Exhibit 10.22

 

InPhonic, Inc.

 

2004 Equity Incentive Plan

 

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TABLE OF CONTENTS

 

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1.    Establishment, Purpose and Term of Plan    1      1.1   

Establishment

   1      1.2   

Purpose

   1      1.3   

Term of Plan

   1 2.    Definitions and Construction    1      2.1   

Definitions

   1      2.2   

Construction

   7 3.    Administration    8      3.1   

Administration by the Committee

   8      3.2   

Authority of Officers

   8      3.3   

Administration with Respect to Insiders

   8      3.4   

Committee Complying with Section 162(m)

   8      3.5   

Powers of the Committee

   8      3.6   

Indemnification

   9 4.    Shares Subject to Plan    10      4.1   

Maximum Number of Shares Issuable

   10      4.2   

Annual Increase in Maximum Number of Shares Issuable

   10      4.3   

Share Accounting

   10      4.4   

Adjustment for Unissued Predecessor Plan Shares

   11      4.5   

Maximum Number of Shares Issuable Pursuant to Incentive Stock Options

   11      4.6   

Adjustments for Changes in Capital Structure

   11 5.    Eligibility and Award Limitations    12      5.1   

Persons Eligible for Awards

   12      5.2   

Participation

   12      5.3   

Incentive Stock Option Limitations

   12 6.    Terms and Conditions of Options    13      6.1   

Exercise Price

   13      6.2   

Exercisability and Term of Options

   13      6.3   

Payment of Exercise Price

   13      6.4   

Effect of Termination of Service

   14      6.5   

Transferability of Options

   15 7.    Terms and Conditions of Stock Appreciation Rights    16      7.1   

Types of SARs Authorized

   16      7.2   

Exercise Price

   16      7.3   

Exercisability and Term of SARs

   16      7.4   

Exercise of SARs

   17      7.5   

Deemed Exercise of SARs

   17      7.6   

Effect of Termination of Service

   17      7.7   

Transferability of SARs

   17

 

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TABLE OF CONTENTS

(continued)

 

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8.    Terms and Conditions of Stock Awards    18      8.1   

Types of Stock Awards Authorized

   18      8.2   

Purchase Price

   18      8.3   

Purchase Period

   18      8.4   

Payment of Purchase Price

   18      8.5   

Vesting and Restrictions on Transfer

   18      8.6   

Voting Rights; Dividends and Distributions

   19      8.7   

Effect of Termination of Service

   19      8.8   

Nontransferability of Stock Award Rights

   19 9.    Terms and Conditions of Restricted Stock Unit Awards    19      9.1
  

Grant of Restricted Stock Unit Awards

   19      9.2   

Purchase Price

   20      9.3   

Vesting

   20      9.4   

Voting Rights, Dividend Equivalent Rights and Distributions

   20      9.5   

Effect of Termination of Service

   20      9.6   

Settlement of Restricted Stock Unit Awards

   21      9.7   

Nontransferability of Restricted Stock Unit Awards

   21 10.    Terms and Conditions of Performance Awards    21      10.1   

Types of Performance Awards Authorized

   21      10.2   

Initial Value of Performance Shares and Performance Units

   21      10.3   

Establishment of Performance Period, Performance Goals and Performance Award
Formula

   22      10.4   

Measurement of Performance Goals

   22      10.5   

Settlement of Performance Awards

   24      10.6   

Voting Rights; Dividend Equivalent Rights and Distributions

   26      10.7   

Effect of Termination of Service

   26      10.8   

Nontransferability of Performance Awards

   26 11.    Deferred Compensation Awards    26      11.1   

Establishment of Deferred Compensation Award Programs

   26      11.2   

Terms and Conditions of Deferred Compensation Awards

   27 12.    Terms and Conditions of Nonemployee Director Awards    28      12.1
  

Automatic Grant of Nonemployee Director Options

   28      12.2   

Terms and Conditions of Nonemployee Director Options

   29      12.3   

Alternative Nonemployee Director Awards

   31 13.    Standard Forms of Award Agreement    31      13.1   

Award Agreements

   31      13.2   

Authority to Vary Terms

   31 14.    Change in Control    32      14.1   

Effect of Change in Control on Options and SARs

   32      14.2   

Effect of Change in Control on Stock Awards

   32

 

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TABLE OF CONTENTS

(continued)

 

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     14.3   

Effect of Change in Control on Restricted Stock Unit Awards

   33      14.4   

Effect of Change in Control on Performance Awards

   33      14.5   

Effect of Change in Control on Deferred Compensation Awards

   33      14.6   

Effect of Change in Control on Nonemployee Director Awards

   33 15.    Compliance with Securities Law    33 16.    Tax Withholding    34  
   16.1   

Tax Withholding in General

   34      16.2   

Withholding in Shares

   34 17.    Amendment or Termination of Plan    34 18.    Miscellaneous
Provisions    34      18.1   

Repurchase Rights

   34      18.2   

Provision of Information

   35      18.3   

Rights as Employee, Consultant or Director

   35      18.4   

Rights as a Stockholder

   35      18.5   

Fractional Shares

   35      18.6   

Severability

   35      18.7   

Beneficiary Designation

   35      18.8   

Unfunded Obligation

   35      18.9   

Choice of Law

   36

 

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InPhonic, Inc.

2004 Equity Incentive Plan

 

  1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

 

1.1 Establishment. The InPhonic, Inc. 2004 Equity Incentive Plan (the “Plan”) is
hereby established effective as of October 1, 2004, the date of its approval by
the stockholders of the Company (the “Effective Date”).

 

1.2 Purpose. The purpose of the Plan is to advance the interests of the
Participating Company Group and its stockholders by providing an incentive to
attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group. The Plan seeks to achieve this
purpose by providing for Awards in the form of Options, Stock Appreciation
Rights, Stock Purchase Rights, Stock Bonuses, Restricted Stock Units,
Performance Shares, Performance Units, Deferred Compensation Awards and
Nonemployee Director Awards.

 

1.3 Term of Plan. The Plan shall continue in effect until its termination by the
Committee; provided however, that all Awards shall be granted, if at all, within
ten (10) years from the Effective Date.

 

  2. DEFINITIONS AND CONSTRUCTION.

 

2.1 Definitions. Whenever used herein, the following terms shall have their
respective meanings set forth below:

 

(a) “Affiliate” means (i) an entity, other than a Parent Corporation, that
directly, or indirectly through one or more intermediary entities, controls the
Company or (ii) an entity, other than a Subsidiary Corporation, that is
controlled by the Company directly, or indirectly through one or more
intermediary entities. For this purpose, the term “control” (including the term
“controlled by”) means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of the relevant
entity, whether through the ownership of voting securities, by contract or
otherwise; or shall have such other meaning assigned such term for the purposes
of registration on Form S-8 under the Securities Act.

 

(b) “Award” means any Option, SAR, Stock Purchase Right, Stock Bonus, Restricted
Stock Unit, Performance Share, Performance Unit, Deferred Compensation Award or
Nonemployee Director Award granted under the Plan.

 

(c) “Award Agreement” means a written agreement between the Company and a
Participant setting forth the terms, conditions and restrictions of the Award
granted to the Participant.

 

(d) “Board” means the Board of Directors of the Company.

 

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(e) “Cause” means, unless such term or an equivalent term is otherwise defined
with respect to an Award by the Participant’s Award Agreement or by a written
contract of employment or service, any of the following: (i) the Participant’s
theft, dishonesty, willful misconduct, breach of fiduciary duty for personal
profit, or falsification of any Participating Company documents or records; (ii)
the Participant’s material failure to abide by a Participating Company’s code of
conduct or other policies (including, without limitation, policies relating to
confidentiality and reasonable workplace conduct); (iii) the Participant’s
unauthorized use, misappropriation, destruction or diversion of any tangible or
intangible asset or corporate opportunity of a Participating Company (including,
without limitation, the Participant’s improper use or disclosure of a
Participating Company’s confidential or proprietary information); (iv) any
intentional act by the Participant which has a material detrimental effect on a
Participating Company’s reputation or business; (v) the Participant’s repeated
failure or inability to perform any reasonable assigned duties after written
notice from a Participating Company of, and a reasonable opportunity to cure,
such failure or inability; (vi) any material breach by the Participant of any
employment, service, non-disclosure, non-competition, non-solicitation or other
similar agreement between the Participant and a Participating Company, which
breach is not cured pursuant to the terms of such agreement; or (vii) the
Participant’s conviction (including any plea of guilty or nolo contendere) of
any criminal act involving fraud, dishonesty, misappropriation or moral
turpitude, or which impairs the Participant’s ability to perform his or her
duties with a Participating Company.

 

(f) “Change in Control” means, unless such term or an equivalent term is
otherwise defined with respect to an Award by the Participant’s Award Agreement
or by a written contract of employment or service, the occurrence of any of the
following:

 

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than (1) a trustee or other fiduciary holding stock of the
Company under an employee benefit plan of a Participating Company or (2) a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the stock of the
Company, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of stock of the Company
representing more than fifty percent (50%) of the total combined voting power of
the Company’s then-outstanding voting stock; or

 

(ii) an Ownership Change Event or series of related Ownership Change Events
(collectively, a “Transaction”) in which the stockholders of the Company
immediately before the Transaction do not retain immediately after the
Transaction direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding voting securities of
the Company or, in the case of an Ownership Change Event described in Section
2.1(z)(iii), the entity to which the assets of the Company were transferred (the
“Transferee”), as the case may be; or

 

(iii) a liquidation or dissolution of the Company.

 

For purposes of the preceding sentence, indirect beneficial ownership shall
include, without limitation, an interest resulting from ownership of the voting
securities of one or more corporations or other business entities which own the
Company or the Transferee, as the case

 

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may be, either directly or through one or more subsidiary corporations or other
business entities. The Committee shall have the right to determine whether
multiple sales or exchanges of the voting securities of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.

 

(g) “Code” means the Internal Revenue Code of 1986, as amended, and any
applicable regulations promulgated thereunder.

 

(h) “Committee” means the Compensation Committee or other committee of the Board
duly appointed to administer the Plan and having such powers as shall be
specified by the Board. If no committee of the Board has been appointed to
administer the Plan, the Board shall exercise all of the powers of the Committee
granted herein, and, in any event, the Board may in its discretion exercise any
or all of such powers.

 

(i) “Company” means InPhonic, Inc., a Delaware corporation, or any successor
corporation thereto.

 

(j) “Consultant” means a person engaged to provide consulting or advisory
services (other than as an Employee or a member of the Board) to a Participating
Company, provided that the identity of such person, the nature of such services
or the entity to which such services are provided would not preclude the Company
from offering or selling securities to such person pursuant to the Plan in
reliance on registration on a Form S-8 Registration Statement under the
Securities Act.

 

(k) “Deferred Compensation Award” means an award of Options or Stock Units
granted to a Participant pursuant to Section 11 of the Plan.

 

(l) “Director” means a member of the Board.

 

(m) “Disability” means the permanent and total disability of the Participant,
within the meaning of Section 22(e)(3) of the Code.

 

(n) “Dividend Equivalent” means a credit, made at the discretion of the
Committee or as otherwise provided by the Plan, to the account of a Participant
in an amount equal to the cash dividends paid on one share of Stock for each
share of Stock represented by an Award held by such Participant.

 

(o) “Employee” means any person treated as an employee (including an Officer or
a member of the Board who is also treated as an employee) in the records of a
Participating Company and, with respect to any Incentive Stock Option granted to
such person, who is an employee for purposes of Section 422 of the Code;
provided, however, that neither service as a member of the Board nor payment of
a director’s fee shall be sufficient to constitute employment for purposes of
the Plan. The Company shall determine in good faith and in the exercise of its
discretion whether an individual has become or has ceased to be an Employee and
the effective date of such individual’s employment or termination of employment,
as the case may be. For purposes of an individual’s rights, if any, under the
terms of the Plan as of the time of the Company’s determination of whether or
not the individual is an Employee, all such determinations by the Company shall
be final, binding and conclusive as to such rights, if any,

 

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notwithstanding that the Company or any court of law or governmental agency
subsequently makes a contrary determination as to such individual’s status as an
Employee.

 

(p) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(q) “Fair Market Value” means, as of any date, the value of a share of Stock or
other property as determined by the Committee, in its discretion, or by the
Company, in its discretion, if such determination is expressly allocated to the
Company herein, subject to the following:

 

(i) Except as otherwise determined by the Committee, if, on such date, the Stock
is listed on a national or regional securities exchange or market system, the
Fair Market Value of a share of Stock shall be the closing price of a share of
Stock (or the mean of the closing bid and asked prices of a share of Stock if
the Stock is so quoted instead) as quoted on the Nasdaq National Market, The
Nasdaq SmallCap Market or such other national or regional securities exchange or
market system constituting the primary market for the Stock, as reported in The
Wall Street Journal or such other source as the Company deems reliable. If the
relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded
prior to the relevant date, or such other appropriate day as shall be determined
by the Committee, in its discretion.

 

(ii) Notwithstanding the foregoing, the Committee may, in its discretion,
determine the Fair Market Value on the basis of the opening, closing, high, low
or average sale price of a share of Stock or the actual sale price of a share of
Stock received by a Participant, on such date, the preceding trading day, the
next succeeding trading day or an average determined over a period of trading
days. The Committee may vary its method of determination of the Fair Market
Value as provided in this Section for different purposes under the Plan.

 

(iii) If, on such date, the Stock is not listed on a national or regional
securities exchange or market system, the Fair Market Value of a share of Stock
shall be as determined by the Committee in good faith without regard to any
restriction other than a restriction which, by its terms, will never lapse.

 

(r) “Incentive Stock Option” means an Option intended to be (as set forth in the
Award Agreement) and which qualifies as an incentive stock option within the
meaning of Section 422(b) of the Code.

 

(s) “Insider” means an Officer, Director or any other person whose transactions
in Stock are subject to Section 16 of the Exchange Act.

 

(t) “Nonemployee Director” means a Director who is not an Employee.

 

(u) “Nonemployee Director Award” means an Award, including a Nonemployee
Director Option, granted to a Nonemployee Director pursuant to Section 12 of the
Plan.

 

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(v) “Nonemployee Director Option” means an Option granted to a Nonemployee
Director pursuant to Section 12.1 of the Plan. Nonemployee Director Options
shall be Nonstatutory Stock Options.

 

(w) “Nonstatutory Stock Option” means an Option not intended to be (as set forth
in the Award Agreement) an incentive stock option within the meaning of Section
422(b) of the Code.

 

(x) “Officer” means any person designated by the Board as an officer of the
Company.

 

(y) “Option” means the right to purchase Stock at a stated price for a specified
period of time granted to a Participant pursuant to Section 6, 11 or 12 of the
Plan. An Option may be either an Incentive Stock Option or a Nonstatutory Stock
Option.

 

(z) “Ownership Change Event” means the occurrence of any of the following with
respect to the Company: (i) the direct or indirect sale or exchange in a single
or series of related transactions by the stockholders of the Company of more
than fifty percent (50%) of the voting stock of the Company; (ii) a merger or
consolidation in which the Company is a party; or (iii) the sale, exchange, or
transfer of all or substantially all of the assets of the Company (other than a
sale, exchange or transfer to one or more subsidiaries of the Company).

 

(aa) “Parent Corporation” means any present or future “parent corporation” of
the Company, as defined in Section 424(e) of the Code.

 

(bb) “Participant” means any eligible person who has been granted one or more
Awards.

 

(cc) “Participating Company” means the Company or any Parent Corporation,
Subsidiary Corporation or Affiliate.

 

(dd) “Participating Company Group” means, at any point in time, all entities
collectively which are then Participating Companies.

 

(ee) “Performance Award” means an Award of Performance Shares or Performance
Units.

 

(ff) “Performance Award Formula” means, for any Performance Award, a formula or
table established by the Committee pursuant to Section 10.3 of the Plan which
provides the basis for computing the value of a Performance Award at one or more
threshold levels of attainment of the applicable Performance Goal(s) measured as
of the end of the applicable Performance Period.

 

(gg) “Performance Goal” means a performance goal established by the Committee
pursuant to Section 10.3 of the Plan.

 

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(hh) “Performance Period” means a period established by the Committee pursuant
to Section 10.3 of the Plan at the end of which one or more Performance Goals
are to be measured.

 

(ii) “Performance Share” means a bookkeeping entry representing a right granted
to a Participant pursuant to Section 10 of the Plan to receive a payment equal
to the value of a Performance Share, as determined by the Committee, based on
performance.

 

(jj) “Performance Unit” means a bookkeeping entry representing a right granted
to a Participant pursuant to Section 10 of the Plan to receive a payment equal
to the value of a Performance Unit, as determined by the Committee, based upon
performance.

 

(kk) “Predecessor Plan” means the Company’s Amended and Restated Stock Incentive
Plan.

 

(ll) “Restricted Stock Unit” or “Stock Unit” means a bookkeeping entry
representing a right granted to a Participant pursuant to Section 9 or Section
11 of the Plan, respectively, to receive a share of Stock on a date determined
in accordance with the provisions of Section 9 or Section 11, as applicable, and
the Participant’s Award Agreement.

 

(mm) “Restriction Period” means the period established in accordance with
Section 8.5 of the Plan during which shares subject to a Stock Award are subject
to Vesting Conditions.

 

(nn) “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from time
to time, or any successor rule or regulation.

 

(oo) “SAR” or “Stock Appreciation Right” means a bookkeeping entry representing,
for each share of Stock subject to such SAR, a right granted to a Participant
pursuant to Section 7 of the Plan to receive payment of an amount equal to the
excess, if any, of the Fair Market Value of a share of Stock on the date of
exercise of the SAR over the exercise price.

 

(pp) “Section 162(m)” means Section 162(m) of the Code.

 

(qq) “Securities Act” means the Securities Act of 1933, as amended.

 

(rr) “Service” means a Participant’s employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. A Participant’s Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Participant renders such
Service or a change in the Participating Company for which the Participant
renders such Service, provided that there is no interruption or termination of
the Participant’s Service. Furthermore, a Participant’s Service shall not be
deemed to have terminated if the Participant takes any military leave, sick
leave, or other bona fide leave of absence approved by the Company. However, if
any such leave taken by a Participant exceeds ninety (90) days, then on the one
hundred eighty-first (181st) day following the commencement of such leave any
Incentive Stock Option held by the Participant shall cease to be treated as an
Incentive Stock Option and instead shall be treated thereafter as a

 

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Nonstatutory Stock Option, unless the Participant’s right to return to Service
with the Participating Company Group is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or
required by law, a leave of absence shall not be treated as Service for purposes
of determining vesting under the Participant’s Award Agreement. A Participant’s
Service shall be deemed to have terminated either upon an actual termination of
Service or upon the entity for which the Participant performs Service ceasing to
be a Participating Company. Subject to the foregoing, the Company, in its
discretion, shall determine whether the Participant’s Service has terminated and
the effective date of such termination.

 

(ss) “Stock” means the common stock of the Company, as adjusted from time to
time in accordance with Section 4.6 of the Plan.

 

(tt) “Stock Award” means an Award of a Stock Bonus or a Stock Purchase Right.

 

(uu) “Stock Bonus” means Stock granted to a Participant pursuant to Section 8 of
the Plan.

 

(vv) “Stock Purchase Right” means a right to purchase Stock granted to a
Participant pursuant to Section 8 of the Plan.

 

(ww) “Subsidiary Corporation” means any present or future “subsidiary
corporation” of the Company, as defined in Section 424(f) of the Code.

 

(xx) “Ten Percent Owner” means a Participant who, at the time an Option is
granted to the Participant, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of a Participating
Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the
Code.

 

(yy) “Vesting Conditions” mean those conditions established in accordance with
Section 8.5 or Section 9.3 of the Plan prior to the satisfaction of which shares
subject to a Stock Award or Restricted Stock Unit Award, respectively, remain
subject to forfeiture or a repurchase option in favor of the Company upon the
Participant’s termination of Service.

 

2.2 Construction. Captions and titles contained herein are for convenience only
and shall not affect the meaning or interpretation of any provision of the Plan.
Except when otherwise indicated by the context, the singular shall include the
plural and the plural shall include the singular. Use of the term “or” is not
intended to be exclusive, unless the context clearly requires otherwise.

 

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  3. ADMINISTRATION.

 

3.1 Administration by the Committee. The Plan shall be administered by the
Committee. All questions of interpretation of the Plan or of any Award shall be
determined by the Committee, and such determinations shall be final and binding
upon all persons having an interest in the Plan or such Award.

 

3.2 Authority of Officers. Any Officer shall have the authority to act on behalf
of the Company with respect to any matter, right, obligation, determination or
election which is the responsibility of or which is allocated to the Company
herein, provided the Officer has apparent authority with respect to such matter,
right, obligation, determination or election. The Board or Committee may, in its
discretion, delegate to a committee comprised of one or more Officers the
authority to grant one or more Awards, without further approval of the Board or
the Committee, to any Employee, other than a person who, at the time of such
grant, is an Insider; provided, however, that (a) such Awards shall not be
granted for shares in excess of the maximum aggregate number of shares of Stock
authorized for issuance pursuant to Section 4.1, (b) the exercise price per
share of each such Award which is an Option or Stock Appreciation Right shall be
not less than the Fair Market Value per share of the Stock on the effective date
of grant (or, if the Stock has not traded on such date, on the last day
preceding the effective date of grant on which the Stock was traded), and (c)
each such Award shall be subject to the terms and conditions of the appropriate
standard form of Award Agreement approved by the Board or the Committee and
shall conform to the provisions of the Plan and such other guidelines as shall
be established from time to time by the Board or the Committee.

 

3.3 Administration with Respect to Insiders. With respect to participation by
Insiders in the Plan, at any time that any class of equity security of the
Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall
be administered in compliance with the requirements, if any, of Rule 16b-3.

 

3.4 Committee Complying with Section 162(m). If the Company is a “publicly held
corporation” within the meaning of Section 162(m), the Board may establish a
Committee of “outside directors” within the meaning of Section 162(m) to approve
the grant of any Award which might reasonably be anticipated to result in the
payment of employee remuneration that would otherwise exceed the limit on
employee remuneration deductible for income tax purposes pursuant to Section
162(m).

 

3.5 Powers of the Committee. In addition to any other powers set forth in the
Plan and subject to the provisions of the Plan, the Committee shall have the
full and final power and authority, in its discretion:

 

(a) to determine the persons to whom, and the time or times at which, Awards
shall be granted and the number of shares of Stock or units to be subject to
each Award;

 

(b) to determine the type of Award granted and to designate Options as Incentive
Stock Options or Nonstatutory Stock Options;

 

(c) to determine the Fair Market Value of shares of Stock or other property;

 

8

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(d) to determine the terms, conditions and restrictions applicable to each Award
(which need not be identical) and any shares acquired pursuant thereto,
including, without limitation, (i) the exercise or purchase price of shares
purchased pursuant to any Award, (ii) the method of payment for shares purchased
pursuant to any Award, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with Award, including by the withholding or
delivery of shares of Stock, (iv) the timing, terms and conditions of the
exercisability or vesting of any Award or any shares acquired pursuant thereto,
(v) the Performance Award Formula and Performance Goals applicable to any Award
and the extent to which such Performance Goals have been attained, (vi) the time
of the expiration of any Award, (vii) the effect of the Participant’s
termination of Service on any of the foregoing, and (viii) all other terms,
conditions and restrictions applicable to any Award or shares acquired pursuant
thereto not inconsistent with the terms of the Plan;

 

(e) to determine whether an Award will be settled in shares of Stock, cash, or
in any combination thereof;

 

(f) to approve one or more forms of Award Agreement;

 

(g) to amend, modify, extend, cancel or renew any Award or to waive any
restrictions or conditions applicable to any Award or any shares acquired
pursuant thereto;

 

(h) to accelerate, continue, extend or defer the exercisability or vesting of
any Award or any shares acquired pursuant thereto, including with respect to the
period following a Participant’s termination of Service;

 

(i) without the consent of the affected Participant and notwithstanding the
provisions of any Award Agreement to the contrary, to unilaterally substitute at
any time a Stock Appreciation Right providing for settlement solely in shares of
Stock in place of any outstanding Option, provided that such Stock Appreciation
Right covers the same number of shares of Stock and provides for the same
exercise price (subject in each case to adjustment in accordance with Section
4.6) as the replaced Option and otherwise provides substantially equivalent
terms and conditions as the replaced Option, as determined by the Committee;

 

(j) to prescribe, amend or rescind rules, guidelines and policies relating to
the Plan, or to adopt sub-plans or supplements to, or alternative versions of,
the Plan, including, without limitation, as the Committee deems necessary or
desirable to comply with the laws or regulations of or to accommodate the tax
policy, accounting principles or custom of, foreign jurisdictions whose citizens
may be granted Awards; and

 

(k) to correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Award Agreement and to make all other determinations and take
such other actions with respect to the Plan or any Award as the Committee may
deem advisable to the extent not inconsistent with the provisions of the Plan or
applicable law.

 

3.6 Indemnification. In addition to such other rights of indemnification as they
may have as members of the Board or the Committee or as officers or employees of
the Participating Company Group, members of the Board or the Committee and any
officers or employees of the Participating Company Group to whom authority to
act for the Board, the

 

9

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Committee or the Company is delegated shall be indemnified by the Company
against all reasonable expenses, including attorneys’ fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them 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 person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.

 

  4. SHARES SUBJECT TO PLAN.

 

4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in
Sections 4.2, 4.3, 4.4 and 4.6, the maximum aggregate number of shares of Stock
that may be issued under the Plan shall be three million (3,000,000) and shall
consist of authorized but unissued or reacquired shares of Stock or any
combination thereof.

 

4.2 Annual Increase in Maximum Number of Shares Issuable. Subject to adjustment
as provided in Section 4.6, the maximum aggregate number of shares of Stock that
may be issued under the Plan as set forth in Section 4.1 shall be cumulatively
increased on January 1, 2006 and on each subsequent January 1, through and
including January 1, 2014, by a number of shares (the “Annual Increase”) equal
to the smaller of (i) five percent (5%) of the number of shares of Stock issued
and outstanding on the immediately preceding December 31 or (ii) an amount
determined by the Board.

 

4.3 Share Accounting. If an outstanding Award for any reason expires or is
terminated or canceled without having been exercised or settled in full, or if
shares of Stock acquired pursuant to an Award subject to forfeiture or
repurchase are forfeited or repurchased by the Company for an amount not greater
than the Participant’s original purchase price, the shares of Stock allocable to
the terminated portion of such Award or such forfeited or repurchased shares of
Stock shall again be available for issuance under the Plan. Shares of Stock
shall not be deemed to have been issued pursuant to the Plan (a) with respect to
any portion of an Award that is settled in cash or (b) to the extent such shares
are withheld or reacquired by the Company in satisfaction of tax withholding
obligations pursuant to Section 16.2. Upon payment in shares of Stock pursuant
to the exercise of or settlement of an Award, including an SAR, the number of
shares available for issuance under the Plan shall be reduced only by the number
of shares actually issued in such payment. If the exercise price of an Option is
paid by tender to the Company, or attestation to the ownership, of shares of
Stock owned by the Participant, the number of shares available for issuance
under the Plan shall be reduced by the net number of shares for which the Option
is exercised.

 

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4.4 Adjustment for Unissued Predecessor Plan Shares. The maximum aggregate
number of shares of Stock that may be issued under the Plan as set forth in
Section 4.1 shall be cumulatively increased from time to time by:

 

(a) the number of shares of Stock subject to that portion of any option or other
award outstanding pusuant to the Predecessor Plan as of the date of its
termination which, on or after such date, expires or is terminated or canceled
for any reason without having been exercised or settled; and

 

(b) the number of shares of Stock acquired pursuant to the Predecessor Plan
subject to forfeiture or repurchase by the Company at the Participant’s purchase
price which, on or after the date of termination of the Predecessor Paln, is so
forfeited or repurchased;

 

provided, however, that the aggregate number of shares of Stock authorized for
issuance under the Predecessor Plan that may become authorized for issuance
under the Plan pursuant to this Section 4.4 shall not exceed five million nine
hundred forty-three thousand nine hundred ninety-two (5,943,992), subject to
adjustment as provided in Section 4.6.

 

4.5 Maximum Number of Shares Issuable Pursuant to Incentive Stock Options.
Subject to adjustment as provided in Section 4.6, the maximum aggregate number
of shares of Stock that may be issued under the Plan pursuant to the exercise of
Incentive Stock Options (the “ISO Share Limit”) shall not exceed twenty-three
million four hundred thousand (23,400,000). The maximum aggregate number of
shares of Stock that may be issued under the Plan pursuant to all Awards other
than Incentive Stock Options shall be the number of shares determined in
accordance with Section 4.1, subject to adjustment as provided in Sections 4.2,
4.3, 4.4 and 4.6.

 

4.6 Adjustments for Changes in Capital Structure. Subject to any required action
by the stockholders of the Company, in the event of any change in the Stock
effected without receipt of consideration by the Company, whether through
merger, consolidation, reorganization, reincorporation, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, split-up,
split-off, spin-off, combination of shares, exchange of shares, or similar
change in the capital structure of the Company, or in the event of payment of a
dividend or distribution to the stockholders of the Company in a form other than
Stock (excepting normal cash dividends) that has a material effect on the Fair
Market Value of shares of Stock, appropriate adjustments shall be made in the
number and kind of shares subject to the Plan and to any outstanding Awards, in
the Annual Increase set forth in Section 4.2, in the ISO Share Limit set forth
in Section 4.5, in the maximum adjustment for unissued Predecessor Plan shares
set forth in Section 4.4, in the maximum number of shares that may be made
subject to Nonemployee Director Awards pursuant to Section 12, and in the
exercise or purchase price per share under any outstanding Award in order to
prevent dilution or enlargement of Participants’ rights under the Plan. For
purposes of the foregoing, conversion of any convertible securities of the
Company shall not be treated as “effected without receipt of consideration by
the Company.” If a majority of the shares which are of the same class as the
shares that are subject to outstanding Awards are exchanged for, converted into,
or otherwise become (whether or not pursuant to an Ownership Change Event)
shares of another corporation (the “New Shares”), the Committee may unilaterally
amend the outstanding Awards to provide that such Awards are for New Shares. In
the event of any such amendment, the number of shares subject to, and the
exercise price per share of, the outstanding Awards shall be adjusted in a fair
and equitable manner as determined by the Committee, in its discretion. Any
fractional share resulting from an adjustment pursuant to this Section 4.6 shall
be rounded down to the nearest whole number, and

 

11

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in no event may the exercise or purchase price under any Award be decreased to
an amount less than the par value, if any, of the stock subject to such Award.
The Committee in its sole discretion, may also make such adjustments in the
terms of any Award to reflect, or related to, such changes in the capital
structure of the Company or distributions as it deems appropriate, including
modification of Performance Goals, Performance Award Formulas and Performance
Periods. The adjustments determined by the Committee pursuant to this Section
4.6 shall be final, binding and conclusive.

 

  5. ELIGIBILITY AND AWARD LIMITATIONS.

 

5.1 Persons Eligible for Awards. Awards may be granted only to Employees,
Consultants and Directors. For purposes of the foregoing sentence, “Employees,”
“Consultants” and “Directors” shall include prospective Employees, prospective
Consultants and prospective Directors to whom Awards are granted in connection
with written offers of an employment or other service relationship with the
Participating Company Group; provided, however, that no Stock subject to any
such Award shall vest, become exercisable or be issued prior to the date on
which such person commences Service. A Nonemployee Director Award may be granted
only to a person who, at the time of grant, is a Nonemployee Director.

 

5.2 Participation. Awards other than Nonemployee Director Awards are granted
solely at the discretion of the Committee. Eligible persons may be granted more
than one Award. However, excepting Nonemployee Director Awards, eligibility in
accordance with this Section shall not entitle any person to be granted an
Award, or, having been granted an Award, to be granted an additional Award.

 

5.3 Incentive Stock Option Limitations.

 

(a) Persons Eligible. An Incentive Stock Option may be granted only to a person
who, on the effective date of grant, is an Employee of the Company, a Parent
Corporation or a Subsidiary Corporation (each being an “ISO-Qualifying
Corporation”). Any person who is not an Employee of an ISO-Qualifying
Corporation on the effective date of the grant of an Option to such person may
be granted only a Nonstatutory Stock Option. An Incentive Stock Option granted
to a prospective Employee upon the condition that such person become an Employee
of an ISO-Qualifying Corporation shall be deemed granted effective on the date
such person commences Service with an ISO-Qualifying Corporation, with an
exercise price determined as of such date in accordance with Section 6.1.

 

(b) Fair Market Value Limitation. To the extent that options designated as
Incentive Stock Options (granted under all stock option plans of the
Participating Company Group, including the Plan) become exercisable by a
Participant for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portion
of such options which exceeds such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section, options designated as Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of stock shall be determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide for a
limitation different from that set forth in this Section, such different
limitation shall be deemed incorporated herein effective as of the

 

12

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date and with respect to such Options as required or permitted by such amendment
to the Code. If an Option is treated as an Incentive Stock Option in part and as
a Nonstatutory Stock Option in part by reason of the limitation set forth in
this Section, the Participant may designate which portion of such Option the
Participant is exercising. In the absence of such designation, the Participant
shall be deemed to have exercised the Incentive Stock Option portion of the
Option first. Upon exercise, shares issued pursuant to each such portion shall
be separately identified.

 

  6. TERMS AND CONDITIONS OF OPTIONS.

 

Options shall be evidenced by Award Agreements specifying the number of shares
of Stock covered thereby, in such form as the Committee shall from time to time
establish. No Option or purported Option shall be a valid and binding obligation
of the Company unless evidenced by a fully executed Award Agreement. Award
Agreements evidencing Options may incorporate all or any of the terms of the
Plan by reference and, except as otherwise set forth in Section 11 with respect
to Options granted pursuant to a Deferred Compensation Award program or Section
12 with respect to Nonemployee Director Options, shall comply with and be
subject to the following terms and conditions:

 

6.1 Exercise Price. The exercise price for each Option shall be established in
the discretion of the Committee; provided, however, that (a) the exercise price
per share of an Incentive Stock Option shall be not less than the Fair Market
Value of a share of Stock on the effective date of grant of the Option and (b)
no Incentive Stock Option granted to a Ten Percent Owner shall have an exercise
price per share less than one hundred ten percent (110%) of the Fair Market
Value of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Incentive Stock Option may be granted with an
exercise price lower than the minimum exercise price set forth above if such
Option is granted pursuant to an assumption or substitution for another option
in a manner that would qualify under the provisions of Section 424(a) of the
Code.

 

6.2 Exercisability and Term of Options. Options shall be exercisable at such
time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Committee and set forth in the Award Agreement evidencing such Option; provided,
however, that (a) no Option shall be exercisable after the expiration of ten
(10) years after the effective date of grant of such Option, (b) no Incentive
Stock Option granted to a Ten Percent Owner shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option,
and (c) no Option granted to a prospective Employee, prospective Consultant or
prospective Director may become exercisable prior to the date on which such
person commences Service. Subject to the foregoing, unless otherwise specified
by the Committee in the grant of an Option, any Option granted hereunder shall
terminate ten (10) years after the effective date of grant of the Option, unless
earlier terminated in accordance with its provisions.

 

6.3 Payment of Exercise Price.

 

(a) Forms of Consideration Authorized. Except as otherwise provided below,
payment of the exercise price for the number of shares of Stock being purchased
pursuant to any Option shall be made (i) in cash, by check or in cash
equivalent, (ii) by tender to

 

13

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the Company, or attestation to the ownership, of shares of Stock owned by the
Participant having a Fair Market Value not less than the exercise price, (iii)
by delivery of a properly executed notice of exercise together with irrevocable
instructions to a broker providing for the assignment to the Company of the
proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a
“Cashless Exercise”), (iv) by such other consideration as may be approved by the
Committee from time to time to the extent permitted by applicable law, or (v) by
any combination thereof. The Committee may at any time or from time to time
grant Options which do not permit all of the foregoing forms of consideration to
be used in payment of the exercise price or which otherwise restrict one or more
forms of consideration.

 

(b) Limitations on Forms of Consideration.

 

(i) Tender of Stock. Notwithstanding the foregoing, an Option may not be
exercised by tender to the Company, or attestation to the ownership, of shares
of Stock to the extent such tender or attestation would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption
of the Company’s stock. Unless otherwise provided by the Committee, an Option
may not be exercised by tender to the Company, or attestation to the ownership,
of shares of Stock unless such shares either have been owned by the Participant
for more than six (6) months or such other period, if any, necessary to avoid
additional compensation expense for financial reporting purposes (and not used
for another Option exercise by attestation during such period) or were not
acquired, directly or indirectly, from the Company.

 

(ii) Cashless Exercise. The Company reserves, at any and all times, the right,
in the Company’s sole and absolute discretion, to establish, decline to approve
or terminate any program or procedures for the exercise of Options by means of a
Cashless Exercise, including with respect to one or more Participants specified
by the Company notwithstanding that such program or procedures may be available
to other Participants.

 

6.4 Effect of Termination of Service.

 

(a) Option Exercisability. Subject to earlier termination of the Option as
otherwise provided herein and unless otherwise provided by the Committee and set
forth in the Award Agreement, an Option shall be exercisable after a
Participant’s termination of Service only during the applicable time period
determined in accordance with this Section and thereafter shall terminate:

 

(i) Disability. If the Participant’s Service terminates because of the
Disability of the Participant, the Option, to the extent unexercised and
exercisable on the date on which the Participant’s Service terminated, may be
exercised by the Participant (or the Participant’s guardian or legal
representative) at any time prior to the expiration of twelve (12) months after
the date on which the Participant’s Service terminated, but in any event no
later than the date of expiration of the Option’s term as set forth in the Award
Agreement evidencing such Option (the “Option Expiration Date”).

 

14

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(ii) Death. If the Participant’s Service terminates because of the death of the
Participant, the Option, to the extent unexercised and exercisable on the date
on which the Participant’s Service terminated, may be exercised by the
Participant’s legal representative or other person who acquired the right to
exercise the Option by reason of the Participant’s death at any time prior to
the expiration of twelve (12) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration Date.
The Participant’s Service shall be deemed to have terminated on account of death
if the Participant dies within three (3) months after the Participant’s
termination of Service.

 

(iii) Termination for Cause. Notwithstanding any other provision of the Plan to
the contrary, if the Participant’s Service is terminated for Cause or if,
following the Participant’s termination of Service and during any period in
which the Option otherwise would remain exercisable, the Participant engages in
any act that would constitute Cause, the Option shall terminate in its entirety
and cease to be exercisable immediately upon such termination of Service or act.

 

(iv) Other Termination of Service. If the Participant’s Service terminates for
any reason, except Disability, death or Cause, the Option, to the extent
unexercised and exercisable by the Participant on the date on which the
Participant’s Service terminated, may be exercised by the Participant at any
time prior to the expiration of three (3) months after the date on which the
Participant’s Service terminated, but in any event no later than the Option
Expiration Date.

 

(b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other
than termination of Service for Cause, if the exercise of an Option within the
applicable time periods set forth in Section 6.4(a) is prevented by the
provisions of Section 15 below, the Option shall remain exercisable until three
(3) months after the date the Participant is notified by the Company that the
Option is exercisable, but in any event no later than the Option Expiration
Date.

 

(c) Extension if Participant Subject to Section16(b). Notwithstanding the
foregoing, other than termination of Service for Cause, if a sale within the
applicable time periods set forth in Section 6.4(a) of shares acquired upon the
exercise of the Option would subject the Participant to suit under Section 16(b)
of the Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which a sale of such
shares by the Participant would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Participant’s termination of
Service, or (iii) the Option Expiration Date.

 

6.5 Transferability of Options. During the lifetime of the Participant, an
Option shall be exercisable only by the Participant or the Participant’s
guardian or legal representative. Prior to the issuance of shares of Stock upon
the exercise of an Option, the Option shall not be subject in any manner to
anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s
beneficiary, except transfer by will or by the laws of descent and distribution.
Notwithstanding the foregoing, a Nonstatutory Stock Option shall be assignable
or transferable

 

15

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to the extent, if any, permitted by the Committee, in its discretion, and set
forth in the Award Agreement evidencing such Option.

 

  7. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.

 

Stock Appreciation Rights shall be evidenced by Award Agreements specifying the
number of shares of Stock subject to the Award, in such form as the Committee
shall from time to time establish. No SAR or purported SAR shall be a valid and
binding obligation of the Company unless evidenced by a fully executed Award
Agreement. Award Agreements evidencing SARs may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:

 

7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any
portion of a related Option (a “Tandem SAR”) or may be granted independently of
any Option (a “Freestanding SAR”). A Tandem SAR may be granted either
concurrently with the grant of the related Option or at any time thereafter
prior to the complete exercise, termination, expiration or cancellation of such
related Option.

 

7.2 Exercise Price. The exercise price for each SAR shall be established in the
discretion of the Committee; provided, however, that (a) the exercise price per
share subject to a Tandem SAR shall be the exercise price per share under the
related Option and (b) the exercise price per share subject to a Freestanding
SAR shall be not less than the Fair Market Value of a share of Stock on the
effective date of grant of the SAR.

 

7.3 Exercisability and Term of SARs.

 

(a) Tandem SARs. Tandem SARs shall be exercisable only at the time and to the
extent, and only to the extent, that the related Option is exercisable, subject
to such provisions as the Committee may specify where the Tandem SAR is granted
with respect to less than the full number of shares of Stock subject to the
related Option. The Committee may, in its discretion, provide in any Award
Agreement evidencing a Tandem SAR that such SAR may not be exercised without the
advance approval of the Company and, if such approval is not given, then the
Option shall nevertheless remain exercisable in accordance with its terms. A
Tandem SAR shall terminate and cease to be exercisable no later than the date on
which the related Option expires or is terminated or canceled. Upon the exercise
of a Tandem SAR with respect to some or all of the shares subject to such SAR,
the related Option shall be canceled automatically as to the number of shares
with respect to which the Tandem SAR was exercised. Upon the exercise of an
Option related to a Tandem SAR as to some or all of the shares subject to such
Option, the related Tandem SAR shall be canceled automatically as to the number
of shares with respect to which the related Option was exercised.

 

(b) Freestanding SARs. Freestanding SARs shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Committee
and set forth in the Award Agreement evidencing such SAR; provided, however,
that no Freestanding SAR shall be exercisable after the expiration of ten (10)
years after the effective date of grant of such SAR.

 

16

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7.4 Exercise of SARs. Upon the exercise (or deemed exercise pursuant to Section
7.5) of an SAR, the Participant (or the Participant’s legal representative or
other person who acquired the right to exercise the SAR by reason of the
Participant’s death) shall be entitled to receive payment of an amount for each
share with respect to which the SAR is exercised equal to the excess, if any, of
the Fair Market Value of a share of Stock on the date of exercise of the SAR
over the exercise price. Payment of such amount shall be made in cash, whole
shares of Stock, or any combination thereof as determined by the Committee.
Unless otherwise provided in the Award Agreement evidencing such SAR, payment
shall be made in a lump sum as soon as practicable following the date of
exercise of the SAR. The Award Agreement evidencing any SAR may provide for
deferred payment in a lump sum or in installments. When payment is to be made in
shares of Stock, the number of shares to be issued shall be determined on the
basis of the Fair Market Value of a share of Stock on the date of exercise of
the SAR. For purposes of Section 7, an SAR shall be deemed exercised on the date
on which the Company receives notice of exercise from the Participant or as
otherwise provided in Section 7.5.

 

7.5 Deemed Exercise of SARs. If, on the date on which an SAR would otherwise
terminate or expire, the SAR by its terms remains exercisable immediately prior
to such termination or expiration and, if so exercised, would result in a
payment to the holder of such SAR, then any portion of such SAR which has not
previously been exercised shall automatically be deemed to be exercised as of
such date with respect to such portion.

 

7.6 Effect of Termination of Service. Subject to earlier termination of the SAR
as otherwise provided herein and unless otherwise provided by the Committee in
the Award Agreement evidencing the SAR, an SAR shall be exercisable after a
Participant’s termination of Service only during the applicable time period
determined in accordance with Section 6.4 (treating the SAR as if it were an
Option) and thereafter shall terminate.

 

7.7 Transferability of SARs. During the lifetime of the Participant, an SAR
shall be exercisable only by the Participant or the Participant’s guardian or
legal representative. Prior to the exercise of an SAR, the SAR shall not be
subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. Notwithstanding the foregoing, a Tandem SAR related to
a Nonstatutory Stock Option and a Freestanding SAR shall be assignable or
transferable to the extent, if any, permitted by the Committee, in its
discretion, and set forth in the Award Agreement evidencing such SAR.

 

17

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  8. TERMS AND CONDITIONS OF STOCK AWARDS.

 

Stock Awards shall be evidenced by Award Agreements specifying whether the Award
is a Stock Bonus or a Stock Purchase Right and the number of shares of Stock
subject to the Award, in such form as the Committee shall from time to time
establish. No Stock Award or purported Stock Award shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Award Agreement.
Award Agreements evidencing Stock Awards may incorporate all or any of the terms
of the Plan by reference and shall comply with and be subject to the following
terms and conditions:

 

8.1 Types of Stock Awards Authorized. Stock Awards may be in the form of either
a Stock Bonus or a Stock Purchase Right. Stock Awards may be granted upon such
conditions as the Committee shall determine, including, without limitation, upon
the attainment of one or more Performance Goals described in Section 10.4. If
either the grant of a Stock Award or the lapsing of the Restriction Period is to
be contingent upon the attainment of one or more Performance Goals, the
Committee shall follow procedures substantially equivalent to those set forth in
Sections 10.3 through 10.5(a).

 

8.2 Purchase Price. The purchase price for shares of Stock issuable under each
Stock Purchase Right shall be established by the Committee in its discretion. No
monetary payment (other than applicable tax withholding) shall be required as a
condition of receiving shares of Stock pursuant to a Stock Bonus, the
consideration for which shall be services actually rendered to a Participating
Company or for its benefit. Notwithstanding the foregoing, if required by
applicable state corporate law, the Participant shall furnish consideration in
the form of cash or past services rendered to a Participating Company or for its
benefit having a value not less than the par value of the shares of Stock
subject to such Stock Award.

 

8.3 Purchase Period. A Stock Purchase Right shall be exercisable within a period
established by the Committee, which shall in no event exceed thirty (30) days
from the effective date of the grant of the Stock Purchase Right; provided,
however, that no Stock Purchase Right granted to a prospective Employee,
prospective Consultant or prospective Director may become exercisable prior to
the date on which such person commences Service.

 

8.4 Payment of Purchase Price. Except as otherwise provided below, payment of
the purchase price for the number of shares of Stock being purchased pursuant to
any Stock Purchase Right shall be made (a) in cash, by check, or in cash
equivalent, (b) by such other consideration as may be approved by the Committee
from time to time to the extent permitted by applicable law, or (iii) by any
combination thereof. The Committee may at any time or from time to time grant
Stock Purchase Rights which do not permit all of the foregoing forms of
consideration to be used in payment of the purchase price or which otherwise
restrict one or more forms of consideration. Stock Bonuses shall be issued in
consideration for past services actually rendered to a Participating Company or
for its benefit, provided that, if required by applicable state corporate law,
the Participant shall furnish cash consideration in an amount not less than the
par value of the shares of Stock subject to the Stock Bonus.

 

8.5 Vesting and Restrictions on Transfer. Shares issued pursuant to any Stock
Award may or may not be made subject to Vesting Conditions based upon the
satisfaction of such Service requirements, conditions, restrictions or
performance criteria, including, without limitation, Performance Goals as
described in Section 10.4, as shall be established by the Committee and set
forth in the Award Agreement evidencing such Award. During any Restriction
Period in which shares acquired pursuant to a Stock Award remain subject to
Vesting Conditions, such shares may not be sold, exchanged, transferred,
pledged, assigned or otherwise disposed of other than pursuant to an Ownership
Change Event, as defined in Section 2.1(z), or as provided in Section 8.8. Upon
request by the Company, each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates representing
shares of Stock

 

18

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acquired hereunder for the placement on such certificates of appropriate legends
evidencing any such transfer restrictions.

 

8.6 Voting Rights; Dividends and Distributions. Except as provided in this
Section, Section 8.5 and any Award Agreement, during any Restriction Period
applicable to shares subject to a Stock Award, the Participant shall have all of
the rights of a stockholder of the Company holding shares of Stock, including
the right to vote such shares and to receive all dividends and other
distributions paid with respect to such shares. However, in the event of a
dividend or distribution paid in shares of Stock or any other adjustment made
upon a change in the capital structure of the Company as described in Section
4.6, any and all new, substituted or additional securities or other property
(other than normal cash dividends) to which the Participant is entitled by
reason of the Participant’s Stock Award shall be immediately subject to the same
Vesting Conditions as the shares subject to the Stock Award with respect to
which such dividends or distributions were paid or adjustments were made.

 

8.7 Effect of Termination of Service. Unless otherwise provided by the Committee
in the Award Agreement evidencing a Stock Award, if a Participant’s Service
terminates for any reason, whether voluntary or involuntary (including the
Participant’s death or disability), then (a) the Company shall have the option
to repurchase for the purchase price paid by the Participant any shares acquired
by the Participant pursuant to a Stock Purchase Right which remain subject to
Vesting Conditions as of the date of the Participant’s termination of Service
and (b) the Participant shall forfeit to the Company any shares acquired by the
Participant pursuant to a Stock Bonus which remain subject to Vesting Conditions
as of the date of the Participant’s termination of Service. The Company shall
have the right to assign at any time any repurchase right it may have, whether
or not such right is then exercisable, to one or more persons as may be selected
by the Company.

 

8.8 Nontransferability of Stock Award Rights. Prior to the issuance of shares of
Stock pursuant to a Stock Award, rights to acquire such shares shall not be
subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or the laws of descent
and distribution. All rights with respect to a Stock Award granted to a
Participant hereunder shall be exercisable during his or her lifetime only by
such Participant or the Participant’s guardian or legal representative.

 

  9. TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARDS.

 

Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying
the number of Restricted Stock Units subject to the Award, in such form as the
Committee shall from time to time establish. No Restricted Stock Unit Award or
purported Restricted Stock Unit Award shall be a valid and binding obligation of
the Company unless evidenced by a fully executed Award Agreement. Award
Agreements evidencing Restricted Stock Units may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:

 

9.1 Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be
granted upon such conditions as the Committee shall determine, including,
without

 

19

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limitation, upon the attainment of one or more Performance Goals described in
Section 10.4. If either the grant of a Restricted Stock Unit Award or the
Vesting Conditions with respect to such Award is to be contingent upon the
attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 10.3 through
10.5(a).

 

9.2 Purchase Price. No monetary payment (other than applicable tax withholding,
if any) shall be required as a condition of receiving a Restricted Stock Unit
Award, the consideration for which shall be services actually rendered to a
Participating Company or for its benefit. Notwithstanding the foregoing, if
required by applicable state corporate law, the Participant shall furnish
consideration in the form of cash or past services rendered to a Participating
Company or for its benefit having a value not less than the par value of the
shares of Stock issued upon settlement of the Restricted Stock Unit Award.

 

9.3 Vesting. Restricted Stock Units may or may not be made subject to Vesting
Conditions based upon the satisfaction of such Service requirements, conditions,
restrictions or performance criteria, including, without limitation, Performance
Goals as described in Section 10.4, as shall be established by the Committee and
set forth in the Award Agreement evidencing such Award.

 

9.4 Voting Rights, Dividend Equivalent Rights and Distributions. Participants
shall have no voting rights with respect to shares of Stock represented by
Restricted Stock Units until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Restricted Stock
Unit Award that the Participant shall be entitled to receive Dividend
Equivalents with respect to the payment of cash dividends on Stock having a
record date prior to date on which Restricted Stock Units held by such
Participant are settled. Such Dividend Equivalents, if any, shall be paid by
crediting the Participant with additional whole Restricted Stock Units as of the
date of payment of such cash dividends on Stock. The number of additional
Restricted Stock Units (rounded to the nearest whole number) to be so credited
shall be determined by dividing (a) the amount of cash dividends paid on such
date with respect to the number of shares of Stock represented by the Restricted
Stock Units previously credited to the Participant by (b) the Fair Market Value
per share of Stock on such date. Such additional Restricted Stock Units shall be
subject to the same terms and conditions and shall be settled in the same manner
and at the same time (or as soon thereafter as practicable) as the Restricted
Stock Units originally subject to the Restricted Stock Unit Award. In the event
of a dividend or distribution paid in shares of Stock or any other adjustment
made upon a change in the capital structure of the Company as described in
Section 4.6, appropriate adjustments shall be made in the Participant’s
Restricted Stock Unit Award so that it represents the right to receive upon
settlement any and all new, substituted or additional securities or other
property (other than normal cash dividends) to which the Participant would
entitled by reason of the shares of Stock issuable upon settlement of the Award,
and all such new, substituted or additional securities or other property shall
be immediately subject to the same Vesting Conditions as are applicable to the
Award.

 

9.5 Effect of Termination of Service. Unless otherwise provided by the Committee
and set forth in the Award Agreement evidencing a Restricted Stock Unit Award,
if a

 

20

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Participant’s Service terminates for any reason, whether voluntary or
involuntary (including the Participant’s death or disability), then the
Participant shall forfeit to the Company any Restricted Stock Units pursuant to
the Award which remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service.

 

9.6 Settlement of Restricted Stock Unit Awards. The Company shall issue to a
Participant on the date on which Restricted Stock Units subject to the
Participant’s Restricted Stock Unit Award vest or on such other date determined
by the Committee, in its discretion, and set forth in the Award Agreement one
(1) share of Stock (and/or any other new, substituted or additional securities
or other property pursuant to an adjustment described in Section 9.4) for each
Restricted Stock Unit then becoming vested or otherwise to be settled on such
date, subject to the withholding of applicable taxes. If permitted by the
Committee and set forth in the Award Agreement, the Participant may elect in
accordance with terms specified in the Award Agreement to defer receipt of all
or any portion of the shares of Stock or other property otherwise issuable to
the Participant pursuant to this Section. Notwithstanding the foregoing, the
Committee, in its discretion, may provide for settlement of any Restricted Stock
Unit Award by payment to the Participant in cash of an amount equal to the Fair
Market Value on the payment date of the shares of Stock or other property
otherwise issuable to the Participant pursuant to this Section.

 

9.7 Nontransferability of Restricted Stock Unit Awards. Prior to the settlement
of a Restricted Stock Unit Award, the Award shall not be subject in any manner
to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s
beneficiary, except transfer by will or by the laws of descent and distribution.
All rights with respect to a Restricted Stock Unit Award granted to a
Participant hereunder shall be exercisable during his or her lifetime only by
such Participant or the Participant’s guardian or legal representative.

 

  10. TERMS AND CONDITIONS OF PERFORMANCE AWARDS.

 

Performance Awards shall be evidenced by Award Agreements in such form as the
Committee shall from time to time establish. No Performance Award or purported
Performance Award shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement. Award Agreements evidencing
Performance Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:

 

10.1 Types of Performance Awards Authorized. Performance Awards may be in the
form of either Performance Shares or Performance Units. Each Award Agreement
evidencing a Performance Award shall specify the number of Performance Shares or
Performance Units subject thereto, the Performance Award Formula, the
Performance Goal(s) and Performance Period applicable to the Award, and the
other terms, conditions and restrictions of the Award.

 

10.2 Initial Value of Performance Shares and Performance Units. Unless otherwise
provided by the Committee in granting a Performance Award, each Performance
Share shall have an initial value equal to the Fair Market Value of one (1)
share of Stock, subject to

 

21

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adjustment as provided in Section 4.6, on the effective date of grant of the
Performance Share, and each Performance Unit shall have an initial value of one
hundred dollars ($100). The final value payable to the Participant in settlement
of a Performance Award determined on the basis of the applicable Performance
Award Formula will depend on the extent to which Performance Goals established
by the Committee are attained within the applicable Performance Period
established by the Committee.

 

10.3 Establishment of Performance Period, Performance Goals and Performance
Award Formula. In granting each Performance Award, the Committee shall establish
in writing the applicable Performance Period, Performance Award Formula and one
or more Performance Goals which, when measured at the end of the Performance
Period, shall determine on the basis of the Performance Award Formula the final
value of the Performance Award to be paid to the Participant. Unless otherwise
permitted in compliance with the requirements under Section 162(m) with respect
to “performance-based compensation,” the Committee shall establish the
Performance Goal(s) and Performance Award Formula applicable to each Performance
Award no later than the earlier of (a) the date ninety (90) days after the
commencement of the applicable Performance Period or (b) the date on which 25%
of the Performance Period has elapsed, and, in any event, at a time when the
outcome of the Performance Goals remains substantially uncertain. Once
established, the Performance Goals and Performance Award Formula applicable to a
“covered employee” within the meaning of Section 162(m) (a “Covered Employee”)
shall not be changed during the Performance Period. The Company shall notify
each Participant granted a Performance Award of the terms of such Award,
including the Performance Period, Performance Goal(s) and Performance Award
Formula.

 

10.4 Measurement of Performance Goals. Performance Goals shall be established by
the Committee on the basis of targets to be attained (“Performance Targets”)
with respect to one or more measures of business or financial performance (each,
a “Performance Measure”), subject to the following:

 

(a) Performance Measures. Performance Measures shall have the same meanings as
used in the Company’s financial statements, or, if such terms are not used in
the Company’s financial statements, they shall have the meaning applied pursuant
to generally accepted accounting principles, or as used generally in the
Company’s industry. Performance Measures shall be calculated with respect to the
Company and each Subsidiary Corporation consolidated therewith for financial
reporting purposes or such division or other business unit as may be selected by
the Committee. For purposes of the Plan, the Performance Measures applicable to
a Performance Award shall be calculated in accordance with generally accepted
accounting principles, but prior to the accrual or payment of any Performance
Award for the same Performance Period and excluding the effect (whether positive
or negative) of any change in accounting standards or any extraordinary, unusual
or nonrecurring item, as determined by the Committee, occurring after the
establishment of the Performance Goals applicable to the Performance Award. Each
such adjustment, if any, shall be made solely for the purpose of providing a
consistent basis from period to period for the calculation of Performance
Measures in order to prevent the dilution or enlargement of the Participant’s
rights with respect to a Performance Award. Performance Measures may be one or
more of the following, as determined by the Committee:

 

(i) revenue;

 

22

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(ii) sales;

 

(iii) expenses;

 

(iv) operating income;

 

(v) gross margin;

 

(vi) operating margin;

 

(vii) earnings before any one or more of: stock-based compensation expense,
interest, taxes and depreciation, and amortization;

 

(viii) pre-tax profit;

 

(ix) net operating income;

 

(x) net income;

 

(xi) economic value added;

 

(xii) free cash flow;

 

(xiii) operating cash flow;

 

(xiv) the market price of the Stock;

 

(xv) earnings per share;

 

(xvi) return on stockholder equity;

 

(xvii) return on capital;

 

(xviii) return on assets;

 

(xix) return on investment;

 

(xx) balance of cash, cash equivalents and marketable securities;

 

(xxi) market share;

 

(xxii) number of customers;

 

(xxiii) customer satisfaction;

 

(xxiv) product development; and

 

(xxv) completion of a joint venture or other corporate transaction.

 

23

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(b) Performance Targets. Performance Targets may include a minimum, maximum,
target level and intermediate levels of performance, with the final value of a
Performance Award determined under the applicable Performance Award Formula by
the level attained during the applicable Performance Period. A Performance
Target may be stated as an absolute value or as a value determined relative to
an index, budget or other standard selected by the Committee.

 

10.5 Settlement of Performance Awards.

 

(a) Determination of Final Value. As soon as practicable following the
completion of the Performance Period applicable to a Performance Award, the
Committee shall certify in writing the extent to which the applicable
Performance Goals have been attained and the resulting final value of the Award
earned by the Participant and to be paid upon its settlement in accordance with
the applicable Performance Award Formula.

 

(b) Discretionary Adjustment of Award Formula. In its discretion, the Committee
may, either at the time it grants a Performance Award or at any time thereafter,
provide for the positive or negative adjustment of the Performance Award Formula
applicable to a Performance Award granted to any Participant who is not a
Covered Employee to reflect such Participant’s individual performance in his or
her position with the Company or such other factors as the Committee may
determine. If permitted under a Covered Employee’s Award Agreement, the
Committee shall have the discretion, on the basis of such criteria as may be
established by the Committee, to reduce some or all of the value of the
Performance Award that would otherwise be paid to the Covered Employee upon its
settlement notwithstanding the attainment of any Performance Goal and the
resulting value of the Performance Award determined in accordance with the
Performance Award Formula. No such reduction may result in an increase in the
amount payable upon settlement of another Participant’s Performance Award.

 

(c) Effect of Leaves of Absence. Unless otherwise required by law, payment of
the final value, if any, of a Performance Award held by a Participant who has
taken in excess of thirty (30) days in leaves of absence during a Performance
Period shall be prorated on the basis of the number of days of the Participant’s
Service during the Performance Period during which the Participant was not on a
leave of absence.

 

(d) Notice to Participants. As soon as practicable following the Committee’s
determination and certification in accordance with Sections 10.5(a) and (b), the
Company shall notify each Participant of the determination of the Committee.

 

(e) Payment in Settlement of Performance Awards. As soon as practicable
following the Committee’s determination and certification in accordance with
Sections 10.5(a) and (b), payment shall be made to each eligible Participant (or
such Participant’s legal representative or other person who acquired the right
to receive such payment by reason of the Participant’s death) of the final value
of the Participant’s Performance Award. Payment of such amount shall be made in
cash, shares of Stock, or a combination thereof as determined by the Committee.
Unless otherwise provided in the Award Agreement evidencing a Performance Award,
payment shall be made in a lump sum. An Award Agreement may provide

 

24

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for deferred payment in a lump sum or in installments. If any payment is to be
made on a deferred basis, the Committee may, but shall not be obligated to,
provide for the payment during the deferral period of Dividend Equivalents or
interest.

 

(f) Provisions Applicable to Payment in Shares. If payment is to be made in
shares of Stock, the number of such shares shall be determined by dividing the
final value of the Performance Award by the value of a share of Stock determined
by the method specified in the Award Agreement. Such methods may include,
without limitation, the closing market price on a specified date (such as the
settlement date) or an average of market prices over a series of trading days.
Shares of Stock issued in payment of any Performance Award may be fully vested
and freely transferable shares or may be shares of Stock subject to Vesting
Conditions as provided in Section 8.5. Any shares subject to Vesting Conditions
shall be evidenced by an appropriate Award Agreement and shall be subject to the
provisions of Sections 8.5 through 8.8 above.

 

10.6 Voting Rights; Dividend Equivalent Rights and Distributions. Participants
shall have no voting rights with respect to shares of Stock represented by
Performance Share Awards until the date of the issuance of such shares, if any
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Performance Share
Award that the Participant shall be entitled to receive Dividend Equivalents
with respect to the payment of cash dividends on Stock having a record date
prior to the date on which the Performance Shares are settled or forfeited. Such
Dividend Equivalents, if any, shall be credited to the Participant in the form
of additional whole Performance Shares as of the date of payment of such cash
dividends on Stock. The number of additional Performance Shares (rounded to the
nearest whole number) to be so credited shall be determined by dividing (a) the
amount of cash dividends paid on such date with respect to the number of shares
of Stock represented by the Performance Shares previously credited to the
Participant by (b) the Fair Market Value per share of Stock on such date.
Dividend Equivalents may be paid currently or may be accumulated and paid to the
extent that Performance Shares become nonforfeitable, as determined by the
Committee. Settlement of Dividend Equivalents may be made in cash, shares of
Stock, or a combination thereof as determined by the Committee, and may be paid
on the same basis as settlement of the related Performance Share as provided in
Section 10.5. Dividend Equivalents shall not be paid with respect to Performance
Units. In the event of a dividend or distribution paid in shares of Stock or any
other adjustment made upon a change in the capital structure of the Company as
described in Section 4.6, appropriate adjustments shall be made in the
Participant’s Performance Share Award so that it represents the right to receive
upon settlement any and all new, substituted or additional securities or other
property (other than normal cash dividends) to which the Participant would
entitled by reason of the shares of Stock issuable upon settlement of the
Performance Share Award, and all such new, substituted or additional securities
or other property shall be immediately subject to the same Performance Goals as
are applicable to the Award.

 

25

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10.7 Effect of Termination of Service. Unless otherwise provided by the
Committee and set forth in the Award Agreement evidencing a Performance Award,
the effect of a Participant’s termination of Service on the Performance Award
shall be as follows:

 

(a) Death or Disability. If the Participant’s Service terminates because of the
death or Disability of the Participant before the completion of the Performance
Period applicable to the Performance Award, the final value of the Participant’s
Performance Award shall be determined by the extent to which the applicable
Performance Goals have been attained with respect to the entire Performance
Period and shall be prorated based on the number of days of the Participant’s
Service during the Performance Period. Payment shall be made following the end
of the Performance Period in any manner permitted by Section 10.5.

 

(b) Other Termination of Service. If the Participant’s Service terminates for
any reason except death or Disability before the completion of the Performance
Period applicable to the Performance Award, such Award shall be forfeited in its
entirety; provided, however, that in the event of an involuntary termination of
the Participant’s Service, the Committee, in its sole discretion, may waive the
automatic forfeiture of all or any portion of any such Award.

 

10.8 Nontransferability of Performance Awards. Prior to settlement in accordance
with the provisions of the Plan, no Performance Award shall be subject in any
manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent and
distribution. All rights with respect to a Performance Award granted to a
Participant hereunder shall be exercisable during his or her lifetime only by
such Participant or the Participant’s guardian or legal representative.

 

  11. DEFERRED COMPENSATION AWARDS.

 

11.1 Establishment of Deferred Compensation Award Programs. This Section 11
shall not be effective unless and until the Committee determines to establish a
program pursuant to this Section. The Committee, in its discretion and upon such
terms and conditions as it may determine, may establish one or more programs
pursuant to the Plan under which:

 

(a) Elective Cash Compensation Reduction Awards. Participants designated by the
Committee who are Insiders or otherwise among a select group of highly
compensated Employees may irrevocably elect, prior to a date specified by the
Committee, to reduce such Participant’s compensation otherwise payable in cash
(subject to any minimum or maximum reductions imposed by the Committee) and to
be granted automatically at such time or times as specified by the Committee one
or more Awards of Stock Units or Nonstatutory Stock Options with respect to such
numbers of shares of Stock as determined in accordance with the rules of the
program established by the Committee and having such other terms and conditions
as established by the Committee.

 

(b) Stock Issuance Deferral Awards. Participants designated by the Committee who
are Insiders or otherwise among a select group of highly compensated Employees
may irrevocably elect, prior to a date specified by the Committee, to be granted
automatically an Award of Stock Units with respect to such number of shares of
Stock and upon such other terms and conditions as established by the Committee
in lieu of:

 

(i) shares of Stock otherwise issuable to such Participant upon the exercise of
an Option;

 

26

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(ii) cash or shares of Stock otherwise issuable to such Participant upon the
exercise of an SAR; or

 

(iii) cash or shares of Stock otherwise issuable to such Participant upon the
settlement of a Performance Award.

 

11.2 Terms and Conditions of Deferred Compensation Awards. Deferred Compensation
Awards granted pursuant to this Section 11 shall be evidenced by Award
Agreements in such form as the Committee shall from time to time establish. No
such Deferred Compensation Award or purported Deferred Compensation Award shall
be a valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement. Award Agreements evidencing Deferred Compensation
Awards may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:

 

(a) Terms and Conditions of Options. Except as provided below, Options granted
pursuant to Section 11 shall comply with and be subject to the terms and
conditions of Section 6.

 

(i) Exercise Price. The exercise price for each Option granted pursuant to
Section 11 shall be established at the discretion of the Committee; provided,
however the exercise price per share shall be not less than twenty-five percent
(25%) of the Fair Market Value of a share of Stock on the effective date of
grant of the Option.

 

(ii) Effect of Termination of Service. Subject to earlier termination of the
Option as otherwise provided herein and unless otherwise provided by the
Committee and set forth in the Award Agreement, an Option granted pursuant to
Section 11 shall be exercisable after a Participant’s termination of Service
during the applicable time period determined in accordance with Section 6.4,
other than Section 6.4(a)(iii) (related to termination for Cause), and
thereafter shall terminate.

 

(b) Terms and Conditions of Stock Units. Except as provided below, Stock Units
granted pursuant to Section 11 shall comply with and be subject to the terms and
conditions of Section 9.

 

(i) Voting Rights; Dividend Equivalent Rights and Distributions. Participants
shall have no voting rights with respect to shares of Stock represented by Stock
Units until the date of the issuance of such shares (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). However, a Participant shall be entitled to receive
Dividend Equivalents with respect to the payment of cash dividends on Stock
having a record date prior to date on which Stock Units held by such Participant
are settled. Such Dividend Equivalents shall be paid by crediting the
Participant with additional whole Stock Units as of the date of payment of such
cash dividends on Stock. The number of additional Stock Units (rounded to the
nearest whole number) to be so credited shall be determined by dividing (A) the
amount of cash dividends paid

 

27

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on such date with respect to the number of shares of Stock represented by the
Stock Units previously credited to the Participant by (B) the Fair Market Value
per share of Stock on such date. Such additional Stock Units shall be subject to
the same terms and conditions and shall be settled in the same manner and at the
same time (or as soon thereafter as practicable) as the Stock Units originally
subject to the Stock Unit Award. In the event of a dividend or distribution paid
in shares of Stock or any other adjustment made upon a change in the capital
structure of the Company as described in Section 4.6, appropriate adjustments
shall be made in the Participant’s Stock Unit Award so that it represent the
right to receive upon settlement any and all new, substituted or additional
securities or other property (other than normal cash dividends) to which the
Participant would entitled by reason of the shares of Stock issuable upon
settlement of the Award.

 

(ii) Settlement of Stock Unit Awards. A Participant electing to receive an Award
of Stock Units pursuant to this Section 11, shall specify at the time of such
election a settlement date with respect to such Award. The Company shall issue
to the Participant on the settlement date elected by the Participant, or as soon
thereafter as practicable, a number of whole shares of Stock equal to the number
of vested Stock Units subject to the Stock Unit Award. Such shares of Stock
shall be fully vested, and the Participant shall not be required to pay any
additional consideration (other than applicable tax withholding) to acquire such
shares.

 

  12. TERMS AND CONDITIONS OF NONEMPLOYEE DIRECTOR AWARDS.

 

Nonemployee Director Awards shall be evidenced by Award Agreements specifying
the number of shares of Stock covered thereby, in such form as the Committee
shall from time to time establish. Such Award Agreements may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions.

 

12.1 Automatic Grant of Nonemployee Director Options.

 

(a) Initial Option. Subject to the execution by the Nonemployee Director of an
appropriate Award Agreement, each person who first becomes a Nonemployee
Director on or after the Effective Date shall be granted automatically and
without further action of the Committee on the date such person first becomes a
Nonemployee Director an Option (an “Initial Option”) to purchase a number of
shares of Stock established from time to time by resolution of the Committee,
but in any event not in excess of thirty thousand (30,000) shares of Stock.

 

(b) Annual Option. Subject to the execution by the Nonemployee Director of an
appropriate Award Agreement, each Nonemployee Director (including any Director
who previously did not qualify as a Nonemployee Director but who subsequently
becomes a Nonemployee Director) shall be granted automatically and without
further action of the Committee on the date of each annual meeting of the
stockholders of the Company (the “Annual Meeting”), commencing with the Annual
Meeting held in 2005 and continuing for each Annual Meeting held thereafter
during the term of the Plan, immediately following which such person remains a
Nonemployee Director, an Option (an “Annual Option”) to purchase a number

 

28

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of shares of Stock established from time to time by resolution of the Committee,
but in any event not in excess of ten thousand (10,000) shares of Stock,
increased by a number of shares of Stock determined in accordance with Section
12.1(c) below; provided, however, that a Nonemployee Director granted an Initial
Option on, or within a period of six (6) months prior to, the date of an Annual
Meeting shall not be granted an Annual Option pursuant to this Section 12.1(b)
with respect to the same Annual Meeting.

 

(c) Enhancement of Annual Option for Committee Service. The number of shares of
Stock subject to an Annual Option granted to a Nonemployee Director shall be
increased on the basis of the Nonemployee Director’s Board committee assignments
for the fiscal year of the Company in which the Annual Option is granted as
follows:

 

(i) for each Board committee on which the Nonemployee Director serves other than
as the chairman of the committee, a number of shares of Stock established from
time to time by resolution of the Committee, but in any event not in excess of
two thousand (2,000) shares of Stock; and

 

(ii) for each Board committee on which the Nonemployee Director serves as the
chairman of the committee, a number of shares of Stock established from time to
time by resolution of the Committee, but in any event not in excess of four
thousand (4,000) shares of Stock.

 

(d) Right to Decline Nonemployee Director Option. Notwithstanding the foregoing,
any person may elect not to receive a Nonemployee Director Option by delivering
written notice of such election to the Board no later than the day prior to the
date such Nonemployee Director Option would otherwise be granted. A person so
declining the grant of a Nonemployee Director Option shall receive no payment or
other consideration in lieu of such declined Nonemployee Director Option. A
person who has declined a Nonemployee Director Option may revoke such election
by delivering written notice of such revocation to the Board no later than the
day prior to the date such Nonemployee Director Option would be granted pursuant
to Section 12.1(a) or (b), as the case may be.

 

12.2 Terms and Conditions of Nonemployee Director Options. Except as provided by
this Section, Nonemployee Directors Options shall comply with and be subject to
the terms and conditions of Section 6.

 

(a) Exercise Price. The exercise price per share of Stock subject to a
Nonemployee Director Option shall be the Fair Market Value of a share of Stock
on the date of grant of the Nonemployee Director Option.

 

(b) Exercisability and Term of Nonemployee Director Options. Except as otherwise
provided in the Plan or in the Award Agreement evidencing a Nonemployee Director
Option and provided that the Participant’s Service has not terminated prior to
the relevant date, each Nonemployee Director Option shall vest and become
exercisable as set forth below and shall terminate and cease to be exercisable
on the tenth (10th) anniversary of the date of grant of the Nonemployee Director
Option, unless earlier terminated in accordance with the terms of the Plan or
the Award Agreement evidencing such Option.

 

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(i) Initial Options. Each Initial Option shall vest and become exercisable in
three (3) substantially equal installments on each of the first three (3)
anniversaries of the date of grant of the Option, provided that the
Participant’s Service has not terminated prior to the applicable date.

 

(ii) Annual Options. Each Annual Option shall become fully vested and
exercisable on the earlier of (A) the first anniversary of the date of grant of
the Option or (B) the day immediately preceding the date of the Annual Meeting
next following the date of grant of the Option, provided the Participant’s
Service has not terminated prior to the applicable date.

 

(c) Effect of Termination of Service.

 

(i) Option Exercisability. Subject to earlier termination of the Nonemployee
Director Option as otherwise provided herein, a Nonemployee Director Option
shall be exercisable after the Participant’s termination of Service only during
the applicable time period determined in accordance with this Section and
thereafter shall terminate:

 

(1) Disability. If the Participant’s Service terminates because of the
Disability of the Participant, the Nonemployee Director Option, to the extent
unexercised and exercisable on the date on which the Participant’s Service
terminated, may be exercised by the Participant (or the Participant’s guardian
or legal representative) at any time prior to the expiration of twelve (12)
months after the date on which the Participant’s Service terminated, but in any
event no later than the Option Expiration Date.

 

(2) Death. If the Participant’s Service terminates because of the death of the
Participant, the Nonemployee Director Option, to the extent unexercised and
exercisable on the date on which the Participant’s Service terminated, may be
exercised by the Participant’s legal representative or other person who acquired
the right to exercise the Nonemployee Director Option by reason of the
Participant’s death at any time prior to the expiration of twelve (12) months
after the date on which the Participant’s Service terminated, but in any event
no later than the Option Expiration Date. The Participant’s Service shall be
deemed to have terminated on account of death if the Participant dies within
three (3) months after the Participant’s termination of Service.

 

(3) Other Termination of Service. If the Participant’s Service terminates for
any reason, except Disability or death, the Nonemployee Director Option, to the
extent unexercised and exercisable by the Participant on the date on which the
Participant’s Service terminated, may be exercised by the Participant at any
time prior to the expiration of twelve (12) months after the date on which the
Participant’s Service terminated, but in any event no later than the Option
Expiration Date.

 

(ii) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if
the exercise of a Nonemployee Director Option within the applicable time periods
set forth in Section 12.2(c)(i) is prevented by the provisions of Section 15
below, the Nonemployee Director Option shall remain exercisable until three (3)

 

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months after the date the Participant is notified by the Company that the
Nonemployee Director Option is exercisable, but in any event no later than the
Option Expiration Date.

 

(iii) Extension if Participant Subject to Section 16(b). Notwithstanding the
foregoing, if a sale within the applicable time periods set forth in Section
12.2(c)(i) of shares acquired upon the exercise of the Nonemployee Director
Option would subject the Participant to suit under Section 16(b) of the Exchange
Act, the Nonemployee Director Option shall remain exercisable until the earliest
to occur of (i) the tenth (10th) day following the date on which a sale of such
shares by the Participant would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Participant’s termination of
Service, or (iii) the Option Expiration Date.

 

12.3 Alternative Nonemployee Director Awards. In lieu of the automatic grant of
any Initial Option or Annual Option to any one or more Nonemployee Directors,
the Committee, in its discretion, may substitute one or more Stock Appreciation
Rights Awards, Stock Awards or Restricted Stock Unit Awards, or any combination
thereof, provided that all such Awards granted in lieu of a Nonemployee Director
Option shall have an aggregate fair value not in excess of the fair value of the
type of Nonemployee Director Option to be replaced (determined on the basis of
the maximum number of shares authorized for such type of Nonemployee Director
Option pursuant to Section 12.1). For the purposes of this Section, fair value
shall be determined in a manner that complies with the requirements of Statement
of Financial Accounting Standards No. 123, as amended from time to time, or any
successor standard thereto. Any such alternative Nonemployee Director Award
shall be subject to substantially the same terms and conditions (including time
of grant, exercise price and effect of termination of Service in the case of an
SAR, and vesting) as the Nonemployee Director Option it replaces and shall
otherwise be subject to the appropriate terms and conditions, as determined by
the committee, applicable to such Award as set forth in Section 7, Section 8 or
Section 9.

 

  13. STANDARD FORMS OF AWARD AGREEMENT.

 

13.1 Award Agreements. Each Award shall comply with and be subject to the terms
and conditions set forth in the appropriate form of Award Agreement approved by
the Committee and as amended from time to time. Any Award Agreement may consist
of an appropriate form of Notice of Grant and a form of Agreement incorporated
therein by reference, or such other form or forms as the Committee may approve
from time to time.

 

13.2 Authority to Vary Terms. The Committee shall have the authority from time
to time to vary the terms of any standard form of Award Agreement either in
connection with the grant or amendment of an individual Award or in connection
with the authorization of a new standard form or forms; provided, however, that
the terms and conditions of any such new, revised or amended standard form or
forms of Award Agreement are not inconsistent with the terms of the Plan.

 

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  14. CHANGE IN CONTROL.

 

14.1 Effect of Change in Control on Options and SARs.

 

(a) Accelerated Vesting. The Committee may, in its sole discretion, provide in
any Award Agreement or, in the event of a Change in Control, may take such
actions as it deems appropriate to provide for the acceleration of the
exercisability and vesting in connection with such Change in Control of any or
all outstanding Options and SARs and shares acquired upon the exercise of such
Options and SARs upon such conditions, including termination of the
Participant’s Service prior to, upon, or following such Change in Control, and
to such extent as the Committee shall determine.

 

(b) Assumption or Substitution. In the event of a Change in Control, the
surviving, continuing, successor, or purchasing entity or parent thereof, as the
case may be (the “Acquiror”), may, without the consent of any Participant,
either assume or continue the Company’s rights and obligations under outstanding
Options and SARs or substitute for outstanding Options and SARs substantially
equivalent options and SARs (as the case may be) for the Acquiror’s stock. Any
Options or SARs which are neither assumed or continued by the Acquiror in
connection with the Change in Control nor exercised as of the time of
consummation of the Change in Control shall terminate and cease to be
outstanding effective as of the time of consummation of the Change in Control.

 

(c) Cash-Out. The Committee may, in its sole discretion and without the consent
of any Participant, determine that, upon the occurrence of a Change in Control,
each or any Option or SAR outstanding immediately prior to the Change in Control
shall be canceled in exchange for a payment with respect to each vested share
(and each unvested share, if so determined by the Committee and agreed to by the
Aquiror) of Stock subject to such canceled Option or SAR in (i) cash, (ii) stock
of the Company or of a corporation or other business entity a party to the
Change in Control, or (iii) other property which, in any such case, shall be in
an amount having a Fair Market Value equal to the excess of the Fair Market
Value of the consideration to be paid per share of Stock in the Change in
Control over the exercise price per share under such Option or SAR (the
“Spread”). In the event such determination is made by the Committee, the Spread
(reduced by applicable withholding taxes, if any) shall be paid to Participants
in respect of the vested portion of their canceled Options and SARs as soon as
practicable following the date of the Change in Control and in respect of the
unvested portion of their canceled Options and SARs in accordance with the
vesting schedule applicable to such Awards as in effect prior to the Change in
Control.

 

14.2 Effect of Change in Control on Stock Awards. The Committee may, in its
discretion, provide in any Award Agreement evidencing a Stock Award that, in the
event of a Change in Control, the lapsing of the Restriction Period applicable
to the shares subject to the Stock Award held by a Participant whose Service has
not terminated prior to the Change in Control shall be accelerated effective
immediately prior to the consummation of the Change in Control to such extent as
specified in such Award Agreement. Any acceleration of the lapsing of the
Restriction Period that was permissible solely by reason of this Section 14.2
and the provisions of such Award Agreement shall be conditioned upon the
consummation of the Change in Control.

 

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14.3 Effect of Change in Control on Restricted Stock Unit Awards. The Committee
may, in its discretion, provide in any Award Agreement evidencing a Restricted
Stock Unit Award that, in the event of a Change in Control, the Restricted Stock
Unit Award held by a Participant whose Service has not terminated prior to such
date shall become vested and shall be settled effective as of the date of the
Change in Control to such extent as specified in such Award Agreement.

 

14.4 Effect of Change in Control on Performance Awards. The Committee may, in
its discretion, provide in any Award Agreement evidencing a Performance Award
that, in the event of a Change in Control, the Performance Award held by a
Participant whose Service has not terminated prior to the Change in Control or
whose Service terminated by reason of the Participant’s death or Disability
shall become vested and payable effective as of the date of the Change in
Control to such extent as specified in such Award Agreement.

 

14.5 Effect of Change in Control on Deferred Compensation Awards. The Committee
may, in its discretion, provide in any Award Agreement evidencing a Deferred
Compensation Award that, in the event of a Change in Control, the Options or
Stock Units pursuant to such Award shall become vested and, in the case of Stock
Units, shall be settled effective as of the date of the Change in Control to
such extent as specified in such Award Agreement. Except as provided in the
preceding sentence, each Option pursuant to a Deferred Compensation Award shall
be subject to the applicable provisions this Section 14.

 

14.6 Effect of Change in Control on Nonemployee Director Awards. Any
unexercisable or unvested portion of each outstanding Nonemployee Director Award
and any shares acquired upon pursuant thereto shall be immediately exercisable
and vested in full as of the date ten (10) days prior to the date of the Change
in Control but conditioned upon the consummation of the Change in Control.
Except as provided in the preceding sentence, each Nonemployee Director Award
shall be subject to the applicable provisions this Section 14.

 

  15. COMPLIANCE WITH SECURITIES LAW.

 

The grant of Awards and the issuance of shares of Stock pursuant to any Award
shall be subject to compliance with all applicable requirements of federal,
state and foreign law with respect to such securities and the requirements of
any stock exchange or market system upon which the Stock may then be listed. In
addition, no Award may be exercised or shares issued pursuant to an Award unless
(a) a registration statement under the Securities Act shall at the time of such
exercise or issuance be in effect with respect to the shares issuable pursuant
to the Award or (b) in the opinion of legal counsel to the Company, the shares
issuable pursuant to the Award may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be
necessary to the lawful issuance and sale of any shares hereunder shall relieve
the Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained. As a
condition to issuance of any Stock, the Company may require the Participant to
satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.

 

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  16. TAX WITHHOLDING.

 

16.1 Tax Withholding in General. The Company shall have the right to deduct from
any and all payments made under the Plan, or to require the Participant, through
payroll withholding, cash payment or otherwise, including by means of a Cashless
Exercise of an Option, to make adequate provision for, the federal, state, local
and foreign taxes, if any, required by law to be withheld by the Participating
Company Group with respect to an Award or the shares acquired pursuant thereto.
The Company shall have no obligation to deliver shares of Stock, to release
shares of Stock from an escrow established pursuant to an Award Agreement, or to
make any payment in cash under the Plan until the Participating Company Group’s
tax withholding obligations have been satisfied by the Participant.

 

16.2 Withholding in Shares. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable to a Participant upon
the exercise or settlement of an Award, or to accept from the Participant the
tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group. The Fair Market Value of any
shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates.

 

  17. AMENDMENT OR TERMINATION OF PLAN.

 

The Committee may amend, suspend or terminate the Plan at any time. However,
without the approval of the Company’s stockholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Section 4.6), (b) no
change in the class of persons eligible to receive Incentive Stock Options, and
(c) no other amendment of the Plan that would require approval of the Company’s
stockholders under any applicable law, regulation or rule, including the rules
of any stock exchange or market system upon which the Stock may then be listed.
No amendment, suspension or termination of the Plan shall affect any then
outstanding Award unless expressly provided by the Committee. In any event, no
amendment, suspension or termination of the Plan may adversely affect any then
outstanding Award without the consent of the Participant unless necessary to
comply with any applicable law, regulation or rule.

 

  18. MISCELLANEOUS PROVISIONS.

 

18.1 Repurchase Rights. Shares issued under the Plan may be subject to one or
more repurchase options, or other conditions and restrictions as determined by
the Committee in its discretion at the time the Award is granted. The Company
shall have the right to assign at any time any repurchase right it may have,
whether or not such right is then exercisable, to one or more persons as may be
selected by the Company. Upon request by the Company, each Participant shall
execute any agreement evidencing such transfer restrictions prior to the receipt
of shares of Stock hereunder and shall promptly present to the Company any and
all certificates representing shares of Stock acquired hereunder for the
placement on such certificates of appropriate legends evidencing any such
transfer restrictions.

 

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18.2 Provision of Information. Each Participant shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company’s common stockholders.

 

18.3 Rights as Employee, Consultant or Director. No person, even though eligible
pursuant to Section 5, shall have a right to be selected as a Participant, or,
having been so selected, to be selected again as a Participant. Nothing in the
Plan or any Award granted under the Plan shall confer on any Participant a right
to remain an Employee, Consultant or Director or interfere with or limit in any
way any right of a Participating Company to terminate the Participant’s Service
at any time. To the extent that an Employee of a Participating Company other
than the Company receives an Award under the Plan, that Award shall in no event
be understood or interpreted to mean that the Company is the Employee’s employer
or that the Employee has an employment relationship with the Company.

 

18.4 Rights as a Stockholder. A Participant shall have no rights as a
stockholder with respect to any shares covered by an Award until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such shares are issued, except as provided
in Section 4.6 or another provision of the Plan.

 

18.5 Fractional Shares. The Company shall not be required to issue fractional
shares upon the exercise or settlement of any Award.

 

18.6 Severability. If any one or more of the provisions (or any part thereof) of
this Plan shall be held invalid, illegal or unenforceable in any respect, such
provision shall be modified so as to make it valid, legal and enforceable, and
the validity, legality and enforceability of the remaining provisions (or any
part thereof) of the Plan shall not in any way be affected or impaired thereby.

 

18.7 Beneficiary Designation. Subject to local laws and procedures, each
Participant may file with the Company a written designation of a beneficiary who
is to receive any benefit under the Plan to which the Participant is entitled in
the event of such Participant’s death before he or she receives any or all of
such benefit. Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company, and will be effective
only when filed by the Participant in writing with the Company during the
Participant’s lifetime. If a married Participant designates a beneficiary other
than the Participant’s spouse, the effectiveness of such designation may be
subject to the consent of the Participant’s spouse. If a Participant dies
without an effective designation of a beneficiary who is living at the time of
the Participant’s death, the Company will pay any remaining unpaid benefits to
the Participant’s legal representative.

 

18.8 Unfunded Obligation. Participants shall have the status of general
unsecured creditors of the Company. Any amounts payable to Participants pursuant
to the Plan shall be unfunded and unsecured obligations for all purposes,
including, without limitation, Title I of the Employee Retirement Income
Security Act of 1974. No Participating Company shall be required to segregate
any monies from its general funds, or to create any trusts, or

 

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establish any special accounts with respect to such obligations. The Company
shall retain at all times beneficial ownership of any investments, including
trust investments, which the Company may make to fulfill its payment obligations
hereunder. Any investments or the creation or maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary
relationship between the Committee or any Participating Company and a
Participant, or otherwise create any vested or beneficial interest in any
Participant or the Participant’s creditors in any assets of any Participating
Company. The Participants shall have no claim against any Participating Company
for any changes in the value of any assets which may be invested or reinvested
by the Company with respect to the Plan.

 

18.9 Choice of Law. Except to the extent governed by applicable federal law, the
validity, interpretation, construction and performance of the Plan and each
Award Agreement shall be governed by the laws of the State of Delaware, without
regard to its conflict of law rules.

 

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