EXHIBIT 10.4
 

SpatiaLight, Inc.
 
2006 Incentive Plan
 
Adopted by the Board of Directors as of
May 3, 2006
 

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Contents
 

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Article 1
Establishment, Purpose, and Duration
1
     
Article 2
Definitions
1
     
Article 3
Administration
5
     
Article 4
Shares Subject to the Plan and Maximum Awards
6
     
Article 5
Eligibility and Participation
8
     
Article 6
Options
8
     
Article 7
Share Appreciation Rights
10
     
Article 8
Restricted Shares and Restricted Share Units
12
     
Article 9
Performance Units/Performance Shares
14
     
Article 10
Other Share-Based Awards
15
     
Article 11
Performance Measures
16
     
Article 12
Nonemployee Director Awards
18
     
Article 13
Dividend Equivalents
19
     
Article 14
Beneficiary Designation
19
     
Article 15
Rights of Participants
19
     
Article 16
Change of Control
19
     
Article 17
Amendment, Modification, Suspension, and Termination
20
     
Article 18
Withholding
20
     
Article 19
Successors
21
     
Article 20
General Provisions
21

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SpatiaLight, Inc.
2006 Incentive Plan

ARTICLE 1
ESTABLISHMENT, PURPOSE, AND DURATION 

 
1.1           Establishment. SpatiaLight, Inc., a New York corporation (the
“Company”), establishes an incentive compensation plan to be known as the 2006
Incentive Plan (the “Plan”), as set forth in this document.
 
The Plan permits the grant of Nonqualified Options, Incentive Options, Share
Appreciation Rights (SARs), Restricted Shares, Restricted Share Units,
Performance Shares, Performance Units, and Other Share-Based Awards.
 
The Plan shall become effective upon shareholder approval (the “Effective Date”)
and shall remain in effect as provided in Section 1.3 hereof.
 
1.2           Purpose of the Plan. The purpose of the Plan is to provide a means
whereby Employees, Directors, and Third Party Service Providers of the Company
develop a sense of proprietorship and personal involvement in the development
and financial success of the Company, and to encourage them to devote their best
efforts to the business of the Company, thereby advancing the interests of the
Company and its shareholders. A further purpose of the Plan is to provide a
means through which the Company may attract able individuals to become Employees
or serve as Directors, or Third Party Service Providers of the Company and to
provide a means whereby those individuals upon whom the responsibilities of the
successful administration and management of the Company are of importance, can
acquire and maintain stock ownership, thereby strengthening their concern for
the welfare of the Company.
 
1.3           Duration of the Plan. Unless sooner terminated as provided herein,
the Plan shall terminate ten (10) years from the Effective Date. After the Plan
is terminated, no Awards may be granted but Awards previously granted shall
remain outstanding in accordance with their applicable terms and conditions and
the Plan’s terms and conditions. Notwithstanding the foregoing, no Incentive
Options may be granted more than ten (10) years after the earlier of (a)
adoption of the Plan by the Board, and (b) the Effective Date.
 
ARTICLE 2 DEFINITIONS
 
Whenever used in the Plan, the following terms shall have the meanings set forth
below, and when the meaning is intended, the initial letter of the word shall be
capitalized.
 
2.1           “Affiliate” shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations of the Exchange Act.
 
2.2           “Annual Award Limit” or “Annual Award Limits” have the meaning set
forth in Section 4.3.
 

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2.3           “Award” means, individually or collectively, a grant under this
Plan of Nonqualified Options, Incentive Options, SARs, Restricted Shares,
Restricted Share Units, Performance Shares, Performance Units, or Other
Share-Based Awards, in each case subject to the terms of this Plan.
 
2.4           “Award Agreement” means either (i) a written agreement entered
into by the Company and a Participant setting forth the terms and provisions
applicable to an Award granted under this Plan, or (ii) a written statement
issued by the Company to a Participant describing the terms and provisions of
such Award.
 
2.5           “Beneficial Owner” or “Beneficial Ownership” shall have the
meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
 
2.6           “Board” or “Board of Directors” means the Board of Directors of
the Company.
 
2.7           “Code” means the U.S. Internal Revenue Code of 1986, as amended
from time to time.
 
2.8           “Committee” means the committee designated by the Board to
administer this Plan. The members of the Committee shall be appointed from time
to time by and shall serve at the discretion of the Board and, unless otherwise
determined by the Board, the Committee shall consist of no fewer than two
directors, each of whom is (i) a “Non-Employee Director” within the meaning of
Rule 16b-3 (or any successor rule) of the Exchange Act, (ii) an “outside
director” within the meaning of Section 162(m) of the Code, and (iii) an
“independent director” for purposes of the rules and regulations of the Nasdaq
Stock Market, Inc. (“NASDAQ”).
 
2.9           “Company” means SpatiaLight, Inc., a New York corporation, and any
successor thereto as provided in Article 20 herein.
 
2.10           “Covered Employee” means a Participant who is a “covered
employee,” as defined in Code Section 162(m) and the Treasury Regulations
promulgated under Code Section 162(m), or any successor statute.
 
2.11           “Director” means any individual who is a member of the Board of
Directors of the Company.
 
2.12           “Effective Date” has the meaning set forth in Section 1.1.
 
2.13           “Employee” means any employee of the Company, its Affiliates,
and/or its Subsidiaries.
 
2.14           “Exchange Act” means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
 

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2.15           “Fair Market Value” or “FMV” means a price that is based on the
opening, closing, actual, high, low, or average selling prices of a Share
reported on the NASDAQ or other established stock exchange (or exchanges) on the
applicable date, the preceding trading day, the next succeeding trading day, or
an average of trading days, as determined by the Committee in its discretion.
Unless the Committee determines otherwise, if the Shares are traded over the
counter at the time a determination of its Fair Market Value is required to be
made hereunder, its Fair Market Value shall be deemed to be equal to the average
between the reported high and low or closing bid and asked prices of a Share on
the most recent date on which Shares were publicly traded. In the event Shares
are not publicly traded at the time a determination of their Fair Market Value
is required to be made hereunder, the determination of their Fair Market Value
shall be made by the Committee in such manner as it deems appropriate. Such
definition(s) of FMV shall be specified in each Award Agreement and may differ
depending on whether FMV is in reference to the grant, exercise, vesting,
settlement, or payout of an Award.
 
2.16           “Full Value Award” means an Award other than in the form of an
ISO, NQSO, or SAR, and which is settled by the issuance of Shares.
 
2.17           “Freestanding SAR” means an SAR that is granted independently of
any Options, as described in Article 7.
 
2.18           “Grant Price” means the price established at the time of grant of
an SAR pursuant to Article 7, used to determine whether there is any payment due
upon exercise of the SAR.
 
2.19           “Incentive Option” or “ISO” means an Option to purchase Shares
granted under Article 6 to an Employee and that is designated as an
Incentive Option and that is intended to meet the requirements of Code Section
422, or any successor provision.
 
2.20           “Insider” shall mean an individual who is, on the relevant date,
an officer or Director of the Company, or a more than ten percent (10%)
Beneficial Owner of any class of the Company’s equity securities that is
registered pursuant to Section 12 of the Exchange Act, as determined by the
Board in accordance with Section 16 of the Exchange Act.
 
2.21           “Nonemployee Director” means a Director who is not an Employee.
 
2.22           “Nonemployee Director Award” means any NQSO, SAR, or Full Value
Award granted, whether singly, in combination, or in tandem, to a Participant
who is a Nonemployee Director pursuant to such applicable terms, conditions, and
limitations as the Board or Committee may establish in accordance with this
Plan.
 
2.23           “Nonqualified Option” or “NQSO” means an Option that is not
intended to meet the requirements of Code Section 422, or that otherwise does
not meet such requirements.
 
2.24           “Option” means an Incentive Option or a Nonqualified Option, as
described in Article 6.
 
2.25           “Option Price” means the price at which a Share may be purchased
by a Participant pursuant to an Option.
 
2.26           “Other Share-Based Award” means an equity-based or equity-related
Award not otherwise described by the terms of this Plan, granted pursuant to
Article 10.
 

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2.27           “Participant” means any eligible individual as set forth in
Article 5 to whom an Award is granted.
 
2.28           “Performance-Based Compensation” means compensation under an
Award that satisfies the requirements of Section 162(m) of the Code and the
applicable Treasury Regulations thereunder for certain performance-based
compensation paid to Covered Employees.
 
2.29           “Performance Measures” means (i) those measures described in
Section 11.3 hereof on which the performance goals are based, or (ii) such other
measures that have been approved by the Company’s shareholders as contemplated
by Article 11 of this Plan in order to qualify Awards as Performance-Based
Compensation.
 
2.30           “Performance Period” means the period of time during which the
performance goals must be met in order to determine the degree of payout and/or
vesting with respect to an Award.
 
2.31           “Performance Share” means an Award granted under Article 9 herein
and subject to the terms of this Plan, denominated in Shares, the value of which
at the time it is payable is determined as a function of the extent to which
corresponding performance criteria have been achieved.
 
2.32           “Performance Unit” means an Award granted under Article 9 herein
and subject to the terms of this Plan, denominated in units, the value of which
at the time it is payable is determined as a function of the extent to which
corresponding performance criteria have been achieved.
 
2.33           “Period of Restriction” means the period when Restricted Shares
or Restricted Share Units are subject to a substantial risk of forfeiture (based
on the passage of time, the achievement of performance goals, or upon the
occurrence of other events as determined by the Committee, in its discretion),
as provided in Article 8.
 
2.34           “Person” shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a “group” as defined in Section 13(d) thereof.
 
2.35           “Plan” means this 2006 Incentive Plan, as it may hereinafter be
amended or restated.
 
2.36           “Plan Year” means the Company’s fiscal year as may be in effect
from time to time. The Company’s current fiscal year is the twelve month period
beginning on January 1st of a particular year and ending on December 31st of
such year.
 
2.37           “Restricted Shares” means an Award granted to a Participant
pursuant to Article 8.
 
2.38           “Restricted Share Unit” means an Award granted to a Participant
pursuant to Article 8, except no Shares are actually awarded to the Participant
on the date of grant.
 

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2.39           “Share” or “Shares” means the Company’s common shares, par value
$.01 per share.
 
2.40           “Share Appreciation Right” or “SAR” means an Award, designated as
a SAR, pursuant to the terms of Article 7 herein.
 
2.41           “Subsidiary” means any corporation, partnership, limited
liability company, trust or other entity, whether domestic or foreign, in which
the Company has or obtains, directly or indirectly, a proprietary interest.
 
2.42           “Tandem SAR” means an SAR that is granted in connection with a
related Option pursuant to Article 7 herein, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when a
Share is purchased under the Option, the Tandem SAR shall similarly be
canceled).
 
2.43           “Third Party Service Provider” means any consultant, agent,
advisor, or independent contractor who renders services to the Company, a
Subsidiary, or an Affiliate that (a) are not in connection with the offer and
sale of the Company’s securities in a capital raising transaction, and (b) do
not directly or indirectly promote or maintain a market for the Company’s
securities.
 
2.44           “Treasury Regulations” means the regulations promulgated under
the Code.
 
2.45           “Withholding Taxes” means any federal, state, local or foreign
income taxes, withholding taxes, or employment taxes required to be withheld by
law or regulations.
 
ARTICLE 3
ADMINISTRATION

 
3.1           General. The Committee shall be responsible for administering the
Plan, subject to this Article 3 and the other provisions of the Plan. The
Committee may employ attorneys, consultants, accountants, agents, and other
individuals, any of whom may be an Employee, and the Committee, the Company, and
its officers and Directors shall be entitled to rely upon the advice, opinions,
or valuations of any such individuals. All actions taken and all interpretations
and determinations made by the Committee shall be final and binding upon the
Participants, the Company, and all other interested individuals.
 
3.2           Authority of the Committee. The Committee shall have full and
exclusive discretionary power to interpret the terms and the intent of the Plan
and any Award Agreement or other agreement or document ancillary to or in
connection with the Plan, to determine eligibility for Awards and to adopt such
rules, regulations, forms, instruments, and guidelines for administering the
Plan as the Committee may deem necessary or proper. Such authority shall
include, but not be limited to, selecting Award recipients, establishing all
Award terms and conditions, including the terms and conditions set forth in
Award Agreements, and, subject to Article 17, adopting modifications and
amendments to the Plan or any Award Agreement, including without limitation, any
that are necessary to comply with the laws of the countries and other
jurisdictions in which the Company, its Affiliates, and/or its Subsidiaries
operate.
 

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3.3           Delegation. The Committee may delegate to one or more of its
members or to one or more officers of the Company, and/or its Subsidiaries and
Affiliates or to one or more agents or advisors such administrative duties or
powers as it may deem advisable, and the Committee or any individual to whom it
has delegated duties or powers as aforesaid may employ one or more individuals
to render advice with respect to any responsibility the Committee or such
individual may have under the Plan. The Committee may, by resolution, authorize
one or more officers of the Company to do one or more of the following on the
same basis as can the Committee: (a) designate Employees to be recipients of
Awards; (b) designate Third Party Service Providers to be recipients of Awards;
and (c) determine the size of any such Awards; provided, however, (i) the
Committee shall not delegate such responsibilities to any such officer for
Awards granted to an Employee that is considered an Insider; (ii) the resolution
providing such authorization sets forth the total number of Awards such
officer(s) may grant; and (iii) the officer(s) shall report periodically to the
Committee regarding the nature and scope of the Awards granted pursuant to the
authority delegated. Notwithstanding the foregoing, the Committee may not
delegate to any officer the ability to take any action or make any determination
regarding issues arising out of Code Section 162(m).
 
ARTICLE 4
SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS

 
4.1           Number of Shares Available for Awards. Subject to adjustment as
provided in Section 4.4 herein, the maximum number of Shares available for
issuance to Participants under the Plan (the "Share Authorization") shall be
equal to 5,000,000 Shares. Any Shares that are subject to Awards other
then Options or Share Appreciation Rights shall be counted against this limit
as two Shares for every Share awarded pursuant to such Awards.
 
4.2           Share Usage. Shares covered by an Award shall only be counted as
used to the extent they are actually issued. Any Shares related to Awards which
terminate by expiration, forfeiture, cancellation, or otherwise without the
issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged
with the Committee’s permission, prior to the issuance of Shares, for Awards not
involving Shares, shall be available again for grant under the Plan. The Shares
available for issuance under the Plan may be authorized and unissued Shares or
treasury Shares.
 
4.3           Annual Award Limits. Unless and until the Committee determines
that an Award to a Covered Employee shall not be designed to qualify as
Performance-Based Compensation, the following limits (each an “Annual Award
Limit” and, collectively, “Annual Award Limits”) shall apply to grants of such
Awards under the Plan:
 
(a)           Options: The maximum aggregate number of Shares subject to Options
granted in any one Plan Year to any one Participant shall be 750,000 Shares.
 
(b)           SARs: The maximum number of Shares subject to Share Appreciation
Rights granted in any one Plan Year to any one Participant shall be 750,000
Shares.
 

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(c)           Restricted Shares or Restricted Share Units: The maximum aggregate
grant with respect to Awards of Restricted Shares and/or Restricted Share Units
in any one Plan Year to any one Participant shall be 750,000.
 
(d)           Performance Units or Performance Shares: The maximum aggregate
Award of Performance Units and/or Performance Shares that any one Participant
may receive in any one Plan Year shall be 750,000 Shares (if such Award is
payable in Shares), or equal to the value of 750,000 Shares. For this purpose,
to the extent an Award is payable in cash or property other than Shares, then
such Award shall be treated as payable in such number of Shares having a value
equal to the value of the cash or property (other than Shares) payable under
such Award, determined as of the earlier of the date of vesting or payout.
 
(e)           Other Share-Based Awards: The maximum aggregate grant with respect
to Other Share-Based Awards pursuant to Section 10.2 in any one Plan Year to any
one Participant shall be 750,000 Shares.
 
The above Annual Award Limits are intended to comply with Code Section 162(m)
and the Treasury Regulations thereunder, and shall be applied and/or construed
in such a way to ensure compliance with Code Section 162(m) and the Treasury
Regulations thereunder.
 
4.4           Adjustments in Authorized Shares. In the event of any corporate
event or transaction (including, but not limited to, a change in the Shares of
the Company or the capitalization of the Company) such as a merger,
consolidation, reorganization, recapitalization, separation, stock dividend,
stock split, reverse stock split, split up, spin-off, or other distribution of
stock or property of the Company, combination of Shares, exchange of Shares,
dividend in kind, or other like change in capital structure or distribution
(other than normal cash dividends) to shareholders of the Company, or any
similar corporate event or transaction, the Committee, in its sole discretion,
in order to prevent dilution or enlargement of Participants’ rights under the
Plan, shall substitute or adjust, as applicable, the number and kind of Shares
that may be issued under the Plan or under particular forms of Awards, the
number and kind of Shares subject to outstanding Awards, the Option Price or
Grant Price applicable to outstanding Awards, the Annual Award Limits, and other
value determinations applicable to outstanding Awards.
 
The Committee, in its sole discretion, may also make appropriate adjustments in
the terms of any Awards under the Plan to reflect or related to such changes or
distributions and to modify any other terms of outstanding Awards, including
modifications of performance goals and changes in the length of Performance
Periods. The determination of the Committee as to the foregoing adjustments, if
any, shall be conclusive and binding on Participants under the Plan.
 
Subject to the provisions of Article 17, without affecting the number of Shares
reserved or available hereunder, the Committee may authorize the issuance or
assumption of benefits under this Plan in connection with any merger,
consolidation, spin-off, split-off, split-up, acquisition of property or stock,
or reorganization (collectively, a “Reorganization”) upon such terms and
conditions as it may deem appropriate, subject to compliance with the ISO rules
under Section 422 of the Code and the provisions of Section 409A of the Code,
where applicable. Without limiting the foregoing, in the event of any
Reorganization, the Committee or the Board may cause any Award outstanding as of
the effective date of the Reorganization to be cancelled in consideration of a
cash payment or alternate Award made to the holder of such cancelled Award equal
in value to the fair market value of such cancelled Award; provided, however,
that nothing in this Section 4.4 shall permit the repricing, replacing or
regranting of Options or SARs in violation of Section 17.1 or the provisions of
Section 409A of the Code.
 
 

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ARTICLE 5
ELIGIBILITY AND PARTICIPATION

 
5.1           Eligibility. Individuals eligible to participate in this Plan
include all key Employees, Directors, and Third Party Service Providers.
 
5.2           Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible individuals, those
individuals to whom Awards shall be granted and shall determine, in its sole
discretion, the nature of, any and all terms permissible by law, and the amount
of each Award.
 
ARTICLE 6
OPTIONS

 
6.1           Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee, in
its sole discretion; provided that ISOs may be granted only to eligible
Employees of the Company or of any parent or subsidiary corporation (as
permitted by Section 422 of the Code and the Treasury Regulations thereunder).
 
6.2           Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the maximum duration of the
Option, the number of Shares to which the Option pertains, the conditions upon
which an Option shall become vested and exercisable, and such other provisions
as the Committee shall determine which are not inconsistent with the terms of
the Plan. The Award Agreement also shall specify whether the Option is intended
to be an ISO or a NQSO.
 
6.3           Option Price. The Option Price for each grant of an Option under
this Plan shall be as determined by the Committee and shall be specified in the
Award Agreement. The Option Price shall be: (i) based on 100% of the FMV of the
Shares on the date of grant or (ii) set at a premium to the FMV of the Shares on
the date of grant.
 
6.4           Duration of Options. Each Option granted to a Participant shall
expire at such time as the Committee shall determine at the time of grant;
provided, however, no Option intended to qualify as an ISO shall be exercisable
later than the tenth anniversary date of its grant.
 
6.5           Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restric-tions and conditions as
the Committee shall in each instance approve, which terms and restrictions need
not be the same for each grant or for each Participant.
 

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6.6           Payment. Options granted under this Article 6 shall be exercised
by the delivery of a notice of exercise to the Company or an agent designated by
the Company in a form specified or accepted by the Committee, or by complying
with any alternative procedures which may be authorized by the Committee,
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares.
 
A condition of the issuance of the Shares as to which an Option shall be
exercised shall be the payment of the Option Price. The Option Price of any
Option shall be payable to the Company in full either: (a) in cash or its
equivalent; (b) by tendering (either by actual delivery or attestation)
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the Option Price (provided that except as otherwise determined
by the Committee, the Shares that are tendered must have been held by the
Participant for at least six months prior to their tender to satisfy the Option
Price or have been purchased on the open market); (c) by a combination of
(a) and (b); or (d) any other method approved or accepted by the Committee in
its sole discretion, including, without limitation, if the Committee so
determines, (i) a cashless (broker-assisted) exercise or (ii) by “net
settlement,” pursuant to which an Option is exercised and the Option Price due
on such exercise is paid by surrendering a portion of the Shares which would
otherwise be issued upon such exercise and which have an aggregate Fair Market
Value at the time of exercise equal to the Option Price.
 
Subject to any governing rules or regulations, as soon as practicable after
receipt of written notification of exercise and full payment (including
satisfaction of any applicable tax withholding), the Company shall deliver to
the Participant evidence of book entry Shares, or upon the Participant’s
request, Share certificates in an appropriate amount based upon the number of
Shares purchased under the Option(s).
 
Unless otherwise determined by the Committee, all payments under all of the
methods indicated above shall be paid in United States dollars.
 
6.7           Restrictions on Share Transferability. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, minimum holding period requirements, restrictions under applicable
federal securities laws, under the requirements of any stock exchange or market
upon which such Shares are then listed and/or traded, or under any blue sky or
state securities laws applicable to such Shares.
 
6.8           Termination of Employment. Each Participant’s Award Agreement
shall set forth the extent to which the Participant shall have the right to
exercise the Option following termination of the Participant’s employment or
provision of services to the Company, its Affiliates, and/or its Subsidiaries,
as the case may be. Such provisions shall be determined in the sole discretion
of the Committee, shall be included in the Award Agreement entered into with
each Participant, need not be uniform among all Options issued pursuant to this
Article 6, and may reflect distinctions based on the reasons for termination.
 

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6.9           Transferability of Options.
 
(a)           Incentive Options. No ISO granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, all ISOs
granted to a Participant under this Article 6 shall be exercisable during his
lifetime only by such Participant.
 
(b)           Nonqualified Options. Except as otherwise provided in a
Participant’s Award Agreement or otherwise determined at any time by the
Committee, no NQSO granted under this Article 6 may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution; provided that the Board or Committee
may permit further transferability, on a general or a specific basis, and may
impose conditions and limitations on any permitted transferability. Further,
except as otherwise provided in a Participant’s Award Agreement or otherwise
determined at any time by the Committee, or unless the Board or Committee
decides to permit further transferability, all NQSOs granted to a Participant
under this Article 6 shall be exercisable during his lifetime only by such
Participant. With respect to those NQSOs, if any, that are permitted to be
transferred to another individual, references in the Plan to exercise or payment
of the Option Price by the Participant shall be deemed to include, as determined
by the Committee, the Participant’s permitted transferee.
 
6.10           Notification of Disqualifying Disposition. If any Participant
shall make any disposition of Shares issued pursuant to the exercise of an ISO
under the circumstances described in Section 421(b) of the Code (relating to
certain disqualifying dispositions), such Participant shall notify the Company
of such disposition within ten days thereof.
 
6.11           Special ISO Rules for 10% Shareholders. If any Participant to
whom an ISO is to be granted is, on the date of grant, the owner of Shares
(determined using applicable attribution rules) possessing more than 10% of the
total combined voting power of all classes of equity securities of his or her
employer (or of its parent or subsidiary), then the following special provisions
will apply to the ISO granted to that Participant:
 
(a)           The Option Price per Share of the ISO will not be less than 110%
of the Fair Market Value of the Shares underlying such ISO on the date of grant;
and
 
(b)           The ISO will not have a term in excess of 5 years from the date of
grant.
 
ARTICLE 7
SHARE APPRECIATION RIGHTS

 
7.1           Grant of SARs. Subject to the terms and conditions of the Plan,
SARs may be granted to Participants at any time and from time to time as shall
be determined by the Committee. The Committee may grant Freestanding SARs,
Tandem SARs, or any combination of these forms of SARs.
 

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Subject to the terms and conditions of the Plan, the Committee shall have
complete discretion in determining the number of SARs granted to each
Participant and, consistent with the provisions of the Plan, in determining the
terms and conditions pertaining to such SARs.
 
The Grant Price for each grant of a Freestanding SAR shall be determined by the
Committee and shall be specified in the Award Agreement. The Grant Price shall
be: (i) based on 100% of the FMV of the Shares on the date of grant or (ii) set
at a premium to the FMV of the Shares on the date of grant
 
7.2           SAR Agreement. Each SAR Award shall be evidenced by an Award
Agreement that shall specify the Grant Price, the term of the SAR, and such
other provisions as the Committee shall determine.
 
7.3           Term of SAR. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion, and except as determined
otherwise by the Committee and specified in the SAR Award Agreement, no SAR
shall be exercisable later than the tenth anniversary date of its grant.
 
7.4           Exercise of Freestanding SARs. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee, in its sole discretion,
imposes.
 
7.5           Exercise of Tandem SARs. Tandem SARs may be exercised for all or
part of the Shares subject to the related Option upon the surrender of the right
to exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
 
Notwithstanding any other provision of this Plan to the contrary, with respect
to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will
expire no later than the expiration of the underlying ISO; (b) the exercise of
the Tandem SAR may not have economic and tax consequences more favorable than
the exercise of the ISO followed by an immediate sale of the underlying Shares,
and the value of the payout with respect to the Tandem SAR may be for no more
than  100% of the excess of the Fair Market Value of the Shares subject to the
underlying ISO at the time the Tandem SAR is exercised over the Option Price of
the underlying ISO; (c) the Tandem SAR may be exercised only when the Fair
Market Value of the Shares subject to the ISO exceeds the Option Price of the
ISO; (d) the Tandem SAR may be exercised only when the underlying ISO is
eligible to be exercised; and (e) the Tandem SAR is transferable only when the
underlying ISO is transferable, and under the same conditions.
 
7.6           Payment of SAR Amount. Upon the exercise of an SAR, a Participant
shall be entitled to receive from the Company such number of Shares determined
by multiplying:
 
(a)           The excess of the Fair Market Value of a Share on the date of
exercise over the Grant Price; by
 
(b)           The number of Shares with respect to which the SAR is exercised.
 

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Such product shall then be divided by the Fair Market Value of a Share on the
date of exercise. The resulting number (rounded down to the next whole number)
is the number of Shares to be issued to the Participant upon exercise of an SAR.
 
7.7           Termination of Employment. Each Award Agreement shall set forth
the extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant’s employment with or provision of
services to the Company, its Affiliates, and/or its Subsidiaries, as the case
may be. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination.
 
7.8           Nontransferability of SARs. Except as otherwise provided in a
Participant’s Award Agreement or otherwise determined at any time by the
Committee, no SAR granted under the Plan may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant’s Award Agreement or otherwise determined at any time by the
Committee, all SARs granted to a Participant under the Plan shall be exercisable
during his lifetime only by such Participant. With respect to those SARs, if
any, that are permitted to be transferred to another individual, references in
the Plan to exercise of the SAR by the Participant or payment of any amount to
the Participant shall be deemed to include, as determined by the Committee, the
Participant’s permitted transferee.
 
7.9           Other Restrictions. The Committee shall impose such other
conditions and/or restrictions on any Shares received upon exercise of a SAR
granted pursuant to the Plan as it may deem advisable or desirable. These
restrictions may include, but shall not be limited to, a requirement that the
Participant hold the Shares received upon exercise of a SAR for a specified
period of time.
 
ARTICLE 8
RESTRICTED SHARES AND RESTRICTED SHARE UNITS

 
8.1           Grant of Restricted Shares or Restricted Share Units. Subject to
the terms and provisions of the Plan, the Committee, at any time and from time
to time, may grant Restricted Shares and/or Restricted Share Units to
Participants in such amounts as the Committee shall determine. Restricted Share
Units shall be similar to Restricted Shares except that no Shares are actually
awarded to the Participant on the date of grant.
 
8.2           Restricted Shares or Restricted Share Unit Agreement. Each
Restricted Share and/or Restricted Share Unit grant shall be evidenced by an
Award Agreement that shall specify the Period(s) of Restriction, the number of
Restricted Shares or the number of Restricted Share Units granted, and such
other provisions as the Committee shall determine. Notwithstanding anything in
this Article 8 to the contrary, delivery of Shares pursuant to an Award of
Restricted Share Units (or an Award of Restricted Shares) shall be made no later
than 2-1/2 months after the close of the Company’s first taxable year in which
such Shares are no longer subject to a risk of forfeiture (within the meaning of
Section 409A of the Code).
 

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8.3           Transferability. Except as provided in this Plan or an Award
Agreement, the Restricted Shares and/or Restricted Share Units granted herein
may not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable Period of Restriction established
by the Committee and specified in the Award Agreement (and in the case of
Restricted Share Units until the date of delivery or other payment), or upon
earlier satisfaction of any other conditions, as specified by the Committee, in
its sole discretion, and set forth in the Award Agreement or otherwise at any
time by the Committee. All rights with respect to the Restricted Shares and/or
Restricted Share Units granted to a Participant under the Plan shall be
available during his lifetime only to such Participant, except as otherwise
provided in an Award Agreement or at any time by the Committee.
 
8.4           Other Restrictions. The Committee shall impose such other
conditions and/or restrictions on any Restricted Shares or Restricted Share
Units granted pursuant to the Plan as it may deem advisable including, without
limitation, a requirement that Participants pay a stipulated purchase price for
each Restricted Share or each Restricted Share Unit, restrictions based upon the
achievement of specific performance goals, time-based restrictions on vesting
following the attainment of the performance goals, time-based restrictions,
and/or restrictions under applicable laws or under the requirements of any stock
exchange or market upon which such Shares are listed or traded, or holding
requirements or sale restrictions placed on the Shares by the Company upon
vesting of such Restricted Share or Restricted Share Units.
 
To the extent deemed appropriate by the Committee, the Company may retain the
certificates representing Restricted Shares in the Company’s possession until
such time as all conditions and/or restrictions applicable to such Shares have
been satisfied or lapse.
 
Except as otherwise provided in this Article 8, Restricted Shares covered by
each Restricted Share Award shall become freely transferable by the Participant
after all conditions and restrictions applicable to such Shares have been
satisfied or lapse (including satisfaction of any applicable tax withholding
obligations), and Restricted Share Units shall be paid in cash, Shares, or a
combination of cash and Shares as the Committee, in its sole discretion shall
determine.
 
8.5           Certificate Legend. In addition to any legends placed on
certificates pursuant to Section 8.4, each certificate representing Restricted
Shares granted pursuant to the Plan may bear a legend such as the following or
as otherwise determined by the Committee in its sole discretion:
 
“The sale or transfer of Shares of stock represented by this certificate,
whether voluntary, involuntary, or by operation of law, is subject to certain
restrictions on transfer as set forth in the SpatiaLight, Inc. 2006 Incentive
Plan, and in the associated Award Agreement. A copy of the Plan and such Award
Agreement may be obtained from SpatiaLight, Inc.”
 
8.6           Voting Rights. Unless otherwise determined by the Committee and
set forth in a Participant’s Award Agreement, to the extent permitted or
required by law, as determined by the Committee, Participants holding Restricted
Shares granted hereunder may be granted the right to exercise full voting rights
with respect to those Shares during the Period of Restriction. A Participant
shall have no voting rights with respect to any Restricted Share Units granted
hereunder.
 

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8.7           Termination of Employment. Each Award Agreement shall set forth
the extent to which the Participant shall have the right to retain Restricted
Shares and/or Restricted Share Units following termination of the Participant’s
employment with or provision of services to the Company, its Affiliates, and/or
its Subsidiaries, as the case may be. Such provisions shall be determined in the
sole discretion of the Committee, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Restricted
Shares or Restricted Share Units issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination.
 
8.8           Section 83(b) Election. The Committee may provide in an Award
Agreement that the Award of Restricted Shares is conditioned upon the
Participant making or refraining from making an election with respect to the
Award under Section 83(b) of the Code. If a Participant makes an election
pursuant to Section 83(b) of the Code concerning a Restricted Share Award, the
Participant shall be required to file promptly a copy of such election with the
Company.
 
ARTICLE 9
PERFORMANCE UNITS/PERFORMANCE SHARES

 
9.1           Grant of Performance Units/Performance Shares. Subject to the
terms and provisions of the Plan, the Committee, at any time and from time to
time, may grant Performance Units and/or Performance Shares to Participants in
such amounts and upon such terms as the Committee shall determine.
 
9.2           Value of Performance Units/Performance Shares. Each Performance
Unit shall have an initial value that is established by the Committee at the
time of grant. Each Performance Share shall have an initial value equal to the
Fair Market Value of a Share on the date of grant. The Committee shall set
performance goals in its discretion which, depending on the extent to which they
are met, will determine the value and/or number of Performance Units/Performance
Shares that will be paid out to the Participant.
 
9.3           Earning of Performance Units/Performance Shares. Subject to the
terms of this Plan, after the applicable Performance Period has ended, the
holder of Performance Units/Performance Shares shall be entitled to receive
payout of the value and number of Performance Units/Performance Shares earned by
the Participant over the Performance Period, to be determined as a function of
the extent to which the corresponding performance goals have been achieved.
 
9.4           Form and Timing of Payment of Performance Units/Performance
Shares. Payment of earned Performance Units/Performance Shares shall be as
determined by the Committee and as evidenced in the Award Agreement. Subject
to the terms of the Plan, the Committee, in its sole discretion, may pay
earned Performance Units/Performance Shares in the form of cash or in Shares (or
in a combination thereof) equal to the value of the earned Performance
Units/Performance Shares at the close of the applicable Performance Period, or
as soon as practicable after the end of the Performance Period. Any Shares may
be granted subject to any restrictions deemed appropriate by the Committee. The
determination of the Committee with respect to the form of payout of such Awards
shall be set forth in the Award Agreement pertaining to the grant of the Award.
Notwithstanding anything in this Article 9 to the contrary, delivery of Shares,
cash or other property pursuant to an Award of Performance Units/Performance
Shares shall be made no later than 2-1/2 months after the close of the Company’s
first taxable year in which delivery of such Shares, cash or other property is
no longer subject to a risk of forfeiture (within the meaning of Section 409A of
the Code).
 

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9.5           Termination of Employment. Each Award Agreement shall set forth
the extent to which the Participant shall have the right to retain Performance
Units and/or Performance Shares following termination of the Participant’s
employment with or provision of services to the Company, its Affiliates, and/or
its Subsidiaries, as the case may be. Such provisions shall be determined in the
sole discretion of the Committee, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Awards of
Performance Units or Performance Shares issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination.
 
9.6           Nontransferability. Except as otherwise provided in a
Participant’s Award Agreement or otherwise determined at any time by the
Committee, Performance Units/Performance Shares may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. Further, except as otherwise provided
in a Participant’s Award Agreement or otherwise determined at any time by the
Committee, a Participant’s rights under the Plan shall be exercisable during his
lifetime only by such Participant.
 
ARTICLE 10
OTHER SHARE-BASED AWARDS

 
10.1           Other Share-Based Awards. The Committee may grant other types of
equity-based or equity-related Awards not otherwise described by the terms of
this Plan (including the grant or offer for sale of unrestricted Shares) in such
amounts and subject to such terms and conditions, as the Committee shall
determine. Such Awards may involve the transfer of actual Shares to
Participants, or payment in cash or otherwise of amounts based on the value of
Shares and may include, without limitation, Awards designed to comply with or
take advantage of the applicable local laws of jurisdictions other than the
United States.
 
10.2           Value of Other Share-Based Awards. Each Other Share-Based Award
shall be expressed in terms of Shares or units based on Shares, as determined by
the Committee. The Committee may establish performance goals in its discretion.
If the Committee exercises its discretion to establish performance goals, the
number and/or value of Other Share-Based Awards that will be paid out to the
Participant will depend on the extent to which the performance goals are met.
 
10.3           Payment of Other Share-Based Awards. Payment, if any, with
respect to an Other Share-Based Award shall be made in accordance with the terms
of the Award, in cash or Shares as the Committee determines. Notwithstanding
anything in this Article 10 to the contrary, delivery of Shares, cash or other
property pursuant to an Other Share-Based Award shall be made no later than
2-1/2 months after the close of the Company’s first taxable year in which
delivery of such Shares, cash or other property is no longer subject to a risk
of forfeiture (within the meaning of Section 409A of the Code).
 

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10.4           Termination of Employment. The Committee shall determine the
extent to which the Participant shall have the right to receive Other
Share-Based Awards following termination of the Participant’s employment with or
provision of services to the Company, its Affiliates, and/or its Subsidiaries,
as the case may be. Such provisions shall be determined in the sole discretion
of the Committee, such provisions may be included in an Award Agreement entered
into with each Participant, but need not be uniform among all Awards of Other
Share-Based Awards issued pursuant to the Plan, and may reflect distinctions
based on the reasons for termination.
 
10.5           Nontransferability. Except as otherwise determined by the
Committee, Other Share-Based Awards may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided by the
Committee, a Participant’s rights under the Plan, if exercisable, shall be
exercisable during his lifetime only by such Participant. With respect to those
Other Share-Based Awards, if any, that are permitted to be transferred to
another individual, references in the Plan to exercise or payment of such Awards
by or to the Participant shall be deemed to include, as determined by the
Committee, the Participant’s permitted transferee.
 
ARTICLE 11
PERFORMANCE MEASURES

 
11.1           General.
 
(a)           Certain Awards granted under the Plan may be granted in a manner
such that the Awards qualify as Performance-Based Compensation and thus are
exempt from the deduction limitation imposed by Section 162(m) of the Code.
Awards shall only qualify as Performance-Based Compensation if, among other
things, at the time of grant the Committee is comprised solely of two or more
“outside directors” (as such term is used in Section 162(m) of the Code and the
Treasury Regulations thereunder).
 
(b)           Awards intended to qualify as Performance-Based Compensation may
be granted to Participants who are or may be Covered Employees at any time and
from time to time, as shall be determined by the Committee. The Committee shall
have complete discretion in determining the number, amount and timing of awards
granted to each Covered Employee.
 
(c)           The Committee shall set performance goals at its discretion which,
depending on the extent to which they are met, will determine the number and/or
value of Awards intended to qualify as Performance-Based Compensation that will
be paid out to the Covered Employees, and may attach to such Performance-Based
Compensation one or more restrictions.
 

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11.2           Other Awards. Either the granting or vesting of Awards intended
to qualify as Performance-Based Compensation (other than Options and SARs)
granted under the Plan shall be subject to the achievement of a performance
target or targets, as determined by the Committee in its sole discretion, based
on one or more of the performance measures specified in Section 11.3 below. With
respect to such Performance-Based Compensation:
 
(a)           the Committee shall establish in writing (x) the objective
performance-based goals applicable to a given period and (y) the individual
Covered Employees or class of Covered Employees to which such performance-based
goals apply no later than 90 days after the commencement of such period (but in
no event after 25 percent of such period has elapsed);
 
(b)           no Performance-Based Compensation shall be payable to or vest with
respect to, as the case may be, any Covered Employee for a given period until
the Committee certifies in writing that the objective performance goals (and any
other material terms) applicable to such period have been satisfied; and
 
(c)           after the establishment of a performance goal, the Committee shall
not revise such performance goal or increase the amount of compensation payable
thereunder (as determined in accordance with Section 162(m) of the Code) upon
the attainment of such performance goal.
 
11.3           Performance Measures. Unless and until the Committee proposes for
shareholder vote and the shareholders approve a change in the general
Performance Measures set forth in this Article 11, the performance goals upon
which the payment or vesting of an Award to a Covered Employee that is intended
to qualify as Performance-Based Compensation shall be limited to the following
Performance Measures:
 
(a)           Net earnings or net income (before or after taxes);
 
(b)           Earnings per share;
 
(c)           Net sales growth;
 
(d)           Net operating profit;
 
(e)           Return measures (including, but not limited to, return on assets,
capital, invested capital, equity, or sales);
 
(f)           Cash flow (including, but not limited to, operating cash flow,
free cash flow, and cash flow return on capital);
 
(g)           Earnings before or after taxes, interest, depreciation, and/or
amortization;
 
(h)           Gross or operating margins;
 
(i)            Productivity ratios;
 

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(j)           Share price (including, but not limited to, growth measures and
total shareholder return);

(k)          The consummation of one or more business acquisitions, combinations
or similar transactions by or with the Company, its Subsidiaries or Affiliates;
and
 
(l)           The consummation of one or more financings (whether through
borrowings, securities issuances or similar transactions) by or with the
Company, its Subsidiaries or Affiliates. 
 
Any Performance Measure(s) may be used to measure the performance of the
Company, Subsidiary, and/or Affiliate as a whole or any business unit of the
Company, Subsidiary, and/or Affiliate or any combination thereof, as the
Committee may deem appropriate, or any of the above Performance Measures as
compared to the performance of a group of peer companies, or published or
special index that the Committee, in its sole discretion, deems appropriate, or
the Company may select Performance Measure (j) above as compared to various
stock market indices.
 
11.4           Evaluation of Performance. The Committee may provide in any such
Award that any evaluation of performance may include or exclude any of the
following events that occurs during a Performance Period: (a) asset write-downs,
(b) litigation or claim judgments or settlements, (c) the effect of changes in
tax laws, accounting principles, or other laws or provisions affecting reported
results, (d) any reorganization and restructuring programs, (e) extraordinary
nonrecurring items as described in Accounting Principles Board Opinion No. 30
and/or in management’s discussion and analysis of financial condition and
results of operations appearing in the Company’s annual report to shareholders
for the applicable year, (f) acquisitions or divestitures, and (g) foreign
exchange gains and losses. To the extent such inclusions or exclusions affect
Awards to Covered Employees, they shall be prescribed in a form that meets the
requirements of Code Section 162(m) for deductibility.
 
11.5           Adjustment of Performance-Based Compensation. Awards intended to
qualify as Performance-Based Compensation may not be adjusted upward. The
Committee shall retain the discretion to adjust such Awards downward, either on
a formula or discretionary basis or any combination, as the Committee
determines.
 
11.6           Committee Discretion. In the event that applicable tax and/or
securities laws change to permit Committee discretion to alter the governing
Performance Measures without obtaining shareholder approval of such changes, the
Committee shall have sole discretion to make such changes without obtaining
shareholder approval. In addition, in the event that the Committee determines
that it is advisable to grant Awards that shall not qualify as Performance-Based
Compensation, the Committee may make such grants without satisfying the
requirements of Code Section 162(m) and base vesting on Performance Measures
other than those set forth in Section 11.1.
 
ARTICLE 12
NONEMPLOYEE DIRECTOR AWARDS

 
All Awards to Nonemployee Directors shall be determined by the Board. The terms
and conditions of any grant to any such Nonemployee Director shall be set forth
in an Award Agreement.
 
 

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ARTICLE 13
DIVIDEND EQUIVALENTS

 
Any Participant selected by the Committee may be granted dividend equivalents
based on the dividends declared on Shares that are subject to any Award, to be
credited as of dividend payment dates, during the period between the date the
Award is granted and the date the Award is exercised, vests or expires, as
determined by the Committee. Such dividend equivalents shall be converted to
cash or additional Shares by such formula and at such time and subject to such
limitations as may be determined by the Committee (but subject to the provisions
of Section 409A of the Code, if applicable).
 
ARTICLE 14
BENEFICIARY DESIGNATION

 
Each Participant under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his death before he receives any
or all of such benefit. Each such designation shall revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Company during the Participant’s lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant’s death shall be paid
to the Participant’s estate. 
 
ARTICLE 15
RIGHTS OF PARTICIPANTS

 
15.1           Employment. Nothing in the Plan or an Award Agreement shall
interfere with or limit in any way the right of the Company, its Affiliates,
and/or its Subsidiaries, to terminate any Participant’s employment or service on
the Board or to the Company at any time or for any reason not prohibited by law,
nor confer upon any Participant any right to continue his employment or service
as a Director or Third Party Service Provider for any specified period of time.
 
Neither an Award nor any benefits arising under this Plan shall constitute an
employment contract with the Company, its Affiliates, and/or its Subsidiaries
and, accordingly, subject to Articles 3 and 17, this Plan and the benefits
hereunder may be terminated at any time in the sole and exclusive discretion of
the Committee without giving rise to any liability on the part of the Company,
its Affiliates, and/or its Subsidiaries.
 
15.2           Participation. No individual shall have the right to be selected
to receive an Award under this Plan, or, having been so selected, to be selected
to receive a future Award.
 
15.3           Rights as a Shareholder. Except as otherwise provided herein, a
Participant shall have none of the rights of a shareholder with respect to
Shares covered by any Award until the Participant becomes the record holder of
such Shares.
 
ARTICLE 16
CHANGE OF CONTROL

 
In addition to the terms and conditions of this Plan, one or more Awards may be
subject to the terms and conditions set forth in a written agreement between the
Company and a Participant providing for different terms or provisions with
respect to such Awards upon a “Change of Control” of the Company (as that term
may be defined in such written agreement), including but not limited to
acceleration of benefits, lapsing of restrictions, vesting of benefits and such
other terms, conditions or provisions as may be contained in such written
agreement; provided however, that such written agreement may not increase the
maximum amount of such Awards.
 
 

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ARTICLE 17
AMENDMENT, MODIFICATION, SUSPENSION, AND TERMINATION

 
17.1           Amendment, Modification, Suspension, and Termination. Subject to
Section 17.3, the Committee may, at any time and from time to time, alter,
amend, modify, suspend, or terminate the Plan and any Award Agreement in whole
or in part; provided, however, that, without the prior approval of the Company’s
shareholders and except as provided in Section 4.4, Options or SARs issued under
the Plan will not be repriced, replaced, or regranted through cancellation, or
by lowering the Option Price of a previously granted Option or the Grant Price
of a previously granted SAR. Further, no amendment of the Plan shall be made
without shareholder approval if shareholder approval is required by law,
regulation, or stock exchange rule.
 
17.2           Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.4 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent unintended dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan. The determination of the
Committee as to the foregoing adjustments, if any, shall be conclusive and
binding on Participants under the Plan.
 
17.3           Awards Previously Granted. Notwithstanding any other provision of
the Plan to the contrary, and except to the extent necessary to avoid the
imposition of additional tax and/or interest under Section 409A of the Code with
respect to Awards that are treated as nonqualified deferred compensation, no
termination, amendment, suspension, or modification of the Plan or an Award
Agreement shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
 
ARTICLE 18
WITHHOLDING

 
The Company shall have the right to withhold from a Participant (or a permitted
assignee thereof), or otherwise require such Participant or assignee to pay, any
Withholding Taxes arising as a result of the grant of any Award, exercise of an
Option or SAR, lapse of restrictions with respect to Restricted Shares or
Restricted Share Units, or any other taxable event occurring pursuant to this
Plan or any Award Agreement. If the Participant (or a permitted assignee
thereof) shall fail to make such tax payments as are required, the Company (or
its Affiliates or Subsidiaries) shall, to the extent permitted by law, have the
right to deduct any such Withholding Taxes from any payment of any kind
otherwise due to such Participant or to take such other action as may be
necessary to satisfy such Withholding Taxes. In satisfaction of the requirement
to pay Withholding Taxes, the Participant (or permitted assignee) may make a
written election which may be accepted or rejected in the discretion of the
Committee, (i) to have withheld a portion of any Shares or other payments then
issuable to the Participant (or permitted assignee) pursuant to any Award, or
(ii) to tender other Shares to the Company (either by actual delivery or
attestation, in the sole discretion of the Committee, provided that, except as
otherwise determined by the Committee, the Shares that are tendered must have
been held by the Participant for at least six months prior to their tender to
satisfy the Option Price or have been purchased on the open market), in either
case having an aggregate Fair Market Value equal to the Withholding Taxes.
 
 

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ARTICLE 19
SUCCESSORS

 
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
 
ARTICLE 20
GENERAL PROVISIONS

 
20.1           Forfeiture Events.
 
(a)           The Committee may specify in an Award Agreement that the
Participant’s rights, payments, and benefits with respect to an Award shall be
subject to reduction, cancellation, forfeiture, or recoupment upon the
occurrence of certain specified events, in addition to any otherwise applicable
vesting or performance conditions of an Award. Such events may include, but
shall not be limited to, termination of employment for cause, termination of the
Participant’s provision of services to the Company, Affiliate, and/or
Subsidiary, violation of material Company, Affiliate, and/or Subsidiary
policies, breach of noncompetition, confidentiality, or other restrictive
covenants that may apply to the Participant, or other conduct by the Participant
that is detrimental to the business or reputation of the Company, its
Affiliates, and/or its Subsidiaries.
 
(b)           If the Company is required to prepare an accounting restatement
due to the material noncompliance of the Company, as a result of misconduct,
with any financial reporting requirement under the securities laws, if the
Participant knowingly or grossly negligently engaged in the misconduct, or
knowingly or grossly negligently failed to prevent the misconduct, or if the
Participant is one of the individuals subject to automatic forfeiture under
Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse
the Company the amount of any payment in settlement of an Award earned or
accrued during the twelve-month period following the first public issuance or
filing with the United States Securities and Exchange Commission (whichever just
occurred) of the financial document embodying such financial reporting
requirement.
 
20.2           Legend. The certificates for Shares may include any legend which
the Committee deems appropriate to reflect any restrictions on transfer of such
Shares.
 

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20.3           Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine, the
plural shall include the singular, and the singular shall include the plural.
 
20.4           Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
 
20.5           Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
 
20.6           Delivery of Title. The Company shall have no obligation to issue
or deliver evidence of title for Shares issued under the Plan prior to:
 
(a)           Obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable; and
 
(b)           Completion of any registration or other qualification of the
Shares under any applicable national or foreign law or ruling of any
governmental body that the Company determines to be necessary or advisable.
 
20.7           Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company’s 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.
 
20.8           Investment Representations. The Committee may require any
individual receiving Shares pursuant to an Award under this Plan to represent
and warrant in writing that the individual is acquiring the Shares for
investment and without any present intention to sell or distribute such Shares.
 
20.9           Employees Based Outside of the United States. Notwithstanding any
provision of the Plan to the contrary, in order to comply with the laws in other
countries in which the Company, its Affiliates, and/or its Subsidiaries operate
or have Employees, Directors, or Third Party Service Providers, the Committee,
in its sole discretion, shall have the power and authority to:
 
(a)           Determine which Affiliates and Subsidiaries shall be covered by
the Plan;
 
(b)           Determine which Employees, Directors, or Third Party Service
Providers outside the United States are eligible to participate in the Plan;
 
(c)           Modify the terms and conditions of any Award granted to Employees,
Directors, or Third Party Service Providers outside the United States to comply
with applicable foreign laws;
 

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(d)           Establish subplans and modify exercise procedures and other terms
and procedures, to the extent such actions may be necessary or advisable. Any
 
subplans and modifications to Plan terms and procedures established under this
Section 20.9 by the Committee shall be attached to this Plan document as
appendices; and
 
(e)           Take any action, before or after an Award is made, that it deems
advisable to obtain approval or comply with any necessary local government
regulatory exemptions or approvals.
 
           Notwithstanding the above, the Committee may not take any actions
hereunder, and no Awards shall be granted, that would violate applicable law.
 
20.10           Uncertificated Shares. To the extent that the Plan provides for
issuance of certificates to reflect the transfer of Shares, the transfer of such
Shares may be effected on a noncertificated basis, to the extent not prohibited
by applicable law or the rules of any stock exchange.
 
20.11           Unfunded Plan. Participants shall have no right, title, or
interest whatsoever in or to any investments that the Company, its Subsidiaries,
and/or its Affiliates may make to aid it in meeting its obligations under the
Plan. Nothing contained in the Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any Participant, beneficiary,
legal representative, or any other individual. To the extent that any individual
acquires a right to receive payments from the Company, its Subsidiaries, and/or
its Affiliates under the Plan, such right shall be no greater than the right of
an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as
the case may be. All payments to be made hereunder shall be paid from the
general funds of the Company, a Subsidiary, or an Affiliate, as the case may be
and no special or separate fund shall be established and no segregation of
assets shall be made to assure payment of such amounts except as expressly set
forth in the Plan.
 
20.12           No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, Awards, or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
 
20.13           Retirement and Welfare Plans. Neither Awards made under the Plan
nor Shares or cash paid pursuant to such Awards may be included as
“compensation” for purposes of computing the benefits payable to any Participant
under the Company’s or any Subsidiary’s or Affiliate’s retirement plans (both
qualified and non-qualified) or welfare benefit plans unless such other plan
expressly provides that such compensation shall be taken into account in
computing a Participant’s benefit.
 
20.14           Nonexclusivity of the Plan. The adoption of this Plan shall not
be construed as creating any limitations on the power of the Board or Committee
to adopt such other compensation arrangements as it may deem desirable for any
Participant.
 

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20.15           No Constraint on Corporate Action. Nothing in this Plan shall be
construed to: (i) limit, impair, or otherwise affect the Company’s or a
Subsidiary’s or an Affiliate’s right or power to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer
all or any part of its business or assets; or, (ii) limit the right or power of
the Company or a Subsidiary or an Affiliate to take any action which such entity
deems to be necessary or appropriate.
 
20.16           Governing Law. The Plan and each Award Agreement shall be
governed by the laws of the State of New York, excluding any conflicts or choice
of law rule or principle that might otherwise refer construction or
interpretation of the Plan to the substantive law of another jurisdiction.
Unless otherwise provided in the Award Agreement, recipients of an Award under
the Plan are deemed to submit to the exclusive jurisdiction and venue of the
federal or state courts of New York, to resolve any and all issues that may
arise out of or relate to the Plan or any related Award Agreement.
 
20.17           Indemnification. Each individual who is or shall have been a
member of the Board, or a committee appointed by the Board, or an officer of the
Company to whom authority was delegated in accordance with Article 3, shall be
indemnified and held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him in
connection with or resulting from any claim, action, suit, or proceeding to
which he may be a party or in which he may be involved by reason of any action
taken or failure to act under the Plan and against and from any and all amounts
paid by him in settlement thereof, with the Company’s approval, or paid by him
in satisfaction of any judgement in any such action, suit, or proceeding against
him, provided he shall give the Company an opportunity, at its own expense, to
handle and defend the same before he undertakes to handle and defend it on his
own behalf, unless such loss, cost, liability, or expense is a result of his own
willful misconduct or except as expressly provided by statute.
 
The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such individuals may be entitled under the
Company’s Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
 
20.18           Amendment to Comply with Applicable Law. It is intended that no
Award granted under this Plan shall be subject to any interest or additional tax
under Section 409A of the Code. In the event Code Section 409A is amended after
the date hereof, or regulations or other guidance is promulgated after the date
hereof that would make an Award under the Plan subject to the provisions of Code
Section 409A, then the terms and conditions of this Plan shall be interpreted
and applied, to the extent possible, in a manner to avoid the imposition of the
provisions of Code Section 409A.
 

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