Exhibit 10.1

 

OVERSTOCK.COM, INC.

 

2005 EQUITY INCENTIVE PLAN

(amended and restated)

 

1.                                      Purposes of the Plan.  The purposes of
this 2005 Equity Incentive Plan are:

 

a.                                      to attract and retain the best available
personnel for positions of substantial responsibility,

 

b.                                      to provide additional incentive to
Service Providers, and

 

c.                                       to promote the success of the Company’s
business.

 

Awards granted under the Plan may be Incentive Stock Options, Nonstatutory Stock
Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights,
Performance Shares, Performance Units or Deferred Stock Units, as determined by
the Administrator at the time of grant.

 

2.                                      Definitions.  As used herein, the
following definitions shall apply:

 

a.                                      “Administrator” means the Board or any
of its Committees that shall be administering the Plan, in accordance with
Section 4 of the Plan.

 

b.                                      “Applicable Laws” means the requirements
relating to the administration of equity compensation plans under U.S. state
corporate laws, U.S. federal and state securities laws, the Code, any stock
exchange or quotation system on which the Common Stock is listed or quoted and
the applicable laws of any foreign country or jurisdiction where Awards are
granted under the Plan.

 

c.                                       “Award” means, individually or
collectively, a grant under the Plan of Options, Restricted Stock, Restricted
Stock Units, Stock Appreciation Rights, Performance Shares, Performance Units or
Deferred Stock Units.

 

d.                                      “Award Agreement” means the written or
electronic agreement setting forth the terms and provisions applicable to each
Award granted under the Plan. The Award Agreement is subject to the terms and
conditions of the Plan.

 

e.                                       “Award Exchange Program” means a
program whereby outstanding Awards are surrendered or cancelled in exchange for
Awards (of the same or different type), which may have a lower exercise or
purchase price, or in exchange for cash or a combination of cash and Awards.

 

f.                                        “Awarded Stock” means the Common Stock
subject to an Award.

 

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

 

--------------------------------------------------------------------------------

 

h.                                      “Cash Position” means the Company’s
level of cash and cash equivalents.

 

i.                                          “Cause” means (i) an act of personal
dishonesty taken by a Participant in connection with his or her responsibilities
as a Service Provider and intended to result in personal enrichment of the
Participant, (ii) a Participant being convicted of a felony, (iii) a willful act
by a Participant which constitutes gross misconduct and which is injurious to
the Company, or (iv) following delivery to a Participant of a written demand for
performance from the Company which describes the basis for the Company’s
reasonable belief that the Participant has not substantially performed his
duties, continued violations by the Participant of his or her obligations to the
Company which are demonstrably willful and deliberate on the Participant’s part.

 

j.                                         “Change of Control” means the
occurrence of any of the following events:

 

i.                                          Any “person” (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act), other than Patrick M. Byrne,
Dorothy M. Byrne or John J. Byrne or an individual or entity that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with Patrick M. Byrne, Dorothy M. Byrne and/or John J.
Byrne, becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange
Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the total voting power represented by the Company’s
then outstanding voting securities; or

 

ii.                                       The consummation of the sale or
disposition by the Company of all or substantially all of the Company’s assets;

 

iii.                                    A change in the composition of the Board
occurring within a one-year period, as a result of which fewer than a majority
of the directors are Incumbent Directors.  “Incumbent Directors” means directors
who either (A) are Directors as of the effective date of the Plan, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but will not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company); or

 

iv.                                   The consummation of a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or its parent) at least fifty percent (50%) of the total voting
power represented by the voting securities of the Company or such surviving
entity or its parent outstanding immediately after such merger or consolidation.

 

2

--------------------------------------------------------------------------------

 

Notwithstanding anything herein to the contrary, and only to the extent that an
Award is subject to Section 409A of the Code and payment of the Award pursuant
to the application of the definition of “Change of Control” above would cause
such Award not to otherwise comply with Section 409A of the Code, payment of an
Award may occur upon a “Change of Control” only to the extent that the event
constitutes a “change in the ownership or effective control” of the Company or a
“change in the ownership of a substantial portion of the assets” of the Company
under Section 409A of the Code and the applicable Internal Revenue Service and
Treasury Department regulations thereunder.

 

k.                                      “Change of Control Value” means, with
respect to a Change of Control, (i) the per share price offered to stockholders
of the Company in any merger, consolidation, reorganization, sale of assets or
dissolution transaction, (ii) the price per share offered to stockholders of the
Company in any tender offer, exchange offer or sale or other disposition of
outstanding voting stock of the Company, or (iii) if such Change of Control
occurs other than as described in clause (i) or clause (ii), the Fair Market
Value per share of the Shares into which Awards are exercisable, as determined
by the Administrator, whichever is applicable.  In the event that the
consideration offered to stockholders of the Company consists of anything other
than cash, the Administrator shall determine the fair cash equivalent of the
portion of the consideration offered which is other than cash.

 

l.                                          “Code” means the Internal Revenue
Code of 1986, as amended.

 

m.                                  “Committee” means a committee of Directors
appointed by the Board in accordance with Section 4 of the Plan.

 

n.                                      “Common Stock” means the common stock of
the Company.

 

o.                                      “Company” means Overstock.com, Inc.

 

p.                                      “Consultant” means any natural person,
including an advisor, engaged by the Company or a Parent or Subsidiary to render
services to such entity.

 

q.                                      “Deferred Stock Unit” means a deferred
stock unit Award granted to a Participant pursuant to Section 14.

 

r.                                         “Director” means a member of the
Board.

 

s.                                        “Disability” means total and permanent
disability as defined in Section 22(e)(3) of the Code.

 

t.                                         “Earnings Per Share” means as to any
Fiscal Year, the Company’s or a business unit’s Net Income, divided by a
weighted average number of common shares outstanding and dilutive common
equivalent shares deemed outstanding, determined in accordance with generally
accepted accounting principles.

 

u.                                      “Employee” means any person, including
Officers and Directors, employed by the Company or any Parent or Subsidiary of
the Company. A Service Provider shall not cease to be an Employee in the case of
(i) any leave of absence

 

3

--------------------------------------------------------------------------------

 

approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. For purposes
of Incentive Stock Options, no such leave may exceed ninety days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, then three (3) months following the 91st day of such leave
any Incentive Stock Option held by the Participant shall cease to be treated as
an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.

 

v.                                      “Exchange Act” means the Securities
Exchange Act of 1934, as amended.

 

w.                                    “Expenses” means as to any Performance
Period, the Company’s or business unit’s incurred expenses.

 

x.                                      “Fair Market Value” means, as of any
date, the value of Common Stock determined as follows:

 

i.                                          If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq Stock Market, its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or system on the day of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

 

ii.                                       If the Common Stock is regularly
quoted by a recognized securities dealer but selling prices are not reported,
the Fair Market Value of a Share of Common Stock shall be the mean between the
high bid and low asked prices for the Common Stock on the day of determination,
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or

 

iii.                                    In the absence of an established market
for the Common Stock, the Fair Market Value shall be determined in good faith by
the Administrator.

 

Notwithstanding the foregoing, for purposes of establishing the exercise price
of Options and SARs, the determination of Fair Market Value in all cases shall
be in accordance with Section 409A of the Code and the regulations thereunder,
with the intent that Options and SARs granted under this Plan shall not
constitute deferred compensation subject to Section 409A of the Code.

 

y.                                      “Fiscal Year” means a fiscal year of the
Company.

 

z.                                       “Gross Margin” means as to any
Performance Period, the Company’s Revenues less the related cost of Revenues
expressed in dollars or as a percentage of Revenues.

 

aa.                               “Incentive Stock Option” means an Option
intended to qualify as an incentive stock option within the meaning of Section
422 of the Code and the regulations promulgated thereunder.

 

4

--------------------------------------------------------------------------------

 

bb.                               “Individual Objectives” means, as to any
Participant for any Performance Period, the objective and measurable goals set
by a process and approved by the Administrator.

 

cc.                                 “Net Income” means as to any Fiscal Year,
the income after taxes of the Company for the Fiscal Year determined in
accordance with generally accepted accounting principles.

 

dd.                               “Nonstatutory Stock Option” means an Option
not intended to qualify as an Incentive Stock Option.

 

ee.                                 “Notice of Grant” means a written or
electronic notice evidencing certain terms and conditions of an individual
Award. The Notice of Grant is part of the Option Agreement or Award Agreement.

 

ff.                                   “Officer” means a person who is an officer
of the Company within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.

 

gg.                                 “Operating Cash Flow” means the Company’s or
a business unit’s sum of Net Income plus depreciation and amortization less
capital expenditures plus changes in working capital comprised of accounts
receivable, inventories, other current assets, trade accounts payable, accrued
expenses, product warranty, advance payments from customers and long-term
accrued expenses, determined in accordance with generally acceptable accounting
principles.

 

hh.                               “Operating Income” means the Company’s or a
business unit’s income from operations but excluding any unusual items,
determined in accordance with generally accepted accounting principles.

 

ii.                                       “Operating Margin” means, as to any
Performance Period, the Company’s or a business unit’s Operating Income divided
by Revenue, expressed as a percentage.

 

jj.                                     “Option” means a stock option granted
pursuant to the Plan.

 

kk.                               “Option Agreement” means a written or
electronic agreement between the Company and a Participant evidencing the terms
and conditions of an individual Option grant. The Option Agreement is subject to
the terms and conditions of the Plan.

 

ll.                                       “Parent” means a “parent corporation”,
whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

mm.                       “Participant” means the holder of an outstanding Award
granted under the Plan.

 

nn.                               “Performance Goals” means the goal(s) (or
combined goal(s)) determined by the Administrator (in its discretion) to be
applicable to a Participant with respect to an Award. As determined by the
Administrator, the Performance Goals applicable to an

 

5

--------------------------------------------------------------------------------

 

Award may provide for a targeted level or levels of achievement using one or
more of the following measures: (a) Cash Position, (b) Earnings Per Share, (c)
Expenses, (d) Gross Margin, (e) Individual Objectives, (f) Net Income, (g)
Operating Cash Flow, (h) Operating Income, (i) Operating Margin, (j) Return on
Assets, (k) Return on Equity, (l) Return on Sales, (m) Revenue, (n) Total
Stockholder Return, and/or (o) Unit Sales. The Performance Goals may differ from
Participant to Participant and from Award to Award. Any criteria used may be
measured, as applicable, (i) in absolute terms, (ii) in relative terms
(including, but not limited to, passage of time and/or against another company
or companies), (iii) on a per-share basis, (iv) against the performance of the
Company as a whole or of a business unit of the Company or by product or product
line, (v) on a pre-tax or after-tax basis, and/or on a GAAP or non-GAAP basis.
Prior to the beginning of the applicable Performance Period, the Administrator
shall determine whether any significant element(s) shall be included or excluded
from the calculation of any Performance Goal with respect to any Participants.
For example, but not by way of limitation, the Administrator may determine that
the measures for one or more Performance Goals shall consist of non-GAAP
variations of any of the foregoing measures. The Committee may set different
goals for Awards not intended to qualify for exemption from the limitations of
Section 162(m) of the Code.

 

The Administrator is authorized, in its sole and absolute discretion, to adjust
or modify the calculation of a Performance Goal for a Performance Period
(provided, that if an Award is intended to constitute “performance-based
compensation” under Section 162(m) of the Code, such adjustment or modification
may be made only to the extent permitted under Section 162(m) of the Code) in
order to prevent the dilution or enlargement of the rights of Participants based
on the following events: (A) asset write-downs; (B) litigation or claim
judgments or settlements; (C) the effect of changes in tax laws, accounting
principles, or other laws or regulatory rules affecting reported results; (D)
any reorganization and restructuring programs; (E) extraordinary nonrecurring
items as described in Accounting Principles Board Opinion No. 30 (or any
successor or pronouncement thereto) and/or in management’s discussion and
analysis of financial condition and results of operations appearing in the
Company’s annual report to stockholders for the applicable year; (F)
acquisitions or divestitures; (G) any other specific unusual or nonrecurring
events, or objectively determinable category thereof; (H) foreign exchange gains
and losses; and (I) a change in the Company’s fiscal year.

 

oo.                               “Performance Period” means any Fiscal Year or
such other period as determined by the Administrator in its sole discretion.

 

pp.                               “Performance Share” means a performance share
Award granted to a Participant pursuant to Section 12.

 

qq.                               “Performance Unit” means a performance unit
Award granted to a Participant pursuant to Section 13.

 

rr.                                     “Plan” means this 2005 Equity Incentive
Plan.

 

6

--------------------------------------------------------------------------------

 

ss.                                   “Restricted Award” means an Award granted
pursuant to Section 11 of the Plan.

 

tt.                                     “Return on Assets” means the percentage
equal to the Company’s or a business unit’s Operating Income before incentive
compensation, divided by average net Company or business unit, as applicable,
assets, determined in accordance with generally accepted accounting principles.

 

uu.                               “Return on Equity” means the percentage equal
to the Company’s Net Income divided by average stockholder’s equity, determined
in accordance with generally accepted accounting principles.

 

vv.                               “Return on Sales” means the percentage equal
to the Company’s or a business unit’s Operating Income before incentive
compensation, divided by the Company’s or the business unit’s, as applicable,
revenue, determined in accordance with generally accepted accounting principles.

 

ww.                           “Revenue” means, as to any Performance Period, the
Company’s or a business unit’s gross revenues, net sales or gross sales, as
determined by the Administrator.

 

xx.                               “Rule 16b-3” means Rule 16b-3 of the Exchange
Act or any successor to Rule 16b-3, as in effect when discretion is being
exercised with respect to the Plan.

 

yy.                               “Section 16(b)” means Section 16(b) of the
Exchange Act.

 

zz.                                 “Securities Act” means the Securities Act of
1933, as amended.

 

aaa.                        “Service Provider” means an Employee, Director or
Consultant.

 

bbb.                        “Share” means a share of the Common Stock, as
adjusted in accordance with Section 16 of the Plan.

 

ccc.                           “Stock Appreciation Right” or “SAR” means an
Award granted pursuant to Section 10 hereof.

 

ddd.                        “Subsidiary” means a “subsidiary corporation”,
whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

eee.                           “Total Stockholder Return” means the total return
(change in share price plus reinvestment of any dividends) of a Share.

 

fff.                              “Unit Sales” means, as to any Performance
Period, gross or net sales of units, consisting of any merchandise or type or
category of merchandise or other product or service sold by the Company at any
time, now or hereafter, as determined and specified by the Administrator.

 

7

--------------------------------------------------------------------------------

 

ggg.                           “Voluntary Termination for Good Reason” means a
Participant voluntarily resigns within ninety (90) days after the occurrence of
any of the following, provided the Participant gives notice to the Company of
such occurrence within sixty (60) days after such occurrence and the Company
does not remedy the condition within thirty (30) days after the Company’s
receipt of such notice: (i) without the Participant’s express written consent, a
material reduction of the Participant’s duties, title, authority or
responsibilities, relative to the Participant’s duties, title, authority or
responsibilities as in effect immediately prior to such reduction, or the
assignment to Participant of such reduced duties, title, authority or
responsibilities; provided, however, that a reduction in duties, title,
authority or responsibilities solely by virtue of the Company being acquired and
made part of a larger entity (as, for example, when the Chief Executive Officer
of the Company remains as such following a Change of Control and is not made the
Chief Executive Officer of the acquiring corporation) shall not by itself
constitute grounds for a “Voluntary Termination for Good Reason;” (ii) a
reduction by the Company in the base salary of the Participant as in effect
immediately prior to such reduction; (iii) the relocation of the Participant to
a facility or a location outside of a 35 mile radius from the present facility
or location, without the Participant’s express written consent; or (iv) any act
or set of facts or circumstances which would, under applicable case law or
statute constitute a constructive termination of the Participant.

 

3.                                      Stock Subject to the Plan.  Subject to
the provisions of Section 16 of the Plan, the maximum aggregate number of Shares
which will be available for grant under the Plan after approval by the
stockholders at the 2012 annual meeting of stockholders is 2,749,501.  The
Shares may be authorized, but unissued, or reacquired Common Stock. All shares
reserved for issuance under this Plan may be used for Incentive Stock Options.

 

To the extent that Shares subject to an Award are not issued to a Participant
because the Award terminates, expires, lapses or becomes unexercisable without
having been exercised in full for any reason, or an Award is settled in cash, or
is surrendered pursuant to an Award Exchange Program, or, with respect to
Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units
or Deferred Stock Units, is forfeited to or repurchased by the Company, the
unissued Shares (or for Awards other than Options and SARs, the forfeited or
repurchased shares) which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated). However, the full
number of Stock Appreciation Rights granted that are to be settled by the
issuance of Shares shall be counted against the number of Shares available for
award under the Plan, regardless of the number of Shares actually issued upon
settlement of such Stock Appreciation Rights.  Shares that have actually been
issued under the Plan under any Award shall not be returned to the Plan and
shall not become available for future distribution under the Plan.  Shares
surrendered or withheld in payment of the exercise price of an Option and Shares
withheld by the Company to satisfy any minimum tax withholding obligation shall
count against the aggregate plan limit described above.  To the extent an Award
under the Plan is paid out in cash rather than Shares, such cash payment shall
not result in a reduction to the number of Shares available for issuance under
the Plan.  Shares repurchased by the Company on the open market with the
proceeds of an Option exercise shall not be added to the number of Shares
available for grant under the Plan.  No fractional shares of Stock may be issued
hereunder.

 

8

--------------------------------------------------------------------------------

 

4.                                      Administration of the Plan.

 

a.                                      Procedure.

 

i.                                          Multiple Administrative Bodies.  The
Plan may be administered by different Committees with respect to different
groups of Service Providers.

 

ii.                                       Section 162(m) of the Code.  To the
extent that the Administrator determines it to be desirable to qualify Options
or other Awards granted hereunder as “performance-based compensation” within the
meaning of Section 162(m) of the Code, the Plan shall be administered by a
Committee of two or more “outside directors” within the meaning of Section
162(m) of the Code.

 

iii.                                    Rule 16b-3.  To the extent desirable to
qualify transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder shall be structured to satisfy the requirements for
exemption under Rule 16b-3, including the composition of the Committee that
grants any related Awards.

 

iv.                                   Other Administration.  Other than as
provided above, the Plan shall be administered by (A) the Board or (B) a
Committee, which committee shall be constituted to satisfy Applicable Laws.

 

b.                                      Powers of the Administrator.  Subject to
the provisions of the Plan, and in the case of a Committee, subject to the
specific duties delegated by the Board to such Committee, the Administrator
shall have the authority, in its discretion:

 

i.                                          to determine the Fair Market Value;

 

ii.                                       to select the Service Providers to
whom Awards may be granted hereunder;

 

iii.                                    to determine whether and to what extent
Awards or any combination thereof, are granted hereunder;

 

iv.                                   to determine the number of shares of
Common Stock or equivalent units to be covered by each Award granted hereunder;

 

v.                                      to approve forms of agreement for use
under the Plan;

 

vi.                                   to reduce the exercise price of an Award
to the then current Fair Market Value if the Fair Market Value of the Common
Stock covered by such Award shall have declined since the date the Award was
granted, provided that such action shall first have been approved by a vote of
the stockholders of the Company;

 

vii.                                to institute an Award Exchange Program,
provided that no exchange shall cause the exercise price of an Option or SAR to
be reduced unless

 

9

--------------------------------------------------------------------------------

 

such action shall first have been approved by a vote of the stockholders of the
Company;

 

viii.                             to determine or modify the terms and
conditions, not inconsistent with the terms of the Plan, of any Award granted
hereunder, provided that no such modification may cause an Option or SAR to
become deferred compensation subject to Section 409A of the Code.  Such terms
and conditions include, but are not limited to, the exercise price, the time or
times when Options or SARs may be exercised or other Awards vest (which may be
based on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Award or the
shares of Common Stock relating thereto, based in each case on such factors as
the Administrator, in its sole discretion, shall determine;

 

ix.                                   to construe and interpret the terms of the
Plan and Awards and to reconcile any inconsistency, correct any defect and/or
supply any omission in the Plan or Award Agreement;

 

x.                                      to prescribe, amend and rescind rules
and regulations relating to the Plan, including rules and regulations relating
to sub-plans established for the purpose of qualifying for preferred tax
treatment under foreign tax laws;

 

xi.                                   to modify or amend each Award (subject to
Section 18.c of the Plan), including the discretionary authority to extend the
post-service-termination exercisability period of Options and SARs longer than
is otherwise provided for in the Plan, provided that no such modification or
extension may cause an Option or SAR to become deferred compensation subject to
Section 409A of the Code;

 

xii.                                to authorize any person to execute on behalf
of the Company any instrument required to effect the grant of an Award
previously granted by the Administrator;

 

xiii.                             to allow Participants to satisfy minimum
withholding tax obligations by tendering cash or unencumbered Shares owned by
the Participant having a Fair Market Value equal to the amount required to be
withheld, or electing to have the Company withhold from the Shares or cash to be
issued upon exercise or vesting of an Award (or distribution of a Deferred Stock
Unit) that number of Shares or cash having a Fair Market Value equal to the
minimum amount required to be withheld (but no more). The Fair Market Value of
any Shares to be withheld shall be determined on the date that the amount of tax
to be withheld is to be determined. All elections by a Participant to have
Shares or cash withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable;

 

xiv.                            to determine the terms and restrictions
applicable to Awards; and

 

xv.                               to make all other determinations deemed
necessary or advisable for administering the Plan.

 

10

--------------------------------------------------------------------------------

 

c.                                       Effect of Administrator’s Decision. 
The Administrator’s decisions, determinations and interpretations shall be final
and binding on all Participants and any other holders of Awards.

 

5.                                      Eligibility.  Restricted Stock,
Restricted Stock Units, Performance Shares, Performance Units, Stock
Appreciation Rights, Deferred Stock Units and Nonstatutory Stock Options may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.  A Consultant shall not be eligible for the grant of an Award if, at
the time of grant, a Form S-8 Registration Statement (“Form S-8”) under the
Securities Act, is not available to register either the offer or the sale of the
Company’s securities to such Consultant because of the nature of the services
that the Consultant is providing to the Company (i.e., capital raising), or
because the Consultant is not a natural person, or as otherwise provided by the
rules governing the use of Form S-8, unless the Company determines both (i) that
such grant (A) shall be registered in another manner under the Securities Act
(e.g., on a Form S-3 Registration Statement) or (B) does not require
registration under the Securities Act in order to comply with the requirements
of the Securities Act, if applicable, and (ii) that such grant complies with the
securities laws of all other relevant jurisdictions.

 

6.                                      No Employment Rights.  Neither the Plan
nor any Award shall confer upon a Participant any right with respect to
continuing the Participant’s employment with the Company or its Subsidiaries,
nor shall they interfere in any way with the Participant’s right or the
Company’s or Subsidiary’s right, as the case may be, to terminate such
employment at any time, with or without cause.

 

7.                                      Code Section 162(m) Provisions.

 

a.                                      Option and SAR Annual Share Limit.  No
Participant shall be granted, in any Fiscal Year, Options to purchase more than
200,000 Shares or Stock Appreciation Rights covering more than 500,000 Shares;
provided, however, that such limits shall be 300,000 Shares with respect to
Options and 750,000 shares with respect to Stock Appreciation Rights in the
Participant’s first Fiscal Year of Company service.

 

b.                                      Restricted Awards and Performance Share
Annual Limit.  No Participant shall be granted, in any Fiscal Year, more than
100,000 Shares of Restricted Stock, 100,000 shares of Restricted Stock Units or
100,000 Performance Shares; provided, however, that each such limit shall be
250,000 Shares in the Participant’s first Fiscal Year of Company service.

 

c.                                       Performance Units Annual Limit.  No
Participant shall receive Performance Units, in any Fiscal Year, having an
initial value greater than $1,000,000, provided, however, that such limit shall
be $2,500,000 in the Participant’s first Fiscal Year of Company service.

 

d.                                      Section 162(m) Performance
Restrictions.  For purposes of qualifying grants of Restricted Stock, Restricted
Stock Units, Performance Shares or Performance Units as “performance-based
compensation” under Section 162(m) of the Code, the Administrator, in its
discretion, may set restrictions based upon the achievement of

 

11

--------------------------------------------------------------------------------

 

Performance Goals. The Performance Goals shall be set by the Administrator on or
before the latest date permissible to enable the Restricted Stock, Restricted
Stock Units, Performance Shares or Performance Units to qualify as
“performance-based compensation” under Section 162(m) of the Code. In granting
Restricted Stock, Restricted Stock Units, Performance Shares or Performance
Units which are intended to qualify under Section 162(m) of the Code, the
Administrator shall follow any procedures determined by it from time to time to
be necessary or appropriate to ensure qualification of the Award under Section
162(m) of the Code (e.g., in determining the Performance Goals).  A Participant
shall be eligible to receive payment in respect of an Award that is intended to
constitute “performance-based compensation” only to the extent that the
applicable Performance Goals are achieved.

 

e.                                       Changes in Capitalization.  The
numerical limitations in Sections 7.a and 7.b shall be adjusted proportionately
in connection with any change in the Company’s capitalization as described in
Section 16.a.

 

f.                                        Certification.  Prior to the payment
of any Award that is intended to constitute “performance-based compensation,”
the Administrator shall review and certify in writing whether, and to what
extent, the Performance Goals have been achieved and, if so, calculate and
certify in writing that amount of the Award earned based upon the achievement of
the Performance Goals.  The Administrator may reduce or eliminate the amount of
such an Award earned through the use of negative discretion if, in its sole
judgment, such reduction or elimination is appropriate.  With respect to any
Award intended to constitute “performance-based compensation,” the Administrator
shall not have the discretion to (A) grant or provide payment in respect of
Awards if the Performance Goals have not been attained; (B) increase an Award
above the maximum amount payable under this Section 7; or (C) cause an increase
in a Participant’s Award as a result of the use of negative discretion with
respect to another Participant’s Award.  In addition, if an Award intended to
constitute “performance-based compensation” is based, in whole or in part, on a
percentage of a Participant’s salary, base pay or other compensation, the
maximum amount of the Award must be fixed at the time the Performance Goals are
established.  Notwithstanding the foregoing, an Award Agreement may provide that
an Award may be payable upon death, disability or change of ownership or control
prior to the attainment of the Performance Goals, provided that any such Award
will not constitute “performance-based compensation” under Section 162(m) of the
Code to the extent the Award is actually paid prior to the attainment of the
Performance Goals.

 

g.                                       If, after the attainment of the
applicable Performance Goals, payment of an Award intended to constitute
“performance-based compensation” in cash is accelerated to an earlier date, the
amount paid will be discounted to reasonably reflect the time value of money. 
Any such Award that has been deferred shall not (between the date as of which
the Award is deferred and the payment date) increase (A) with respect to an
Award that is payable in cash, by a measuring factor for each fiscal year
greater than a reasonable rate of interest set by the Administrator, or (B) with
respect to an Award that is payable in Common Stock, by an amount greater than
the appreciation of a Share from the date such Award is deferred to the payment
date.

 

12

--------------------------------------------------------------------------------

 

h.                                      If an Award is cancelled in the same
Fiscal Year in which it was granted (other than in connection with a transaction
described in Section 16), the cancelled Award will be counted against the limits
set forth in subsections (a) and (b) above. For this purpose, if the exercise
price of an Award is reduced, the transaction will be treated as a cancellation
of the Award and the grant of a new Award.

 

8.                                      Effective Date; Term of Plan.  The
Plan’s effective date is the date on which it is adopted by the Board, so long
as it is approved by the Company’s stockholders at any time within 12 months of
such adoption.  The Plan will have no fixed expiration date; provided, however,
that no Incentive Stock Options may be granted more than 10 years after the
later of (a) the Plan’s adoption by the Board, or (b) the adoption by the Board
of any amendment to the Plan that constitutes the adoption of a new plan for
purposes of Section 422 of the Code.

 

9.                                      Stock Options.

 

a.                                      The term of each Option shall be stated
in the Notice of Grant; provided, however, that the term shall be ten (10) years
from the date of grant or such shorter term as may be provided in the Notice of
Grant. Moreover, in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Incentive
Stock Option shall be five (5) years from the date of grant or such shorter term
as may be provided in the Notice of Grant.

 

b.                                      Option Exercise Price.  The per share
exercise price for the Shares to be issued pursuant to exercise of an Option
shall be determined by the Administrator, subject to the following:

 

i.                                          In the case of an Incentive Stock
Option:

 

(1)                                 granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.

 

(2)                                 granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.

 

ii.                                       In the case of a Nonstatutory Stock
Option, the per Share exercise price shall be determined by the Administrator
and shall be no less than 100% of the Fair Market Value per Share on the date of
grant.

 

iii.                                    Notwithstanding the foregoing, an Option
may be granted with a per Share exercise price of less than 100% of the Fair
Market Value per Share if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of
Sections 409A and 424(a) of the

 

13

--------------------------------------------------------------------------------

 

Code and the regulations thereunder.  No Option shall include any feature for
the deferral of compensation other than the deferral of recognition of income
until the exercise of the Option.

 

c.                                       Waiting Period and Exercise Dates.  At
the time an Option is granted, the Administrator shall fix the period within
which the Option may be exercised and shall determine any conditions which must
be satisfied before the Option may be exercised. In so doing, the Administrator
may specify that an Option may not be exercised until the completion of a
service period or until performance milestones are satisfied.

 

d.                                      Form of Consideration.  The
Administrator shall determine the acceptable form of consideration for
exercising an Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the acceptable form of
consideration at the time of grant. Subject to Applicable Laws, such
consideration may consist entirely of:

 

i.                                          cash;

 

ii.                                       check;

 

iii.                                    other Shares which are owned by the
Participant and have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised;

 

iv.                                   delivery of a properly executed exercise
notice together with such other documentation as the Administrator and the
broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale proceeds required to pay the exercise price;

 

v.                                      such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws,
including, to the extent permitted by Applicable Laws and approved by the
Administrator, delivery of a promissory note, consideration received by the
Company under a cashless exercise program implemented by the Company in
connection with the Plan, or a reduction in the amount of any Company liability
to the Participant; or

 

vi.                                   any combination of the foregoing methods
of payment.

 

e.                                       Exercise of Option; Rights as a
Stockholder.  Any Option granted hereunder shall be exercisable according to the
terms of the Plan and at such times and under such conditions as determined by
the Administrator and set forth in the Option Agreement. An Option may not be
exercised for a fraction of a Share. An Option shall be deemed exercised when
the Company receives: (i) written or electronic notice of exercise (in
accordance with the Option Agreement) from the person entitled to exercise the
Option, and (ii) full payment for the Shares with respect to which the Option is
exercised. Full payment may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Option Agreement and the
Plan. Shares issued upon exercise of an Option shall be issued in the name of
the Participant or, if requested by the

 

14

--------------------------------------------------------------------------------

 

Participant, in the name of the Participant and his or her spouse. Until the
stock certificate evidencing such Shares is issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), no right to vote or receive dividends or any other rights
as a stockholder shall exist with respect to the optioned stock, notwithstanding
the exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 16 of the
Plan. Exercising an Option in any manner shall decrease the number of Shares
thereafter available for sale under the Option, by the number of Shares as to
which the Option is exercised.

 

f.                                        Termination of Relationship as a
Service Provider.  If a Participant ceases to be a Service Provider, other than
upon the Participant’s death or Disability, the Participant may exercise his or
her Option within such period of time as is specified in the Option Agreement to
the extent that the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for three months following the Participant’s
termination. If, on the date of termination, the Participant is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Participant does not
exercise his or her Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.

 

g.                                       Disability.  If a Participant ceases to
be a Service Provider as a result of the Participant’s Disability, the
Participant may exercise his or her Option within such period of time as is
specified in the Option Agreement to the extent the Option is vested on the date
of termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). In the absence of a specified time
in the Option Agreement, the Option shall remain exercisable for twelve (12)
months following the Participant’s termination. If, on the date of termination,
the Participant is not vested as to his or her entire Option, the Shares covered
by the unvested portion of the Option shall revert to the Plan. If, after
termination, the Participant does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

 

h.                                      Death of Participant.  If a Participant
dies while a Service Provider, the Option may be exercised following the
Participant’s death within such period of time as is specified in the Option
Agreement to the extent that the Option is vested on the date of death (but in
no event may the option be exercised later than the expiration of the term of
such Option as set forth in the Option Agreement), by the Participant’s
designated beneficiary, provided such beneficiary has been designated prior to
Participant’s death in a form acceptable to the Administrator. If no such
beneficiary has been designated by the Participant, then such Option may be
exercised by the personal representative of the Participant’s estate or by the
person(s) to whom the Option is transferred pursuant to the Participant’s will
or in accordance with the laws of descent and distribution. In the

 

15

--------------------------------------------------------------------------------

 

absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following Participant’s death. If, at the
time of death, the Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall immediately revert to
the Plan. If the Option is not so exercised within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

 

i.                                          ISO $100,000 Rule.  Each Option
shall be designated in the Notice of Grant as either an Incentive Stock Option
or a Nonstatutory Stock Option. However, notwithstanding such designations, to
the extent that the aggregate Fair Market Value of Shares subject to a
Participant’s Incentive Stock Options (determined without regard to this
paragraph) granted by the Company, any Parent or Subsidiary, which become
exercisable for the first time during any calendar year (under all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall
be treated as Nonstatutory Stock Options. For purposes of this Section 9.i,
Incentive Stock Options shall be taken into account in the order in which they
were granted (or as otherwise provided under applicable regulations), and the
Fair Market Value of the Shares shall be determined as of the time of grant.

 

j.                                         Section 409A of the Code. 
Notwithstanding anything herein to the contrary, if an Option is granted to a
Service Provider with respect to whom Common Stock does not constitute “service
recipient stock” (as defined in Treasury Regulation Section
1.409A-1(b)(5)(iii)), the Option shall comply with Section 409A of the Code to
the extent applicable.

 

10.                               Stock Appreciation Rights.

 

a.                                      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 Administrator, in its sole
discretion. The Administrator shall have complete discretion to determine the
number of SARs granted to any Participant.  SARs may be granted either alone
(“Free Standing Rights”) or in conjunction with all or part of any Option
granted under the Plan (“Related SARs”).  Free Standing Rights shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Administrator.  Related SARs shall be exercisable
only at such time or times and to the extent that the Options to which they
relate shall be exercisable.  No Related SAR may be granted for more shares of
Common Stock than are subject to the Option to which it relates.  The number of
shares of Common Stock subject to an SAR must be fixed on the date of grant of
the SAR, and the SAR must not include any feature for the deferral of
compensation other than the deferral of recognition of income until the exercise
of the SAR.  The provisions of SARs need not be the same with respect to each
Participant.

 

b.                                      Exercise Price and other Terms.  Subject
to Section 7.a of the Plan, the Administrator, subject to the provisions of the
Plan, shall have complete discretion to determine the terms and conditions of
SARs granted under the Plan; provided, however, that no SAR may have a term of
more than ten (10) years from the date of grant. An SAR must be granted with an
exercise price per Share not less than the Fair Market Value per

 

16

--------------------------------------------------------------------------------

 

Share on the date of grant.  The exercise price for the Shares or cash to be
issued pursuant to an already granted SAR may not be changed without the consent
of the Company’s stockholders. This shall include, without limitation, a
repricing of the SAR as well as an SAR exchange program whereby the Participant
agrees to cancel an existing SAR in exchange for an Option, SAR or other Award. 
Upon any exercise of a Related SAR, the number of Shares for which the related
Option shall be exercisable shall be reduced by the number of Shares for which
the SAR shall have been exercised.  The number of Shares for which a Related SAR
shall be exercisable shall be reduced upon any exercise of the related Option by
the number of Shares for which such Option shall have been exercised.

 

c.                                       Payment of SAR Amount.  Upon exercise
of a SAR, a Participant shall be entitled to receive payment from the Company in
an amount determined by multiplying:

 

i.                                          The difference between the Fair
Market Value of a Share on the date of exercise over the exercise price; times

 

ii.                                       the number of Shares with respect to
which the SAR is exercised.

 

d.                                      Payment upon Exercise of SAR.  At the
discretion of the Administrator, payment for a SAR may be in cash, Shares or a
combination thereof.

 

e.                                       SAR Agreement.  Each SAR grant shall be
evidenced by an Award Agreement that shall specify the exercise price, the term
of the SAR, the conditions of exercise, and such other terms and conditions as
the Administrator, in its sole discretion, shall determine.

 

f.                                        Expiration of SARs.  A SAR granted
under the Plan shall expire upon the date determined by the Administrator, in
its sole discretion, and set forth in the Award Agreement.

 

g.                                       Termination of Relationship as a
Service Provider.  If a Participant ceases to be a Service Provider, other than
upon the Participant’s death or Disability termination, the Participant may
exercise his or her SAR within such period of time as is specified in the Award
Agreement to the extent that the SAR is vested on the date of termination (but
in no event later than the expiration of the term of such SAR as set forth in
the SAR Agreement). In the absence of a specified time in the Award Agreement,
the SAR shall remain exercisable for three months following the Participant’s
termination. If, on the date of termination, the Participant is not vested as to
his or her entire SAR, the Shares covered by the unvested portion of the SAR
shall revert to the Plan. If, after termination, the Participant does not
exercise his or her SAR within the time specified by the Administrator, the SAR
shall terminate, and the Shares covered by such SAR shall revert to the Plan.

 

h.                                      Disability.  If a Participant ceases to
be a Service Provider as a result of the Participant’s Disability, the
Participant may exercise his or her SAR within such period of time as is
specified in the Award Agreement to the extent the SAR is vested on the date of
termination (but in no event later than the expiration of the term of such SAR

 

17

--------------------------------------------------------------------------------

 

as set forth in the Award Agreement). In the absence of a specified time in the
Award Agreement, the SAR shall remain exercisable for twelve (12) months
following the Participant’s termination. If, on the date of termination, the
Participant is not vested as to his or her entire SAR, the Shares covered by the
unvested portion of the SAR shall revert to the Plan. If, after termination, the
Participant does not exercise his or her SAR within the time specified herein,
the SAR shall terminate, and the Shares covered by such SAR shall revert to the
Plan.

 

i.                                          Death of Participant.  If a
Participant dies while a Service Provider, the SAR may be exercised following
the Participant’s death within such period of time as is specified in the Award
Agreement (but in no event may the SAR be exercised later than the expiration of
the term of such SAR as set forth in the Award Agreement), by the Participant’s
designated beneficiary, provided such beneficiary has been designated prior to
Participant’s death in a form acceptable to the Administrator. If no such
beneficiary has been designated by the Participant, then such SAR may be
exercised by the personal representative of the Participant’s estate or by the
person(s) to whom the SAR is transferred pursuant to the Participant’s will or
in accordance with the laws of descent and distribution. In the absence of a
specified time in the SAR Agreement, the SAR shall remain exercisable for twelve
(12) months following Participant’s death. If the SAR is not so exercised within
the time specified herein, the SAR shall terminate, and the Shares covered by
such SAR shall revert to the Plan.

 

j.                                         Section 409A of the Code.  An SAR
that is subject to Section 409A of the Code shall satisfy the requirements of
this Section 10.j and the additional conditions applicable to nonqualified
deferred compensation under Section 409A of the Code.  The requirements herein
shall apply in the event any SAR under this Plan is granted with an exercise
price less than the Fair Market Value per Share on the date the SAR is granted,
is granted to a Service Provider with respect to whom Common Stock does not
constitute “service recipient stock” (as defined in Treasury Regulation Section
1.409A-1(b)(5)(iii)), or is otherwise determined to constitute “nonqualified
deferred compensation” within the meaning of Section 409A of the Code.  Any such
SAR may provide that it is exercisable at any time permitted under the governing
Award Agreement, but such exercise shall be limited to fixing the measurement of
the amount, if any, by which the Fair Market Value of a Share on the date of
exercise exceeds the exercise price (the “SAR Amount”).  However, once the SAR
is exercised, the SAR Amount may be paid only on the fixed time, payment
schedule or other event specified in the governing Award Agreement.

 

11.                               Restricted Awards.

 

a.                                      Grant of Restricted Awards.  Subject to
the terms and conditions of the Plan, Restricted Awards may be granted to
Participants at any time as shall be determined by the Administrator, in its
sole discretion.  A Restricted Award is an Award of Common Stock (“Restricted
Stock”) or hypothetical shares of Common Stock (“Restricted Stock Units”) having
a value equal to the Fair Market Value of an identical number of shares of
Common Stock, which may, but need not, provide that such Restricted Award will
be subject to forfeiture and may not be sold, assigned, transferred or otherwise
disposed of, pledged or hypothecated as collateral for a loan or as security for
the performance of any

 

18

--------------------------------------------------------------------------------

 

obligation or for any other purpose for such period as the Administrator shall
determine.  Subject to Section 7.b hereof, the Administrator shall have complete
discretion to determine (i) the number of Shares subject to a Restricted Award
granted to any Participant, and (ii) the conditions that must be satisfied,
which may include a performance-based component, upon which is conditioned the
grant, vesting or issuance of a Restricted Award.

 

b.                                      Restricted Stock.  Each Participant
granted Restricted Stock shall execute and deliver to the Company an Award
Agreement with respect to the Restricted Stock setting forth the restrictions
and other terms and conditions applicable to such Restricted Stock.  If the
Administrator determines that the Restricted Stock shall be held by the Company
or in escrow rather than delivered to the Participant pending the release of the
applicable restrictions, the Administrator may require the Participant to
additionally execute and deliver to the Company (i) an escrow agreement
satisfactory to the Administrator, if applicable and (ii) the appropriate blank
stock power with respect to the Restricted Stock covered by such agreement.

 

Subject to the restrictions set forth in the Award Agreement, the Participant
generally shall have the rights and privileges of a holder of Common Stock as to
such Restricted Stock, including the right to vote such Restricted Stock.  At
the discretion of the Administrator, cash dividends and stock dividends with
respect to the Restricted Stock may be either currently paid to the Participant
on the day on which the corresponding dividend on shares of Common Stock is paid
to stockholders, or withheld by the Company for the Participant’s account, and
interest may be credited on the amount of the cash dividends withheld at a rate
and subject to such terms as determined by the Administrator.  Any cash
dividends or stock dividends so withheld by the Administrator and attributable
to any particular Share (and earnings thereon, if applicable) shall be
distributed to the Participant in cash or, at the discretion of the
Administrator, in Shares having a Fair Market Value equal to the amount of such
dividends, if applicable, upon the release of restrictions on such Shares and,
if such Shares are forfeited, the Participant shall have no right to such
dividends.

 

Restricted Stock awarded to a Participant shall be subject to the following
restrictions until the expiration of such restrictions, and to such other terms
and conditions as may be set forth in the applicable Award Agreement:  (A) if an
escrow arrangement is used, the Participant shall not be entitled to delivery of
the stock certificate; (B) the Shares shall be subject to the restrictions on
transferability set forth in the Award Agreement; (C) the Shares shall be
subject to forfeiture to the extent provided in the Award Agreement; and (D) to
the extent such Shares are forfeited, the stock certificates shall be returned
to the Company, and all rights of the Participant to such shares and as a
stockholder with respect to such Shares shall terminate without further
obligation on the part of the Company.

 

Upon the expiration of the restrictions with respect to any Restricted Stock,
the restrictions set forth in this Section 11 and the applicable Award Agreement
shall be of no further force or effect with respect to such Shares, except as
set forth in the applicable Award Agreement.  If an escrow arrangement is used,
upon such expiration, the

 

19

--------------------------------------------------------------------------------

 

Company shall deliver to the Participant, or his beneficiary, without charge,
the stock certificate evidencing the Restricted Stock which has not then been
forfeited and with respect to which the restrictions have expired (to the
nearest full Share) and any cash distributions or stock dividends credited to
the Participant’s account with respect to such Restricted Stock and the interest
thereon, if any.

 

c.                                       Restricted Stock Units.  The terms and
conditions of a grant of Restricted Stock Units shall be reflected in a written
Award Agreement.  Each Restricted Stock Unit shall be the equivalent of one
Share for purposes of determining the number of Shares subject to an Award.  No
Shares shall be issued at the time a Restricted Stock Unit is granted, and the
Company will not be required to set aside a fund for the payment of any such
Award.  Until the Shares are issued, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to Restricted Stock
Units.  At the discretion of the Administrator, and only to the extent set forth
in the applicable Award Agreement, each Restricted Stock Unit may be credited
with cash distributions and stock dividends paid by the Company in respect of
one share of Stock (“Dividend Equivalents”).  At the discretion of the
Administrator, Dividend Equivalents may be either currently paid to the
Participant on the day on which the corresponding dividend on shares of Common
Stock is paid to stockholders, or withheld by the Company for the Participant’s
account, and interest may be credited on the amount of cash Dividend Equivalents
withheld at a rate and subject to such terms as determined by the
Administrator.  Dividend Equivalents credited to a Participant’s account and
attributable to any particular Restricted Stock Unit (and earnings thereon, if
applicable) shall be distributed in cash or, at the discretion of the
Administrator, in Shares having a Fair Market Value equal to the amount of such
Dividend Equivalents and earnings, if applicable, to the Participant upon
settlement of such Restricted Stock Unit and, if such Restricted Stock Unit is
forfeited, the Participant shall have no right to such Dividend Equivalents.

 

Restricted Stock Units awarded to any Participant shall be subject to (A)
forfeiture until the expiration of the restrictions applicable to such Award,
and satisfaction of any applicable Performance Goals during such period, to the
extent provided in the applicable Award Agreement, and to the extent such
Restricted Stock Units are forfeited, all rights of the Participant to such
Restricted Stock Units shall terminate without further obligation on the part of
the Company and (B) such other terms and conditions as may be set forth in the
applicable Award Agreement.

 

Except as otherwise provided in the Plan or an Award Agreement, upon the
expiration of the restrictions with respect to any outstanding Restricted Stock
Units, the Company shall deliver to the Participant, or his beneficiary, without
charge, one Share for each such outstanding Restricted Stock Unit (“Vested
Unit”) and cash equal to any Dividend Equivalents credited with respect to each
such Vested Unit and the interest thereon or, at the discretion of the
Administrator, in Shares having a Fair Market Value equal to such Dividend
Equivalents’ interest thereon, if any; provided, however, that, if explicitly
provided in the applicable Award Agreement, the Administrator may, in its sole
discretion, elect to pay cash or part cash and part Shares in lieu of delivering
only Shares for Vested Units.  If a cash payment is made in lieu of delivering
Shares, the amount of

 

20

--------------------------------------------------------------------------------

 

such payment shall be equal to the aggregate Fair Market Value of the Shares as
of the date on which the restrictions lapsed with respect to such Vested Unit.

 

d.                                      Other Terms.  The Administrator, subject
to the provisions of the Plan, shall have complete discretion to determine the
terms and conditions of Restricted Awards granted under the Plan. Restricted
Award grants shall be subject to the terms, conditions, and restrictions
determined by the Administrator at the time the Restricted Stock or the
Restricted Stock Unit is awarded. Any certificates representing the Shares of
stock awarded shall bear such legends as shall be determined by the
Administrator.

 

e.                                       Restricted Award Agreement.  Each
Restricted Award grant shall be evidenced by an Award Agreement that shall
specify the purchase price (if any) and such other terms and conditions as the
Administrator, in its sole discretion, shall determine; provided; however, that
if the Restricted Award grant has a purchase price, such purchase price must be
paid no more than ten (10) years following the date of grant.

 

12.                               Performance Shares.

 

a.                                      Grant of Performance Shares.  Subject to
the terms and conditions of the Plan, Performance Shares may be granted to
Participants at any time as shall be determined by the Administrator, in its
sole discretion. Subject to Section 7.b hereof, the Administrator shall have
complete discretion to determine (i) the number of Shares subject to a
Performance Share award granted to any Participant, and (ii) the conditions that
must be satisfied, which typically will be based principally or solely on
achievement of performance milestones but may include a service-based component,
upon which is conditioned the grant or vesting of Performance Shares.
Performance Shares shall be granted in the form of units to acquire Shares. Each
such unit shall be the equivalent of one Share for purposes of determining the
number of Shares subject to an Award. Until the Shares are issued, no right to
vote or receive dividends or any other rights as a stockholder shall exist with
respect to the units to acquire Shares.

 

b.                                      Other Terms.  The Administrator, subject
to the provisions of the Plan, shall have complete discretion to determine the
terms and conditions of Performance Shares granted under the Plan. Performance
Share grants shall be subject to the terms, conditions, and restrictions
determined by the Administrator at the time the stock is awarded, which may
include such performance-based milestones as are determined appropriate by the
Administrator. The Administrator may require the recipient to sign an Award
Agreement as a condition of the award. Any certificates representing the Shares
of stock awarded shall bear such legends as shall be determined by the
Administrator.

 

c.                                       Performance Share Award Agreement. 
Each Performance Share grant shall be evidenced by an Award Agreement that shall
specify such other terms and conditions as the Administrator, in its sole
discretion, shall determine.

 

13.                               Performance Units.

 

a.                                      Grant of Performance Units.  Performance
Units are similar to Performance Shares, except that they shall be settled in a
cash equivalent to the Fair

 

21

--------------------------------------------------------------------------------

 

Market Value of the underlying Shares, determined as of the vesting date.
Subject to the terms and conditions of the Plan, Performance Units may be
granted to Participants at any time and from time to time as shall be determined
by the Administrator, in its sole discretion. The Administrator shall have
complete discretion to determine the conditions that must be satisfied, which
typically will be based principally or solely on achievement of performance
milestones but may include a service-based component, upon which is conditioned
the grant or vesting of Performance Units. Performance Units shall be granted in
the form of units to acquire Shares. Each such unit shall be the cash equivalent
of one Share of Common Stock. No right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to Performance Units or the
cash payable thereunder.

 

b.                                      Number of Performance Units.  Subject to
Section 7.c hereof, the Administrator will have complete discretion in
determining the number of Performance Units granted to any Participant.

 

c.                                       Other Terms.  The Administrator,
subject to the provisions of the Plan, shall have complete discretion to
determine the terms and conditions of Performance Units granted under the Plan.
Performance Unit grants shall be subject to the terms, conditions, and
restrictions determined by the Administrator at the time the grant is awarded,
which may include such performance-based milestones as are determined
appropriate by the Administrator. The Administrator may require the recipient to
sign an Award Agreement as a condition of the award.  Any certificates
representing the units awarded shall bear such legends as shall be determined by
the Administrator.

 

d.                                      Performance Unit Award Agreement.  Each
Performance Unit grant shall be evidenced by an Award Agreement that shall
specify such terms and conditions as the Administrator, in its sole discretion,
shall determine.

 

14.                               Deferred Stock Units.

 

a.                                      Description.  Deferred Stock Units shall
consist of a Restricted Stock, Restricted Stock Unit, Performance Share or
Performance Unit Award that the Administrator, in its sole discretion permits to
be paid out in installments or on a deferred basis, in accordance with rules and
procedures established by the Administrator. Deferred Stock Units shall remain
subject to the claims of the Company’s general creditors until distributed to
the Participant.

 

b.                                      Code Section 162(m) Limits.  Deferred
Stock Units shall be subject to the annual limits under Section 162(m) of the
Code applicable to the underlying Restricted Stock, Restricted Stock Unit,
Performance Share or Performance Unit Award as set forth in Section 7 hereof.

 

c.                                       Code Section 409A Limitations.  If any
Deferred Stock Units are considered to be deferred compensation under Section
409A of the Code, then the terms of such Deferred Stock Units shall comply with
Section 409A of the Code.

 

22

--------------------------------------------------------------------------------

 

15.                               Non-Transferability of Awards.  Unless
determined otherwise by the Administrator, an Award may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the recipient, only by the recipient. If the Administrator makes an
Award transferable, such Award shall contain such additional terms and
conditions as the Administrator deems appropriate.

 

16.                               Adjustments Upon Changes in Capitalization,
Dissolution or Liquidation or Change of Control.

 

a.                                      Changes in Capitalization.  In the event
that any dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, or other change in the corporate structure of the Company affecting the
Shares, then the Administrator shall, in an equitable manner and to the extent
necessary to preserve the economic intent of Awards, adjust the number and class
of Shares which may be delivered under the Plan, the number, class, and exercise
price of Shares covered by each outstanding Award, and the maximum number of
Shares with respect to which any one person may be granted Awards during any
period stated in Section 7.  Unless the Committee specifically determines that
such adjustment is in the best interests of the Company, any adjustments under
this Section 16.a shall be made in a manner which does not result in a violation
of Section 409A of the Code or the modification, extension or renewal of any
Incentive Stock Option.  Any adjustments under this Section 16.a shall be made
in a manner which does not adversely affect the exemption provided pursuant to
Rule 16b-3.  Further, with respect to Awards intended to qualify as
“performance-based compensation” under Section 162(m) of the Code, any
adjustments or substitutions will not cause the Company to be denied a tax
deduction on account of Section 162(m) of the Code.

 

b.                                      Dissolution or Liquidation.  In the
event of the proposed dissolution or liquidation of the Company, the
Administrator shall notify each Participant as soon as practicable prior to the
effective date of such proposed transaction. The Administrator in its discretion
may provide for a Participant to have the right to exercise his or her Option or
SAR until ten (10) days prior to such transaction as to all of the Awarded Stock
covered thereby, including Shares as to which the Award would not otherwise be
exercisable. In addition, the Administrator may provide that any Company
repurchase option or forfeiture rights applicable to any Award shall lapse 100%,
and that any Award vesting shall accelerate 100%, provided the proposed
dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised (with respect
to Options and SARs) or vested (with respect to other Awards), an Award will
terminate immediately prior to the consummation of such proposed action.

 

c.                                       Change of Control.

 

i.                                          Stock Options and SARs.  In the
event of a Change of Control, each outstanding Option and SAR shall be assumed
or an equivalent option or SAR

 

23

--------------------------------------------------------------------------------

 

substituted by the successor entity or a Parent or Subsidiary of the successor
entity.  Notwithstanding the foregoing, in the event that the successor entity
refuses to assume or substitute for the Option or SAR, or if the successor
entity does not have outstanding common equity securities required to be
registered under Section 12 of the Exchange Act, the Participant shall fully
vest in and have the right to exercise the Option or SAR as to all of the
Awarded Stock, including Shares as to which it would not otherwise be vested or
exercisable.  If an Option or SAR becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a Change of Control, the
Administrator may take one or more actions with respect to such Option or SAR
including, but not limited to, the following:  (i) notifying the Participant in
writing or electronically that such Option or SAR may be exercised in full for a
limited period of time on or before a specified date (before or after the Change
of Control) fixed by the Administrator, after which specified date the
unexercised portion of such Option or SAR and all rights of the Participant
thereunder shall terminate, (ii) requiring the mandatory surrender to the
Company by the Participant of some or all of the outstanding Options or SARs
held by such Participant as of a date, before or after such Change of Control,
specified by the Administrator, in which event the Administrator shall thereupon
cancel such Options and SARs and the Company shall pay to such Participant an
amount of cash per share equal to the excess, if any, of the Change of Control
Value of the Shares subject to such Options and SARs over the exercise price(s)
under such Options and SARs for such Shares, or (iii) making such adjustments to
Options and SARs then outstanding as the Administrator deems appropriate to
reflect such Change of Control.  For the purposes of this paragraph, the Option
or SAR shall be considered assumed if, following the Change of Control, the
option or stock appreciation right confers the right to purchase or receive, for
each Share of Awarded Stock subject to the Option or SAR immediately prior to
the Change of Control, the consideration (whether stock, cash, or other
securities or property) received in the Change of Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares); provided, however, that
if such consideration received in the Change of Control is not solely common
stock of the successor entity or its Parent, the Administrator may, with the
consent of the successor entity, provide for the consideration to be received
upon the exercise of the Option or SAR, for each Share of Awarded Stock subject
to the Option or SAR, to be solely common stock of the successor entity or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the Change of Control.

 

ii.                                       Restricted Stock, Restricted Stock
Units, Performance Shares, Performance Units and Deferred Stock Units.  In the
event of a Change of Control, each outstanding Restricted Stock, Restricted
Stock Unit, Performance Share, Performance Unit and Deferred Stock Unit Award
shall be assumed or an equivalent Restricted Stock, Restricted Stock Unit,
Performance Share, Performance Unit or Deferred Stock Unit Award substituted by
the successor entity or a Parent or Subsidiary of the successor entity. 
Notwithstanding the

 

24

--------------------------------------------------------------------------------

 

foregoing, in the event that the successor entity refuses to assume or
substitute for the Restricted Stock, Restricted Stock Unit, Performance Share,
Performance Unit or Deferred Stock Unit Award, or if the successor entity does
not have outstanding common equity securities required to be registered under
Section 12 of the Exchange Act, the Participant shall fully vest in the
Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit or
Deferred Stock Unit Award, including as to Shares (or with respect to
Performance Units, the cash equivalent thereof) which would not otherwise be
vested. For the purposes of this paragraph, a Restricted Stock, Restricted Stock
Unit, Performance Share, Performance Unit and Deferred Stock Unit Award shall be
considered assumed if, following the Change of Control, the award confers the
right to purchase or receive, for each Share (or with respect to Performance
Units, the cash equivalent thereof) subject to the Award immediately prior to
the Change of Control, the consideration (whether stock, cash, or other
securities or property) received in the Change of Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares); provided, however, that
if such consideration received in the Change of Control is not solely common
stock of the successor entity or its Parent, the Administrator may, with the
consent of the successor entity, provide for the consideration to be received,
for each Share and each unit/right to acquire a Share subject to the Award, to
be solely common stock of the successor entity or its Parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the Change of Control.

 

d.                                      Involuntary Termination other than for
Cause, Death or Disability or a Voluntary Termination for Good Reason, Following
a Change of Control.  If, within eighteen (18) months following a Change of
Control, a Participant’s employment is terminated (i) involuntarily by the
Company or successor entity other than (A) for Cause, or (B) on account of death
or Disability, or (ii) by the Participant by a Voluntary Termination for Good
Reason, then the Participant shall fully vest in and receive payment of or have
the right to exercise his Award, as applicable, as to all of the Shares subject
to each such Award including Shares as to which such Award would not otherwise
be vested or exercisable.  Notwithstanding the foregoing or anything in an Award
Agreement to the contrary, (i) if an Award is subject to Section 409A of the
Code and payment of the Award at the time of termination of employment under
this paragraph would cause the Award not to comply with Section 409A of the
Code, the Award shall be paid only at such time and in such form as will comply
with Section 409A of the Code, and (ii) any Restricted Stock, Restricted Stock
Unit, Performance Share, Performance Unit or Deferred Stock Award that is
intended to constitute “performance-based compensation” under Section 162(m) of
the Code shall not vest in connection with the Participant’s involuntary
termination of employment or Voluntary Termination for Good Reason until the end
of the applicable Performance Period, and then only to the extent that the
applicable Performance Goals have been satisfied.

 

17.                               Date of Grant.  The date of grant of an Award
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Award, or such other later

 

25

--------------------------------------------------------------------------------

 

date as is determined by the Administrator. Notice of the determination shall be
provided to each Participant within a reasonable time after the date of such
grant.

 

18.                               Amendment and Termination of the Plan.

 

a.                                      Amendment and Termination.  The Board
may at any time amend, alter, suspend or terminate the Plan; provided, however,
that the Board may not materially amend the Plan without obtaining stockholder
approval.

 

b.                                      Stockholder Approval.  The Company shall
obtain stockholder approval of any Plan amendment to the extent necessary and
desirable to comply with Applicable Law.

 

c.                                       Effect of Amendment or Termination.  No
amendment, alteration, suspension or termination of the Plan shall impair the
rights of any Participant, unless mutually agreed otherwise between the
Participant and the Administrator, which agreement must be in writing (or
electronic format) and signed by the Participant and the Company.  Termination
of the Plan shall not affect the Administrator’s ability to exercise the powers
granted to it hereunder with respect to Awards granted under the Plan prior to
the date of such termination.

 

19.                               Conditions Upon Issuance of Shares.

 

a.                                      Legal Compliance.  Shares shall not be
issued pursuant to the exercise of an Award unless the exercise of the Award or
the issuance and delivery of such Shares (or with respect to Performance Units,
the cash equivalent thereof) shall comply with Applicable Laws.

 

b.                                      Investment Representations.  As a
condition to the exercise or receipt of an Award, the Company may require the
person exercising or receiving such Award to represent and warrant at the time
of any such exercise or receipt that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.

 

20.                               Liability of Company.

 

a.                                      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.

 

b.                                      Grants Exceeding Allotted Shares.  If
the Awarded Stock covered by an Award exceeds, as of the date of grant, the
number of Shares which may be issued under the Plan without additional
stockholder approval, such Award shall be void with respect to such excess
Awarded Stock, unless stockholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 18 of the Plan.

 

26

--------------------------------------------------------------------------------

 

21.                               General Provisions.

 

a.                                      Section 409A of the Code.  The Plan is
intended to comply with Section 409A of the Code to the extent subject thereto,
and, accordingly, to the maximum extent permitted, the Plan shall be interpreted
and administered to be in compliance therewith. Any payments described in the
Plan that are due within the “short-term deferral period” as defined in Section
409A of the Code shall not be treated as deferred compensation unless Applicable
Laws require otherwise.  Notwithstanding anything to the contrary in the Plan,
to the extent required to avoid accelerated taxation and tax penalties under
Section 409A of the Code, amounts that would otherwise be payable and benefits
that would otherwise be provided pursuant to the Plan during the six (6) month
period immediately following a Participant’s “separation from service” within
the meaning of Section 409A of the Code shall instead be paid on the first
payroll date after the six-month anniversary of the Participant’s separation
from service.

 

b.                                      Section 16.  It is the intent of the
Company that the Plan satisfy, and be interpreted in a manner that satisfies,
the applicable requirements of Rule 16b-3 so that Participants will be entitled
to the benefit of Rule 16b-3, or any other rule promulgated under Section 16 of
the Exchange Act, and will not be subject to short-swing liability under Section
16 of the Exchange Act.  Accordingly, if the operation of any provision of the
Plan would conflict with the intent expressed in this Section 21.b, such
provision to the extent possible shall be interpreted and/or deemed amended so
as to avoid such conflict.

 

c.                                       Clawbacks.  Notwithstanding any other
provisions in this Plan, any Award which is subject to recovery under any law,
government regulation or stock exchange listing requirement, will be subject to
such deductions and clawback as may be required to be made pursuant to such law,
government regulation or stock exchange listing requirement (or any policy
adopted by the Company pursuant to any such law, government regulation or stock
exchange listing requirement).

 

22.                               Reservation of Shares.  The Company, during
the term of this Plan, will at all times reserve and keep available such number
of Shares as shall be sufficient to satisfy the requirements of the Plan.

 

27

--------------------------------------------------------------------------------