ex1.htm


                                                                                                                         

     Exhibit
10.1

     

     

    SONICWALL,
INC.

     

    2008
EQUITY INCENTIVE PLAN

     

    1. Purposes
of the Plan.  The purposes of this Plan
are:

     

    
      	
              ·  

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

            


    

     

    
      	
              ·  

            	
              to
      provide incentives to individuals who perform services to the Company,
      and

            


    

     

    
      	
              ·  

            	
              to
      promote the success of the Company’s
business.

            


    

     

    The Plan
permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units and Performance
Shares as the Administrator may determine.

     

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

     

    (a) “Administrator”
means the Board or any of its Committees as will be administering the Plan, in
accordance with Section 4 of the Plan.

     

    (b) “Applicable
Laws” means the requirements relating to the administration of
equity-based awards 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, or will be, granted under the
Plan.

     

    (c) “Award”
means, individually or collectively, a grant under the Plan of Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units and Performance
Shares as the Administrator may determine.

     

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

     

    (f) “Change
in Control” means the occurrence of any of the following
events:

     

    (i) A change
in the ownership of the Company which
occurs on the date that any one person, or more than one person acting as a
group, (“Person”)
acquires ownership of the stock of the Company that, together with the stock
held by such Person, constitutes more than 50% of the total voting power of the
stock of the Company; provided, however, that for purposes of this subsection
(i), the acquisition of additional stock by any one Person, who is considered to
own more than 50% of the total voting power of the stock of the Company will not
be considered a Change in Control; or

    
      
        
        

      

      
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    (ii) A change
in the effective control of the Company which occurs on the date that a majority
of members of the Board is replaced during any twelve (12) month period by
Directors whose appointment or election is not endorsed by a majority of the
members of the Board prior to the date of the appointment or
election.  For purposes of this clause (ii), if any Person is
considered to effectively control the Company, the acquisition of additional
control of the Company by the same Person will not be considered a Change in
Control; or

     

    (iii) A change
in the ownership of a substantial portion of the Company’s assets which occurs
on the date that any Person acquires (or has acquired during the twelve (12)
month period ending on the date of the most recent acquisition by such person or
persons) assets from the Company that have a total gross fair market value equal
to or more than 50% of the total gross fair market value of all of the assets of
the Company immediately prior to such acquisition or acquisitions; provided,
however, that for purposes of this subsection (iii), the following will not
constitute a change in the ownership of a substantial portion of the Company’s
assets: (A) a transfer to an entity that is controlled by the Company’s
stockholders immediately after the transfer, or (B) a transfer of assets by the
Company to: (1) a stockholder of the Company (immediately before the asset
transfer) in exchange for or with respect to the Company’s stock, (2) an entity,
50% or more of the total value or voting power of which is owned, directly or
indirectly, by the Company, (3) a Person, that owns, directly or indirectly, 50%
or more of the total value or voting power of all the outstanding stock of the
Company, or (4) an entity, at least 50% of the total value or voting power of
which is owned, directly or indirectly, by a Person described in this subsection
(iii)(B)(3).  For purposes of this subsection (iii), gross fair market
value means the value of the assets of the Company, or the value of the assets
being disposed of, determined without regard to any liabilities associated with
such assets.

     

    For
purposes of this Section 2(f), persons will be considered to be acting as a
group if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock, or similar business transaction
with the Company.

     

    Notwithstanding
the foregoing, a transaction shall not be deemed a Change in Control unless the
transaction qualifies as a  change in the ownership of the Company,
change in the effective control of the Company or a change in the ownership of a
substantial portion of the Company’s assets, each within the meaning of Section
409A of the Code and any proposed or final Treasury Regulations and Internal
Revenue Service guidance that has been promulgated or may be promulgated
thereunder from time to time (“Section 409A”).

     

    (g) “Code”
means the Internal Revenue Code of 1986, as amended.  Any reference to
a section of the Code herein will be a reference to any successor or amended
section of the Code.

     

    (h) “Committee”
means a committee of Directors or of other individuals satisfying Applicable
Laws appointed by the Board in accordance with Section 4
hereof.

     

    (i) “Common
Stock” means the common stock of the Company.

    
      
        
        

      

      
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    (j) “Company”
means SonicWALL, Inc., a California corporation, or any successor
thereto.

     

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

     

    (l) “Determination
Date” means the latest possible date that will not jeopardize the
qualification of an Award granted under the Plan as “performance-based
compensation” under Section 162(m) of the Code.

     

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

     

    (n) “Disability”
means total and permanent disability as defined in Section 22(e)(3) of the
Code, provided that in the case of Awards other than Incentive Stock Options,
the Administrator in its discretion may determine whether a permanent and total
disability exists in accordance with uniform and non-discriminatory standards
adopted by the Administrator from time to time.

     

    (o)  “Employee”
means any person, including Officers and Directors, employed by the Company or
any Parent or Subsidiary of the Company.  Neither service as a
Director nor payment of a director’s fee by the Company will be sufficient to
constitute “employment” by the Company.

     

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

     

    (q) “Fair
Market Value” means, as of any date, the value of the Common Stock as the
Administrator may determine in good faith by reference to the price of such
stock on any established stock exchange or a national market system on the day
of determination if the Common Stock is so listed on any established stock
exchange or a national market system.  If the Common Stock is not
listed on any established stock exchange or a national market system, the value
of the Common Stock will be determined as the Administrator may determine in
good faith.

     

    (r) “Fiscal
Year” means the fiscal year of the Company.

     

    (s) “Incentive
Stock Option” means an Option that by its terms qualifies and is
otherwise intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated
thereunder.

     

    (t) “Nonstatutory
Stock Option” means an Option that by its terms does not qualify or is
not intended to qualify as an Incentive Stock Option.

     

    (u) “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.

     

    (v)  “Option”
means a stock option granted pursuant to Section 6 of the
Plan.

     

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

    
      
        
        

      

      
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    (x) “Participant”
means the holder of an outstanding Award.

     

    (y) “Performance
Goals” will have the meaning set forth in Section 11 of the
Plan.

     

    (z) “Performance
Period” means any Fiscal Year of the Company or such other period as
determined by the Administrator in its sole discretion.

     

    (aa) “Performance
Share” means an Award denominated in Shares which may be earned in whole
or in part upon attainment of Performance Goals or other vesting criteria as the
Administrator may determine pursuant to Section 10.

     

    (bb) “Period
of Restriction” means the period during which the transfer of Shares of
Restricted Stock are subject to restrictions and therefore, the Shares are
subject to a substantial risk of forfeiture.  Such restrictions may be
based on the passage of time, the achievement of target levels of performance,
or the occurrence of other events as determined by the
Administrator.

     

    (cc) “Plan”
means this 2008 Equity Incentive Plan.

     

    (dd)  “Restricted
Stock” means Shares issued pursuant to an Award of Restricted Stock under
Section 8 of the Plan, or issued pursuant to the early exercise of an
Option.

     

    (ee) “Restricted
Stock Unit” means a bookkeeping entry representing an amount equal to the
Fair Market Value of one Share, granted pursuant to
Section 9.  Each Restricted Stock Unit represents an unfunded and
unsecured obligation of the Company.

     

    (ff)  “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.

     

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

     

    (hh) “Service
Provider” means an Employee, Director, or Consultant.

     

    (ii) “Share”
means a share of the Common Stock, as adjusted in accordance with
Section 14 of the Plan.

     

    (jj) “Stock
Appreciation Right” means an Award, granted alone or in connection with
an Option, that pursuant to Section 7 is designated as a Stock Appreciation
Right.

     

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

     

    3. Stock Subject to the Plan.

     

    (a) Subject
to the provisions of Section 14 of the Plan, the maximum aggregate number
of Shares that may be awarded and sold under the Plan is eight hundred thousand
(800,000) Shares plus any Shares subject to stock options or similar awards
granted under the 1998 Stock Option Plan that expire or otherwise terminate
without having been exercised in full and Shares issued pursuant to awards
granted under the 1998 Stock Option Plan that are forfeited to or repurchased by
the Company, with the maximum number of Shares to be added to the Plan equal to
five million (5,000,000) Shares.  The Shares may be authorized, but
unissued, or reacquired Common Stock.

    
      
        
        

      

      
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    (b) Full
Value Awards.  Any
Shares subject to Awards other than Options or Stock Appreciation Rights will be
counted against the numerical limits of this Section 3 as two (2) Shares for
every one (1) Share subject thereto.  Further, if Shares
acquired pursuant to any such Award are forfeited or repurchased by the Company
and would otherwise return to the Plan pursuant to Section 3(c), two (2) times
the number of Shares so forfeited or repurchased will return to the Plan and
will again become available for issuance.

     

    (c) Lapsed
Awards.  If an Award expires or becomes unexercisable without
having been exercised in full, or, with respect to Restricted Stock, Restricted
Stock Units or Performance Shares, is forfeited to or repurchased by the
Company, the unpurchased Shares (or for Awards other than Options and Stock
Appreciation Rights, the forfeited or repurchased Shares) which were subject
thereto will become available for future grant or sale under the Plan (unless
the Plan has terminated).  Upon exercise of a Stock Appreciation Right
settled in Shares, the gross number of Shares covered by the portion of the
Award so exercised will cease to be available under the Plan.  Shares
that have actually been issued under the Plan under any Award will not be
returned to the Plan and will not become available for future distribution under
the Plan; provided, however, that if unvested Shares of Restricted Stock,
Restricted Stock Units or Performance Shares are repurchased by the Company or
are forfeited to the Company, such Shares will become available for future grant
under the Plan.  Shares used to pay the withholding tax related to an
Award or to pay for the exercise price of an Award will not become available for
future grant or sale under the Plan.  To the extent an Award under the
Plan is paid out in cash rather than Shares, such cash payment will not result
in reducing the number of Shares available for issuance under the
Plan.  Notwithstanding the foregoing provisions of this Section 3(c),
subject to adjustment provided in Section 14, the maximum number of Shares
that may be issued upon the exercise of Incentive Stock Options will equal the
aggregate Share number stated in Section 3(a), plus, to the extent
allowable under Section 422 of the Code, any Shares that become available
for issuance under the Plan under this Section 3(c).

     

    (d) Share
Reserve.  The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as will be sufficient
to satisfy the requirements of the Plan.

     

    4. Administration
of the Plan.

     

    (a) Procedure.

     

    (i) Multiple
Administrative Bodies.  Different Committees with respect to
different groups of Service Providers may administer the
Plan.

     

    (ii) Section 162(m).  To
the extent that the Administrator determines it to be desirable to qualify
Awards granted hereunder as “performance-based compensation” within the meaning
of Section 162(m) of the Code, the Plan will be administered by a Committee
of two (2) or more “outside directors” within the meaning of Section 162(m)
of the Code.

    
      
        
        

      

      
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    (iii) Rule
16b-3.  To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
will be structured to satisfy the requirements for exemption under Rule
16b-3.

     

    (iv) Other
Administration.  Other than as provided above, the Plan will be
administered by (A) the Board or (B) a Committee, which committee will
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 will 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 the terms and conditions, not inconsistent with the terms of the Plan,
of any Award granted hereunder;

     

    (iv) to
construe and interpret the terms of the Plan and Awards granted pursuant to the
Plan;

     

    (v) 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 satisfying applicable foreign laws;

     

    (vi) to modify
or amend each Award (subject to Section 19(c) of the
Plan);

     

    (vii) 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;

     

    (viii) to allow
a Participant to defer the receipt of the payment of cash or the delivery of
Shares that would otherwise be due to such Participant under an Award pursuant
to such procedures as the Administrator may determine; and

     

    (ix) to make
all other determinations deemed necessary or advisable for administering the
Plan.

     

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

    
      
        
        

      

      
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    5. Eligibility.  Nonstatutory
Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation
Rights, Performance Shares may be granted to Service
Providers.  Incentive Stock Options may be granted only to
Employees.

     

    6. Stock
Options.

     

    (a) Limitations.

     

    (i) Each
Option will be designated in the Award Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option.  However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of the Shares
with respect to which Incentive Stock Options are exercisable for the first time
by the Participant during any calendar year (under all plans of the Company and
any Parent or Subsidiary) exceeds $100,000, such Options will be treated as
Nonstatutory Stock Options.  For purposes of this Section 6(a),
Incentive Stock Options will be taken into account in the order in which they
were granted.  The Fair Market Value of the Shares will be determined
as of the time the Option with respect to such Shares is
granted.

     

    (ii) The
Administrator will have complete discretion to determine the number of Shares
subject to an Option granted to any Participant, provided that during any Fiscal
Year, no Participant will be granted Option or Stock Appreciation Rights
covering more than, in the aggregate, five million (5,000,000)
Shares.

     

    (b) Term
of Option.  The Administrator will determine the term of each
Option in its sole discretion; provided,
however, that the term will be no more than seven (7) years from the date of
grant thereof.  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 10% of the total combined voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option will be five (5) years from the date of grant or such
shorter term as may be provided in the Award Agreement.

     

    (c) Option
Exercise Price and Consideration.

     

    (i) Exercise
Price.  The per share exercise price for the Shares to be
issued pursuant to exercise of an Option will be determined by the
Administrator, but will be no less than 100% of the Fair Market Value per Share
on the date of grant.  In addition, in the case of an Incentive Stock
Option granted to an Employee who, at the time the Incentive Stock Option is
granted, owns stock representing more than 10% of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price will be no less than 110% of the Fair Market Value per Share on
the date of grant.  Notwithstanding the foregoing provisions of this
Section 6(c), Options may be granted with a per Share exercise price of less
than 100% of the Fair Market Value per Share on the date of grant pursuant to a
transaction described in, and in a manner consistent with, Section 424(a)
of the Code.

     

    (ii) Waiting
Period and Exercise Dates.  At the time an Option is granted,
the Administrator will fix the period within which the Option may be exercised
and will determine any conditions that must be satisfied before the Option may
be exercised.

    
      
        
        

      

      
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    (iii) No
Repricing.  The exercise price for an Option may not be reduced
without the consent of the Company’s stockholders.  This shall
include, without limitation, a repricing of the Option as well as an Option
exchange program whereby the Participant agrees to cancel an existing Option in
exchange for an Option, Stock Appreciation Right or other
Award.

     

    (iv) Form
of Consideration.  The Administrator will determine the
acceptable form(s) of consideration for exercising an Option, including the
method of payment, to the extent permitted by Applicable Laws (and, in the case
of an Incentive Stock Option, shall be determined at the time of
grant).  Such consideration may consist of, without limitation,
(1) cash, (2) check, (3) promissory note, to the extent permitted by
Applicable Laws, (4) other Shares, provided that such Shares have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which such Option shall be exercised and provided that accepting
such Shares, in the sole discretion of the Administrator, shall not result in
any adverse accounting consequences to the Company, (5) consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan, (6) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws,
or (7) any combination of the foregoing methods of payment.  In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.

     

    (d) Exercise
of Option.

     

    (i) Procedure
for Exercise; Rights as a Stockholder.  Any Option granted
hereunder will 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 Award Agreement.  An Option may not be exercised for a fraction
of a Share.

     

    An Option
will be deemed exercised when the Company receives: (i) notice of exercise
(in such form as the Administrator specifies from time to time) from the person
entitled to exercise the Option, and (ii) full payment for the Shares with
respect to which the Option is exercised (together with any applicable
withholding taxes).  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 14 of the Plan.

     

    (ii) Termination
of Relationship as a Service Provider.  If a Participant ceases
to be a Service Provider, other than upon the Participant’s termination as the
result of the Participant’s death or Disability, the Participant may exercise
his or her Option within such period of time as is specified in the Award
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 Award Agreement).  In the absence of a specified time in
the Award Agreement, the Option will remain exercisable for three (3) months
following the Participant’s termination.  Unless otherwise provided by
the Administrator, 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 will 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 will terminate, and the Shares covered by such Option
will revert to the Plan.

    
      
        
        

      

      
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    (iii) Disability
of Participant.  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
Award 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 Award Agreement).  In the absence of a specified time in
the Award Agreement, the Option will remain exercisable for twelve (12) months
following the Participant’s termination.  Unless otherwise provided by
the Administrator, 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 will revert to the Plan.  If after termination the
Participant does not exercise his or her Option within the time specified
herein, the Option will terminate, and the Shares covered by such Option will
revert to the Plan.

     

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

     

    (v) Other
Termination.  A Participant’s Award Agreement may also provide
that if the exercise of the Option following the termination of Participant’s
status as a Service Provider (other than upon the Participant’s death or
Disability) would result in liability under Section 16(b), then the Option will
terminate on the earlier of (A) the expiration of the term of the Option set
forth in the Award Agreement, or (B) the 10th day after the last date on which
such exercise would result in such liability under Section 16(b), but in no
event later than the original full term of the Option.  Finally, a
Participant’s Award Agreement may also provide that if the exercise of the
Option following the termination of the Participant’s status as a Service
Provider (other than upon the Participant’s death or Disability) would be
prohibited at any time solely because the issuance of Shares would violate the
registration requirements under the Securities Act, then the Option will
terminate on the earlier of (A) the expiration of the term of the Option, or (B)
the expiration of a period of three (3) months after the termination of the
Participant’s status as a Service Provider during which the exercise of the
Option would not be in violation of such registration
requirements.

    
      
        
        

      

      
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    7. Stock
Appreciation Rights.

     

    (a) Grant
of Stock Appreciation Rights.  Subject to the terms and
conditions of the Plan, a Stock Appreciation Right may be granted to Service
Providers at any time and from time to time as will be determined by the
Administrator, in its sole discretion.

     

    (b) Number
of Shares.  The Administrator will have complete discretion to
determine the number of Stock Appreciation Rights granted to any Participant,
provided that during any Fiscal Year, no Participant will be granted Options or
Stock Appreciation Rights covering more than, in the aggregate, five million
(5,000,000) Shares.

     

    (c) Exercise
Price and Other Terms.  The Administrator, subject to the
provisions of the Plan, will have complete discretion to determine the terms and
conditions of Stock Appreciation Rights granted under the Plan, provided,
however, that the exercise price will be not less than 100% of the Fair Market
Value of a Share on the date of grant.

     

    (d) Stock
Appreciation Right Agreement.  Each Stock Appreciation Right
grant will be evidenced by an Award Agreement that will specify the exercise
price, the term of the Stock Appreciation Right, the conditions of exercise, and
such other terms and conditions as the Administrator, in its sole discretion,
will determine.

     

    (e) Expiration
of Stock Appreciation Rights.  A Stock Appreciation Right
granted under the Plan will expire upon the date determined by the
Administrator, in its sole discretion, and set forth in the Award Agreement;
provided, however, that the term will be no more than seven (7) years from the
date of grant thereof.  Notwithstanding the foregoing, the rules of
Section 6(d) also will apply to Stock Appreciation
Rights.

     

    (f) No
Repricing.  The exercise price for a Stock Appreciation Right
may not be reduced without the consent of the Company’s
stockholders.  This shall include, without limitation, a repricing of
the Stock Appreciation Right as well as a Stock Appreciation Right exchange
program whereby the Participant agrees to cancel an existing Stock Appreciation
Right in exchange for an Option, Stock Appreciation Right or other
Award.

     

    (g) Payment
of Stock Appreciation Right Amount.  Upon exercise of a Stock
Appreciation Right, a Participant will 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 Stock Appreciation Right is
exercised.

     

    (iii) At the
discretion of the Administrator, the payment upon Stock Appreciation Right
exercise may be in cash, in Shares of equivalent value, or in some combination
thereof, as specified in the Award Agreement.

    
      
        
        

      

      
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    8. Restricted
Stock.

     

    (a) Grant
of Restricted Stock.  Subject to the terms and provisions of
the Plan, the Administrator, at any time and from time to time, may grant Shares
of Restricted Stock to Service Providers in such amounts as the Administrator,
in its sole discretion, will determine.

     

    (b) Restricted
Stock Agreement.  Each Award of Restricted Stock will be
evidenced by an Award Agreement that will specify the Period of Restriction, the
number of Shares granted, and such other terms and conditions as the
Administrator, in its sole discretion, will
determine.  Notwithstanding the foregoing sentence, during any Fiscal
Year no Participant will be granted more than an aggregate of two million
(2,000,000) Shares of Restricted Stock, Restricted Stock Units and Performance
Shares.  Unless the Administrator determines otherwise, Shares of
Restricted Stock will be held by the Company as escrow agent until the
restrictions on such Shares have lapsed.

     

    (c) Transferability.  Except
as provided in this Section 8, Shares of Restricted Stock may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction.

     

    (d) Other
Restrictions.  The Administrator, in its sole discretion, may
impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate.

     

    (e) Removal
of Restrictions.  Except as otherwise provided in this Section
8, Shares of Restricted Stock covered by each Restricted Stock grant made under
the Plan will be released from escrow as soon as practicable after the last day
of the Period of Restriction.  The Administrator, in its discretion,
may accelerate the time at which any restrictions will lapse or be
removed.

     

    (f) Voting
Rights.  During the Period of Restriction, Service Providers
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares, unless the Administrator determines
otherwise.

     

    (g) Dividends
and Other Distributions.  During the Period of Restriction,
Service Providers holding Shares of Restricted Stock will be entitled to receive
all dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement.  If any such dividends or
distributions are paid in Shares, the Shares will be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.

     

    (h) Return
of Restricted Stock to Company.  On the date set forth in the
Award Agreement, the Restricted Stock for which restrictions have not lapsed
will revert to the Company and again will become available for grant under the
Plan.

     

    (i) Section
162(m) Performance Restrictions.  For purposes of qualifying
grants of Restricted Stock as “performance-based compensation” under
Section 162(m) of the Code, the Administrator, in its discretion, may set
restrictions based upon the achievement of Performance Goals.  The
Performance Goals will be set by the Administrator on or before the
Determination Date. In granting Restricted Stock which is intended to
qualify under Section 162(m) of the Code, the Administrator will 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). 

    
      
        
        

      

      
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    9. Restricted
Stock Units.

     

    (a) Grant.  Restricted
Stock Units may be granted at any time and from time to time as determined by
the Administrator.  Each Restricted Stock Unit grant will be evidenced
by an Award Agreement that will specify such other terms and conditions as the
Administrator, in its sole discretion, will determine, including all terms,
conditions, and restrictions related to the grant, the number of Restricted
Stock Units and the form of payout, which, subject to Section 9(d), may be
left to the discretion of the Administrator.  Notwithstanding anything
to the contrary in this subsection (a), during any Fiscal Year no
Participant will be granted more than an aggregate of two million (2,000,000)
Shares of Restricted Stock, Restricted Stock Units and Performance
Shares.

     

    (b) Vesting
Criteria and Other Terms.  The Administrator will set vesting
criteria in its discretion, which, depending on the extent to which the criteria
are met, will determine the number of Restricted Stock Units that will be paid
out to the Participant.  The Administrator may set vesting criteria
based upon the achievement of Company-wide, business unit, or individual goals
(including, but not limited to, continued employment or status as  a
Service Provider), or any other basis determined by the Administrator in its
discretion.  After the grant of Restricted Stock Units, the
Administrator, in its sole discretion, may reduce or waive any restrictions for
such Restricted Stock Units.  Each Award of Restricted Stock Units
will be evidenced by an Award Agreement that will specify the vesting criteria,
and such other terms and conditions as the Administrator, in its sole discretion
will determine.  The Administrator, in its discretion, may accelerate
the time at which any restrictions will lapse or be removed.

     

    (c) Earning
Restricted Stock Units.  Upon meeting the applicable vesting
criteria, the Participant will be entitled to receive a payout as specified in
the Award Agreement.

     

    (d) Form
and Timing of Payment.  Payment of earned Restricted Stock
Units will be made as soon as practicable after the date(s) set forth in the
Award Agreement.  The Administrator, in its sole discretion, may pay
earned Restricted Stock Units in cash, Shares, or a combination
thereof.  Shares represented by Restricted Stock Units that are fully
paid in cash again will be available for grant under the
Plan.

     

    (e) Cancellation.  On
the date set forth in the Award Agreement, all unearned Restricted Stock Units
will be forfeited to the Company.

     

    (f) Section
162(m) Performance Restrictions.  For purposes of qualifying
grants of Restricted Stock 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 Performance Goals.  The
Performance Goals will be set by the Administrator on or before the
Determination Date.  In granting Restricted Stock Units which are
intended to qualify under Section 162(m) of the Code, the Administrator
will 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).

    
      
        
        

      

      
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    10. Performance
Shares.

     

    (a) Grant
of Performance Shares.  Performance Shares may be granted to
Service Providers at any time and from time to time, as will be determined by
the Administrator, in its sole discretion.  The Administrator will
have complete discretion in determining the number of Performance Shares granted
to each Participant provided that during any Fiscal Year, for Performance Shares
intended to qualify as “performance-based compensation” within the meaning of
Section 162(m) of the Code, no Participant will be granted more than an
aggregate of two million (2,000,000) Shares of Restricted Stock, Restricted
Stock Units and Performance Shares.

     

    (b) Value
of Performance Shares.  Each Performance Share will have an
initial value equal to the Fair Market Value of a Share on the date of
grant.

     

    (c) Performance
Objectives and Other Terms.  The Administrator will set
performance objectives or other vesting provisions.  The Administrator
may set vesting criteria based upon the achievement of Company-wide, business
unit, or individual goals (including, but not limited to, continued employment
or status as  a Service Provider), or any other basis determined by
the Administrator in its discretion.

     

    (d) Earning
of Performance Shares.  After the applicable Performance Period
has ended, the holder of Performance Shares will be entitled to receive a payout
of the number of Performance Shares earned by the Participant over the
Performance Period, to be determined as a function of the extent to which the
corresponding performance objectives or other vesting provisions have been
achieved.  After the grant of a Performance Share, the Administrator,
in its sole discretion, may reduce or waive any performance objectives or other
vesting provisions for such Performance Share.

     

    (e) Form
and Timing of Payment of Performance Shares.  Payment of earned
Performance Shares will be made as soon as practicable after the expiration of
the applicable Performance Period in Shares (which have an aggregate Fair Market
Value equal to the value of the earned Performance Shares at the close of the
applicable Performance Period).

     

    (f) Cancellation
of Performance Shares.  On the date set forth in the Award
Agreement, all unearned or unvested Performance Shares will be forfeited to the
Company, and again will be available for grant under the
Plan.

     

    (g) Section
162(m) Performance Restrictions.  For purposes of qualifying
grants of Performance Shares as “performance-based compensation” under
Section 162(m) of the Code, the Administrator, in its discretion, may set
restrictions based upon the achievement of Performance Goals.  The
Performance Goals will be set by the Administrator on or before the
Determination Date.  In granting Performance Shares which are intended
to qualify under Section 162(m) of the Code, the Administrator will 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).

     

    11. Performance
Goals.  The granting and/or vesting of Awards of Restricted
Stock, Restricted Stock Units and Performance Shares may be made subject to the
attainment of performance goals relating to one or more business criteria within
the meaning of Section 162(m) of 

    
      
        
        

      

      
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the Code
and may provide for a targeted level or levels of achievement (“Performance
Goals”) including (a) earnings per share, (b) operating cash
flow, (c) operating income, (d) profit (e) return on assets, (f)
return on equity, (g) return on sales, (h)  revenue, (i) stock price,
(j) growth in stockholder value relative to the moving average of the
S&P 500 Index or another index, (k) gross margin, (l) operating
expenses or operating expenses as a percentage of revenue, (m) earnings
(which may include earnings before interest and taxes, earnings before taxes and
net earnings), (n) return on capital, (o) return on assets or net
assets, (p) return on investment, (q) operating margin,
(r) market share, (s) contract awards or backlog, (t) overhead or
other expense reduction, (u) objective customer indicators, (v) new product
invention or innovation, (w) attainment of research and development
milestones, and (x) total stockholder return.  Any Performance
Goals may be used to measure the performance of the Company as a whole or a
Subsidiary or other business unit or segment of the Company and may be measured
relative to a peer group or index.  Any criteria used may be measured,
as applicable (i) in absolute terms, (ii) against another company or companies,
on a per-share basis, and/or (iii) on a pre-tax or post-tax basis (if
applicable).  The Performance Goals may differ from participant to
participant and from Award to Award.  In establishing the Performance
Goals, the Administrator shall determine whether to determine such goals in
accordance with United States Generally Accepted Accounting Principles (“GAAP”)
or to exclude any items otherwise includable under
GAAP.

    

     

    12. Leaves
of Absence; Transfer Between Locations.  Unless the
Administrator provides otherwise, vesting of Awards granted hereunder will be
suspended during any unpaid leave of absence.  A Service Provider will
not cease to be an Employee in the case of (i) any leave of absence
approved by the Company, or (ii) transfers between locations of the Company
or between the Company, its Parent, or any Subsidiary.  For purposes
of Incentive Stock Options, no such leave may exceed three (3) months, 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 six (6) months and one day
following the commencement of such leave any Incentive Stock Option held by the
Participant will cease to be treated as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option.

     

    13. 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 Participant, only
by the Participant.  If the Administrator makes an Award transferable,
such Award will contain such additional terms and conditions as the
Administrator deems appropriate; provided, however, that in no event may an
Award be transferred to a third party for value.

     

    14. Adjustments;
Dissolution or Liquidation; Merger or Change in
Control.

     

    (a) Adjustments.  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 occurs, the Administrator, in order to prevent diminution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan, will adjust the number and class of Shares that may be delivered under the
Plan and/or the number, class, and price of Shares covered by each outstanding
Award, and the numerical Share limits set forth in Sections 3, 6, 7, 8, 9,
and 10.

    
      
        
        

      

      
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    (b) Dissolution
or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify each Participant as
soon as practicable prior to the effective date of such proposed
transaction.  To the extent it has not been previously exercised, an
Award will terminate immediately prior to the consummation of such proposed
action.

     

    (c) Change
in Control.  In the event of a merger or Change in Control,
each outstanding Award will be treated as the Administrator determines,
including, without limitation, that each Award will be assumed or an equivalent
option or right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation (the “Successor
Corporation”).  The Administrator will not be required to treat
all Awards similarly in the transaction.

     

    In the
event that the Successor Corporation does not assume or substitute for the
Award, the Participant will fully vest in and have the right to exercise all of
his or her outstanding Options and Stock Appreciation Rights, including Shares
as to which such Awards would not otherwise be vested or exercisable, all
restrictions on Restricted Stock will lapse, and, with respect to Restricted
Stock Units and Performance Shares, all Performance Goals or other vesting
criteria will be deemed achieved at target levels and all other terms and
conditions met.  In addition, if an Option or Stock Appreciation Right
is not assumed or substituted for in the event of a Change in Control, the
Administrator will notify the Participant in writing or electronically that the
Option or Stock Appreciation Right will be fully vested and exercisable for a
period of time determined by the Administrator in its sole discretion (but in no
event longer than the original full term), and the Option or Stock Appreciation
Right will terminate upon the expiration of such period.

     

    For the
purposes of this subsection (c), an Award will be considered assumed if,
following the Change in Control, the Award confers the right to purchase or
receive, for each Share subject to the Award immediately prior to the Change in
Control, the consideration (whether stock, cash, or other securities or
property) or, in the case of a Stock Appreciation Right upon the exercise of
which the Administrator determines to pay cash or a Performance Share which the
Administrator can determine to pay in cash, the fair market value of the
consideration received in the merger or Change in 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 in Control is not solely common
stock of the Successor Corporation, the Administrator may, with the consent of
the Successor Corporation, provide for the consideration to be received upon the
exercise of an Option or Stock Appreciation Right or upon the payout of a
Restricted Stock Unit or Performance Share, for each Share subject to such
Award, to be solely common stock of the Successor Corporation equal in fair
market value to the per share consideration received by holders of Common Stock
in the Change in Control.

     

    Notwithstanding
anything in this Section 14(c) to the contrary, an Award that vests, is earned
or paid-out upon the satisfaction of one or more Performance Goals or other
performance criteria will not be considered assumed if the Company or its
successor modifies any of such Performance Goals or other performance criteria
without the Participant’s consent; provided, however, a modification to such
Performance Goals or other performance criteria only to reflect the Successor
Corporation’s post-Change in Control corporate structure will not be deemed to
invalidate an otherwise valid Award assumption.

    
      
        
        

      

      
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    15. Tax
Withholding

     

    (a) Withholding
Requirements.  Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company will have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, local, foreign or other
taxes (including the Participant’s FICA obligation) required to be withheld with
respect to such Award (or exercise thereof).

     

    (b) Withholding
Arrangements.  The Administrator, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part by
(without limitation) (i) paying cash, (ii) electing to have the Company
withhold otherwise deliverable cash or Shares having a Fair Market Value equal
to the minimum amount required to be withheld, (iii) delivering to the Company
already-owned Shares having a Fair Market Value equal to the amount required to
be withheld, or (iv) selling a sufficient number of Shares otherwise
deliverable to the Participant through such means as the Administrator may
determine in its sole discretion (whether through a broker or otherwise) equal
to the amount required to be withheld.  The amount of the withholding
requirement will be deemed to include any amount which the Administrator agrees
may be withheld at the time the election is made, not to exceed the amount
determined by using the maximum federal, state or local marginal income tax
rates applicable to the Participant with respect to the Award on the date that
the amount of tax to be withheld is to be determined.  The Fair Market
Value of the Shares to be withheld or delivered will be determined as of the
date that the taxes are required to be withheld.

     

    16. No
Effect on Employment or Service.  Neither the Plan nor any
Award will confer upon a Participant any right with respect to continuing the
Participant’s relationship as a Service Provider with the Company, nor will they
interfere in any way with the Participant’s right or the Company’s right to
terminate such relationship at any time, with or without cause, to the extent
permitted by Applicable Laws.

     

    17. Date
of Grant.  The date of grant of an Award will be, for all
purposes, the date on which the Administrator makes the determination granting
such Award, or such other later date as is determined by the
Administrator.  Notice of the determination will be provided to each
Participant within a reasonable time after the date of such
grant.

     

    18. Term
of Plan.  Subject to Section 22 of
the Plan, the Plan will become effective upon its adoption by the
Board.  It will continue in effect for a term of ten (10) years unless
terminated earlier under Section 19 of
the Plan.

     

    19. Amendment
and Termination of the Plan.

     

    (a) Amendment
and Termination.  The Administrator may at any time amend,
alter, suspend or terminate the Plan.

     

    (b) Stockholder
Approval.  The Company will obtain stockholder approval of any
Plan amendment to the extent necessary and desirable to comply with Applicable
Laws.

    
      
        
        

      

      
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    (c) Effect
of Amendment or Termination.  No amendment, alteration,
suspension, or termination of the Plan will impair the rights of any
Participant, unless mutually agreed otherwise between the Participant and the
Administrator, which agreement must be in writing and signed by the Participant
and the Company.  Termination of the Plan will 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.

     

    20. Conditions
Upon Issuance of Shares.

     

    (a) Legal
Compliance.  Shares will not be issued pursuant to the exercise
of an Award unless the exercise of such Award and the issuance and delivery of
such Shares will comply with Applicable Laws and will be further subject to the
approval of counsel for the Company with respect to such
compliance.

     

    (b) Investment
Representations.  As a condition to the exercise of an Award,
the Company may require the person exercising such Award to represent and
warrant at the time of any such exercise 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.

     

    21. 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, will relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority
will not have been obtained.

     

    22. Stockholder
Approval.  The Plan will be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted.  Such stockholder approval will be obtained in the manner and
to the degree required under Applicable Laws.

     

     

    
      
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