exv4w3



 





Exhibit 4.3




SOURCEFIRE, INC.




2007 STOCK INCENTIVE PLAN




     1. Purposes of the Plan. The purposes of this Plan are to attract and retain the best
available personnel, to provide additional incentives to Employees, Directors and Consultants and
to promote the success of the Company’s business.



     2. Definitions. The following definitions shall apply as used herein and in the
individual Award Agreements except as defined otherwise in an individual Award Agreement. In the
event a term is separately defined in an individual Award Agreement, such definition shall
supercede the definition contained in this Section 2.



          (a) “Administrator” means the Board or any of the Committees appointed to administer
the Plan.




          (b) “Affiliate” and “Associate” shall have the respective meanings ascribed to
such terms in Rule 12b-2 promulgated under the Exchange Act.




          (c) “Applicable Laws” means the legal requirements relating to the Plan and the Awards
under applicable provisions of federal securities laws, state corporate and securities laws, the
Code, the rules of any applicable stock exchange or national market system, and the rules of any
non-U.S. jurisdiction applicable to Awards granted to residents therein.




          (d) “Assumed” means that pursuant to a Corporate Transaction either (i) the Award is
expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are
expressly assumed (and not simply by operation of law) by the successor entity or its Parent in
connection with the Corporate Transaction with appropriate adjustments to the number and type of
securities of the successor entity or its Parent subject to the Award and the exercise or purchase
price thereof which at least preserves the compensation element of the Award existing at the time
of the Corporate Transaction as determined in accordance with the instruments evidencing the
agreement to assume the Award.




          (e) “Award” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted
Stock, Restricted Stock Unit or other right or benefit under the Plan.




          (f) “Award Agreement” means the written agreement evidencing the grant of an Award
executed by the Company and the Grantee, including any amendments thereto.




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




          (h) “Cause” means, with respect to the termination by the Company or a Related Entity
of the Grantee’s Continuous Service, that such termination is for “Cause” as such term (or word of
like import) is expressly defined in a then-effective written agreement between the Grantee and the
Company or such Related Entity, or in the absence of such then-effective written agreement and
definition, is based on, in the determination of the Administrator, the Grantee’s: (i) performance
of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related
Entity; (ii) dishonesty, intentional misconduct or material




1









 







breach of any agreement with the Company or a Related Entity; or (iii) commission of a crime
involving dishonesty, breach of trust, or physical or emotional harm to any person; provided,
however, that with regard to any agreement that defines “Cause” on the occurrence of or in
connection with a Corporate Transaction or a Change in Control, such definition of “Cause” shall
not apply until a Corporate Transaction or a Change in Control actually occurs.




          (i) “Change in Control” means a change in ownership or control of the Company after
the Registration Date effected through either of the following transactions:




               (i) the direct or indirect acquisition by any person or related group of persons (other than
an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a
person that directly or indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined voting power of the
Company’s outstanding securities pursuant to a tender or exchange offer made directly to the
Company’s stockholders which a majority of the Continuing Directors who are not Affiliates or
Associates of the offeror do not recommend such stockholders accept, or



               (ii) a change in the composition of the Board over a period of twelve (12) months or less such
that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one
or more contested elections for Board membership, to be comprised of individuals who are Continuing
Directors.



          (j) “Code” means the Internal Revenue Code of 1986, as amended.




          (k) “Committee” means any committee composed of members of the Board appointed by the
Board to administer the Plan.




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




          (m) “Company” means Sourcefire, Inc., a Delaware corporation, or any successor entity
that adopts the Plan in connection with a Corporate Transaction.




          (n) “Consultant” means any person (other than an Employee or a Director, solely with
respect to rendering services in such person’s capacity as a Director) who is engaged by the
Company or any Related Entity to render consulting or advisory services to the Company or such
Related Entity.




          (o) “Continuing Directors” means members of the Board who either (i) have been Board
members continuously for a period of at least twelve (12) months or (ii) have been Board members
for less than twelve (12) months and were elected or nominated for election as Board members by at
least a majority of the Board members described in clause (i) who were still in office at the time
such election or nomination was approved by the Board.




          (p) “Continuous Service” means that the provision of services to the Company or a
Related Entity in any capacity of Employee, Director or Consultant is not interrupted or
terminated. In jurisdictions requiring notice in advance of an effective termination as an




2









 







Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual
cessation of providing services to the Company or a Related Entity notwithstanding any required
notice period that must be fulfilled before a termination as an Employee, Director or Consultant
can be effective under Applicable Laws. A Grantee’s Continuous Service shall be deemed to have
terminated either upon an actual termination of Continuous Service or upon the entity for which the
Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be
considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the
Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant,
or (iii) any change in status as long as the individual remains in the service of the Company or a
Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in
the Award Agreement). An approved leave of absence shall include sick leave, military leave, or
any other authorized personal leave. For purposes of each Incentive Stock Option granted under the
Plan, if such leave exceeds three (3) months, and reemployment upon expiration of such leave is not
guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a
Non-Qualified Stock Option on the day three (3) months and one (1) day following the expiration of
such three (3) month period.




          (q) “Corporate Transaction” means any of the following transactions, provided,
however, that the Administrator shall determine under parts (iv) and (v) whether multiple
transactions are related, and its determination shall be final, binding and conclusive:




               (i) a merger or consolidation in which the Company is not the surviving entity, except for a
transaction the principal purpose of which is to change the state in which the Company is
incorporated;



               (ii) the sale, transfer or other disposition of all or substantially all of the assets of the
Company;



               (iii) the complete liquidation or dissolution of the Company;



               (iv) any reverse merger or series of related transactions culminating in a reverse merger
(including, but not limited to, a tender offer followed by a reverse merger) in which the Company
is the surviving entity but (A) the shares of Common Stock outstanding immediately prior to such
merger are converted or exchanged by virtue of the merger into other property, whether in the form
of securities, cash or otherwise, or (B) in which securities possessing more than forty percent
(40%) of the total combined voting power of the Company’s outstanding securities are transferred to
a person or persons different from those who held such securities immediately prior to such merger
or the initial transaction culminating in such merger; or



               (v) acquisition in a single or series of related transactions by any person or related group
of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or
series of related transactions that the Administrator determines shall not be a Corporate
Transaction.



3









 





          (r) “Covered Employee” means an Employee who is a “covered employee” under Section
162(m)(3) of the Code.




          (s) “Director” means a member of the Board or the board of directors of any Related
Entity.




          (t) “Disability” means as defined under the long-term disability policy of the Company
or the Related Entity to which the Grantee provides services regardless of whether the Grantee is
covered by such policy. If the Company or the Related Entity to which the Grantee provides service
does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to
carry out the responsibilities and functions of the position held by the Grantee by reason of any
medically determinable physical or mental impairment for a period of not less than ninety (90)
consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she
furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.




          (u) “Dividend Equivalent Right” means a right entitling the Grantee to compensation
measured by dividends paid with respect to Common Stock.




          (v) “Employee” means any person, including an Officer or Director, who is in the
employ of the Company or any Related Entity, subject to the control and direction of the Company or
any Related Entity as to both the work to be performed and the manner and method of performance.
The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to
constitute “employment” by the Company.




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




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




               (i) If the Common Stock is listed on one or more established stock exchanges or national
market systems, including without limitation The Nasdaq National Market or The Nasdaq SmallCap
Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on the principal exchange or system
on which the Common Stock is listed (as determined by the Administrator) on the date of
determination (or, if no closing sales price or closing bid was reported on that date, as
applicable, on the last trading date such closing sales price or closing bid was reported), as
reported in The Wall Street Journal or such other source as the Administrator deems reliable;



               (ii) If the Common Stock is regularly quoted on an automated quotation system (including the
OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the
closing sales price for such stock as quoted on such system or by such securities dealer on the
date of determination, but if selling prices are not reported, the Fair
Market Value of a share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the date of determination (or, if no such prices were reported on
that date, on the last date such prices were reported), as reported in The Wall Street Journal or
such other source as the Administrator deems reliable; or



4









 





               (iii) In the absence of an established market for the Common Stock of the type described in
(i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good
faith.



          (y) “Grantee” means an Employee, Director or Consultant who receives an Award under
the Plan.




          (z) “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code




          (aa) “Non-Qualified Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.




          (bb) “Officer” means a person who is an officer of the Company or a Related Entity
within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.




          (cc) “Option” means an option to purchase Shares pursuant to an Award Agreement
granted under the Plan.




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




          (ee) “Performance-Based Compensation” means compensation qualifying as
“performance-based compensation” under Section 162(m) of the Code.




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




          (gg) “Registration Date” means the first to occur of (i) the closing of the first sale
to the general public pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission under the Securities Act of 1933, as amended, of (A) the Common
Stock or (B) the same class of securities of a successor corporation (or its Parent) issued
pursuant to a Corporate Transaction in exchange for or in substitution of the Common Stock; and
(ii) in the event of a Corporate Transaction, the date of the consummation of the Corporate
Transaction if the same class of securities of the successor corporation (or its Parent) issuable
in such Corporate Transaction shall have been sold to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended, on or prior to the date of consummation of such Corporate
Transaction.




          (hh) “Related Entity” means any Parent or Subsidiary of the Company.




          (ii) “Replaced” means that pursuant to a Corporate Transaction the Award is replaced
with a comparable stock award or a cash incentive program of the Company, the successor entity (if
applicable) or Parent of either of them which preserves the compensation element of such Award
existing at the time of the Corporate Transaction and provides for subsequent payout in accordance
with the same (or a more favorable) vesting schedule




5









 




applicable to such Award. The determination of Award comparability shall be made by the Administrator
and its determination shall be final, binding and conclusive.




          (jj) “Restricted Stock” means Shares issued under the Plan to the Grantee for such
consideration, if any, and subject to such restrictions on transfer, rights of first refusal,
repurchase provisions, forfeiture provisions, and other terms and conditions as established by the
Administrator.




          (kk) “Restricted Stock Units” means an Award which may be earned in whole or in part
upon the passage of time or the attainment of performance criteria established by the Administrator
and which may be settled for cash, Shares or other securities or a combination of cash, Shares or
other securities as established by the Administrator.




          (ll) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor
thereto.




          (mm) “SAR” means a stock appreciation right entitling the Grantee to Shares or cash
compensation, as established by the Administrator, measured by appreciation in the value of Common
Stock.




          (nn) “Share” means a share of the Common Stock.




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




     3. Stock Subject to the Plan.



          (a) Subject to the provisions of Section 10, below, the maximum aggregate number of Shares
which may be issued pursuant to all Awards is 3,142,452 Shares, plus an annual increase to be added
on the first day of the Company’s calendar year beginning in 2008 equal to four percent (4%) of the
number of Shares outstanding as of such date or a lesser number of Shares determined by the
Administrator. Notwithstanding the foregoing, subject to the provisions of Section 10, below, of
the number of Shares specified above, the maximum aggregate number of Shares available for grant of
Incentive Stock Options shall be 3,142,452 Shares. The Shares to be issued pursuant to Awards may
be authorized, but unissued, or reacquired Common Stock.




          (b) Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or
expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes
of determining the maximum aggregate number of Shares which may be issued under the Plan. Shares
that actually have been issued under the Plan pursuant to an Award shall not be returned to the
Plan and shall not become available for future issuance under the Plan, except that if unvested
Shares are forfeited, or repurchased by the Company at the
lower of their original purchase price or their Fair Market Value at the time of repurchase,
such Shares shall become available for future grant under the Plan. To the extent not prohibited
by the listing requirements of The Nasdaq National Market (or other established stock exchange or
national market system on which the Common Stock is traded) and Applicable Law, any Shares covered
by an Award which are surrendered (i) in payment of the Award exercise or purchase




6









 




price (including pursuant to the “net exercise” of an option pursuant to Section 7(b)(v)) or (ii) in satisfaction of
tax withholding obligations incident to the exercise of an Award shall be deemed not to have been
issued for purposes of determining the maximum number of Shares which may be issued pursuant to all
Awards under the Plan, unless otherwise determined by the Administrator.




     4. Administration of the Plan.



          (a) Plan Administrator.




               (i) Administration with Respect to Directors and Officers. With respect to grants of
Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall
be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and
related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in
accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board.



               (ii) Administration With Respect to Consultants and Other Employees. With respect to
grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed,
such Committee shall continue to serve in its designated capacity until otherwise directed by the
Board. The Board may authorize one or more Officers to grant such Awards and may limit such
authority as the Board determines from time to time.



               (iii) Administration With Respect to Covered Employees. Notwithstanding the
foregoing, as of and after the date that the exemption for the Plan under Section 162(m) of the
Code expires, as set forth in Section 18 below, grants of Awards to any Covered Employee intended
to qualify as Performance-Based Compensation shall be made only by a Committee (or subcommittee of
a Committee) which is comprised solely of two or more Directors eligible to serve on a committee
making Awards qualifying as Performance-Based Compensation. In the case of such Awards granted to
Covered Employees, references to the “Administrator” or to a “Committee” shall be deemed to be
references to such Committee or subcommittee.



               (iv) Administration Errors. In the event an Award is granted in a manner inconsistent
with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant
date to the extent permitted by the Applicable Laws.



          (b) Powers of the Administrator. Subject to Applicable Laws and the provisions of the
Plan (including any other powers given to the Administrator hereunder), and
except as otherwise provided by the Board, the Administrator shall have the authority, in its
discretion:




               (i) to select the Employees, Directors and Consultants to whom Awards may be granted from time
to time hereunder;



7









 





               (ii) to determine whether and to what extent Awards are granted hereunder;



               (iii) to determine the number of Shares or the amount of other consideration to be covered by
each Award granted hereunder;



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



               (v) to determine the terms and conditions of any Award granted hereunder;



               (vi) to amend the terms of any outstanding Award granted under the Plan, provided that any
amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be
made without the Grantee’s written consent, provided, however, that an amendment or modification
that may cause an Incentive Stock Option to become a Non-Qualified Stock Option shall not be
treated as adversely affecting the rights of the Grantee;



               (vii) to construe and interpret the terms of the Plan and Awards, including without
limitation, any notice of award or Award Agreement, granted pursuant to the Plan;



               (viii) to grant Awards to Employees, Directors and Consultants employed outside the United
States on such terms and conditions different from those specified in the Plan as may, in the
judgment of the Administrator, be necessary or desirable to further the purpose of the Plan; and



               (ix) to take such other action, not inconsistent with the terms of the Plan, as the
Administrator deems appropriate.


The express grant in the Plan of any specific power to the Administrator shall not be construed as
limiting any power or authority of the Administrator; provided that the Administrator may not
exercise any right or power reserved to the Board. Any decision made, or action taken, by the
Administrator or in connection with the administration of this Plan shall be final, conclusive and
binding on all persons having an interest in the Plan.




          (c) Indemnification. In addition to such other rights of indemnification as they may
have as members of the Board or as Officers or Employees of the Company or a Related Entity,
members of the Board and any Officers or Employees of the Company or a Related Entity to whom
authority to act for the Board, the Administrator or the Company is delegated shall be defended and
indemnified by the Company to the extent permitted by law on an after-tax basis against all
reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection
with the defense of any claim, investigation, action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with the Plan, or any Award granted
hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is
approved by the Company) or paid by them in satisfaction of a judgment in any such claim,
investigation, action, suit or proceeding, except in relation to matters as to which it shall be
adjudged in such claim, investigation, action, suit or proceeding that such person is liable for




8









 




gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30)
days after the institution of such claim, investigation, action, suit or proceeding, such person
shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the
same.




     5. Eligibility. Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of
the Company or a Parent or a Subsidiary of the Company. An Employee, Director or Consultant who
has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be
granted to such Employees, Directors or Consultants who are residing in non-U.S. jurisdictions as
the Administrator may determine from time to time.



     6. Terms and Conditions of Awards.



          (a) Types of Awards. The Administrator is authorized under the Plan to award any type
of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions
of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash
or (iii) an Option, a SAR, or similar right with a fixed or variable price related to the Fair
Market Value of the Shares and with an exercise or conversion privilege related to the passage of
time, the occurrence of one or more events, or the satisfaction of performance criteria or other
conditions. Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted
Stock, Restricted Stock Units or Dividend Equivalent Rights, and an Award may consist of one such
security or benefit, or two (2) or more of them in any combination or alternative.




          (b) Designation of Award. Each Award shall be designated in the Award Agreement. In
the case of an Option, the Option shall be designated as either an Incentive Stock Option or a
Non-Qualified Stock Option. However, notwithstanding such designation, an Option will qualify as
an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of
Section 422(d) of the Code is not exceeded. The $100,000 limitation of Section 422(d) of the Code
is calculated based on the aggregate Fair Market Value of the Shares subject to Options designated
as Incentive Stock Options which become exercisable for the first time by a Grantee during any
calendar year (under all plans of the Company or any Parent or Subsidiary of the Company). For
purposes of this calculation, Incentive Stock Options shall be taken into account in the order in
which they were granted, and the Fair Market Value of the Shares shall be determined as of the
grant date of the relevant Option.




          (c) Conditions of Award. Subject to the terms of the Plan, the Administrator shall
determine the provisions, terms, and conditions of each Award including, but not limited to, the
Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form
of payment (cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance criteria
established by the Administrator may be based on any one of, or combination of, the following: (i)
increase in share price, (ii) earnings per share, (iii) total stockholder return, (iv) operating
margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on
investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow,
(xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi)
economic value added




9









 




and (xvii) market share. The performance criteria may be applicable to the Company,
Related Entities and/or any individual business units of the Company or any Related
Entity. Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.




          (d) Acquisitions and Other Transactions. The Administrator may issue Awards under the
Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant
future awards in connection with the Company or a Related Entity acquiring another entity, an
interest in another entity or an additional interest in a Related Entity whether by merger, stock
purchase, asset purchase or other form of transaction.




          (e) Deferral of Award Payment. The Administrator may establish one or more programs
under the Plan to permit selected Grantees the opportunity to elect to defer receipt of
consideration upon exercise of an Award, satisfaction of performance criteria, or other event that
absent the election would entitle the Grantee to payment or receipt of Shares or other
consideration under an Award. The Administrator may establish the election procedures, the timing
of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if
any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules
and procedures that the Administrator deems advisable for the administration of any such deferral
program.




          (f) Separate Programs. The Administrator may establish one or more separate programs
under the Plan for the purpose of issuing particular forms of Awards to one or more classes of
Grantees on such terms and conditions as determined by the Administrator from time to time.




          (g) Individual Limitations on Awards.




               (i) Individual Limit for Options and SARs. Following the date that the exemption from
application of Section 162(m) of the Code described in Section 18 (or any exemption having similar
effect) ceases to apply to Awards, the maximum number of Shares with respect to which Options and
SARs may be granted to any Grantee in any calendar year shall be 750,000 Shares. The foregoing
limitation shall be adjusted proportionately in connection with any change in the Company’s
capitalization pursuant to Section 10, below. To the extent required by Section 162(m) of the Code
or the regulations thereunder, in applying the foregoing limitation with respect to a Grantee, if
any Option or SAR is canceled, the canceled Option or SAR shall continue to count against the
maximum number of Shares with respect to which Options and SARs may be granted to the Grantee. For
this purpose, the repricing of an Option (or in the case of a SAR, the base amount on which the
stock appreciation is calculated is reduced to reflect a reduction in the Fair Market Value of the
Common Stock) shall be treated as the cancellation of the existing Option or SAR and the grant of a
new Option or SAR.



               (ii) Individual Limit for Restricted Stock and Restricted Stock Units. Following the
date that the exemption from application of Section 162(m) of the Code described in Section 18 (or
any exemption having similar effect) ceases to apply to Awards, for awards of Restricted Stock and
Restricted Stock Units that are intended to be Performance-Based Compensation, the maximum number
of Shares with respect to which such Awards may be



10









 




granted to any Grantee in any calendar year shall be 750,000 Shares. The foregoing limitation shall be
adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10, below.




               (iii) Deferral. If the vesting or receipt of Shares under an Award is deferred to a
later date, any amount (whether denominated in Shares or cash) paid in addition to the original
number of Shares subject to such Award will not be treated as an increase in the number of Shares
subject to the Award if the additional amount is based either on a reasonable rate of interest or
on one or more predetermined actual investments such that the amount payable by the Company at the
later date will be based on the actual rate of return of a specific investment (including any
decrease as well as any increase in the value of an investment).



          (h) Early Exercise. The Award Agreement may, but need not, include a provision
whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any
part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant
to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity
or to any other restriction the Administrator determines to be appropriate.




          (i) Term of Award. The term of each Award shall be the term stated in the Award
Agreement, provided, however, that the term of an Incentive Stock Option shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive Stock Option
granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any Parent or
Subsidiary of the Company, the term of the Incentive Stock Option shall be five (5) years from the
date of grant thereof or such shorter term as may be provided in the Award Agreement.
Notwithstanding the foregoing, the specified term of any Award shall not include any period for
which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the
Award.




          (j) Transferability of Awards. Incentive Stock Options 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 Grantee, only by the
Grantee. Other Awards shall be transferable (i) by will and by the laws of descent and
distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner
authorized by the Administrator. Notwithstanding the foregoing, the Grantee may designate one or
more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary
designation form provided by the Administrator.




          (k) Time of Granting Awards. The date of grant of an Award shall for all purposes be
the date on which the Administrator makes the determination to grant such Award, or such other date
as is determined by the Administrator.




11









 





     7. Award Exercise or Purchase Price, Consideration and Taxes.



          (a) Exercise or Purchase Price. The exercise or purchase price, if any, for an Award
shall be as follows:




               (i) In the case of an Incentive Stock Option:



                    (A) granted to an Employee who, at the time of the grant of such Incentive Stock Option owns
stock representing more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary of the Company, the per Share exercise price shall be not less
than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or



                    (B) granted to any Employee other than an Employee described in the preceding paragraph, the
per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value
per Share on the date of grant.



               (ii) In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not
less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.



               (iii) In the case of Awards intended to qualify as Performance-Based Compensation, the
exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant.



               (iv) In the case of SARs, the base appreciation amount shall not be less than one hundred
percent (100%) of the Fair Market Value per Share on the date of grant.



               (v) In the case of other Awards, such price as is determined by the Administrator.



               (vi) Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award
issued pursuant to Section 6(d), above, the exercise or purchase price for the Award shall be
determined in accordance with the provisions of the relevant instrument evidencing the agreement to
issue such Award.



          (b) Consideration. Subject to Applicable Laws, the consideration to be paid for the
Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be
determined by the Administrator. In addition to any other types of consideration the Administrator
may determine, the Administrator is authorized to accept as consideration for Shares issued under
the Plan the following, provided that the portion of the consideration equal to the par value of
the Shares must be paid in cash or other legal consideration permitted by the Delaware General
Corporation Law:




               (i) cash;



               (ii) check;



12









 





               (iii) surrender of Shares or delivery of a properly executed form of attestation of ownership
of Shares as the Administrator may require which have a Fair Market Value on the date of surrender
or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be
exercised;



               (iv) with respect to Options, if the exercise occurs on or after the Registration Date,
payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A)
shall provide written instructions to a Company designated brokerage firm to effect the immediate
sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the
aggregate exercise price payable for the purchased Shares and (B) shall provide written directives
to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm
in order to complete the sale transaction; or



               (v) with respect to Options, payment through a “net exercise” such that, without the payment
of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (i)
the number of Shares as to which the Option is being exercised, multiplied by (ii) a fraction, the
numerator of which is the Fair Market Value per Share (on such date as is determined by the
Administrator) less the Exercise Price per Share, and the denominator of which is such Fair Market
Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole
number of Shares);



               (vi) any combination of the foregoing methods of payment.


The Administrator may at any time or from time to time, by adoption of or by amendment to the
standard forms of Award Agreement described in Section 4(b)(iv), or by other means, grant Awards
which do not permit all of the foregoing forms of consideration to be used in payment for the
Shares or which otherwise restrict one or more forms of consideration.




          (c) Taxes. No Shares shall be delivered under the Plan to any Grantee or other person
until such Grantee or other person has made arrangements acceptable to the Administrator for the
satisfaction of any non-U.S., federal, state, or local income and employment tax withholding
obligations, including, without limitation, obligations incident to the receipt of Shares. Upon
exercise or vesting of an Award the Company shall withhold or collect from the Grantee an amount
sufficient to satisfy such tax obligations, including, but not limited to, by surrender of the
whole number of Shares covered by the Award sufficient to satisfy the minimum applicable tax
withholding obligations incident to the exercise or vesting of an Award.




     8. Exercise of Award.



          (a) Procedure for Exercise; Rights as a Stockholder.




               (i) Any Award granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator under the terms of the Plan and specified in the Award
Agreement.



               (ii) An Award shall be deemed to be exercised when written notice of such exercise has been
given to the Company in accordance with the terms of the Award by the



13









 




person entitled to exercise the Award and full payment for the Shares with respect to which
the Award is exercised has been made, including, to the extent selected, use of the broker-dealer
sale and remittance procedure to pay the purchase price as provided in Section 7(b)(iv).




          (b) Exercise of Award Following Termination of Continuous Service.




               (i) An Award may not be exercised after the termination date of such Award set forth in the
Award Agreement and may be exercised following the termination of a Grantee’s Continuous Service
only to the extent provided in the Award Agreement.



               (ii) Where the Award Agreement permits a Grantee to exercise an Award following the
termination of the Grantee’s Continuous Service for a specified period, the Award shall terminate
to the extent not exercised on the last day of the specified period or the last day of the original
term of the Award, whichever occurs first.



               (iii) Any Award designated as an Incentive Stock Option to the extent not exercised within the
time permitted by law for the exercise of Incentive Stock Options following the termination of a
Grantee’s Continuous Service shall convert automatically to a Non-Qualified Stock Option and
thereafter shall be exercisable as such to the extent exercisable by its terms for the period
specified in the Award Agreement.



     9. Conditions Upon Issuance of Shares.



          (a) If at any time the Administrator determines that the delivery of Shares pursuant to the
exercise, vesting or any other provision of an Award is or may be unlawful under Applicable Laws,
the vesting or right to exercise an Award or to otherwise receive Shares pursuant to the terms of
an Award shall be suspended until the Administrator determines that such delivery is lawful and
shall be further subject to the approval of counsel for the Company with respect to such
compliance. The Company shall have no obligation to effect any registration or qualification of
the Shares under federal or state laws.




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




     10. Adjustments Upon Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each outstanding Award, and the number
of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet
been granted or which have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, the maximum number of Shares with respect to which Awards may be granted to any
Grantee in any calendar year, as well as any other terms that the Administrator determines require
adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other
increase or decrease in the number of issued Shares effected without receipt of consideration by
the Company, or (iii) any other transaction with respect to



14









 




Common Stock including a corporate merger, consolidation, acquisition of property or stock,
separation (including a spin-off or other distribution of stock or property), reorganization,
liquidation (whether partial or complete) or any similar transaction; provided, however that
conversion of any convertible securities of the Company shall not be deemed to have been “effected
without receipt of consideration.” Any such adjustments to outstanding Awards will be effected in
a manner that precludes the material enlargement of rights and benefits under such Awards.
Adjustments, if any, and any determinations or interpretations, including any determination of
whether a distribution is other than a normal cash dividend, shall be made by the Administrator and
its determination shall be final, binding and conclusive. In connection with the foregoing
adjustments, the Administrator may, in its discretion, prohibit the exercise of Awards or other
issuance of Shares, cash or other consideration pursuant to Awards during certain periods of time.
Except as the Administrator determines, no issuance by the Company of shares of any class, or
securities convertible into shares of any class, shall affect, and no adjustment by reason hereof
shall be made with respect to, the number or price of Shares subject to an Award.




     11. Corporate Transactions and Changes in Control.



          (a) Termination of Award to Extent Not Assumed in Corporate Transaction. Effective
upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall
terminate. However, all such Awards shall not terminate to the extent they are Assumed in
connection with the Corporate Transaction.




          (b) Acceleration of Award Upon Corporate Transaction or Change in Control. The
Administrator shall have the authority, exercisable either in advance of any actual or anticipated
Corporate Transaction or Change in Control or at the time of an actual Corporate Transaction or
Change in Control and exercisable at the time of the grant of an Award under the Plan or any time
while an Award remains outstanding, to provide for the full or partial automatic vesting and
exercisability of one or more outstanding unvested Awards under the Plan and the release from
restrictions on transfer and repurchase or forfeiture rights of such Awards in connection with a
Corporate Transaction or Change in Control, on such terms and conditions as the Administrator may
specify. The Administrator also shall have the authority to condition any such Award vesting and
exercisability or release from such limitations upon the subsequent termination of the Continuous
Service of the Grantee within a specified period following the effective date of the Corporate
Transaction or Change in Control. The Administrator may provide that any Awards so vested or
released from such limitations in connection with a Change in Control, shall remain fully
exercisable until the expiration or sooner termination of the Award.




          (c) Effect of Acceleration on Incentive Stock Options. Any Incentive Stock Option
accelerated under this Section 11 in connection with a Corporate Transaction or Change in Control
shall remain exercisable as an Incentive Stock Option under the Code only to the extent the
$100,000 dollar limitation of Section 422(d) of the Code is not exceeded.




     12. Effective Date and Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board or its approval by the stockholders of the Company. It shall
continue in effect for a term of ten (10) years unless sooner terminated. Subject to



15









 




Section 17, below, and Applicable Laws, Awards may be granted under the Plan upon its becoming
effective.




     13. Amendment, Suspension or Termination of the Plan.



          (a) The Board may at any time amend, suspend or terminate the Plan; provided, however, that no
such amendment shall be made without the approval of the Company’s stockholders to the extent such
approval is required by Applicable Laws.




          (b) No Award may be granted during any suspension of the Plan or after termination of the
Plan.




          (c) No suspension or termination of the Plan (including termination of the Plan under Section
11, above) shall adversely affect any rights under Awards already granted to a Grantee.




     14. Reservation of Shares.



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




          (b) The inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority shall not have been
obtained.




     15. No Effect on Terms of Employment/Consulting Relationship. The Plan shall not
confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it
interfere in any way with his or her right or the right of the Company or any Related Entity to
terminate the Grantee’s Continuous Service at any time, with or without Cause, and with or without
notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee
who is employed at will is in no way affected by its determination that the Grantee’s Continuous
Service has been terminated for Cause for the purposes of this Plan.



     16. No Effect on Retirement and Other Benefit Plans. Except as specifically provided
in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be
deemed compensation for purposes of computing benefits or contributions under any retirement plan
of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the availability or amount of
benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare
Plan” under the Employee Retirement Income Security Act of 1974, as amended.



     17. Stockholder Approval. The grant of Incentive Stock Options under the Plan shall
be subject to approval by the stockholders of the Company within twelve (12) months before or after
the date the Plan is adopted excluding Incentive Stock Options issued in substitution for
outstanding Incentive Stock Options pursuant to Section 424(a) of the Code. Such stockholder



16









 




approval shall be obtained in the degree and manner required under Applicable Laws. The
Administrator may grant Incentive Stock Options under the Plan prior to approval by the
stockholders, but until such approval is obtained, no such Incentive Stock Option shall be
exercisable. In the event that stockholder approval is not obtained within the twelve (12) month
period provided above, all Incentive Stock Options previously granted under the Plan shall be
exercisable as Non-Qualified Stock Options.




     18. Effect of Section 162(m) of the Code. Section 162(m) of the Code does not apply
to the Plan prior to the Registration Date. Following the Registration Date, the Plan, and all
Awards issued thereunder, are intended to be exempt from the application of Section 162(m) of the
Code, which restricts under certain circumstances the Federal income tax deduction for compensation
paid by a public company to named executives in excess of $1 million per year. The exemption is
based on Treasury Regulation Section 1.162-27(f), in the form existing on the effective date of the
Plan, with the understanding that such regulation generally exempts from the application of Section
162(m) of the Code compensation paid pursuant to a plan that existed before a company becomes
publicly held. Under such Treasury Regulation, this exemption is available to the Plan for the
duration of the period that lasts until the earlier of (i) the expiration of the Plan, (ii) the
material modification of the Plan, (iii) the exhaustion of the maximum number of shares of Common
Stock available for Awards under the Plan, as set forth in Section 3(a), (iv) the first meeting of
stockholders at which directors are to be elected that occurs after the close of the third calendar
year following the calendar year in which the Company first becomes subject to the reporting
obligations of Section 12 of the Exchange Act, or (v) such other date required by Section 162(m) of
the Code and the rules and regulations promulgated thereunder. To the extent that the
Administrator determines as of the date of grant of an Award that (i) the Award is intended to
qualify as Performance-Based Compensation and (ii) the exemption described above is no longer
available with respect to such Award, such Award shall not be effective until any stockholder
approval required under Section 162(m) of the Code has been obtained.



     19. Unfunded Obligation. Grantees shall have the status of general unsecured
creditors of the Company. Any amounts payable to Grantees pursuant to the Plan shall be unfunded
and unsecured obligations for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974, as amended. Neither the Company nor any Related Entity
shall be required to segregate any monies from its general funds, or to create any trusts, or
establish any special accounts with respect to such obligations. The Company shall retain at all
times beneficial ownership of any investments, including trust investments, which the Company may
make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance
of any trust or any Grantee account shall not create or constitute a trust or fiduciary
relationship between the Administrator, the Company or any Related Entity and a Grantee, or
otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any
assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or
any Related Entity for any changes in the value of any assets that may be invested or reinvested by
the Company with respect to the Plan.



     20. Construction. Captions and titles contained herein are for convenience only and
shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise
indicated by the context, the singular shall include the plural and the plural shall



17









 




include the singular. Use of the term “or” is not intended to be exclusive, unless the
context clearly requires otherwise.




-oOo-





18