Exhibit
4.2


HSW INTERNATIONAL, INC.

2006 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 additional incentive to Employees,
Directors and Consultants, and


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


The Plan permits the
grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock,
Stock Appreciation Rights, Restricted Stock Units, Performance Units,
Performance Shares, and Other Stock Based Awards.


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 or 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, or will be, granted under the
Plan.


(c)           “Award”
means, individually or collectively, a grant under the Plan of Options, SARs,
Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares
or Other Stock Based Awards.


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


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


(g)           “Change
in 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) 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;


(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
two-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.


(h)           “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.


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


(j)            “Common
Stock” means the Common Stock of the Company, or in the case of Performance
Units, Restricted Stock Units, and certain Other Stock Based Awards, the cash
equivalent thereof, as applicable.


(k)           “Company”
means HSW International, Inc., a Delaware corporation, or any successor
thereto.


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


(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)           “Dividend
Equivalent” means a credit, made at the discretion of the Administrator, to
the account of a Participant in an amount equal to the value of dividends paid
on one Share for each Share represented by an Award held by such Participant.


(p)           “Employee”
means any person, including Officers and Directors, employed by the Company or
any Parent or Subsidiary of the Company. 
Neither service as a 


 


 


 


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Director
nor payment of a director’s fee by the Company will be sufficient to constitute
“employment” by the Company.


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


(r)            “Exchange
Program” means a program under which (i) outstanding Awards are surrendered
or cancelled in exchange for Awards of the same type (which may have lower
exercise prices and different terms), Awards of a different type, and/or cash,
and/or (ii) the exercise price of an outstanding Award is reduced.  The terms and conditions of any Exchange
Program will be determined by the Administrator in its sole discretion.


(s)           “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
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value will be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for 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 will be the mean between the high bid and low asked
prices for the Common Stock for 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 will be determined in good faith by the
Administrator.


Notwithstanding the
preceding, for federal, state, and local income tax reporting purposes and for
such other purposes as the Administrator deems appropriate, the Fair Market
Value shall be determined by the Administrator in accordance with uniform and
nondiscriminatory standards adopted by it from time to time.


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


(u)           “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.


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


(w)          “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.


 


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(x)            “Option”
means a stock option granted pursuant to the Plan.


(y)           “Other
Stock Based Awards” means any other awards not specifically described in
the Plan that are valued in whole or in part by reference to, or are otherwise
based on, Shares and are created by the Administrator pursuant to Section 12.


(z)            “Outside
Director” means a Director who is not an Employee.


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


(bb)         “Participant”
means the holder of an outstanding Award granted under the Plan.


(cc)         “Performance
Share” means an Award granted to a Service Provider pursuant to Section 10
of the Plan.


(dd)         “Performance
Unit” means an Award granted to a Service Provider pursuant to Section 10
of the Plan.


(ee)         “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.


(ff)           “Plan”
means this 2006 Equity Incentive Plan.


(gg)         “Restricted
Stock” means Shares issued pursuant to a Restricted Stock award under
Section 8 or issued pursuant to the early exercise of an option.


(hh)         “Restricted
Stock Unit” means an Award that the Administrator permits to be paid in
installments or on a deferred basis pursuant to Sections 4 and 11 of the Plan.


(ii)           “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.


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


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


(ll)           “Share”
means a share of the Common Stock, as adjusted in accordance with Section 15 of
the Plan.


(mm)       “Stock
Appreciation Right” or “SAR” means an Award that pursuant to Section
9 of the Plan is designated as a SAR.


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


 


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3.             Stock Subject to the Plan.


(a)           Stock
Subject to the Plan.  Subject to the
provisions of Section 15 of the Plan, the maximum aggregate number of Shares
that may be issued under the Plan is 8,000,000, all of which may be issued
pursuant to Incentive Stock Options.  The
Shares may be authorized, but unissued, or reacquired Common Stock.  Shares shall not be deemed to have been
issued pursuant to the Plan with respect to any portion of an Award that is
settled in cash.  Upon payment in Shares
pursuant to the exercise of an Award, the number of Shares available for
issuance under the Plan shall be reduced only by the number of Shares actually
issued in such payment.  If a Participant
pays the exercise price (or purchase price, if applicable) of an Award through
the tender of Shares, or if Shares are tendered or withheld to satisfy any
Company withholding obligations, the number of Shares so tendered or withheld
shall again be available for issuance pursuant to future Awards under the Plan.


(b)           Lapsed
Awards.  If any outstanding Award
expires or is terminated or canceled without having been exercised or settled
in full, or if Shares acquired pursuant to an Award subject to forfeiture or
repurchase are forfeited or repurchased by the Company, the Shares allocable to
the terminated portion of such Award or such forfeited or repurchased Shares
shall again be available for grant under the Plan.


(c)           Share
Reserve.  The Company, during the
term of the Plan, shall 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 and
necessary 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 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 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.


(v)           Delegation of Authority for Day-to-Day Administration.  Except to the extent prohibited by Applicable
Law, the Administrator may delegate to one or more 


 


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individuals the day-to-day
administration of the Plan and any of the functions assigned to it in this
Plan.  Such delegation may be revoked at
any time.


(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 number of Shares to be covered by each
Award granted hereunder;


(iv)          to approve forms of agreement for use under the Plan;


(v)           to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Award granted hereunder.  Such terms and conditions include, but are
not limited to, the exercise price, the time or times when Awards may be
exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture or repurchase restrictions, and any restriction
or limitation regarding any Award or the Shares relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, will
determine;


(vi)          to reduce the exercise price of any 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;


(vii)         to institute an Exchange Program;


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


(ix)           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 and/or
qualifying for preferred tax treatment under applicable foreign tax laws;


(x)            to modify or amend each Award (subject to Section 18(c)
of the Plan), including (A) the discretionary authority to extend the
post-termination exercisability period of Awards longer than is otherwise
provided for in the Plan and (B) accelerate the satisfaction of any vesting
criteria or waiver of forfeiture or repurchase restrictions;


(xi)           to allow Participants to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares or cash to
be issued upon exercise or vesting of an Award that number of Shares or cash
having a Fair Market Value equal to the minimum amount required to be withheld.
The Fair Market Value of any Shares to be withheld will be determined on the
date that the amount of tax to be withheld is to be determined.  All 


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elections by a Participant to have
Shares or cash withheld for this purpose will be made in such form and under
such conditions as the Administrator may deem necessary or advisable;


(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 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;


(xiv)        to determine whether Awards will be settled in Shares, cash
or in any combination thereof;


(xv)         to determine whether Awards will be adjusted for Dividend
Equivalents;


(xvi)        to create Other Stock Based Awards for issuance under the
Plan;


(xvii)       to establish a program whereby Service Providers designated by
the Administrator can reduce compensation otherwise payable in cash in exchange
for Awards under the Plan;


(xviii)      to impose such restrictions, conditions or limitations as it
determines appropriate as to the timing and manner of any resales by a
Participant or other subsequent transfers by the Participant of any Shares
issued as a result of or under an Award, including without limitation, (A)
restrictions under an insider trading policy, and (B) restrictions as to the
use of a specified brokerage firm for such resales or other transfers; and


(xix)         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.


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


6.             Limitations.


(a)           ISO
$100,000 Rule.  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 


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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.


(b)           Special
Limits for Grants of Options and Stock Appreciation Rights.  Subject to Section 15 of the Plan, the
following special limits shall apply to Shares available for Awards under the
Plan:


(i)            the maximum number of Shares that may be subject to
Options granted to any Service Provider in any calendar year shall equal
4,000,000 Shares, plus any Shares which were available under this Section
6(b)(i) for Awards to such Service Provider in any prior calendar year but
which were not covered by such Awards; and


(ii)           the maximum number of Shares that may be subject to Stock
Appreciation Rights granted to any Service Provider in any calendar year shall
equal 4,000,000 Shares, plus any Shares which were available under this Section
6(b)(ii) for Awards to such Service Provider in any prior calendar year but
which were not covered by such Awards.


(c)           No
Rights as a Service Provider. 
Neither the Plan nor any Award shall confer upon a Participant any right
with respect to continuing his or her relationship as a Service Provider, nor
shall they interfere in any way with the right of the Participant or the right
of the Company or its Parent or Subsidiaries to terminate such relationship at
any time, with or without cause.


7.             Stock Options.


(a)           Term
of Option.  The term of each Option
will be stated in the Award Agreement. 
In the case of an Incentive Stock Option, the term will be ten (10)
years from the date of grant or such shorter term as may be provided in the
Award Agreement.  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 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.


(b)           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, subject to the following:


(1)           In the case of an
Incentive Stock Option


(A)          granted to an Employee who, at the
time the Incentive Stock Option is granted, owns stock representing more than
ten percent (10%) of the total combined 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.


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


(2)           In the case of a Nonstatutory Stock
Option, the per Share exercise price will be determined by the
Administrator.  In the case of a
Nonstatutory Stock Option intended to qualify as “performance-based compensation”
within the meaning of Section 162 (m) of the Code, the per Share exercise price
will be no less than 100% of the Fair Market Value per Share on the date of
grant.


(3)           Notwithstanding the foregoing,
Incentive Stock 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.  The Administrator, in its sole
discretion, may accelerate the satisfaction of such conditions at any time.


(c)           Form
of Consideration.  The Administrator
will 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.  Such consideration, to the extent permitted
by Applicable Laws, may consist entirely of:


(i)            cash;


(ii)           check;


(iii)          promissory note;


(iv)          other Shares which meet the conditions established by the
Administrator to avoid adverse accounting consequences (as determined by the
Administrator);


(v)           consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;


(vi)          a reduction in the amount of any Company liability to the
Participant, including any liability attributable to the Participant’s
participation in any Company-sponsored deferred compensation program or
arrangement;


(vii)         any combination of the foregoing methods of payment; or


(viii)        such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.


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(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: (x)
written or electronic notice of exercise (in accordance with the Award
Agreement) from the person entitled to exercise the Option, and (y) full
payment for the Shares with respect to which the Option is exercised (including
provision for any applicable tax withholding). 
Full payment may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Award Agreement and the
Plan.  Shares issued upon exercise of an
Option will be issued in the name of the Participant or, if requested by the
Participant, in the name of the Participant and his or her spouse.  Until the Shares are 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 will exist with respect to the Awarded Stock,
notwithstanding the exercise of the Option. 
The Company will issue (or cause to be issued) such Shares 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 Shares are issued, except as provided in Section 15 of
the Plan or the applicable Award Agreement.


Exercising an Option in any manner will decrease the number of Shares
thereafter available for sale under the Option, by the number of Shares as to
which the Option is exercised.


(ii)           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 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 as to all of the vested Shares
within the time specified by the Administrator, the Option will terminate, and
the remaining Shares covered by such Option will revert to the Plan.


(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 


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not exercise his or her Option as to
all of the vested Shares within the time specified by the Administrator, the
Option will terminate, and the remaining 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 the 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 persons) 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 the Participant’s death.  Unless otherwise provided by the Administrator,
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 will
immediately revert to the Plan.  If the
Option is not exercised as to all of the vested Shares within the time
specified by the Administrator, the Option will terminate, and the remaining
Shares covered by such Option will revert to the Plan.


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.  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.


 


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(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.


9.             Stock Appreciation Rights.


(a)           Grant
of SARs.  Subject to the terms and
conditions of the Plan, a SAR 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 SARs granted to any Service
Provider.


(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 SARs granted under the
Plan.


(d)           Exercise
of SARs.  SARs will be exercisable on
such terms and conditions as the Administrator, in its sole discretion, will
determine.  The Administrator, in its
sole discretion, may accelerate exercisability at any time.


(e)           SAR
Agreement.  Each SAR grant will be
evidenced by an Award Agreement that will 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, will determine.


(f)            Expiration
of SARs.  An SAR granted under the
Plan will expire upon the date determined by the Administrator, in its sole
discretion, and set forth in the Award Agreement.  Notwithstanding the foregoing, the rules of
Sections 7(d)(ii), 7(d)(iii) and 7(d)(iv) also will apply to SARs.


(g)           Payment
of SAR Amount.  Upon exercise of an
SAR, 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 SAR is
exercised.


 


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At the discretion of the
Administrator, the payment upon SAR exercise may be in cash, in Shares of
equivalent value, or in some combination thereof.


10.           Performance Units and Performance Shares.


(a)           Grant
of Performance Units/Shares.  Subject
to the terms and conditions of the Plan, Performance Units and 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 Units and Performance
Shares granted to each Participant.


(b)           Value
of Performance Units/Shares.  Each
Performance Unit will have an initial value that is established by the
Administrator on or before the date of grant. 
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 in its discretion which,
depending on the extent to which they are met, will determine the number or
value of Performance Units/Shares that will be paid out to the
Participant.  The time period during
which the performance objectives must be met will be called the “Performance
Period.”  Each Award of Performance
Units/Shares will be evidenced by an Award Agreement that will specify the
Performance Period, and such other terms and conditions as the Administrator,
in its sole discretion, will determine. 
The Administrator may set performance objectives based upon the
achievement of Company-wide, divisional, or individual goals (including solely
continued service), applicable federal or state securities laws, or any other basis
determined by the Administrator in its discretion.


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


(e)           Form
and Timing of Payment of Performance Units/Shares.  Payment of earned Performance Units/Shares
will be made after the expiration of the applicable Performance Period at the
time determined by the Administrator. 
The Administrator, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash, in Shares (which have an aggregate Fair
Market Value equal to the value of the earned Performance Units/Shares at the
close of the applicable Performance Period) or in a combination of cash and
Shares.


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


11.           Restricted
Stock Units.  Restricted Stock Units
shall consist of a Restricted Stock, Performance Share or Performance Unit
Award that the Administrator, in its sole discretion 


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permits
to be paid out in installments or on a deferred basis, in accordance with rules
and procedures established by the Administrator


12.           Other
Stock Based Awards.  Other Stock
Based Awards may be granted either alone, in addition to, or in tandem with,
other Awards granted under the Plan and/or cash awards made outside of the
Plan.  The Administrator shall have
authority to determine the Service Providers to whom and the time or times at
which Other Stock Based Awards shall be made, the amount of such Other Stock
Based Awards, and all other conditions of the Other Stock Based Awards
including any dividend and/or voting rights.


13.           Leaves
of Absence.  Unless the Administrator
provides otherwise, vesting of Awards granted hereunder will be suspended
during any unpaid leave of absence and will resume on the date the Participant
returns to work on a regular schedule as determined by the Company; provided,
however, that no vesting credit will be awarded for the time vesting has
been suspended during such 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
leave of absence may exceed ninety (90) 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 months
following the 91st day 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.


14.           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 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.


15.           Adjustments; Dissolution or Liquidation; 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 such that an adjustment is
determined by the Administrator (in its sole discretion) to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Administrator shall, in
such manner as it may deem equitable, adjust the number and class of Shares
which may be delivered under the Plan, the number, class and price of Shares
subject to outstanding awards, and the numerical limits in Section 6.  Notwithstanding the preceding, the number of
Shares subject to any Award always shall be a whole number.


(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 


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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 Award, to
the extent applicable, 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 or vested, an Award will terminate immediately prior to the
consummation of such proposed action.


(c)           Change in Control.


(i)            Stock Options and SARs.  In the event of a Change in Control, each
outstanding Option and SAR shall be assumed or an equivalent option or SAR
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation.  Unless determined
otherwise by the Administrator, in the event that the successor corporation
refuses to assume or substitute for the Option or SAR, 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 is not
assumed or substituted in the event of a Change in Control, the Administrator
shall notify the Participant in writing or electronically that the Option or
SAR shall be exercisable, to the extent vested, for a period of up to fifteen
(15) days from the date of such notice, and the Option or SAR shall terminate
upon the expiration of such period.  For
the purposes of this paragraph, the Option or SAR shall be considered assumed
if, following the Change in Control, the option or SAR confers the right to
purchase or receive, for each Share of Awarded Stock subject to the Option or
SAR immediately prior to the Change in Control, the consideration (whether
stock, cash, or other securities or property) received in the 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 or its Parent, the
Administrator may, with the consent of the successor corporation, 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 corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the Change
in Control.  Notwithstanding anything
herein to the contrary, an Award that vests, is earned, or is paid-out upon the
satisfaction of one or more performance goals will not be considered assumed if
the Company or its successor modifies any of such performance goals without the
Participant’s consent; provided, however, a modification to such performance
goals only to reflect the successor corporation’s post-Change in Control
corporate structure will not be deemed to invalidate an otherwise valid Award
assumption.


(ii)           Restricted Stock, Performance Shares, Performance
Units, Restricted Stock Units and Other Stock Based Awards.  In the event of a Change in Control, each
outstanding Award of Restricted Stock, Performance Share, Performance Unit,
Other Stock Based Award and Restricted Stock Unit shall be assumed or an equivalent
Restricted Stock, Performance Share, Performance Unit, Other Stock Based Award
and Restricted Stock Unit 


15

















award substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation.  Unless determined otherwise by the
Administrator, in the event that the successor corporation refuses to assume or
substitute for the Award, the Participant shall fully vest in the Award
including as to Shares/Units that would not otherwise be vested, all applicable
restrictions will lapse, and all performance objectives and other vesting
criteria will be deemed achieved at targeted levels.  For the purposes of this paragraph, an Award
of Restricted Stock, Performance Shares, Performance Units, Other Stock Based
Awards and Restricted Stock Units shall 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 (and if a
Restricted Stock Unit or Performance Unit, for each Share as determined based
on the then current value of the unit), the consideration (whether stock, cash,
or other securities or property) received in the 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 or its Parent,
the Administrator may, with the consent of the successor corporation, provide
that the consideration to be received for each Share (and if a Restricted Stock
Unit or Performance Unit, for each Share as determined based on the then
current value of the unit) be solely common stock of the successor corporation
or its Parent equal in fair market value to the per share consideration
received by holders of Common Stock in the Change in Control.  Notwithstanding anything herein to the
contrary, an Award that vests, is earned, or is paid-out upon the satisfaction
of one or more performance goals will not be considered assumed if the Company
or its successor modifies any of the performance goals without the Participant’s
consent; provided, however, a modification to the performance goals only to
reflect the successor corporation’s post-Change in Control corporate structure
will not be deemed to invalidate an otherwise valid Award assumption.


(iii)          Outside Director Awards.  Notwithstanding any provision of Section 15(c)(i) or 15(c)(ii)
to the contrary, with respect to Awards granted to an Outside Director that are
assumed or substituted for, if on the date of or following the assumption or
substitution the Participant’s status as a Director or a director of the
successor corporation, as applicable, is terminated other than upon a voluntary
resignation by the Participant, then the Participant shall fully vest in and
have the right to exercise his or her Options and Stock Appreciation Rights as
to all of the  Awarded Stock, including
Shares as to which such Awards would not otherwise be vested or exercisable,
all restrictions on Restricted Stock and Restricted Stock Units, as applicable,
will lapse, and, with respect to Performance Shares, Performance Units, and
Other Stock Based Awards, all performance goals and other vesting criteria will
be deemed achieved at target levels and all other terms and conditions met.


16.           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.


17.           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 18 of the Plan.


 


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18.           Amendment and Termination of the Plan.


(a)           Amendment
and Termination.  The Board 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.


(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.


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


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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