EXHIBIT 4.1


 


COPART, INC.


 


2007 EQUITY INCENTIVE PLAN


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(i)    A change in the ownership of the Company  which occurs on the date that any one
person, or more than one person acting as a group, (“Person”) acquires
ownership of the stock of the Company that, together with the stock held by
such Person, constitutes more than 50% of the total voting power of the stock
of the Company; provided, however, that for purposes of this subsection (i),
the acquisition of additional stock by any one Person, who is considered to own
more 


 


 





















 


than 50% of the total
voting power of the stock of the Company will not be considered a Change in
Control; or


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(o)           “Earnings Per Share” means as
to any performance period, the Company’s or a business unit’s Profit After-Tax,
divided by a weighted average number of Shares outstanding and dilutive common
equivalent Shares deemed outstanding, determined in accordance with generally
accepted accounting principles.


 


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


 


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


 


(r)            “Exchange Program” means a
program under which (i) outstanding Awards are surrendered or cancelled in
exchange for Awards of the same type (which may have lower exercise prices and
different terms), Awards of a different type, and/or cash, (ii) Participants
would have the opportunity to transfer any outstanding Awards to a financial
institution or other person or entity selected by the Administrator, and/or (iii) the
exercise price of an outstanding Award is reduced.  The Administrator will determine the terms
and conditions of any Exchange Program in its sole discretion.


 


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


 


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


 


(u)           “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.


 


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


 


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


 


(x)            “Operating Cash Flow”  means as to any performance period, the
Company’s or a business unit’s sum of Profit After-Tax plus depreciation and
amortization less capital expenditures plus changes in working capital
comprised of accounts receivable, inventories, other current assets, trade
accounts payable, accrued expenses, product warranty, advance payments from
customers and long-term accrued expenses, determined in accordance with
generally acceptable accounting principles.”Operating Income” means as
to any performance period, the Company’s or a business unit’s income from
operations but excluding any unusual items, determined in accordance with
generally accepted accounting principles. “Option” means a stock option
granted pursuant to Section 6 of the Plan.


 


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


 


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


 


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


 


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


 


(ee)         “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.


 


(ff)           “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.


 


(gg)         “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.


 


(hh)         “Plan” means this 2007 Equity
Incentive Plan.


 


(ii)           “Profit After-Tax” means as to
any performance period, the Company’s or a business unit’s income after taxes,
determined in accordance with generally accepted accounting principles. “Profit
Before-Tax” means as to any performance period, the Company’s or a business
unit’s income before taxes, determined in accordance with generally accepted
accounting 


 


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principles. “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.


 


(ll)           “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.


 


(mm)       “Return on Assets” means as to any
performance period, the percentage equal to the Company’s or a business unit’s
Operating Income before incentive compensation, divided by average net Company
or business unit, as applicable, assets, determined in accordance with
generally accepted accounting principles.


 


(nn)         “Return on Equity” means as to
any performance period, the percentage equal to the Company’s Profit After-Tax
divided by average stockholder’s equity, determined in accordance with
generally accepted accounting principles.


 


(oo)         “Return on Sales” means as to
any performance period, the percentage equal to the Company’s or a business
unit’s Operating Income before incentive compensation, divided by the Company’s
or the business unit’s, as applicable, Revenue, determined in accordance with
generally accepted accounting principles.


 


(pp)         “Revenue” means as to any
performance period, the Company’s or business unit’s net sales, determined in
accordance with generally accepted accounting principles.


 


(qq)         “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.


 


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


 


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


 


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


 


(uu)         “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.


 


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


 


(ww)       “Total Shareholder Return” means
as to any performance period, the total return (change in share price plus
reinvestment of any dividends) of a Share.


 


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3.             Stock Subject to the Plan.


 


(a)           Subject to the provisions of Section 14 of the Plan, the maximum aggregate
number of Shares that may be awarded and sold under the Plan is 4,000,000
Shares.  The Shares may be authorized,
but unissued, or reacquired Common Stock.


 


(b)           Full Value Awards.  Any Shares subject to Awards granted with an
exercise price less than the Fair Market Value on the date of grant of such
Awards will be counted against the numerical limits of this Section 3 as
two (2) Shares for every one (1) Share subject thereto.  Further, if Shares acquired pursuant to any
such Award are forfeited or repurchased by the Company and would otherwise
return to the Plan pursuant to Section 3(c), two (2) times the number
of Shares so forfeited or repurchased will return to the Plan and will again
become available for issuance.


 


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


 


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


 


4.             Administration of the Plan.


 


(a)           Procedure.


 


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


 


(ii)   Section 162(m).  To the extent that the Administrator
determines it to be desirable to qualify Awards granted hereunder as “performance-based
compensation” within the 


 


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meaning of Section 162(m) of
the Code, the Plan will be administered by a Committee of two (2) or more “outside
directors” within the meaning of Section 162(m) of the Code.


 


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


 


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


 


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


 


(i)    to determine the Fair Market Value;


 


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


 


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


 


(iv)  to determine the terms and conditions of any,
and with the approval of the Company’s stockholders, to institute an Exchange
Program;


 


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


 


(vi)  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;


 


(vii) to modify or amend each Award (subject to Section 19(c) of the Plan).  Notwithstanding the previous sentence, the
Administrator may not, without the approval of the Company’s stockholders: (A) 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), or (B) 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;


 


(viii) 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;


 


(ix)   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


 


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(x)    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.


 


6.             Stock Options.


 


(a)           Limitations.


 


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


 


(ii)   The Administrator will have complete
discretion to determine the number of Shares subject to an Option granted to
any Participant, provided that during any Fiscal Year, no Participant will be
granted an Option covering more than 1,000,000 Shares.  Notwithstanding the limitation in the previous
sentence, in connection with his or her initial service as an Employee, an
Employee may be granted Options covering up to an additional 1,000,000 Shares.


 


(b)           Term of Option.  The Administrator will determine the term of
each Option in its sole discretion; provided, however, that the term will be no
more than ten (10) years from the date of grant thereof.  Moreover, in the case of an Incentive Stock
Option granted to a Participant who, at the time the Incentive Stock Option is
granted, owns stock representing more than 10% of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option will be five (5) years from the date of
grant or such shorter term as may be provided in the Award Agreement.


 


(c)           Option Exercise Price and
Consideration.


 


(i)    Exercise Price.  The per share exercise price for the Shares
to be issued pursuant to exercise of an Option will be determined by the
Administrator, but will be no less than 100% of the Fair Market Value per Share
on the date of grant.  In addition, in
the case of an Incentive Stock Option granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than 10% of
the voting power of all classes of stock of the 


 


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Company or any Parent or
Subsidiary, the per Share exercise price will be no less than 110% of the Fair
Market Value per Share on the date of grant. 
Notwithstanding the foregoing provisions of this Section 6(c),
Options may be granted with a per Share exercise price of less than 100% of the
Fair Market Value per Share on the date of grant pursuant to a transaction
described in, and in a manner consistent with, Section 424(a) of the
Code.


 


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


 


(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.


 


(d)           Exercise of Option.


 


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


 


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


 


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


 


(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.


 


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Unless otherwise provided
by the Administrator, if on the date of termination the Participant is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will revert to the Plan. 
If after termination the Participant does not exercise his or her Option
within the time specified herein, the Option will terminate, and the Shares
covered by such Option will revert to the Plan.


 


(iv)                              Death of Participant. 
If a Participant dies while a Service Provider, the Option may be
exercised following the Participant’s death within such period of time as is
specified in the Award Agreement to the extent that the Option is vested on the
date of death (but in no event may the option be exercised later than the
expiration of the term of such Option as set forth in the Award Agreement), by
the Participant’s designated beneficiary, provided such beneficiary has been
designated prior to Participant’s death in a form acceptable to the
Administrator.  If no such beneficiary
has been designated by the Participant, then such Option may be exercised by
the personal representative of the Participant’s estate or by the person(s) to
whom the Option is transferred pursuant to the Participant’s will or in
accordance with the laws of descent and distribution.  In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for twelve (12) months
following Participant’s death.  Unless
otherwise provided by the Administrator, if at the time of death Participant is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will immediately revert to the Plan.  If the Option is not so exercised within the
time specified herein, the Option will terminate, and the Shares covered by
such Option will revert to the Plan.


 


(v)                                 Other Termination. 
A Participant’s Award Agreement may also provide that if the exercise of
the Option following the termination of Participant’s status as a Service
Provider (other than upon the Participant’s death or Disability) would result
in liability under Section 16(b), then the Option will terminate on the
earlier of (A) the expiration of the term of the Option set forth in the
Award Agreement, or (B) the 10th day after the last date on which such
exercise would result in such liability under Section 16(b).  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 limitation in the previous sentence, in connection
with his or 


 


 


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her initial service as an
Employee, an Employee may be granted Stock Appreciation Rights covering up to
an additional 1,000,000 Shares.


 


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


 


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


 


(e)                                  Expiration of Stock Appreciation Rights. 
A Stock Appreciation Right granted under the Plan will expire upon the
date determined by the Administrator, in its sole discretion, and set forth in
the Award Agreement; provided, however, that the term will be no more
than ten (10) years from the date of grant thereof. 
Notwithstanding the foregoing, the rules of Section 6(d) 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, for restricted stock intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code,
during any Fiscal Year no Participant will receive more than an aggregate of
300,000 Shares of Restricted Stock. 
Notwithstanding the foregoing limitation, in connection with his or her
initial service as an Employee, for restricted stock intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code, an
Employee may be granted an aggregate of up to an additional 300,000 Shares of
Restricted Stock.  Unless the
Administrator determines otherwise, 


 


 


11

















 


Shares of Restricted
Stock will be held by the Company as escrow agent until the restrictions on
such Shares have lapsed.


 


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


 


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


 


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


 


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


 


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


 


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


 


(i)                                     Section 162(m) Performance
Restrictions.  For
purposes of qualifying grants of Restricted Stock as “performance-based
compensation” under Section 162(m) of the Code, the Administrator, in
its discretion, may set restrictions based upon the achievement of Performance
Goals.  The Performance Goals will be set
by the Administrator on or before the Determination Date.  In granting Restricted Stock which is
intended to qualify under Section 162(m) of the Code, the
Administrator will follow any procedures determined by it from time to time to
be necessary or appropriate to ensure qualification of the Award under Section 162(m) of
the Code (e.g., in determining the Performance Goals).


 


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 


 


 


12

















 


subsection (a),
for Restricted Stock Units intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code,
during any Fiscal Year of the Company, no Participant will receive more than an
aggregate of 300,000 Restricted
Stock Units.  Notwithstanding the limitation in the previous
sentence, for Restricted Stock Units intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code, in
connection with his or her initial service as an Employee, an Employee may be granted
an aggregate of up to an additional 300,000 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.


 


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


 


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


 


(f)                                   Section 162(m) Performance
Restrictions.  For
purposes of qualifying grants of Restricted Stock Units as “performance-based
compensation” under Section 162(m) of the Code, the Administrator, in
its discretion, may set restrictions based upon the achievement of Performance
Goals.  The Performance Goals will be set
by the Administrator on or before the Determination Date.  In granting Restricted Stock Units which are
intended to qualify under Section 162(m) of the Code, the Administrator
will follow any procedures determined by it from time to time to be necessary
or appropriate to ensure qualification of the Award under Section 162(m) of
the Code (e.g., in determining the Performance Goals).


 


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, for Performance Units or Performance Shares intended to
qualify as “performance-based compensation” within the meaning of Section 162(m) of
the Code, (i) no Participant will receive Performance Units having an
initial value greater than $2,000,000, and (ii) no Participant will
receive more than 300,000 Performance Shares. 
Notwithstanding the 


 


 


13

















 


foregoing limitation, for
Performance Shares intended to qualify as “performance-based compensation”
within the meaning of Section 162(m) of the Code, in connection with
his or her initial service, a Service Provider may be granted up to an
additional 300,000 Performance Shares.


 


(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.  The Administrator may set
vesting criteria based upon the achievement of Company-wide, business unit, or
individual goals (including, but not limited to, continued employment), or 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.  The
Administrator, in its sole discretion, may provide at the time of or following
the date of grant for accelerated vesting for an Award of Performance
Units/Shares.


 


(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.


 


(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.


 


(g)                                  Section 162(m) Performance
Restrictions.  For
purposes of qualifying grants of Performance Units/Shares as “performance-based
compensation” under Section 162(m) of the Code, the Administrator, in
its discretion, may set restrictions based upon the achievement of Performance
Goals.  The Performance Goals will be set
by the Administrator on or before the Determination Date.  In granting Performance Units/Shares which
are intended to qualify under Section 162(m) of the Code, the
Administrator will follow any procedures determined by it from time to time to
be necessary or appropriate to ensure qualification of the Award under Section 162(m) of
the Code (e.g., in determining the Performance Goals).


 


 


14

















 


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 (a) Earnings per Share, (b) Operating Cash
Flow, (c) Operating Income, (d) Profit After-Tax, (e) Profit
Before-Tax, (f) Return on Assets, (g) Return on Equity, (h) Return
on Sales, (i)  Revenue, and (j) Total Shareholder Return.  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.  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.  In all other
respects, Performance Goals will be calculated in accordance with the Company’s
financial statements, generally accepted accounting principles, or under a
methodology established by the Administrator prior to the issuance of an Award,
which is consistently applied and identified in the financial statements,
including footnotes, or the management discussion and analysis section of the
Company’s annual report.


 


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


 


13.                               Transferability of Awards. 
Unless determined otherwise by the Administrator, an Award may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Participant, only by the
Participant.  If the Administrator makes
an Award transferable, such Award will contain such additional terms and
conditions as the Administrator deems appropriate.


 


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


 


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


 


 


15

















 


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


 


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


 


In the event that the Successor Corporation does not assume or
substitute for the Award, the Participant will fully vest in and have the right
to exercise all of his or her outstanding Options and Stock Appreciation
Rights, including Shares as to which such Awards would not otherwise be vested
or exercisable, all restrictions on Restricted Stock will lapse, and, with
respect to Restricted Stock Units, 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 an Option or Stock
Appreciation Right is not assumed or substituted for in the event of a Change
in Control, the Administrator will notify the Participant in writing or
electronically that the Option or Stock Appreciation Right will be fully vested
and exercisable for a period of time determined by the Administrator in its
sole discretion, 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
payout of a Performance Share or Performance Unit, for each Share subject to
such Award (or in the case of Performance Units, the number of implied shares
determined by dividing the value of the Performance Units 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.


 


 


16

















 


15.                               Tax Withholding


 


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


 


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


 


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


 


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


 


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


 


19.                               Amendment and Termination of the Plan.


 


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


 


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


 


(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 


 


 


17

















 


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