EX-10.4



 





Exhibit 10.4




2007 Stock Incentive Plan

of

Osteotech Inc.





	1.	 	Purpose of this Plan





     The purpose of this 2007 Stock Incentive Plan is to enhance the long-term stockholder value of
Osteotech Inc. by offering opportunities to eligible individuals to participate in the growth in
value of the equity of Osteotech Inc.




	2.	 	Definitions and Rules of Interpretation





     2.1 Definitions.



     This Plan uses the following defined terms:



          (a) “Administrator” means the Board or the Committee, or any officer or employee of
the Company to whom the Board or the Committee delegates authority to administer this Plan.




          (b) “Affiliate” means a “parent” or “subsidiary” (as each is defined in Section 424
of the Code) of the Company, and any other entity that the Board or Committee designates as an
“Affiliate” for purposes of this Plan.




          (c) “Applicable Law” means any and all laws of whatever jurisdiction, within or
without the United States, and the rules of any stock exchange or quotation system on which Shares
are listed or quoted, applicable to the taking or refraining from taking of any action under this
Plan, including the administration of this Plan and the issuance or transfer of Awards or Award
Shares.




          (d) “Award” means a Stock Award, SAR, or Option granted in accordance with the terms
of this Plan. An Award may include a “re-load” Option under terms established by the Administrator
to permit the grant of a new Option upon the exercise of the previous Option.




          (e) “Award Agreement” means the document evidencing the grant of an Award.




          (f) “Award Shares” means Shares covered by an outstanding Award or purchased under
an Award.




          (g) “Awardee” means: (i) a person to whom an Award has been granted, including a
holder of a Substitute Award, or (ii) a person to whom an Award has been transferred in accordance
with all applicable requirements of Sections 6.5, 7(h), and 17.




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




 









 








          (i) “Cause” means (i) the Awardee’s actions on behalf of the Company or any
Affiliate, without the authorization of the Board or the President and Chief Executive Officer of
the Company, which actions are knowingly for the pecuniary benefit of the Awardee or members of his
or her family and which actions materially and adversely effect the business or affairs of the
Company or any Affiliate, or (ii) the Awardee fails in any material respect to observe and perform
his or her obligations under any employment agreement with the Company or the Awardee’s Employee
Confidential Information, Invention and Non Competition Agreement with the Company which failure is
not cured within twenty (20) days after written notice thereof is given to the Awardee by the
Company, or (iii) the commission by the Awardee of an act involving embezzlement or fraud against
the Company (other than non-material expense account issues) or commission or conviction of a
felony or (iv) the repeated use by the Awardee of alcohol in a manner which impairs his or her
duties or the use of any controlled substance other than under a physicians prescription.




          (j) “Change in Control” means (i) a “Board Change” which shall have occurred if a
majority of the seats (not counting vacant seats) on the Company’s Board were to be occupied by
individuals who were neither (A) nominated by a majority of the Incumbent Directors (as defined
below) nor (B) appointed by Directors so nominated; or (ii) the acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
“Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of a majority of the then outstanding voting securities of the Company (the “Outstanding
Company Voting Securities”); provided, however, that the following acquisitions shall not
constitute a Change in Control: (A) any acquisition by the Company, or (B) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (C) any public offering, private placement or other issuance by the
Company of its voting securities; or (iii) a merger or consolidation of the Company with another
entity in which neither the Company nor a corporation that, prior to the merger or consolidation,
was a subsidiary of the Company, shall be the surviving entity; or (iv) a merger or consolidation
of the Company following which (A) the Company or a corporation that, prior to the merger or
consolidation, was a subsidiary of the Company shall be the surviving entity and (B) a majority of
the Outstanding Company Voting Securities is owned by a Person or Persons who were not beneficial
owners (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of a majority of
the Outstanding Company Voting Securities immediately prior to such merger or consolidation; or (v)
a voluntary or involuntary liquidation of the Company; or (vi) a sale or disposition by the Company
of at least 80% of its assets in a single transaction or a series of transactions (other than a
sale or disposition of assets to a subsidiary of the Company in a transaction not involving a
Change in Control or a change in control of such subsidiary). An “Incumbent Director” is a member
of the Board who has been either (A) nominated by a majority of the Directors of the Company then
in office or (B) appointed by Directors so nominated, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of either an actual or threatened
election contest or other actual or threatened solicitation of proxies or consents by or on behalf
of a Person (as defined below) other than the Board.




          (k) “Code” means the Internal Revenue Code of 1986.




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          (l) “Committee” means a committee composed of Company Directors appointed in
accordance with the Company’s charter documents and Section 4.




          (m) “Company” means Osteotech Inc., a Delaware corporation.




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




          (o) “Consultant” means an individual or an entity who (including as an employee or
agent of an entity that) provides bona fide services to the Company or an Affiliate not in
connection with the offer or sale of securities in a capital-raising transaction, but who is not an
Employee.




          (p) “Director” means a member of the Board of Directors of the Company or an
Affiliate.




          (q) “Domestic Relations Order” means a “domestic relations order” as defined in, and
otherwise meeting the requirements of, Section 414(p) of the Code, except that reference to a
“plan” in that definition shall be to this Plan.




          (r) “Effective Date” means the date the stockholders of the Company approve the
Plan. In the event the stockholders do not approve the Plan, the Plan shall be null and void and
no terms of the Plan shall take effect.




          (s) “Employee” means a regular employee of the Company or an Affiliate, including an
officer or Director, who is treated as an employee in the personnel records of the Company or an
Affiliate, but not individuals who are classified by the Company or an Affiliate as: (i) leased
from or otherwise employed by a third party, (ii) independent contractors, or (iii) intermittent or
temporary workers. The Company’s or an Affiliate’s classification of an individual as an
“Employee” (or as not an “Employee”) for purposes of this Plan shall not be altered retroactively
even if that classification is changed retroactively for another purpose as a result of an audit,
litigation or otherwise. An Awardee shall not cease to be an Employee due to transfers between
locations of the Company, or between the Company and an Affiliate, or to any successor to the
Company or an Affiliate that assumes the Awardee’s Options under Section 10. Neither service as a
Director nor receipt of a director’s fee shall be sufficient to make a Director an “Employee.”




          (t) “Exchange Act” means the Securities Exchange Act of 1934.




          (u) “Executive” means, if the Company has any class of any equity security
registered under Section 12 of the Exchange Act, an individual who is subject to Section 16 of the
Exchange Act or who is a “covered employee” under Section 162(m) of the Code, in either case
because of the individual’s relationship with the Company or an Affiliate. If the Company does not
have any class of any equity security registered under Section 12 of the Exchange Act, “Executive”
means any officer elected or appointed by the Board.




          (v) “Expiration Date” means, with respect to an Award, the date stated in the Award
Agreement as the expiration date of the Award or, if no such date is stated in the Award




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Agreement, then the last day of the maximum exercise period for the Award, disregarding the effect of an
Awardee’s Termination or any other event that would shorten that period.




          (w) “Fair Market Value” means the value of Shares as determined under Section 18.2.




          (x) “Grant Date” means the date the Administrator approves the grant of an Award.
However, if the Administrator specifies that an Award’s Grant Date is a future date or the date on
which a condition is satisfied, the Grant Date for such Award is that future date or the date that
the condition is satisfied.




          (y) “Incentive Stock Option” means an Option intended to qualify as an incentive
stock option under Section 422 of the Code and designated as an Incentive Stock Option in the Award
Agreement for that Option.




          (z) “Nonstatutory Option” means any Option other than an Incentive Stock Option.




          (aa) “Objectively Determinable Performance Condition” shall mean any one or more of
the following performance criteria, either individually, alternatively or in any combination,
applied to either the Company as a whole or to a business unit, Affiliate or business segment,
either individually, alternatively or in any combination, and measured either annually or
cumulatively over a period of years, on an absolute basis or relative to a pre-established target,
to previous years’ results or to a designated comparison group, in each case as specified by the
Committee in the Award and may include actual, growth, or performance-to-target for: (i) cash flow,
including free cash flow; (ii) earnings (including revenue, gross margin, operating profit,
earnings before interest and taxes, earnings before taxes, and net earnings) or earnings per share;
(iii) stock price; (iv) return on equity or average stockholders’ equity; (v) total stockholder
return, either actual or relative to share price or market capitalization; (vi) return on capital;
(vii) return on assets or net assets; (viii) return on investment or invested capital; (ix) return
on operating revenue; (x) income, net income, operating income, net operating income, operating
profit, net operating profit, or operating margin (with or without regard to
amortization/impairment of goodwill); (xi) market share or applications won; (xii) operational
performance, including orders, backlog, deferred revenues, revenue per employee, overhead, days
sales outstanding, inventory turns, or other expense levels; (xiii) stockholder value or return
relative to the moving average of the S&P 500 Index or a peer group index; (xiv) asset turns; (xv)
development, regulatory approval and market introduction of new products and technologies, (xvi)
objective strategic plan development and implementation (including individually designed goals and
objectives that are consistent with the Awardee’s specific duties and responsibilities and that are
designed to improve the financial performance of the Company, an Affiliate, or a specific business
unit thereof and that are consistent with and derived from the strategic operating plan of the
Company, an Affiliate or any of their business units for the applicable performance period) and
(xvii) any other similar conditions. The Committee may appropriately adjust any evaluation of
performance under an Objectively Determinable Performance Condition to exclude any of the following events that occurs during a performance
period: (A) asset write-downs; (B) litigation or claim judgments or settlements; (C) the effect of




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changes in tax law, accounting principles or other such laws or provisions affecting reported
results; (D) accruals for reorganization and restructuring programs; (E) any extraordinary
non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or in
management’s discussion and analysis of financial condition and results of operations appearing in
the Company’s annual report to stockholders for the applicable year and (F) any events that the
Board deems to be unusual, infrequent or extraordinary.




          (bb) “Officer” means an officer of the Company as defined in Rule 16a-1 adopted
under the Exchange Act.




          (cc) “Option” means a right to purchase Shares of the Company granted under this
Plan.




          (dd) “Option Price” means the price payable under an Option for Shares, not
including any amount payable in respect of withholding or other taxes.




          (ee) “Option Shares” means Shares covered by an outstanding Option or purchased
under an Option.




          (ff) “Plan” means this 2007 Stock Incentive Plan of Osteotech Inc.




          (gg) “Purchase Price” means the price payable under a Stock Award for Shares, not
including any amount payable in respect of withholding or other taxes.




          (hh) “Rule 16b-3” means Rule 16b-3 adopted under Section 16(b) of the Exchange Act.




          (ii) “SAR” or “Stock Appreciation Right” means a right to receive cash and/or Shares
based on a change in the Fair Market Value of a specific number of Shares pursuant to an Award
Agreement, as described in Section 8.1.




          (jj) “Securities Act” means the Securities Act of 1933.




          (kk) “Share” means a share of the common stock of the Company or other securities
substituted for the common stock under Section 10.




          (ll) “Stock Award” means an offer by the Company to sell or issue Shares, including
Shares subject to certain restrictions pursuant to the Award Agreement as described in Section 8.2
or, as determined by the Committee, a notional account representing the right to be paid an amount
based on Shares. Types of Awards which may be granted as Stock Awards include such awards as are
commonly known as restricted stock, deferred stock, restricted stock units, performance shares,
phantom stock or similar types of awards as determined by the Administrator.




          (mm) “Substitute Award” means a Substitute Option, Substitute SAR or Substitute
Stock Award granted in accordance with Sections 6.6, 8.1(d) and 8.2(e) of this Plan.




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          (nn) “Substitute Option” means an Option granted in substitution for, or upon the
conversion of, an option granted by another entity to purchase equity securities in the granting
entity.




          (oo) “Substitute SAR” means a SAR granted in substitution for, or upon the
conversion of, a stock appreciation right granted by another entity with respect to equity
securities in the granting entity.




          (pp) “Substitute Stock Award” means a Stock Award granted in substitution for, or
upon the conversion of, a stock award granted by another entity to purchase equity securities in
the granting entity.




          (qq) “Termination” means that the Awardee has ceased to be, with or without any
cause or reason, an Employee, Director or Consultant. Unless so determined by the Administrator,
or otherwise provided in this Plan, “Termination” shall include a change in status from an Employee
to a Consultant or Director but not from a Consultant or Director to an Employee. An event that
causes an Affiliate to cease being an Affiliate shall be treated as the “Termination” of that
Affiliate’s Employees, Directors, and Consultants.




     2.2 Rules of Interpretation. Any reference to a “Section,” without more, is to a Section of this
Plan. Captions and titles are used for convenience in this Plan and shall not, by themselves,
determine the meaning of this Plan. Except when otherwise indicated by the context, the singular
includes the plural and vice versa. Any reference to a statute is also a reference to the
applicable rules and regulations adopted under that statute. Any reference to a statute, rule or
regulation, or to a section of a statute, rule or regulation, is a reference to that statute, rule,
regulation, or section as amended from time to time, both before and after the Effective Date and
including any successor provisions.




	3.	 	Shares Subject to this Plan; Term of this Plan





     3.1 Number of Award Shares. The Shares issuable under this Plan shall be authorized but unissued
or reacquired Shares, including Shares repurchased by the Company on the open market. Subject to
adjustment under Section 10, the number of Shares initially reserved for issuance or sale over the
term of this Plan shall be 1,400,000. Except as required by Applicable Law, Shares shall not
reduce the number of Shares reserved for issuance under this Plan until the actual date of delivery
of the Shares to the Awardee. Shares subject to Awards granted under this Plan that are
cancelled, expire or are forfeited or repurchased (including without limitation any such Shares
that have been issued under the Award to the Awardee) shall be available for re-grant or
re-issuance under the Plan following such cancellation, expiration, forfeiture or repurchase. If
an Awardee pays the exercise or purchase price of an Award granted under the Plan through the
withholding of Award Shares or the tender of Shares, or if Shares are withheld from the Award or otherwise tendered
to satisfy any applicable withholding obligations, the number of Shares so tendered or withheld
shall become available for re-grant or re-issuance thereafter under the Plan following such tender
or withholding.



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     3.2 Term of this Plan.



          (a) This Plan shall be effective on, and Awards may be granted under this Plan on
and after, the earliest the date on which the Plan has been both adopted by the Board and approved
by the Company’s stockholders.




          (b) Subject to the provisions of Section 13, Awards may be granted under this Plan
for a period of ten years from the latest date the Company’s stockholders approve this Plan,
including any subsequent amendment or restatement of this Plan approved by the Company’s
stockholders.





	4.	 	Administration





     4.1 General.



          (a) The Board shall have ultimate responsibility for administering this Plan. The
Board may delegate certain of its responsibilities to a Committee, which shall consist of at least
two members of the Board. The Board or the Committee may further delegate its responsibilities to
any Employee of the Company or any Affiliate. Where this Plan specifies that an action is to be
taken or a determination made by the Board, only the Board may take that action or make that
determination. Where this Plan specifies that an action is to be taken or a determination made by
the Committee, only the Committee may take that action or make that determination; provided that,
the Board shall always be authorized to take any action or make any determination that could have
been taken or made by the Committee. Where this Plan references the “Administrator,” the action
may be taken or determination made by the Board, the Committee, or other Administrator. However,
only the Board or the Committee may approve, or otherwise take actions or make determinations with
respect to, grants of Awards to Executives or Directors, and an Administrator other than the Board
or the Committee may grant or otherwise take actions or make determinations with respect to Awards
only to the extent such authority is delegated to such Administrator by the Committee or the Board
and only within the guidelines established by the Board or Committee. Moreover, all actions and
determinations by any Administrator are subject to the provisions of this Plan.




          (b) So long as the Company has registered and outstanding a class of equity
securities under Section 12 of the Exchange Act, to more effectively comply with various legal and
regulatory requirements the Committee should, though is not required if circumstances otherwise
suggest and such requirements are taken into account, consist of Company Directors who are
“Non-Employee Directors” as defined in Rule 16b-3 and, after the expiration of any transition
period permitted by Treasury Regulations Section 1.162-27(h)(3), who are “outside directors” as
defined in Section 162(m) of the Code. So long as the Shares are listed with Nasdaq, the Committee
shall comply with applicable Nasdaq rules and listing standards.




     4.2 Authority of the Board or the Committee. Subject to the other provisions of this Plan, the
Board or the Committee shall have the authority to:



          (a) grant Awards, including Substitute Awards;




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          (b) determine the Fair Market Value of Shares;




          (c) determine the Option Price and the Purchase Price of Awards;




          (d) select the Awardees;




          (e) determine the times Awards are granted;




          (f) determine the number of Shares subject to each Award;




          (g) determine the methods of payment that may be used to purchase Award Shares;




          (h) determine the methods of payment that may be used to satisfy withholding tax
obligations;




          (i) determine the other terms of each Award, including but not limited to the time
or times at and the conditions upon which Awards may be exercised or become vested, whether and
under what conditions an Award is assignable, whether an Option is a Nonstatutory Option or an
Incentive Stock Option, automatic cancellation of the Award if certain objective requirements
determined by the Administration are not met, and whether the Award or Award Shares are subject to
any forfeiture or other conditions;




          (j) modify or amend any Award;




          (k) authorize any person to sign any Award Agreement or other document related to
this Plan on behalf of the Company;




          (l) determine the form of any Award Agreement or other document related to this
Plan, and whether that document, including signatures, may be in electronic form;




          (m) interpret this Plan and any Award Agreement or document related to this Plan;




          (n) correct any defect, remedy any omission, or reconcile any inconsistency in this
Plan, any Award Agreement or any other document related to this Plan;




          (o) adopt, amend, and revoke rules and regulations under this Plan, including rules
and regulations relating to sub-plans and Plan addenda;




          (p) adopt, amend, and revoke special rules and procedures which may be inconsistent
with the terms of this Plan, set forth (if the Committee or Board so chooses) in sub-plans
regarding (for example) the operation and administration of this Plan and the terms of Awards, if
and to the extent necessary or useful to accommodate non-U.S. Applicable Laws and practices as they
apply to Awards and Award Shares held by, or granted or issued to, persons working or resident
outside of the United States or employed by Affiliates incorporated outside the United States;




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          (q) determine whether a transaction or event should be treated as a Change in
Control, as well as the effect of a Change of Control on Awards; and




          (r) make all other determinations the Committee or Board deems necessary or
advisable for the administration of this Plan.




     4.3 Scope of Discretion. Subject to the provisions of this Section 4.3, on all matters for which
this Plan confers the authority, right or power on the Board, the Committee, or other Administrator
to make decisions, that body may make those decisions in its sole and absolute discretion. Those
decisions will be final, binding and conclusive. In making its decisions, the Board, Committee or
other Administrator need not treat all persons eligible to receive Awards, all Awardees, all Awards
or all Award Shares the same way. Notwithstanding anything herein to the contrary, and except as
provided in Section 13.3, the discretion of the Board, Committee or other Administrator is subject
to the specific provisions and specific limitations of this Plan, as well as all rights conferred
on specific Awardees by Award Agreements and other agreements.




	5.	 	Persons Eligible to Receive Awards





     5.1 Eligible Individuals. Awards (including Substitute Awards) may be granted to, and only to,
Employees, Directors and Consultants. However, Incentive Stock Options may only be granted to
Employees, as provided in Section 7(g).



     5.2 Section 162(m) Limitation.



          (a) Options and SARs. Subject to the provisions of this Section 5.2, for so long as
the Company is a “publicly held corporation” within the meaning of Section 162(m) of the Code, no
Employee may be granted one or more Options or SARs within any fiscal year of the Company under
this Plan giving him or her the right to purchase or be issued more than 500,000 Shares under such
Options or SARs, or to receive compensation calculated with reference to more than that number of
Shares under Options and SARs, subject to adjustment pursuant to Section 10. If an Option or SAR
is cancelled without being exercised or if the Option Price of an Option is reduced, that cancelled
or repriced Option or SAR shall continue to be counted against the annual limit on Options and SARs
that may be granted to any individual under this Section 5.2. Notwithstanding anything herein to
the contrary, a new Employee of the Company or an Affiliate shall be eligible to be granted in the
fiscal year in which he or she commences employment Options and SARs giving him or her the right to purchase or be issued up to a
maximum of 1,000,000 Shares, or to receive compensation calculated with reference to that number of
Shares under such Options and SARs, subject to adjustment pursuant to Section 10.




          (b) Stock Awards. Any Stock Award intended as “qualified performance-based
compensation” within the meaning of Section 162(m) of the Code, whether granted solely under this
Plan or pursuant to the terms of any other stockholder-approved compensation plan awards which are
intended to comply with Code Section 162(m), must be granted, vest or become exercisable contingent
on the achievement of one or more Objectively Determinable Performance Conditions. The Committee
shall have the discretion to determine the time and manner of compliance with Section 162(m) of the
Code. No Employee may be granted one or




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more Stock Awards within any fiscal year of the Company
under this Plan giving him or her the right to purchase or be issued more than 500,000 Shares under
such Stock Awards, or to receive compensation calculated with reference to more than that number of
Shares under Stock Awards, subject to adjustment pursuant to Section 10.





	6.	 	Terms and Conditions of Options





     The following rules apply to all Options:



     6.1 Price. Except as otherwise provided, no Option may have a per-Share Option
Price less than the par value of a Share on the Grant Date. Except as provided in Section 10, once
an Option is granted it shall not be subject to amendment or substitution without stockholder
approval if the effect is to lower the exercise price or otherwise address a circumstance where the
fair market value of the Shares exceeds the exercise price of the Option.



     6.2 Term. No Option shall be exercisable after its Expiration Date. No Option may have an
Expiration Date that is more than ten years after its Grant Date. Additional provisions regarding
the term of Incentive Stock Options are provided in Sections 7(a) and 7(e).



     6.3 Vesting. Options shall vest and become exercisable: (a) on the Grant Date, or (b) in
accordance with a schedule related to the Grant Date, the date the Optionee’s directorship,
employment or consultancy begins, or a different date specified in the Option Agreement.
Additional provisions regarding the vesting of Incentive Stock Options are provided in Section
7(c).



     6.4 Form and Method of Payment.



          (a) The Board or Committee shall determine the acceptable form and method of payment
for exercising an Option. So long as there is no material adverse accounting consequence during
the term of the Award or at the time of exercise, the Board or Committee may require the delivery
of Shares with a Fair Market Value equal to the excess of the Fair Market Value of the aggregate
number of Shares for which the Option is being exercised over the aggregate Option Price for the
number of Shares for which the Option is being exercised. The difference between the full number of Shares covered by the exercised portion of the Award
and the number of Shares actually delivered shall be restored to the amount of Shares reserved for
issuance under Section 3.1.




          (b) Unless otherwise prohibited by the Board or Committee, acceptable forms of
payment for Option Shares can include cash, check or wire transfer, denominated in U.S. dollars
except as specified by the Administrator for non-U.S. Employees or non-U.S. sub-plans.




          (c) In addition, the Administrator may permit payment to be made by any of the
following methods:




               (i) the surrender of Shares to the Company, or the designation of Shares, in either
case whether such Shares are subject to the Option or not, that have a Fair



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Market Value on the
date of surrender to the Company equal to the Option Price of the Shares as to which the Option is
being exercised;




               (ii) provided that a public market exists for the Shares, consideration received by
the Company under a procedure under which a licensed broker-dealer advances funds on behalf of an
Optionee or sells Option Shares on behalf of an Optionee (a “Cashless Exercise Procedure”); and



               (iii) any combination of the methods of payment permitted by any paragraph of this
Section 6.4.



          (d) The Administrator may also permit any other form or method of payment for Option
Shares permitted by Applicable Law.




     6.5 Nonassignability of Options. Except as determined by the Administrator, no Option shall be
assignable or otherwise transferable by the Optionee except by will or by the laws of descent and
distribution. However, Options may be transferred and exercised in accordance with a Domestic
Relations Order, or in any manner allowed under the Form S-8 rules if so permitted by the
Administrator and may be exercised by a guardian or conservator appointed to act for the Optionee.
Incentive Stock Options may only be assigned in compliance with Section 7(h).



     6.6 Substitute Options. The Board may cause the Company to grant Substitute Options in connection
with the acquisition by the Company or an Affiliate of equity securities of any entity (including
by merger, tender offer, or other similar transaction) or of all or a portion of the assets of any
entity. Any such substitution shall be effective on the effective date of the acquisition.
Substitute Options may be Nonstatutory Options or Incentive Stock Options. Unless and to the
extent specified otherwise by the Board, Substitute Options shall have the same terms and
conditions as the options they replace, except that (subject to the provisions of Section 10)
Substitute Options shall be Options to purchase Shares rather than equity securities of the
granting entity and shall have an Option Price determined by the Board.




	7.	 	Incentive Stock Options





     The following rules apply only to Incentive Stock Options and only to the extent these rules
are more restrictive than the rules that would otherwise apply under this Plan. With the consent
of the Optionee, or where this Plan provides that an action may be taken notwithstanding any other
provision of this Plan, the Administrator may deviate from the requirements of this Section,
notwithstanding that any Incentive Stock Option modified by the Administrator will thereafter be
treated as a Nonstatutory Option.



          (a) Except as provided in Section 7(e), the Expiration Date of an Incentive Stock
Option shall not be later than ten years from its Grant Date, with the result that no Incentive
Stock Option may be exercised after the expiration of ten years from its Grant Date.




          (b) No Incentive Stock Option may be granted more than ten years from the date this
Plan was approved or amended by the Board consistent with the requirements of Section 422 of the
Code and any applicable guidance.




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          (c) Options intended to be incentive stock options under Section 422 of the Code
that are granted to any single Optionee under all incentive stock option plans of the Company and
its Affiliates, including incentive stock options granted under this Plan, may not vest at a rate
of more than $100,000 in Fair Market Value of Shares (measured on the grant dates of the options)
during any calendar year. For this purpose, an option vests with respect to a given share of stock
the first time its holder may purchase that share, notwithstanding any right of the Company to
repurchase that share. Unless the administrator of that option plan specifies otherwise in the
related agreement governing the option, this vesting limitation shall be applied by, to the extent
necessary to satisfy this $100,000 rule, treating certain stock options that were intended to be
Incentive Stock Options under Section 422 of the Code as Nonstatutory Options. The reclassification
of stock options or portions of stock options as Nonstatutory Options shall be determined by the
Company consistent with Internal Revenue Service guidance. This Section 7(c) shall not cause an
Incentive Stock Option to vest before its original vesting date or cause an Incentive Stock Option
that has already or would otherwise be vested to cease to vest or be vested.




          (d) In order for an Incentive Stock Option to be exercised for any form of payment
other than those described in Section 6.4(b), that right must be stated at the time of grant in the
Option Agreement relating to that Incentive Stock Option.




          (e) Any Incentive Stock Option granted to a Ten Percent Stockholder, must have an
Expiration Date that is not later than five years from its Grant Date, with the result that no such
Option may be exercised after the expiration of five years from the Grant Date. A “Ten Percent
Stockholder” is any person who, directly or by attribution under Section 424(d) of the Code, owns
stock possessing more than ten percent of the total combined voting power of all classes of stock
of the Company or of any Affiliate on the Grant Date.




          (f) The Option Price of an Incentive Stock Option shall never be less than the Fair
Market Value of the Shares at the Grant Date. The Option Price for the Shares covered by an
Incentive Stock Option granted to a Ten Percent Stockholder shall never be less than 110%
of the Fair Market Value of the Shares at the Grant Date.




          (g) Incentive Stock Options may be granted only to Employees.




          (h) No rights under an Incentive Stock Option may be transferred by the Optionee,
other than by will or the laws of descent and distribution. During the life of the Optionee, an
Incentive Stock Option may be exercised only by the Optionee. The Company’s compliance with a
Domestic Relations Order, or the exercise of an Incentive Stock Option by a guardian or conservator
appointed to act for the Optionee, shall not violate this Section 7(h).




          (i) An Incentive Stock Option shall be treated as a Nonstatutory Option if it
remains exercisable after, and is not exercised within, the three-month period beginning with the
Optionee’s Termination for any reason other than the Optionee’s death or disability (as defined in
Section 22(e) of the Code). In the case of the Termination of an Employee due to death, an
Incentive Stock Option shall continue to be treated as an Incentive Stock Option if it remains
exercisable after, and is not exercised within, the three month period after the Optionee’s




12









 







Termination provided it is exercised before the Expiration Date. In the case of the Termination of
the Employee due to disability, an Incentive Stock Option shall be treated as a Nonstatutory Option
if it remains exercisable after, and is not exercised within, one year after the Optionee’s
Termination.





	8.	 	Stock Appreciation Rights and Stock Awards





     8.1 Stock Appreciation Rights. The following rules apply to SARs:



          (a) General. SARs may be granted either alone, in addition to, or in tandem with
other Awards granted under this Plan. The Administrator may grant SARs to eligible participants
subject to terms and conditions not inconsistent with this Plan and determined by the
Administrator. The specific terms and conditions applicable to the Awardee shall be provided for in
the Award Agreement. SARs shall be exercisable, in whole or in part, at such times as the
Administrator shall specify in the Award Agreement. The grant or vesting of a SAR may be made
contingent on the achievement of Objectively Determinable Performance Conditions. Except as
provided in Section 10, once an SAR is granted it shall not be subject to amendment or substitution
without stockholder approval if the effect is to lower the exercise price or otherwise address a
circumstance where the fair market value of the Shares exceeds the exercise price of the SAR.




          (b) Exercise of SARs. Upon the exercise of an SAR, in whole or in part, an Awardee
shall be entitled to a payment in an amount equal to the excess of the Fair Market Value of a fixed
number of Shares covered by the exercised portion of the SAR on the date of exercise, over the Fair
Market Value of the Shares covered by the exercised portion of the SAR on the Grant Date. The
amount due to the Awardee upon the exercise of a SAR shall be paid in cash, Shares or a combination
thereof, as specified in the Award Agreement, over the period or periods specified in the Award
Agreement. An Award Agreement may place limits on the amount that may be paid over any specified period or periods upon the exercise of a SAR, on an
aggregate basis or as to any Awardee. A SAR shall be considered exercised when the Company
receives written notice of exercise in accordance with the terms of the Award Agreement from the
person entitled to exercise the SAR. If a SAR has been granted in tandem with an Option, upon the
exercise of the SAR, the number of shares that may be purchased pursuant to the Option shall be
reduced by the number of shares with respect to which the SAR is exercised.




          (c) Nonassignability of SARs. Except as determined by the Administrator, no SAR
shall be assignable or otherwise transferable by the Awardee except by will or by the laws of
descent and distribution. Notwithstanding anything herein to the contrary, SARs may be transferred
and exercised in accordance with a Domestic Relations Order or in any manner allowed under the Form
S-8 rules if so permitted by the Administrator.




          (d) Substitute SARs. The Board may cause the Company to grant Substitute SARs in
connection with the acquisition by the Company or an Affiliate of equity securities of any entity
(including by merger) or all or a portion of the assets of any entity. Any such substitution shall
be effective on the effective date of the acquisition. Unless and to the extent specified
otherwise by the Board, Substitute SARs shall have the same terms and conditions as





13









 




the awards they replace, except that (subject to the provisions of Section 10) Substitute SARs
shall be exercisable with respect to the Fair Market Value of Shares rather than with regard to the
value of equity securities of the granting entity and shall be on terms that, as determined by the
Board in its sole and absolute discretion, properly reflects the substitution.




     8.2 Stock Awards. The following rules apply to all Stock Awards:



          (a) General. The specific terms and conditions of a Stock Award applicable to the
Awardee shall be provided for in the Award Agreement. The Award Agreement shall state the number of
Shares that the Awardee shall be entitled to receive or purchase, the terms and conditions on which
the Shares shall vest, the price to be paid (if any), whether Shares are to be delivered at the
time of grant or at some deferred date specified in the Award Agreement, whether the Award is
payable solely in Shares, cash or either and, if applicable, the time within which the Awardee must
accept such offer. The offer shall be accepted by execution of the Award Agreement. The
Administrator may require that all Shares subject to a right of repurchase or risk of forfeiture be
held in escrow until such repurchase right or risk of forfeiture lapses. The grant or vesting of a
Stock Award may be made contingent on the achievement of Objectively Determinable Performance
Conditions. Total Awards under this Section 8 which are determined solely by reference to the
lapse of time shall not exceed 50% of the Shares available for grant under this Plan. Awards
subject to the limit in the immediately preceding sentence shall not include Awards which do not
vest.




          (b) Right of Repurchase. If so provided in the Award Agreement, Award Shares
acquired pursuant to a Stock Award may be subject to repurchase by the Company or an Affiliate if
not vested in accordance with the Award Agreement.




          (c) Form of Payment. If the Awardee is required to pay any amount to purchase
Shares subject to the Stock Award, then the Administrator shall determine the acceptable form and
method of payment for exercising a Stock Award. Acceptable forms of payment for all Award Shares
are cash, check or wire transfer, denominated in U.S. dollars except as specified by the
Administrator for non-U.S. sub-plans. In addition, the Administrator may permit payment to be made
by any of the methods permitted with respect to the exercise of Options pursuant to Section 6.4.




          (d) Nonassignability of Stock Awards. Except as determined by the Administrator, no
Stock Award shall be assignable or otherwise transferable by the Awardee except by will or by the
laws of descent and distribution. Notwithstanding anything to the contrary herein, Stock Awards
may be transferred and exercised in accordance with a Domestic Relations Order and in any manner
allowed under the Form S-8 rules if so permitted by the Administrator.




          (e) Substitute Stock Award. The Board may cause the Company to grant Substitute
Stock Awards in connection with the acquisition by the Company or an Affiliate of equity securities
of any entity (including by merger) or all or a portion of the assets of any entity. Unless and to
the extent specified otherwise by the Board, Substitute Stock Awards shall have
the same terms and conditions as the stock awards they replace, except that (subject to the

14









 








provisions of Section 10) Substitute Stock Awards shall be Stock Awards to purchase Shares rather
than equity securities of the granting entity and shall have a Purchase Price that, as determined
by the Board in its sole and absolute discretion, properly reflects the substitution. Any such
Substitute Stock Award shall be effective on the effective date of the acquisition.




9. Exercise of Awards




     9.1 In General. An Award shall be exercisable in accordance with this Plan and the Award
Agreement under which it is granted.



     9.2 Time of Exercise. Options and Stock Awards shall be considered exercised when the Company (or
its authorized agent) receives: (a) written (including electronic) notice of exercise from the
person entitled to exercise the Option or Stock Award, (b) full payment, or provision for payment,
in a form and method approved by the Administrator, for the Shares for which the Option or Stock
Award is being exercised, and (c) if applicable, payment, or provision for payment, in a form
approved by the Administrator, of all applicable withholding taxes due upon exercise. An Award may
not be exercised for a fraction of a Share. SARs shall be considered exercised when the Company
receives written notice of the exercise from the person entitled to exercise the SAR.



     9.3 Issuance of Award Shares. The Company shall issue Award Shares in the name of the person
properly exercising the Award. If the Awardee is that person and so requests, the Award Shares
shall be issued in the name of the Awardee and the Awardee’s spouse. The Company shall endeavor to
issue Award Shares promptly after an Award is exercised or after the Grant Date of a Stock Award,
as applicable. Until Award Shares are actually issued, as evidenced by the appropriate entry on
the stock register of the Company or its transfer agent, the Awardee will not have the rights of a
stockholder with respect to those Award Shares, even though the Awardee has completed all the steps
necessary to exercise the Award. No adjustment shall be made for any dividend, distribution, or
other right for which the record date precedes the date the Award Shares are issued, except as
provided in Section 10 or with regard to Stock Awards, except as set forth in the Award Agreement.



     9.4 Termination.



          (a) In General. Except as provided in an Award Agreement or in writing by the
Administrator, including in an Award Agreement, and as otherwise provided in Sections 9.4(b), (c),
and (d) after an Awardee’s Termination for other than Cause, the Awardee’s Awards shall be
exercisable to the extent (but only to the extent) they are vested on the date of that Termination
and only during the ninety (90) days after the Termination, but in no event after the Expiration
Date. Except as provided in an Award Agreement, or otherwise in writing by the Administrator
(including, pursuant to Section 9.4(d)(ii)), an Award shall terminate as to all Shares that
are unvested as of the Awardee’s date of Termination for any reason. Unless otherwise provided in
the Award Agreement, in the event of Termination for Cause the Award may not be exercised after the
date of Termination (even as to vested Shares). To the extent the Awardee does not exercise an
Award within the time specified for exercise, the Award shall automatically terminate.

15









 









          (b) Leaves of Absence. Unless otherwise provided in the Award Agreement, no Award
may be exercised more than three months after the beginning of a leave of absence, other than a
personal or medical leave approved by an authorized representative of the Company with employment
guaranteed upon return. Awards shall not continue to vest during a leave of absence, unless
otherwise determined by the Administrator with respect to an approved personal or medical leave
with employment guaranteed upon return.




          (c) Death or Disability. Unless otherwise provided by the Administrator, if an
Awardee’s Termination is due to death or disability (as determined by the Administrator with
respect to all Awards other than Incentive Stock Options and as defined by Section 22(e) of the
Code with respect to Incentive Stock Options), all Awards of that Awardee to the extent exercisable
at the date of that Termination may be exercised for one year after that Termination, but in no
event after the Expiration Date. In the case of Termination due to death, an Award may be
exercised as provided in Section 17. In the case of Termination due to disability, if a guardian
or conservator has been appointed to act for the Awardee and been granted this authority as part of
that appointment, that guardian or conservator may exercise the Award on behalf of the Awardee.
Death or disability occurring after an Awardee’s Termination shall not cause the Termination to be
treated as having occurred due to death or disability. To the extent an Award is not so exercised
within the time specified for its exercise, the Award shall automatically terminate.




          (d) Administrator Discretion. Notwithstanding the provisions of Section 9.4
(a)-(c), the Plan Administrator shall have complete discretion, exercisable either at the time an
Award is granted or at any time while the Award remains outstanding, to:




               (i) After considering any tax and accounting consequences of such change, extend the
period of time for which the Award is to remain exercisable, following the Awardee’s Termination,
from the limited exercise period otherwise in effect for that Award to such greater period of time
as the Administrator shall deem appropriate, but in no event beyond the Expiration Date; and/or



               (ii) Permit the Award to be exercised, during the applicable post-Termination
exercise period, not only with respect to the number of vested Shares for which such Award may be
exercisable at the time of the Awardee’s Termination but also with respect to one or more
additional installments in which the Awardee would have vested had the Awardee not been subject to
Termination.



          (e) Consulting or Employment Relationship. Nothing in this Plan or in any Award
Agreement, and no Award or the fact that an Award remains unvested or that Award Shares remain
subject to repurchase rights or other forfeiture conditions, shall: (A) interfere with
or limit the right of the Company or any Affiliate to terminate the employment or consultancy
of any Awardee at any time, whether with or without cause or reason, and with or without the
payment of severance or any other compensation or payment, or (B) interfere with the application of
any provision in any of the Company’s or any Affiliate’s charter documents or Applicable Law
relating to the election, appointment, term of office, or removal of a Director.




16









 








10. Certain Transactions and Events




     10.1 In General. Except as provided in this Section 10, the existence of outstanding Awards shall
not affect in any way the right or power of the Company or its stockholders to make or authorize
any or all adjustments, recapitalizations, reorganizations, exchanges, or other changes in the
Company’s capital structure or its business, or any merger or consolidation of the Company or any
issuance of Shares or other securities or subscription rights thereto, or any issuance of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Shares or other
securities of the Company or the rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise. Further, except as expressly provided in
this Section 10 or otherwise expressly provided for in a writing approved by the Board or
Committee, (i) the issuance by the Company of shares of stock or any class of securities
convertible into shares of stock of any class, for cash, property, labor or services, upon direct
sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares
or obligations of the Company convertible into such shares or other securities, (ii) the payment of
a dividend in property other than Shares, or (iii) the occurrence of any similar transaction, and
in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number of Shares subject to Options or other Awards theretofore
granted or the purchase or repurchase price per Share.



     10.2 Changes in Capital Structure. In the event of any stock split, reverse stock split or stock
dividend, the (a) the number and type of Shares that may be granted subject to Awards granted under
this Plan, (b) the number and type of Awards that may be granted to any individual under this Plan,
(c) the terms of any SAR, (d) the Purchase Price or repurchase price of any Stock Award, (e) the
Option Price and number and class of securities issuable under each outstanding Option, and (f) the
repurchase price of any securities substituted for Award Shares that are subject to repurchase
rights shall be adjusted proportionately in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be provided under the Awards. The specific adjustments
to be made to effectuate the intent of the preceding sentence shall be determined by the Board or
Committee, whose determination in this regard shall be final and binding on all parties. In the
event of any other change to the capital structure of the Company, the Board or Committee shall
have the discretion to determine what if any adjustments shall be made. Unless the Board or
Committee specifies otherwise, any securities issuable as a result of any such adjustments shall be
rounded down to the next lower whole security. The Board or Committee need not adopt the same
rules for each Award or each Awardee.



     10.3 Change of Control Transactions. In the event of a Change of Control, any or all outstanding
Awards shall be subject to the definitive agreement governing the Change of Control transaction.
Such transaction agreement may provide, without limitation and in a manner that is binding on all
parties, for (1) the assumption, substitution or replacement with equivalent awards of outstanding
Awards (but in each case adjusted to reflect the transaction terms) by the surviving corporation or
its parent, (2) continuation of outstanding Awards (but again adjusted to reflect the transaction
terms) by the Company if the Company is a surviving corporation, (3) accelerated vesting, or lapse
of repurchase rights or forfeiture conditions applicable to, and accelerated expiration or
termination of, the outstanding Awards, or (4) settlement of outstanding



17









 







Awards (including termination thereof) in cash. Except for adjustments to reflect the transaction terms as
referenced above or, to the extent any Award or Award Shares are subject to accelerated vesting or
lapse of restrictions approved by the Board or Committee upon specific events or conditions (and
then only to the extent such acceleration benefits are reflected in the transaction agreement, the
applicable Award Agreement or another written agreement between the participant and the Company),
any outstanding Awards that are assumed, substituted, replaced with equivalent awards or continued
shall continue following the transaction to be subject to the same vesting or other restrictions
that applied to the original Award. The Administrator need not adopt the same rules or apply the
same treatment for each Award or Awardee.



     10.4 Dissolution. Notwithstanding anything herein to the contrary, in the event of a dissolution
or liquidation of the Company, to the extent an Award has not been exercised or the Shares subject
thereto have not been issued in full prior to the earlier of the completion of the transaction or
the applicable Award Expiration Date, then outstanding Awards shall terminate immediately prior to
the transaction.



11. Award Grants to Non-Employee Directors




     11.1 General.



     Consistent with the terms of this Plan and as reflected in individual Award Agreements, the
Administrator or, if required by Applicable Law, the Board, may grant Awards to Directors who are
not Employees (“Non-Employee Directors”) on such terms and conditions as it determines, including
to provide for satisfaction of Director fee or retainer payments through issuance of Awards under
the Plan. Such Awards may be done by establishing an annual or other periodic grant program, or
may done through action taken to approve individual Awards from time to time. To the extent that
the Administrator or the Board from time to time establish an annual or other periodic grant
program for Non-Employee Directors, it may at any time amend, suspend or terminate such program
with respect to Awards that have not yet been granted, without the need for approval from any
Non-Employee Director who might otherwise have benefited from such Awards or from the stockholders.



     11.2 Non-Employee Director Award Guidelines



     Awards granted by the Board pursuant to Section 11.1 may be granted only with the approval of
the Committee or a majority of the Company Directors then serving on the Board who meet the
director independence standards of Nasdaq (or such other primary exchange or system on which Shares
are traded or quoted).



12. Tax Matters




     12.1 Tax Withholding.



          (a) General. Whenever Awards are granted, Award Shares vest, are issued or become
free of restrictions, or Awards or Award Shares are transferred, the Company may require the
Awardee to remit to the Company an amount sufficient to satisfy any applicable tax withholding
requirement, whether the related tax is imposed on the Awardee or the Company.




18









 







The Company shall have no obligation to deliver Award Shares or release Award Shares from an escrow or permit a
transfer of Award Shares until the Awardee has satisfied those tax withholding obligations. The
Awardee accepts this requirement as a condition of his or her receipt of the Award. To the extent
any payment in satisfaction of Awards is made in cash, the payment will be reduced by an amount
sufficient to satisfy all tax withholding requirements.




          (b) Method of Payment. The Awardee shall pay any required withholding using the
forms of consideration described in Section 6.4(b), except that, in the discretion of the
Administrator, the Company may also permit the Awardee to use any of the forms of payment described
in Section 6.4(c). If the Administrator permits Award Shares to be withheld from the Award to
satisfy applicable withholding obligations, the Fair Market Value of the Award Shares withheld, as
determined as of the date of withholding, shall not exceed the amount determined by the applicable
minimum statutory withholding rates to the extent the Administrator determines such limit is
necessary or advisable in light of generally accepted accounting principles.




     12.2 Reporting of Dispositions. Any holder of Option Shares acquired under an Incentive Stock
Option shall promptly notify the Administrator, following such procedures as the Administrator may
require, of the sale or other disposition of any of those Option Shares if the disposition occurs
during: (a) the longer of two years after the Grant Date of the Incentive Stock Option and one
year after the date the Incentive Stock Option was exercised, or (b) such other period as the
Administrator has established.



     12.3 Liability for Applicable Taxes.



     Regardless of any action the Company or the Awardee’s employer (the “Employer”) takes with
respect to any or all income tax, social security, payroll tax, payment on account, other
tax-related withholding or information reporting (“Tax-Related Items”), the Awardee acknowledges
and agrees that the ultimate liability for all Tax-Related Items legally due by him is and remains
the Awardee ‘s responsibility and that the Company and or the Employer (i) make no representations
nor undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of
an Award; and (ii) do not commit to structure the terms or any aspect of an Award granted hereunder
to reduce or eliminate the Awardee ‘s liability for Tax-Related Items.
The Awardee shall pay the Company or the Employer any amount of Tax-Related Items that the
Company or the Employer may be required to withhold as a result of the Awardee’s participation in
the Plan that cannot be satisfied by the means previously described. The Company may refuse to
deliver any benefit under the Plan if the Awardee fails to comply with his or her obligations in
connection with the Tax-Related Items.



13. Compliance with Law




     13.1 General. The grant of Awards and the issuance and subsequent transfer of Award Shares shall
be subject to compliance with all Applicable Law, including all applicable securities laws. Awards
may not be exercised, and Award Shares may not be transferred, in violation of Applicable Law.
Thus, for example, Awards may not be exercised or issued unless: (a) a registration statement
under the Securities Act is then in effect with respect to the related Award Shares, or (b) in the
opinion of legal counsel to the Company, those Award Shares may



19









 







be issued in accordance with an applicable exemption from the registration requirements of the Securities Act and
any other applicable securities laws. The failure or inability of the Company to obtain from any regulatory
body the authority considered by the Company’s legal counsel to be necessary or useful for the
lawful issuance of any Award Shares or their subsequent transfer shall relieve the Company of any
liability for failing to issue those Award Shares or permitting their transfer. As a condition to
the exercise of any Award or the transfer of any Award Shares, the Company may require the Awardee
to satisfy any requirements or qualifications that may be necessary or appropriate to comply with
or evidence compliance with any Applicable Law. The Company shall have no liability to any Awardee
or any party who might claim through the Awardee to the extent that the Awardee (or his or her
permitted transferee) is required to forfeit an Award, or the benefits received or to be received
under an Award, pursuant to any Applicable Law.



     13.2 Tax Matters. Notwithstanding anything to the contrary contained herein, to the extent that
the Administrator determines that any Award granted under the Plan is subject to Code Section 409A
and unless otherwise specified in the applicable Award Agreement, the Award Agreement evidencing
such Award shall incorporate the terms and conditions necessary for such Award to avoid the
consequences described in Code Section 409A(a)(1), and to the maximum extent permitted under
Applicable Law (and unless otherwise stated in the applicable Award Agreement), the Plan and the
Award Agreements shall be interpreted in a manner that results in their conforming to the
requirements of Code Section 409A(a)(2), (3) and (4) and any Department of Treasury or Internal
Revenue Service regulations or other interpretive guidance issued under Section 409A (whenever
issued, the “Guidance”). Notwithstanding anything to the contrary in this Plan (and unless the
Award Agreement provides otherwise, with specific reference to this sentence), to the extent that
an Awardee holding an Award that constitutes “deferred compensation” under Section 409A and the
Guidance is a “specified employee” (also as defined thereunder), no distribution or payment of any
amount shall be made before a date that is six months following the date of such Awardee’s
“separation from service” (as defined in Section 409A and the Guidance) or, if earlier, the date of
the Awardee’s death.



14. Amendment or Termination of this Plan or Outstanding Awards




     14.1 Amendment and Termination. The Board may at any time amend, suspend, or terminate this Plan.



     14.2 Stockholder Approval. The Company shall obtain the approval of the Company’s stockholders for
any amendment to this Plan if stockholder approval is necessary or desirable to comply with any
Applicable Law or with the requirements applicable to the grant of Awards intended to be Incentive
Stock Options; provided however that the Company shall obtain stockholder approval of any of the
following: (a) other than an increase under Section 10.2, an increase to the Shares reserved for
issuance hereunder; (b) an expansion of the class of persons eligible to receive Awards hereunder;
or (c) otherwise than as provided under Section 10, any amendment of outstanding Options or SARs
that effects a repricing of such Awards or other lowering of the original Option Price or grant
date Fair Market Value that applies to a SAR. For Stock Awards to continue to be eligible to
qualify as “performance-based compensation” under Code Section 162(m), the Company’s stockholders
must re-approve the material terms of the



20









 







performance goals included in the Plan by the date of the first stockholder meeting that occurs in the
fifth year following the year in which the
stockholders first approved the Plan. The Board may also, but need not, require that the Company’s
stockholders approve any other amendments to this Plan.



     14.3 Effect. No amendment, suspension, or termination of this Plan, and no modification of any
Award even in the absence of an amendment, suspension, or termination of this Plan, shall impair
any existing contractual rights of any Awardee unless the affected Awardee consents to the
amendment, suspension, termination, or modification. Notwithstanding anything herein to the
contrary, no such consent shall be required if the Board determines, in its sole and absolute
discretion, that the amendment, suspension, termination, or modification: (a) is required or
advisable in order for the Company, this Plan or the Award to satisfy Applicable Law, to meet the
requirements of any accounting standard or to avoid any adverse accounting treatment, or (b) in
connection with any transaction or event described in Section 10, is in the best interests of the
Company or its stockholders. The Board may, but need not, take the tax or accounting consequences
to affected Awardees into consideration in acting under the preceding sentence. Those decisions
shall be final, binding and conclusive. Termination of this Plan shall not affect the
Administrator’s ability to exercise the powers granted to it under this Plan with respect to Awards
granted before the termination of Award Shares issued under such Awards even if those Award Shares
are issued after the termination.



15. Reserved Rights




     15.1 Nonexclusivity of this Plan. This Plan shall not limit the power of the Company or any Affiliate to adopt other incentive
arrangements including, for example, the grant or issuance of stock options, stock, or other
equity-based rights under other plans.



     15.2 Unfunded Plan. This Plan shall be unfunded. Although bookkeeping accounts may be established
with respect to Awardees, any such accounts will be used merely as a convenience. The Company
shall not be required to segregate any assets on account of this Plan, the grant of Awards, or the
issuance of Award Shares. The Company and the Administrator shall not be deemed to be a trustee of
stock or cash to be awarded under this Plan. Any obligations of the Company to any Awardee shall
be based solely upon contracts entered into under this Plan, such as Award Agreements. No such
obligations shall be deemed to be secured by any pledge or other encumbrance on any assets of the
Company. Neither the Company nor the Administrator shall be required to give any security or bond
for the performance of any such obligations.



16. Special Arrangements Regarding Award Shares




     16.1 Escrow of Stock Certificates. To enforce any restrictions on Award Shares, the Administrator
may require their holder to deposit the certificates representing Award Shares, with stock powers
or other transfer instruments approved by the Administrator endorsed in blank, with the Company or
an agent of the Company to hold in escrow until the restrictions have lapsed or terminated. The
Administrator may also cause a legend or legends referencing the restrictions to be placed on the
certificates.



     16.2 Repurchase Rights.



21









 





          (a) General. If a Stock Award is subject to vesting or other forfeiture conditions,
the Company shall have the right, during such period after the Awardee’s Termination as is
specified by the Administrator to repurchase any or all of the Award Shares that were unvested or
otherwise subject to forfeiture as of the date of that Termination. The repurchase price shall be
such price as is determined by the Administrator and set forth in the Award Agreement, subject to
adjustment under Section 10. The repurchase price shall be paid in cash. The Company may assign
this right of repurchase.




          (b) Procedure. The Company or its assignee may choose to give the Awardee a written
notice of exercise of its repurchase rights under this Section 16.2. However, the Company’s
failure to give such a notice shall not affect its rights to repurchase Award Shares. The Company
must, however, tender the repurchase price during the period specified in this Section 16.2 for
exercising its repurchase rights in order to exercise such rights.




     16.3 Deferral of Award Benefits. The Administrator may in its discretion and upon such terms and
conditions as it determines appropriate permit one or more Awardees whom it selects to (a) defer
compensation payable pursuant to the terms of an Award, or (b) defer compensation arising outside, even if
in connection with, the terms of this Plan pursuant to a program that provides for deferred payment
in satisfaction of such other compensation amounts through or in connection with the issuance of
one or more Awards. Any such deferral arrangement shall be evidenced by an Award Agreement in such
form as the Administrator shall from time to time establish, and no such deferral arrangement shall
be a valid and binding obligation unless evidenced by a fully executed Award Agreement, the form of
which the Administrator has approved, including through the Administrator’s establishing a written
program (the “Program”) under this Plan to govern the form of Award Agreements participating in
such Program. Any such Award Agreement or Program shall specify the treatment of dividends or
dividend equivalent rights (if any) that apply to Awards governed thereby, and shall further
provide that any elections governing payment of amounts pursuant to such Program shall be in
writing, shall be delivered to the Company or its agent in a form and manner that complies with
Code Section 409A and the Guidance, and shall specify the amount to be distributed in settlement of
the deferral arrangement, as well as the time and form of such distribution in a manner required by
the Administrator, and shall specify the amount to be distributed in settlement of the deferral
arrangement, as well as the time and form of such distribution.



17. Beneficiaries




     An Awardee may file a written designation of one or more beneficiaries who are to receive the
Awardee’s rights under the Awardee’s Awards after the Awardee’s death. An Awardee may change such
a designation at any time by written notice. If an Awardee designates a beneficiary, the
beneficiary may exercise the Awardee’s Awards after the Awardee’s death. If an Awardee dies when
the Awardee has no living beneficiary designated under this Plan, the Company shall allow the
executor or administrator of the Awardee’s estate to exercise the Award or, if there is none, the
person entitled to exercise the Option under the Awardee’s will or the laws of descent and
distribution; provided the Company may require of any such person,



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evidence of authority to act in such capacity as it deems appropriate.
In any case, no Award may be exercised after its Expiration Date.



18. Miscellaneous




     18.1 Governing Law. This Plan, the Award Agreements and all other agreements entered into under
this Plan, and all actions taken under this Plan or in connection with Awards or Award Shares,
shall be governed by the laws of the State of Delaware.



     18.2 Determination of Value. Fair Market Value shall be determined as follows:



          (a) Listed Stock. If the Shares are traded on any established stock exchange or
quoted on a national market system, Fair Market Value shall be the closing sales price for the
Shares as quoted on that stock exchange or system for the date the value is to be determined
(the “Value Date”) as reported in The Wall Street Journal or a similar publication. If no sales
are reported as having occurred on the Value Date, Fair Market Value shall be that closing sales
price for the last preceding trading day on which sales of Shares are reported as having occurred.
If no sales are reported as having occurred during the five trading days before the Value Date,
Fair Market Value shall be the closing bid for Shares on the Value Date (or on the last preceding
date on which a closing bid for the Shares was made). If Shares are listed on multiple exchanges
or systems, Fair Market Value shall be based on sales or bid prices on the primary exchange or
system on which Shares are traded or quoted.




          (b) Stock Quoted by Securities Dealer. If Shares are regularly quoted by a
recognized securities dealer but selling prices are not reported on any established stock exchange
or quoted on a national market system, Fair Market Value shall be the mean between the high bid and
low asked prices on the Value Date. If no prices are quoted for the Value Date, Fair Market Value
shall be the mean between the high bid and low asked prices on the last preceding trading day on
which any bid and asked prices were quoted.




          (c) No Established Market. If Shares are not traded on any established stock
exchange or quoted on a national market system and are not quoted by a recognized securities
dealer, and unless otherwise required by Applicable Law, the Administrator (following guidelines
established by the Board or Committee) will determine Fair Market Value in good faith using any
reasonable valuation method. The Administrator will consider the following factors, and any others
it considers significant, in determining Fair Market Value: (i) the price at which other securities
of the Company have been issued to purchasers other than Employees, Directors, or Consultants, (ii)
the Company’s stockholder’s equity, prospective earning power, dividend-paying capacity, present
value of future cash flows, and value of tangible and intangible assets, if any, and (iii) any
other relevant factors, including the economic outlook for the Company and the Company’s industry,
the Company’s position in that industry, the Company’s goodwill and other intellectual property,
and the values of securities of other businesses in the same industry.




     18.3 Reservation of Shares. During the term of this Plan, the Company shall at all times
reserve and keep available such number of Shares as are still issuable under this Plan.



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     18.4 Electronic Communications. Any Award Agreement, notice of exercise of an Award, or other
document required or permitted by this Plan may be delivered in writing or, to the extent
determined by the Administrator, electronically. Signatures may also be electronic if permitted by
the Administrator.



     18.5 Notices. Unless the Administrator specifies otherwise, any notice to the Company under any
Option Agreement or with respect to any Awards or Award Shares shall be in writing (or, if so
authorized by Section 18.4, communicated electronically), shall be addressed to the Secretary of
the Company, and shall only be effective when received by the Secretary of the Company.




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