Exhibit 10.14


 


UTSTARCOM,
INC.


 


2006
EQUITY INCENTIVE PLAN


 


(As
Amended and Restated February 18, 2009)


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(b)                                 “Affiliate” means any corporation or
any other entity (including, but not limited to, partnerships and joint
ventures) controlling, controlled by, or under common control with the Company.


 


(c)                                  “Annual
Revenue” means the Company’s or a business unit’s net sales for the Performance
Period, determined in accordance with generally accepted accounting principles;
provided, however, that prior to the Performance Period, the Administrator
shall determine whether any significant item(s) shall be excluded or
included from the calculation of Annual Revenue with respect to one or more
Participants.


 


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


 


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


 














 


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


 


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


 


(h)                                 “Cash
Collections” means the actual cash or other freely negotiable
consideration, in any currency, received in satisfaction of accounts receivable
created by the sale of any Company products or services.


 


(i)                                     “Change
in Control”  Before the February 18,
2009 amendment and restatement of the Plan, Change in Control means the
occurrence of any of the following events means the occurrence of any of the
following events:


 


(i)            Any “person” (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial
owner” (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company’s then outstanding
voting securities;


 


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


 


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


 


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


 


On or after the February 18,
2009 amendment and restatement of the Plan, Change in Control means the
occurrence of any of the following events:


 


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


 


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


 


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


 


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


 


Notwithstanding the
foregoing provisions of this definition, a transaction shall not be deemed a
Change in Control unless the transaction qualifies as a change in control event
within the meaning of Code Section 409A.


 


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


 


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


 


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


 


(m)                               “Company”
means UTStarcom, Inc., a Delaware corporation, or any successor thereto.


 


(n)                                 “Consultant”
means any person, including an advisor, engaged by the Company or its
Affiliates to render services to such entity.


 


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(o)           “Customer Satisfaction MBOs”
means as to any Participant, the objective and measurable individual goals set
by a “management by objectives” process and approved by the Administrator,
which goals relate to the satisfaction of external or internal customer
requirements.


 


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


 


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


 


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


 


(s)           “Earnings Per Share” means as
to any Performance Period, the Company’s Net Income or a business unit’s Pro
Forma Net Income, divided by a weighted average number of Shares outstanding
and dilutive common equivalent Shares deemed outstanding.


 


(t)            “Employee” means any person,
including Officers and Directors, employed by the Company or its Affiliates.  Neither service as a Director nor payment of
a director’s fee by the Company will be sufficient to constitute “employment”
by the Company.


 


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


 


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


 


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


 


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


 


(y)           “Net Income” means as to any Performance
Period, the income after taxes of the Company determined in accordance with generally
accepted accounting principles, provided that prior to the Performance Period,
the Administrator shall determine whether any significant item(s) shall be
included or excluded from the calculation of Net Income with respect to one or
more participants.


 


(z)            “New Orders” means as to any Performance
Period, the firm orders for a system, product, part, or service that are being
recorded for the first time as defined in the Company’s order recognition
policy.


 


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


 


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


 


(cc)         “Operating Profit” means as to
any Performance Period, the difference between revenue and related costs and
expenses, excluding income derived from sources other than regular activities
and before income deductions.


 


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


 


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


 


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


 


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


 


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


 


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


 


(jj)           “Performance Unit” means an
Award which may be earned in whole or in part upon attainment of Performance
Goals or other vesting criteria as the Administrator may determine and which
may be settled for cash, Shares or other securities or a combination of the
foregoing pursuant to Section 10.


 


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


 


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


 


(mm)       “Pro Forma Net Income” means as to
any business unit for any Performance Period, the Net Income of such business
unit, minus allocations of designated corporate expenses.


 


(nn)         “Product Shipments” means as to
any Performance Period, the quantitative and measurable number of units of a
particular product that shipped during such Performance Period.


 


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


 


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


 


(qq)         “Return on Designated Assets”
means as to any Performance Period, the Pro Forma Net Income of a business
unit, divided by the average of beginning and ending business unit designated
assets, or Net Income of the Company, divided by the average of beginning and ending
designated corporate assets.


 


(rr)           “Return on Equity” means, as
to any Performance Period, the percentage equal to the value of the Company’s
or any business unit’s common stock investments at the end of such Performance
Period, divided by the value of such common stock investments at the start of
such Performance Period, excluding any common stock investments so designated
by the Administrator.


 


(ss)         “Return on Sales” means as to
any Performance Period, the percentage equal to the Company’s Net Income or the
business unit’s Pro Forma Net Income, divided by the Company’s or the business
unit’s Annual Revenue.


 


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


 


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


 


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


 


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


 


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


 


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


 


(zz)          “Successor Corporation” has the
meaning given to such term in Section 14(c) of the Plan.


 


3.                                       Stock Subject to the Plan.


 


(a)           Stock Subject to the Plan.  Subject to the provisions of Section 14 of the Plan, the maximum aggregate
number of Shares that may be awarded and sold under the Plan is 4,500,000
Shares plus (i) any
Shares that, as of the date of stockholder approval of this Plan, have been
reserved but not issued pursuant to any awards granted under the Company’s 1997
Stock Plan (the “1997 Plan”), the Company’s Amended 2001 Director Option
Plan (the “2001 Plan”), and the Company’s 2003 Non-Statutory Stock
Option Plan (the “2003 Plan”) and are not subject to any awards granted
thereunder, and (ii) any Shares subject to stock options or similar awards
granted under the 1997 Plan, the 2001 Plan, and the 2003 Plan that expire or otherwise
terminate without 


 


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having been exercised in
full and Shares issued pursuant to awards granted under the 1997 Plan, the 2001
Plan, and the 2003 Plan that are forfeited to or repurchased by the Company.  The Shares may be authorized, but unissued,
or reacquired Common Stock.


 


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


 


4.                                       Administration
of the Plan.


 


(a)                                  Procedure.


 


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


 


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


 


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


 


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


 


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


 


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(i)            to determine the Fair Market Value;


 


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


 


(iii)          to determine the terms and
conditions, not inconsistent with the terms of the Plan, of any Award granted
hereunder;


 


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


 


(v)           to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating
to sub-plans established for the purpose of satisfying applicable foreign laws;


 


(vi)          to modify or amend each Award (subject
to Section 19(c) of
the Plan).  Notwithstanding the previous
sentence, the Administrator may not modify or amend an Option or Stock
Appreciation Right to reduce the exercise price of such Option or Stock
Appreciation Right after it has been granted (except for adjustments made
pursuant to Section 14), and neither may the Administrator cancel any
outstanding Option or Stock Appreciation Right and immediately replace it with a
new Option or Stock Appreciation Right with a lower exercise price;


 


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


 


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


 


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


 


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


 


5.                                       Eligibility.  Nonstatutory Stock Options, Restricted Stock,
Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance
Shares and such other cash or stock awards as the Administrator determines may
be granted to Service Providers.  Incentive Stock Options may be granted only
to employees of the Company or any Parent or Subsidiary of the Company.


 


6.                                       Stock
Options.


 


(a)                                  Limitations.  Each Option will be designated in the Award
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.  However, notwithstanding such designation, to
the extent that the aggregate Fair Market Value of the Shares with respect to
which Incentive Stock Options are exercisable for the first time by the
Participant during any calendar year 


 


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(under all plans of the Company and any Parent or
Subsidiary) exceeds $100,000, such Options will be treated as Nonstatutory
Stock Options.  For purposes of this Section 6(a),
Incentive Stock Options will be taken into account in the order in which they
were granted.  The Fair Market Value of
the Shares will be determined as of the time the Option with respect to such
Shares is granted.


 


(b)                                 Number
of Shares.  The Administrator will
have complete discretion to determine the number of Options granted to any
Participant, provided that during any Fiscal Year, no Participant will be
granted Options covering more than 1,000,000 Shares.  Notwithstanding the foregoing limitation, in
connection with a Participant’s initial service as an Employee, an Employee may
be granted Options covering up to an additional 2,000,000 Shares.


 


(c)                                  Term
of Option.  The Administrator will
determine the term of each Option in its sole discretion.  Any Option granted under the Plan will not be
exercisable after the expiration of seven (7) years from the date of grant
or such shorter term as may be provided in the Award Agreement.  Moreover, in the case of an Incentive Stock
Option granted to a Participant who, at the time the Incentive Stock Option is granted,
owns stock representing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option will be five (5) years
from the date of grant or such shorter term as may be provided in the Award
Agreement.


 


(d)                                 Option
Exercise Price and Consideration.


 


(i)            Exercise Price.  The per share exercise price for the Shares
to be issued pursuant to exercise of an Option will be determined by the
Administrator, but will
be no less than 100% of the Fair Market Value per Share on the date of
grant.  In addition, in the case
of an Incentive Stock Option granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price will be no less than 110% of
the Fair Market Value per Share on the date of grant.  Notwithstanding
the foregoing provisions of this Section 6(c), Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a transaction described in, and in a manner
consistent with, Section 424(a) of the Code.  The Administrator may not modify or amend an
Option to reduce the exercise price of such Option after it has been granted
(except for adjustments made pursuant to Section 14 of the Plan) nor may
the Administrator cancel any outstanding Option and replace it with a new
Option, Stock Appreciation Right, or other Award with a lower exercise price,
unless, in either case, such action is approved by the Company’s stockholders.


 


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


 


(iii)          Form of Consideration.  The Administrator will determine the
acceptable form(s) of consideration for exercising an Option, including
the method of payment, to the extent permitted by Applicable Laws.


 


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(e)                                  Exercise
of Option.


 


(i)            Procedure for Exercise; Rights as
a Stockholder.  Any Option granted
hereunder will be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set
forth in the Award Agreement.  An Option
may not be exercised for a fraction of a Share.


 


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


 


(ii)           Termination of Relationship as a
Service Provider.  If a Participant
ceases to be a Service Provider, other than upon the Participant’s termination
as the result of the Participant’s death or Disability, the Participant may
exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Award Agreement). 
In the absence of a specified time in the Award Agreement, the Option
will remain exercisable for three (3) months following the Participant’s
termination.  Unless otherwise provided
by the Administrator, if on the date of termination the Participant is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will revert to the Plan. 
If after termination the Participant does not exercise his or her Option
within the time specified by the Administrator, the Option will terminate, and
the Shares covered by such Option will revert to the Plan.


 


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


 


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


 


10

















 


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


 


(v)           Other Termination.  A Participant’s Award Agreement may also
provide that if the exercise of the Option following the termination of
Participant’s status as a Service Provider (other than upon the Participant’s
death or Disability) would result in liability under Section 16(b), then
the Option will terminate on the earlier of (A) the expiration of the term
of the Option set forth in the Award Agreement, or (B) the 10th day after
the last date on which such exercise would result in such liability under Section 16(b).  Finally, a Participant’s Award Agreement may
also provide that if the exercise of the Option following the termination of
the Participant’s status as a Service Provider (other than upon the Participant’s
death or disability) would be prohibited at any time solely because the
issuance of Shares would violate the registration requirements under the
Securities Act, then the Option will terminate on the earlier of (A) the
expiration of the term of the Option, or (B) the expiration of a period of
three (3) months after the termination of the Participant’s status as a
Service Provider during which the exercise of the Option would not be in
violation of such registration requirements.


 


7.                                       Stock
Appreciation Rights.


 


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


 


(b)                                 Number
of Shares.  The Administrator will
have complete discretion to determine the number of Stock Appreciation Rights
granted to any Participant, provided that during any Fiscal Year, no
Participant will be granted Stock Appreciation Rights covering more than 1,000,000
Shares.  Notwithstanding the foregoing
limitation, in connection with a Participant’s initial service as an Employee,
an Employee may be granted Stock Appreciation Rights covering up to an
additional 2,000,000 Shares.


 


(c)                                  Exercise
Price and Other Terms.  The
Administrator, subject to the provisions of the Plan, will have complete
discretion to determine the terms and conditions of Stock Appreciation Rights
granted under the Plan, provided, however, that the exercise price will be not less than 100% of the Fair Market Value
of a Share on the date of grant.  The
Administrator may not modify or amend a Stock Appreciation Right to reduce the
exercise price of such Stock Appreciation Right after it has been granted
(except for adjustments made pursuant to Section 14 of the Plan) nor may
the Administrator cancel any outstanding Stock Appreciation Right and replace
it with a new Stock Appreciation Right, Option, or other Award with a lower
exercise price, unless, in either case, such action is approved by the Company’s
stockholders.


 


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


 


11

















 


(e)                                  Expiration
of Stock Appreciation Rights.  A
Stock Appreciation Right granted under the Plan will expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the
Award Agreement.  Notwithstanding the foregoing,
the rules of Section 6(e) also will apply to Stock Appreciation
Rights.


 


(f)                                    Payment
of Stock Appreciation Right Amount. 
Upon exercise of a Stock Appreciation Right, a Participant will be
entitled to receive payment from the Company in an amount determined by
multiplying:


 


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


 


(ii)           The number of Shares with respect to
which the Stock Appreciation Right is exercised.


 


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


 


8.                                       Restricted
Stock.


 


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


 


(b)                                 Restricted
Stock Agreement.  Each Award of
Restricted Stock will be evidenced by an Award Agreement that will specify the
Period of Restriction, the number of Shares granted, and such other terms and
conditions as the Administrator, in its sole discretion, will determine.  Notwithstanding the foregoing sentence,
during any Fiscal Year no Participant will receive more than an aggregate of 300,000
Shares of Restricted Stock; provided, however, that in connection with a
Participant’s initial service as an Employee, an Employee may be granted an
aggregate of up to an additional 600,000 Shares of Restricted Stock.  Unless the Administrator determines
otherwise, Shares of Restricted Stock will be held by the Company as escrow
agent until the restrictions on such Shares have lapsed.


 


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


 


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


 


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


 


12

















 


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


 


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


 


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


 


9.                                       Restricted
Stock Units.


 


(a)           Grant.  Restricted Stock Units may be granted at any
time and from time to time as determined by the Administrator.  Each Restricted Stock Unit grant will be
evidenced by an Award Agreement that will specify such other terms and
conditions as the Administrator, in its sole discretion, will determine,
including all terms, conditions, and restrictions related to the grant, the
number of Restricted Stock Units and the form of payout, which, subject to Section 9(d),
may be left to the discretion of the Administrator.  Notwithstanding anything to the contrary in
this subsection (a), during any Fiscal Year of the Company, no Participant will
receive more than an aggregate of 300,000 Restricted Stock Units; provided,
however, that in connection with a Participant’s initial service as an
Employee, an Employee may be granted an aggregate of up to an additional 600,000
Restricted Stock Units.


 


(b)           Vesting Criteria and Other Terms.  The Administrator will set vesting criteria
in its discretion, which, depending on the extent to which the criteria are
met, will determine the number of Restricted Stock Units that will be paid out
to the Participant.  After the grant of
Restricted Stock Units, the Administrator, in its sole discretion, may reduce
or waive any restrictions for such Restricted Stock Units.  Each Award of Restricted Stock Units will be
evidenced by an Award Agreement that will specify the vesting criteria, and
such other terms and conditions as the Administrator, in its sole discretion,
will determine.


 


(c)           Earning Restricted Stock Units.  Upon meeting the applicable vesting criteria,
the Participant will be entitled to receive a payout as specified in the Award
Agreement.  Notwithstanding the
foregoing, at any time after the grant of Restricted Stock Units, the
Administrator, in its sole discretion, may reduce or waive any vesting criteria
that must be met to receive a payout.


 


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


 


13

















 


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


 


10.                                 Performance
Units and Performance Shares.


 


(a)           Grant of Performance Units/Shares.  Performance Units and Performance Shares may
be granted to Service Providers at any time and from time to time, as will be
determined by the Administrator, in its sole discretion.  The Administrator will have complete
discretion in determining the number of Performance Units/Shares granted to
each Participant provided that during any Fiscal Year, (a) no Participant
will receive Performance Units having an initial value greater than $2,000,000,
and (b) no Participant will receive more than 300,000 Performance
Shares.  Notwithstanding the foregoing
limitation, in connection with a Participant’s initial service as an Employee,
an Employee may be granted up to an additional 600,000 Performance Shares and
additional Performance Units having an initial value up to $2,000,000.


 


(b)           Value of Performance Units/Shares.  Each Performance Unit will have an initial
value that is established by the Administrator on or before the date of
grant.  Each Performance Share will have
an initial value equal to the Fair Market Value of a Share on the date of
grant.


 


(c)           Performance Objectives and Other
Terms.  The Administrator will set
performance objectives or other vesting provisions (including, without
limitation, continued status as a Service Provider) in its discretion which,
depending on the extent to which they are met, will determine the number or
value of Performance Units/Shares that will be paid out to the Participant.  The Administrator may set performance
objectives based upon the achievement of Company-wide, divisional, or
individual goals, or any other basis determined by the Administrator in its
discretion.  Each Award of Performance
Units/Shares will be evidenced by an Award Agreement that will specify the
Performance Period, and such other terms and conditions as the Administrator,
in its sole discretion, will determine.


 


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


 


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


 


14

















 


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


 


11.                                 Performance
Goals.  The granting and/or vesting
of Awards of Restricted Stock, Restricted Stock Units, Performance Shares and
Performance Units and other incentives under the Plan may be made subject to
the attainment of performance goals relating to one or more business criteria
within the meaning of Section 162(m) of the Code and may provide for
a targeted level or levels of achievement (“Performance Goals”) including one
or more of the following measures: (a) Annual Revenue, (b) Cash
Collections, (c) Customer Satisfaction MBOs, (d) Earnings Per Share, (e) Net
Income, (f) New Orders, (g) Operating Profit, (h) Pro Forma Net
Income, (i) Return on Designated Assets, (j) Return on Equity, (k) Return
on Sales, and (l) Product Shipments. 
Any Performance Goals may be used to measure the performance of the
Company as a whole or a business unit of the Company and may be measured
relative to a peer group or index.  The
Performance Goals may differ from Participant to Participant and from Award to
Award.  Any criteria used may be (i) measured
in absolute terms, (ii) compared to another company or companies, (iii) measured
against the performance of the Company as a whole or a segment of the Company
and/or (iv) measured on a pre-tax or post-tax basis (if applicable).  Prior to the Determination Date, the
Administrator will determine whether any significant element(s) will be
included in or excluded from the calculation of any Performance Goal with
respect to any Participant.


 


12.                                 Leaves
of Absence/Transfer Between Locations. 
Unless the Administrator provides otherwise, vesting of Awards granted
hereunder will be suspended during any unpaid leave of absence.  A Service Provider will not cease to be an
Employee in the case of (i) any leave of absence approved by the Company
or (ii) transfers between locations of the Company or between the Company and
its Affiliates.  For purposes of
Incentive Stock Options, no such leave may exceed ninety (90) days, unless
reemployment upon expiration of such leave is guaranteed by statute or
contract.  If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed,
then three (3) months following the ninety-first (91st) day of such leave any Incentive Stock
Option held by the Participant will cease to be treated as an Incentive Stock
Option and will be treated for tax purposes as a Nonstatutory Stock Option.


 


13.                                 Transferability
of Awards.  Unless determined
otherwise by the Administrator, an Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or
by the laws of descent or distribution and may be exercised, during the
lifetime of the Participant, only by the Participant.  With the approval of the Administrator, a
Participant may, in a manner specified by the Administrator, (a) transfer
an Award to a Participant’s spouse or former spouse pursuant to a
court-approved domestic relations order which relates to the provision of child
support, alimony payments or marital property rights, and (b) transfer an
Option by bona fide gift and not for any consideration, to (i) a member or
members of the Participant’s immediate family, (ii) a trust established
for the exclusive benefit of the Participant and/or member(s) of the
Participant’s immediate family, (iii) a partnership, limited liability
company of other entity whose only partners or members are the Participant
and/or member(s) of the Participant’s immediate family, or (iv) a
foundation in which the Participant and/or member(s) of the Participant’s
immediate family control the management of the foundation’s assets.  For purposes of this Section 13, “immediate
family” shall mean the Participant’s spouse, former spouse, children,
grandchildren, parents, grandparents, siblings, nieces, nephews, parents-in-law,
sons-in-law, daughters-in-law, 


 


15

















 


brothers-in-law,
sisters-in-law, including adoptive or step relationships and any person sharing
the Participant’s household (other than as a tenant or employee).


 


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


 


(a)           Adjustments.  In the event that any dividend
or other distribution (whether in the form of cash, Shares, other securities,
or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other
change in the corporate structure of the Company affecting the Shares occurs, the
Administrator, in order to prevent diminution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, shall adjust
the number and class of Shares that may be delivered under the Plan and/or the
number, class, and price of Shares covered by each outstanding Award, and
the numerical Share limits set forth in Sections 3, 6, 7, 8, 9 and 10.


 


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


 


(c)           Change in Control.  In the event of a Change in Control, each
outstanding Award will be assumed or an equivalent option or right substituted
by the successor corporation or a Parent or Subsidiary of the successor
corporation (the “Successor Corporation”).  In the event that the Successor Corporation
refuses to assume or substitute for the Award, the Participant will fully vest
in and have the right to exercise all of his or her outstanding Options and
Stock Appreciation Rights, including Shares as to which such Awards would not
otherwise be vested or exercisable, all restrictions on Restricted Stock will
lapse, and, with respect to Restricted Stock Units, Performance Shares and
Performance Units, all Performance Goals or other vesting criteria will be
deemed achieved at target levels and all other terms and conditions met.  In addition, if the Successor Corporation
refuses to assume or substitute an Option or Stock Appreciation Right in the
event of a Change in Control, the Administrator will notify the Participant in
writing or electronically that the Option or Stock Appreciation Right will be
fully vested and exercisable for a period of time determined by the
Administrator in its sole discretion, and the Option or Stock Appreciation
Right will terminate upon the expiration of such period.


 


For the purposes of this
subsection (c), an Award will be considered assumed if, following the Change in
Control, the Award confers the right to purchase or receive, for each Share
subject to the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, or other securities or property) or, in the
case of a Stock Appreciation Right upon the exercise of which the Administrator
determines to pay cash or a Performance Share or Performance Unit which the
Administrator can determine to pay in cash, the fair market value of the
consideration received in the merger or Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the Change in Control is not
solely common stock of the Successor Corporation, the Administrator may, with
the consent of the Successor Corporation, provide for the consideration to be
received upon the exercise of an Option or Stock Appreciation Right or upon the



 


16

















 


payout of a Restricted Stock
Unit, Performance Share or Performance Unit, for each Share subject to such
Award (or in the case of an Award settled in cash, the number of implied shares
determined by dividing the value of the Award by the per share consideration
received by holders of Common Stock in the Change in Control), to be solely
common stock of the Successor Corporation equal in fair market value to the per
share consideration received by holders of Common Stock in the Change in
Control.


 


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


 


15.                                 Tax
Withholding


 


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


 


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


 


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


 


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


 


17

















 


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


 


19.                                 Amendment
and Termination of the Plan.


 


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


 


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


 


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


 


20.                                 Conditions
Upon Issuance of Shares.


 


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


 


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


 


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


 


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


 


18