period as the
Committee shall establish at the time of such grant or thereafter, but not later
than the time permitted by Section 162(m) of the Code in the case of a Covered
Employee, unless the Committee determines not to comply with Section 162(m) of
the Code with respect to such Performance Share.

 

2.23. “Performance Unit” shall mean any grant pursuant to Section 9 of a unit
valued by reference to a designated amount of property (including cash) other
than Shares, which value may be paid to the Participant by

 

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delivery of such property as the Committee shall determine, including cash,
Shares, other property, or any combination thereof, upon achievement of such
performance goals during the Performance Period as the Committee shall establish
at the time of such grant or thereafter, but not later than the time permitted
by Section 162(m) of the Code in the case of a Covered Employee, unless the
Committee determines not to comply with Section 162(m) of the Code with respect
to such Performance Unit.

 

2.24. “Permitted Assignee” shall have the meaning set forth in Section 12.3.

 

2.25. “Prior Plans” shall mean the Red Hat, Inc. 1999 Stock Option and Incentive
Plan (as amended and restated July 12, 2000), the Red Hat, Inc. 1998 Stock
Option Plan, the Akopia, Inc. 2000 Stock Plan, the Bluecurve, Inc. 1996 Stock
Plan, the Community Connexion 1996 Stock Option Plan, the C2Net Software, Inc.
1998 Stock Option Plan, the C2Net Software, Inc. 2000 Stock Option Plan, the
Cygnus Solutions 1995 Stock Plan, the Cygnus Solutions 1997 Stock Plan, the
Cygnus Solutions 1998 Executive Stock Plan, the Planning Technologies, Inc.
Stock Incentive Plan, the Wirespeed Communications Stock Option Plan (as amended
July 12, 2000), and the Sistina Software, Inc. 1997 Omnibus Stock Plan.

 

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

 

2.27. “Restricted Stock Unit” means an Award that is valued by reference to a
Share, which value may be paid to the Participant by delivery of such property
as the Committee shall determine, including without limitation, cash or Shares,
or any combination thereof, and that has such restrictions as the Committee, in
its sole discretion, may impose, including without limitation, any restriction
on the right to retain such Awards, to sell, transfer, pledge or assign such
Awards, and/or to receive any cash Dividend Equivalents with respect to such
Awards, which restrictions may lapse separately or in combination at such time
or times, in installments or otherwise, as the Committee may deem appropriate,

 

2.28. “Restriction Period” shall have the meaning set forth in Section 7.1.

 

2.29. “Restricted Stock Award” shall have the meaning set forth in Section 7.1.

 

2.30. “Restricted Stock Unit Award” shall have the meaning set forth in Section
7.1.

 

2.31. “Share” shall mean a share of common stock of the Company, par value
$.0001 per share

 

2.32. “Stock Appreciation Right” shall mean the right granted to a Participant
pursuant to Section 6.

 

2.33. “Subsidiary” shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain.

 

2.34. “Substitute Awards” shall mean Awards granted or Shares issued by the
Company in assumption of, or in substitution or exchange for, awards previously
granted, or the right or obligation to make future awards, by a company acquired
by the Company or any Subsidiary or with which the Company or any Subsidiary
combines.

 

2.35. “Tandem Stock Appreciation Right” shall have the meaning set forth in
Section 6.1(b).

 

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3. SHARES SUBJECT TO THE PLAN

 

3.1. Number of Shares.    (a) Subject to adjustment as provided in this Section
3.1 and in Section 12.2, a total of 5,000,000 Shares shall be authorized for
issuance pursuant to Awards granted under the Plan. Upon approval of this Plan
by the stockholders of the Company, no further grants may be made under the
Prior Plans, but Shares authorized for issuance pursuant to awards granted under
the Prior Plans that have not been used for awards granted under the Prior Plans
may be issued pursuant to Awards granted under this Plan in addition to the
number of Shares specified immediately above. Any Shares that are subject to
Awards of Options or Stock Appreciation Rights shall be counted against this
limit as one (1) Share for every one (1) Share granted. Any Shares that are
subject to Awards other than Options or Stock Appreciation Rights shall be
counted against this limit as one-and-one-quarter (1.25) Shares for every one
(1) Share granted.

 

(b) If any Shares subject to an Award or to an award under the Prior Plans are
forfeited, expire or otherwise terminate without issuance of such Shares, or any
Award or award under the Prior Plans is settled for cash or otherwise does not
result in the issuance of all or a portion of the Shares subject to such Award,
the Shares shall, to the extent of such forfeiture, expiration, termination,
cash settlement or non-issuance, again be available for Awards under the Plan,
as provided in Section 3.1(f) below.

 

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

 

(d) Shares reacquired by the Company on the open market using Option Proceeds
shall also be available for Awards under the Plan. The increase in Shares
available pursuant to the repurchase of Shares with Option Proceeds shall not be
greater than the amount of such proceeds divided by the Fair Market Value of a
Share on the date of exercise of the Option giving rise to such Option Proceeds.

 

(e) Substitute Awards may be granted under the Plan and any such grants shall
not reduce the Shares authorized for grant under the Plan or authorized for
grant to a Participant in any calendar year. Additionally, in the event that a
company acquired by the Company or any Subsidiary or with which the Company or
any Subsidiary combines has shares available under a pre-existing plan approved
by shareholders and not adopted in contemplation of such acquisition or
combination, the shares available for grant pursuant to the terms of such
pre-existing plan (as adjusted, to the extent appropriate, using the exchange
ratio or other adjustment or valuation ratio or formula used in such acquisition
or combination to determine the consideration payable to the holders of common
stock of the entities party to such acquisition or combination) may be used for
Awards under the Plan and shall not reduce the Shares authorized for grant under
the Plan; provided that Awards using such available shares shall not be made
after the date awards or grants could have been made under the terms of the
pre-existing plan, absent the acquisition or combination, and shall only be made
to individuals who were not Employees or Directors or an Affiliate prior to such
acquisition or combination.

 

(f) Any Shares that again become available for grant pursuant to this Section 3
shall be added back as one (1) Share if such Shares were subject to Options or
Stock Appreciation Rights granted under the Plan or options or stock
appreciation rights granted under the Prior Plans, and as one-and-one-quarter
(1.25) Shares if such Shares were subject to Awards other than Options or Stock
Appreciation Rights granted under the Plan.

 

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3.2. Character of Shares.    Any Shares issued hereunder may consist, in whole
or in part, of authorized and unissued shares, treasury shares or shares
purchased in the open market or otherwise.

 

4. ELIGIBILITY AND ADMINISTRATION

 

4.1. Eligibility.    Any Employee or Director shall be eligible to be selected
as a Participant.

 

4.2. Administration.    (a) The Plan shall be administered by the Committee. The
Directors may remove from, add members to, or fill vacancies on, the Committee.

 

(b) The Committee shall have full power and authority, subject to the provisions
of the Plan and subject to such orders or resolutions not inconsistent with the
provisions of the Plan as may from time to time be adopted by the Board, to: (i)
select the Employees and Directors to whom Awards may from time to time be
granted hereunder; (ii) determine the type or types of Awards, not inconsistent
with the provisions of the Plan, to be granted to each Participant hereunder;
(iii) determine the number of Shares to be covered by each Award granted
hereunder; (iv) determine the terms and conditions, not inconsistent with the
provisions of the Plan, of any Award granted hereunder; (v) determine whether,
to what extent and under what circumstances Awards may be settled in cash,
Shares or other property, subject to Section 8.1; (vi) determine whether, to
what extent, and under what circumstances cash, Shares, other property and other
amounts payable with respect to an Award made under the Plan shall be deferred
either automatically or at the election of the Participant; (vii) determine
whether, to what extent and under what circumstances any Award shall be canceled
or suspended; (viii) interpret and administer the Plan and any instrument or
agreement entered into under or in connection with the Plan, including any Award
Agreement; (ix) correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent that the
Committee shall deem desirable to carry it into effect; (x) establish such rules
and regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; (xi) determine whether any Award will have
Dividend Equivalents; and (xii) make any other determination and take any other
action that the Committee deems necessary or desirable for administration of the
Plan.

 

(c) Decisions of the Committee shall be final, conclusive and binding on all
persons or entities, including the Company, any Participant, any shareholder and
any Employee or any Affiliate.

 

(d) The Committee may delegate to a committee of one or more directors of the
Company or, to the extent permitted by law, to one or more officers or a
committee of officers the right to grant Awards to Employees who are not
Directors or officers of the Company and to cancel or suspend Awards to
Employees who are not Directors or officers of the Company.

 

5. OPTIONS

 

5.1. Grant of Options.    Options may be granted hereunder to Participants
either alone or in addition to other Awards granted under the Plan. Any Option
shall be subject to the terms and conditions of this Section 5 and to such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall deem desirable.

 

5.2. Award Agreements.    All Options granted pursuant to this Section 5 shall
be evidenced by a written Award Agreement in such form and containing such terms
and conditions as the Committee shall determine which are not inconsistent with
the provisions of the Plan. Granting of an Option pursuant to the Plan shall
impose no obligation on the recipient to exercise such Option. Any individual
who is granted an Option pursuant to this Section 5 may hold more than one
Option granted pursuant to the Plan at the same time.

 

5.3. Option Price.    Other than in connection with Substitute Awards, the
option price per each Share purchasable under any Option granted pursuant to
this Section 5 shall not be less than 100% of the Fair Market Value of such
Share on the date of grant of such Option. Other than pursuant to Section 12.2,
the Committee

 

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shall not be permitted to (a) lower the option price per Share of an Option
after it is granted, (b) cancel an Option when the option price per Share
exceeds the Fair Market Value of the underlying Shares in exchange for another
Award (other than in connection with Substitute Awards), or (c) take any other
action with respect to an Option that may be treated as a repricing under the
rules and regulations of Nasdaq, without shareholder approval.

 

5.4. Option Period.    The term of each Option shall be fixed by the Committee
in its sole discretion; provided that no Option shall be exercisable after the
expiration of ten years from the date the Option is granted, except in the event
of death or disability.

 

5.5. Exercise of Options.    Vested Options granted under the Plan shall be
exercised by the Participant or by a Permitted Assignee thereof (or by the
Participant’s executors, administrators, guardian or legal representative, as
may be provided in an Award Agreement) as to all or part of the Shares covered
thereby, by the giving of written, telephonic, or electronic notice of exercise
to the Company or its designated agent pursuant to rules and procedures
established by the Committee for this purpose, specifying the number of Shares
to be purchased, accompanied by payment of the full purchase price for the
Shares being purchased. Unless otherwise provided in an Award Agreement, full
payment of such purchase price shall be made at the time of exercise and shall
be made (a) in cash or cash equivalents (including certified check or bank check
or wire transfer of immediately available funds), (b) by tendering previously
acquired Shares (either actually or by attestation, valued at their then Fair
Market Value) that have been owned for a period of at least six months (or such
other period specified by the Committee for the purposes of avoiding accounting
charges against the Company’s earnings, as applicable), (c) with the consent of
the Committee, by delivery of other consideration (including, where permitted by
law and the Committee, other Awards) having a Fair Market Value on the exercise
date equal to the total purchase price, (d) with the consent of the Committee,
by withholding Shares otherwise issuable in connection with the exercise of the
Option, (e) through any other method specified in an Award Agreement; (f) as
provided by the Committee, cashless exercises as permitted under the Federal
Reserve Board’s Regulation T, subject to applicable securities law restrictions,
or (g) any combination of any of the foregoing. The notice of exercise,
accompanied by such payment, shall be delivered to the Company at its principal
business office or such other office as the Committee may from time to time
direct, and shall be in such form, containing such further provisions consistent
with the provisions of the Plan, as the Committee may from time to time
prescribe. In no event may any Option granted hereunder be exercised for a
fraction of a Share. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date of such issuance. Except
under certain circumstances contemplated by Section 11 or as may be set forth in
an Award Agreement with respect to death or disability of a Participant, Options
will not be exercisable before the expiration of one year from the date the
Option is granted.

 

5.6. Form of Settlement.    In its sole discretion, the Committee may provide,
at the time of grant, that the Shares to be issued upon an Option’s exercise
shall be in the form of Restricted Stock or other similar securities, or may
reserve the right so to provide after the time of grant.

 

6. STOCK APPRECIATION RIGHTS

 

6.1. Grant and Exercise.    The Committee may provide Stock Appreciation Rights
alone or in tandem with other Awards (including Options), in each case upon such
terms and conditions, not inconsistent with the Plan, as the Committee may
establish. The provisions of Stock Appreciation Rights need not be the same with
respect to each recipient.

 

(a) Stock Appreciation Rights granted without regard to any Option or other
Award (a “Freestanding Stock Appreciation Right”) shall generally have the same
terms and conditions as Options, including (i) an exercise price not less than
Fair Market Value on the date of grant (except in the case of Substitute Awards
or in connection with an adjustment provided in Section 12.2) (ii) a term not
greater than ten years, and (iii) a vesting schedule not less than one year from
the date of grant, except under certain circumstances contemplated by Section 11
or as may be set forth in an Award Agreement with respect to death or disability

 

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of a Participant. Upon the exercise of a Freestanding Stock Appreciation Right,
the holder shall have the right to receive the excess of (i) the Fair Market
Value of one Share on the date of exercise or such other amount as the Committee
shall so determine at any time during a specified period before the date of
exercise over (ii) the grant price of the right on the date of grant.

 

(b) Stock Appreciation Rights may be granted in conjunction with all or part of
any Option granted under the Plan (a “Tandem Stock Appreciation Right”). Any
Tandem Stock Appreciation Right may be granted at the same time as the related
Option is granted or at any time thereafter before exercise or expiration of
such Option. Upon the exercise of a Tandem Stock Appreciation Right, the holder
shall have the right to receive (i) the excess of the Fair Market Value of one
Share on the date of exercise or such other amount as the Committee shall so
determine at any time during a specified period before the date of exercise over
(ii) the related Option exercise price. Any Tandem Stock Appreciation Right may
be exercised only when the related Option would be exercisable and the Fair
Market Value of the Shares subject to the related Option exceeds the option
price at which Shares can be acquired pursuant to the Option. Tandem Stock
Appreciation Rights shall terminate and no longer be exercisable upon and to the
extent of the termination or exercise of the related Option; provided that,
unless the Committee otherwise determines at or after the time of grant, a
Tandem Stock Appreciation Right granted with respect to less than the full
number of Shares covered by a related Option shall not terminate until the
number of Shares then exercisable under such Option equals the number of Shares
to which the Tandem Stock Appreciation Right applies. Any Option related to a
Tandem Stock Appreciation Right shall no longer be exercisable to the extent the
Tandem Stock Appreciation Right has been exercised.

 

(c) The Committee may impose such terms and conditions on Stock Appreciation
Rights granted in conjunction with any Award (other than an Option) as the
Committee shall determine in its sole discretion.

 

(d) The Committee shall determine in its sole discretion whether payment upon
the exercise of a Stock Appreciation Right, shall be made in cash, in whole
Shares or other property, or any combination thereof. If payment will be made in
Shares, the number of Shares shall be determined based on the Fair Market Value
of a Share on the date of exercise. If the Committee elects to make full payment
in Shares, no fractional Shares shall be issued and cash payments shall be made
in lieu of fractional Shares. The Committee shall have sole discretion as to the
timing of any payment made in cash or Shares, or a combination thereof, upon
exercise of Stock Appreciation Rights. Payment may be made in a lump sum, in
annual installments or may be otherwise deferred; and the Committee shall have
sole discretion to determine whether any deferred payments may bear amounts
equivalent to interest or cash dividends.

 

(e) Other than pursuant to Section 12.2, the Committee shall not be permitted to
(i) lower the exercise price per Share of a Stock Appreciation Right after it is
granted, (ii) cancel a Stock Appreciation Right when the exercise price per
Share exceeds the Fair Market Value of the underlying Shares in exchange for
another Award (other than in connection with Substitute Awards), and (iii) take
any other action with respect to a Stock Appreciation Right that may be treated
as a repricing under the rules and regulations of Nasdaq, without shareholder
approval.

 

7. RESTRICTED STOCK AWARDS AND RESTRICTED STOCK UNIT AWARDS

 

7.1. Grants.    Awards of Restricted Stock and of Restricted Stock Units may be
granted hereunder to Participants either alone or in addition to other Awards
granted under the Plan (a “Restricted Stock Award” or “Restricted Stock Unit
Award”, respectively). A Restricted Stock Award or Restricted Stock Unit Award
shall be subject to restrictions imposed by the Committee covering a period of
time specified by the Committee (the “Restriction Period”). The provisions of
Restricted Stock Awards and Restricted Stock Unit Awards need not be the same
with respect to each recipient. The Committee has absolute discretion to
determine whether any consideration (other than services) is to be received by
the Company or any Affiliate as a condition precedent to the issuance of
Restricted Stock or Restricted Stock Units.

 

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7.2. Award Agreements.    The terms of any Restricted Stock Award or Restricted
Stock Unit Award granted under the Plan shall be set forth in a written Award
Agreement which shall contain provisions determined by the Committee and not
inconsistent with the Plan.

 

7.3. Rights of Holders of Restricted Stock and Restricted Stock
Units.    Beginning on the date of grant of the Restricted Stock Award and
subject to execution of the Award Agreement, the Participant shall become a
shareholder of the Company with respect to all Shares subject to the Award
Agreement and shall have all of the rights of a shareholder, including the right
to vote such Shares and the right to receive distributions made with respect to
such Shares. A Participant receiving a Restricted Stock Unit Award shall not
possess voting rights with respect to such Award. Any Shares or any other
property (other than cash) distributed as a dividend, Dividend Equivalent or
otherwise with respect to any Restricted Stock Award or Restricted Stock Unit
Award as to which the restrictions have not yet lapsed shall be subject to the
same restrictions as such Restricted Stock Award or Restricted Stock Unit Award.

 

7.4. Minimum Vesting Period.    Except in limited situations as determined by
the Committee (including termination of employment, a Change in Control referred
to in Section 11, grants to new hires to replace forfeited compensation, grants
representing payment of earned Performance Awards or other incentive
compensation, or grants to Directors), Restricted Stock Awards and Restricted
Stock Unit Awards subject solely to future service requirements shall have a
Restriction Period of not less than three years from date of grant (but
permitting pro-rata vesting over such time).

 

8. OTHER STOCK-BASED AWARDS

 

8.1. Stock and Administration.    Other Awards of Shares and other Awards that
are valued in whole or in part by reference to, or are otherwise based on,
Shares or other property (“Other Stock-Based Awards”) may be granted hereunder
to Participants, either alone or in addition to other Awards granted under the
Plan, and such Other Stock-Based Awards shall also be available as a form of
payment in the settlement of other Awards granted under the Plan. Other
Stock-Based Awards shall be paid only in Shares. Subject to the provisions of
the Plan, the Committee shall have sole and complete authority to determine the
Employees and Directors to whom and the time or times at which such Other
Stock-Based Awards shall be made, the number of Shares to be granted pursuant to
such Awards, and all other conditions of the Awards. The provisions of Other
Stock-Based Awards need not be the same with respect to each recipient. Except
for certain limited situations (including termination of employment, a Change in
Control referred to in Section 11, grants to new hires to replace forfeited
compensation, grants representing payment of earned Performance Awards or other
incentive compensation, or grants to Directors), Other Stock-Based Awards
subject solely to future service requirements shall have a Restriction Period of
not less than three years from date of grant (but permitting pro-rata vesting
over such time).

 

8.2. Terms and Conditions.    Shares (including securities convertible into
Shares) subject to Awards granted under this Section 8 may be issued for no
consideration or for such minimum consideration as may be required by applicable
law. Shares (including securities convertible into Shares) purchased pursuant to
a purchase right awarded under this Section 8 shall be purchased for such
consideration as the Committee shall determine in its sole discretion.

 

9. PERFORMANCE AWARDS

 

9.1. Terms of Performance Awards.    Performance Awards may be issued hereunder
to Participants, for no consideration or for such minimum consideration as may
be required by applicable law, either alone or in addition to other Awards
granted under the Plan. The performance criteria to be achieved during any
Performance Period and the length of the Performance Period shall be determined
by the Committee upon the grant of each Performance Award; provided, however,
that a Performance Period shall not be shorter than 12 months nor longer than
five years. Except as provided in Section 11 or as may be provided in an Award
Agreement, Performance Awards will be distributed only after the end of the
relevant Performance Period. Performance Awards may be paid in cash, Shares,
other property, or any combination thereof, in the sole

 

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discretion of the Committee at the time of payment. The performance goals to be
achieved for each Performance Period shall be conclusively determined by the
Committee and may be based upon the criteria set forth in Section 10.1. The
amount of the Award to be distributed shall be conclusively determined by the
Committee. Performance Awards may be paid in a lump sum or in installments
following the close of the Performance Period or, in accordance with procedures
established by the Committee, on a deferred basis.

 

10. CODE SECTION 162(m) PROVISIONS

 

10.1. Covered Employees and Performance Criteria.    Notwithstanding any other
provision of the Plan, if the Committee determines at the time a Restricted
Stock Award, a Restricted Stock Unit Award, a Performance Award or an Other
Stock-Based Award is granted to a Participant who is, or is likely to be, as of
the end of the tax year in which the Company would claim a tax deduction in
connection with such Award, a Covered Employee, then the Committee may provide
that this Section 10.1 is applicable to the Award and that the lapsing of
restrictions thereon and the distribution of cash, Shares or other property
pursuant thereto, as applicable, shall accordingly be subject to the achievement
of one or more objective performance goals established by the Committee, which
shall be based on the attainment of specified levels of one or any combination
of the following: revenue growth; earnings before taxes; earnings before
interest and taxes; earnings before interest, taxes, depreciation and
amortization; operating income; pre- or after-tax income; cash flow; cash flow
per share; net earnings; earnings per share; return on equity; return on
invested capital; return on assets; economic value added (or an equivalent
metric); share price performance; total shareholder return; improvement in or
attainment of expense levels; improvement in or attainment of working capital
levels; attainment of strategic and operational initiatives; market share; gross
profits; and/or comparisons with various stock market indices of the Company or
any Affiliate, division or business unit of the Company for or within which the
Participant is primarily employed. Such performance goals also may be based
solely by reference to the Company’s performance or the performance of an
Affiliate, division or business unit of the Company, or based upon the relative
performance of other companies or upon comparisons of any of the indicators of
performance relative to other companies. The Committee may also exclude the
impact of an event or occurrence which the Committee determines should
appropriately be excluded, including (a) restructurings, discontinued
operations, extraordinary items, and other unusual or non-recurring charges, (b)
an event either not directly related to the operations of the Company or not
within the reasonable control of the Company’s management, or (c) a change in
accounting standards required by generally accepted accounting principles. Such
performance goals shall be set by the Committee within the time period
prescribed by, and shall otherwise comply with the requirements of, Section
162(m) of the Code, or any successor provision thereto, and the regulations
thereunder.

 

10.2. Adjustments.    Notwithstanding any provision of the Plan (other than
Sections 11 and 12.2), with respect to any Restricted Stock Award, Restricted
Stock Unit Award, Performance Award or Other Stock-Based Award that is subject
to this Section 10, the Committee may adjust downwards, but not upwards, the
amount payable pursuant to such Award, and the Committee may not waive the
achievement of the applicable performance goals, except in the case of the death
or disability of the Participant.

 

10.3. Restrictions.    The Committee shall have the power to impose such other
restrictions on Awards subject to this Section 10 as it may deem necessary or
appropriate to ensure that such Awards satisfy all requirements for
“performance-based compensation” within the meaning of Section 162(m)(4)(C) of
the Code, or any successor provision thereto.

 

10.4. Limitations on Grants to Individual Participant.    Subject to adjustment
as provided in Section 12.2, no Participant may be granted (i) Options,
Freestanding Stock Appreciation Rights, or Option/Tandem Stock Appreciation
Rights during any 12-month period with respect to more than two million
(2,000,000) Shares or (ii) Restricted Stock Awards, Restricted Stock Unit
Awards, Performance Awards and/or Other Stock-Based Awards that are denominated
in Shares in any 12-month period with respect to more than one million
(1,000,000) Shares (the “Limitations”). In addition to the foregoing, the
maximum dollar value payable to any Participant in any 12-month period with
respect to Performance Awards that are valued with reference to property other
than Shares is $10,000,000. If an Award is cancelled, the cancelled Award shall
continue to be counted toward the

 

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applicable Limitations. The per-Participant limit described in this Section 10.4
shall be construed and applied consistently with Section 162(m) of the Code, or
any successor provision thereto, and the regulations thereunder.

 

11. CHANGE IN CONTROL PROVISIONS

 

11.1. Impact of Change in Control on Options, Stock Appreciation Rights,
Restricted Stock Awards, Restricted Stock Unit Awards and Other Stock-Based
Awards.    The terms of any Award may provide in the Award Agreement evidencing
the Award that, upon a “Change in Control” of the Company (as that term may be
defined therein), (a) Options and Stock Appreciation Rights outstanding as of
the date of the Change in Control shall become exercisable in full or part (b)
restrictions and deferral limitations on Restricted Stock Awards and Restricted
Stock Unit Awards lapse and the Restricted Stock Awards and Restricted Stock
Unit Awards become free of all restrictions and limitations and become vested,
and (c) the restrictions and deferral limitations and other conditions
applicable to any Other Stock-Based Awards or any other Awards shall lapse, and
such Other Stock-Based Awards or such other Awards shall become free of all
restrictions, limitations or conditions and become fully vested in full or part
and transferable to the full extent of the original grant, subject in each case
to any terms and conditions contained in the Award Agreement evidencing such
Award, including but not limited to a condition that such treatment will apply
only if the Participant remains employed on the effective date of the Change in
Control or has incurred an involuntary termination of employment without cause
on account of the Change in Control, as determined by the Committee in its sole
discretion, within a period of up to 3 months prior to the effective date of the
Change in Control. Notwithstanding any other provision of the Plan, the
Committee, in its discretion, may determine that, upon the occurrence of a
Change in Control of the Company, each Option and Stock Appreciation Right
outstanding shall terminate within a specified number of days after notice to
the Participant, and such Participant shall receive, with respect to each Share
subject to such Option or Stock Appreciation Right, an amount equal to the
excess of the Fair Market Value of such Share immediately prior to the
occurrence of such Change in Control over the exercise price per share of such
Option and/or Stock Appreciation Right; such amount to be payable in cash, in
one or more kinds of stock or property (including the stock or property, if any,
payable in the transaction) or in a combination thereof, as the Committee, in
its discretion, shall determine.

 

11.2. Assumption of Options, Stock Appreciation Rights, Restricted Stock Awards,
Restricted Stock Unit Awards, and Other Stock-Based Awards Upon Change in
Control.    In the event of a Change in Control, the successor company may
assume or substitute for an Option, Stock Appreciation Right, Restricted Stock
Award, Restricted Stock Unit Award, or Other Stock-Based Award. For the purposes
of this Section 11.2, an Option, Stock Appreciation Right, Restricted Stock
Award, Restricted Stock Unit Award, or Other Stock-Based Award shall be
considered assumed or substituted for if following the Change in Control the
award confers the right to purchase or receive, for each Share subject to the
Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit
Award, or Other Stock-Based Award immediately prior to the Change in Control,
the consideration (whether stock, cash or other securities or property) received
in the transaction constituting a Change in Control by holders of Shares for
each Share held on the effective date of such transaction (and if holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares); provided, however, that if
such consideration received in the transaction constituting a Change in Control
is not solely common stock of the successor company, the Committee may, with the
consent of the successor company, provide that the consideration to be received
upon the exercise or vesting of an Option, Stock Appreciation Right, Restricted
Stock Award, Restricted Stock Unit Award, or Other Stock-Based Award, for each
Share subject thereto, will be solely common stock of the successor company
substantially equal in fair market value to the per share consideration received
by holders of Shares in the transaction constituting a Change in Control. The
determination of such substantial equality of value of consideration shall be
made by the Committee in its sole discretion and its determination shall be
conclusive and binding. Notwithstanding the foregoing, on such terms and
conditions as may be set forth in an Award Agreement, in the event of an
involuntary termination of a Participant’s employment without cause in such
successor company within the period of up to 24 months following such Change in
Control, each Award held by such Participant at the time of the Change in
Control shall be accelerated as described in Sections 11.1 above.

 

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11.3. Impact of Change in Control on Performance Awards.    The terms of any
Performance Award may provide in the Award Agreement evidencing the Performance
Award that, upon a Change in Control of the Company (as that term may be defined
therein),

 

(a) a pro rata portion of Performance Awards shall be considered to be earned
and payable based on the portion of the Performance Period completed as of the
date of the Change in Control and based on performance to such date, or if
performance to such date is not determinable, based on target performance, and

 

(b) the remaining portion of Performance Awards shall be assumed, converted or
replaced with restricted stock in the successor company’s shares (if Performance
Shares) or restricted deferred compensation (if Performance Units) based on the
portion of the Performance Period not yet completed and based on target
performance. Such assumed, converted or replaced portion of the Performance
Award shall be restricted for the remainder of the Performance Period or vesting
period, as applicable. If the successor company does not assume, convert or
replace the remaining portion of the Performance Award as described in this
Section 11.3(b), the full award shall be considered earned and payable upon
consummation of the Change in Control. Notwithstanding the foregoing, the Award
Agreement for a Performance Award may provide that in the event of an
involuntary termination of the Participant’s employment with the Company or any
Affiliate without cause on account of the Change in Control, as determined by
the Committee in its sole discretion, within a period of up to 3 months prior to
the effective date of the Change in Control and/or in the event of an
involuntary termination of the Participant’s employment without cause in such
successor company within the period of up to 24 months following such Change in
Control, the vesting of the restricted stock or restricted deferred
compensation, as applicable, held by such Participant at the time of the Change
in Control shall be accelerated.

 

12. GENERALLY APPLICABLE PROVISIONS

 

12.1. Amendment and Modification of the Plan.    The Board may, from time to
time, alter, amend, suspend or terminate the Plan as it shall deem advisable,
subject to any requirement for shareholder approval imposed by applicable law,
including the rules and regulations of Nasdaq or any rule or regulation of any
stock exchange or quotation system on which Shares are listed or quoted;
provided that the Board may not amend the Plan in any manner that would result
in noncompliance with Rule 16b-3 of the Exchange Act; and further provided that
the Board may not, without the approval of the Company’s shareholders, amend the
Plan to (a) increase the number of Shares that may be the subject of Awards
under the Plan (except for adjustments pursuant to Section 12.2), (b) expand the
types of awards available under the Plan, (c) materially expand the class of
persons eligible to participate in the Plan, (d) amend any provision of Section
5.3, (e) increase the maximum permissible term of any Option specified by
Section 5.4, or (f) amend any provision of Section 10.4. In addition, no
amendments to, or termination of, the Plan shall in any way materially impair
the rights of a Participant under any Award previously granted without such
Participant’s consent.

 

12.2. Adjustments.    In the event of any merger, reorganization, consolidation,
recapitalization, dividend or distribution (whether in cash, shares or other
property), stock split, reverse stock split, spin-off or similar transaction or
other change in corporate structure affecting the Shares or the value thereof,
such adjustments and other substitutions shall be made to the Plan and to Awards
as the Committee, in its sole discretion, deems equitable or appropriate,
including such adjustments in the aggregate number, class and kind of securities
that may be delivered under the Plan and, in the aggregate or to any one
Participant, in the number, class, kind and option or exercise price of
securities subject to outstanding Awards granted under the Plan (including, if
the Committee deems appropriate, the substitution of similar options to purchase
the shares of, or other awards denominated in the shares of, another company) as
the Committee may determine to be appropriate in its sole discretion; provided,
however, that the number of Shares subject to any Award shall always be a whole
number.

 

12.3. Transferability of Awards.    Except as provided below, and except as
otherwise authorized by the Committee in an Award Agreement, no Award and no
Shares subject to Awards described in Section 8 that have

 

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not been issued or as to which any applicable restriction, performance or
deferral period has not lapsed, may be sold, assigned, transferred, pledged or
otherwise encumbered, other than by will or the laws of descent and
distribution, and such Award may be exercised during the life of the Participant
only by the Participant or the Participant’s guardian or legal representative.
Notwithstanding the foregoing, the Committee may, in its discretion, permit the
transfer of an Award to an individual or entity other than the Company (each
transferee thereof, a “Permitted Assignee”).

 

12.4. Termination of Employment.    The Committee shall determine and set forth
in each Award Agreement whether any Awards granted in such Award Agreement will
continue to be exercisable, and the terms of such exercise, on and after the
date that a Participant ceases to be employed by or to provide services to the
Company or any Affiliate (including as a Director), whether by reason of death,
disability, voluntary or involuntary termination of employment or services, or
otherwise. The date of termination of a Participant’s employment or services
will be determined by the Committee, which determination will be final.

 

12.5. Deferral; Dividend Equivalents.    The Committee shall be authorized to
establish procedures pursuant to which the payment of any Award may be deferred.
Subject to the provisions of the Plan and any Award Agreement, the recipient of
an Award (including any deferred Award) may, if so determined by the Committee,
be entitled to receive, currently or on a deferred basis, cash, stock or other
property dividends, or cash payments in amounts equivalent to cash, stock or
other property dividends on Shares (“Dividend Equivalents”) with respect to the
number of Shares covered by the Award, as determined by the Committee, in its
sole discretion, and the Committee may provide that such amounts (if any) shall
be deemed to have been reinvested in additional Shares or otherwise reinvested.

 

13. MISCELLANEOUS

 

13.1. Tax Withholding.    The Company shall have the right to make all payments
or distributions pursuant to the Plan to a Participant (or a Permitted Assignee
thereof) (any such person, a “Payee”) net of any applicable Federal, State and
local taxes required to be paid or withheld as a result of (a) the grant of any
Award, (b) the exercise of an Option or Stock Appreciation Right, (c) the
delivery of Shares or cash, (d) the lapse of any restrictions in connection with
any Award or (e) any other event occurring pursuant to the Plan. The Company or
any Affiliate shall have the right to withhold from wages or other amounts
otherwise payable to such Payee such withholding taxes as may be required by
law, or to otherwise require the Payee to pay such withholding taxes. If the
Payee shall fail to make such tax payments as are required, the Company or its
Affiliates shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to such Payee or to take
such other action as may be necessary to satisfy such withholding obligations.
The Committee shall be authorized to establish procedures for election by
Participants to satisfy such obligation for the payment of such taxes by
tendering previously acquired Shares (either actually or by attestation, valued
at their then Fair Market Value) that have been owned for a period of at least
six months (or such other period to avoid accounting charges against the
Company’s earnings), or by directing the Company to retain Shares (up to the
employee’s minimum required tax withholding rate) otherwise deliverable in
connection with the Award.

 

13.2. Right of Discharge Reserved; Claims to Awards.    Nothing in the Plan nor
the grant of an Award hereunder shall confer upon any Employee or Director the
right to continue in the employment or service of the Company or any Affiliate
or affect any right that the Company or any Affiliate may have to terminate the
employment or service of (or to demote or to exclude from future Awards under
the Plan) any such Employee or Director at any time for any reason. Except as
specifically provided by the Committee, the Company shall not be liable for the
loss of existing or potential profit from an Award granted in the event of
termination of an employment or other relationship. No Employee or Participant
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Employees or Participants under the
Plan.

 

13.3. Prospective Recipient.    The prospective recipient of any Award under the
Plan shall not, with respect to such Award, be deemed to have become a
Participant, or to have any rights with respect to such Award, until

 

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and unless such recipient shall have executed an agreement or other instrument
evidencing the Award and delivered a copy thereof to the Company, and otherwise
complied with the then applicable terms and conditions.

 

13.4. Cancellation of Award.    Notwithstanding anything to the contrary
contained herein, all outstanding Awards granted to any Participant shall be
canceled if the Participant, without the consent of the Company, while employed
by the Company or any Affiliate or after termination of such employment or
service, establishes a relationship with a competitor of the Company.

 

13.5. Stop Transfer Orders.    All certificates for Shares delivered under the
Plan pursuant to any Award shall be subject to such stop-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Shares are then listed, and any applicable
federal or state securities law, and the Committee may cause a legend or legends
to be put on any such certificates to make appropriate reference to such
restrictions. Notwithstanding any other provision of the Plan, the Company shall
have no liability to deliver any Shares under the Plan or make any other
distributions or the benefits under the Plan unless such delivery or
distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933, and the applicable
requirements of any securities exchange or similar entity.

 

13.6. Nature of Payments.    All Awards made pursuant to the Plan are in
consideration of services performed or to be performed for the Company or any
Affiliate, division or business unit of the Company. Any income or gain realized
pursuant to Awards under the Plan constitute a special incentive payment to the
Participant and shall not be taken into account, to the extent permissible under
applicable law, as compensation for purposes of any of the employee benefit
plans of the Company or any Affiliate except as may be determined by the
Committee or by the Board or board of directors of the applicable Affiliate.

 

13.7. Other Plans.    Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.

 

13.8. Severability.    If any provision of the Plan shall be held unlawful or
otherwise invalid or unenforceable in whole or in part by a court of competent
jurisdiction, such provision shall (a) be deemed limited to the extent that such
court of competent jurisdiction deems it lawful, valid and/or enforceable and as
so limited shall remain in full force and effect, and (b) not affect any other
provision of the Plan or part thereof, each of which shall remain in full force
and effect. If the making of any payment or the provision of any other benefit
required under the Plan shall be held unlawful or otherwise invalid or
unenforceable by a court of competent jurisdiction, such unlawfulness,
invalidity or unenforceability shall not prevent any other payment or benefit
from being made or provided under the Plan, and if the making of any payment in
full or the provision of any other benefit required under the Plan in full would
be unlawful or otherwise invalid or unenforceable, then such unlawfulness,
invalidity or unenforceability shall not prevent such payment or benefit from
being made or provided in part, to the extent that it would not be unlawful,
invalid or unenforceable, and the maximum payment or benefit that would not be
unlawful, invalid or unenforceable shall be made or provided under the Plan.

 

13.9. Construction.    All references in the Plan to “Section or Sections” are
intended to refer to the Section or Sections, as the case may be, of the Plan.
As used in the Plan, the words “include” and “including,” and variations
thereof, shall not be deemed to be terms of limitation, but rather shall be
deemed to be followed by the words “without limitation.”

 

13.10. Unfunded Status of the Plan.    The Plan is intended to constitute an
“unfunded” plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver the Shares or payments in lieu of or with
respect to Awards hereunder; provided, however, that the existence of such
trusts or other arrangements is consistent with the unfunded status of the Plan.

 

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13.11. Governing Law.    The Plan and all determinations made and actions taken
thereunder, to the extent not otherwise governed by the Code or the laws of the
United States, shall be governed by the laws of the State of Delaware and
construed accordingly.

 

13.12. Effective Date of Plan; Termination of Plan.    The Plan shall be
effective on the date of the approval of the Plan by the holders of a majority
of the shares entitled to vote at a duly constituted meeting of the shareholders
of the Company. The Plan shall be null and void and of no effect if the
foregoing condition is not fulfilled and in such event each Award shall,
notwithstanding any of the preceding provisions of the Plan, be null and void
and of no effect. Awards may be granted under the Plan at any time and from time
to time on or prior to the tenth anniversary of the effective date of the Plan,
on which date the Plan will expire except as to Awards then outstanding under
the Plan. Such outstanding Awards shall remain in effect until they have been
exercised or terminated, or have expired.

 

13.13. Foreign Employees.    Awards may be granted to Participants who are
foreign nationals or employed outside the United States, or both, on such terms
and conditions different from those applicable to Awards to Employees employed
in the United States as may, in the judgment of the Committee, be necessary or
desirable in order to recognize differences in local law or tax policy. The
Committee also may impose conditions on the exercise or vesting of Awards in
order to minimize the Company’s obligation with respect to tax equalization for
Employees on assignments outside their home country. The Committee may approve
such supplements to or amendments, restatements or alternative versions of this
Plan as it may consider necessary or appropriate for such purposes, without
thereby affecting the terms of this Plan as in effect for any other purpose, and
the Secretary or other appropriate officer of the Company may certify any such
document as having been approved and adopted in the same manner as this Plan.

 

13.14. Captions.    The captions in the Plan are for convenience of reference
only, and are not intended to narrow, limit or affect the substance or
interpretation of the provisions contained herein.

 

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