exv10w1



 





Exhibit 10.1










2007 EQUITY INCENTIVE PLAN




1. Purposes of the Plan.




     The purpose of this Plan is to encourage ownership in Phoenix Technologies Ltd., a Delaware
corporation (the “Company”), by key personnel whose long-term employment or other service
relationship with the Company is considered essential to the Company’s continued progress and,
thereby, encourage recipients to act in the stockholders’ interest and share in the Company’s
success.



2. Definitions.





As used herein, the following definitions shall apply:




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




(b) “Affiliate” means any entity that is directly or indirectly controlled by the Company
or any entity in which the Company has a significant ownership interest as determined by the
Administrator.




(c) “Applicable Laws” means the requirements relating to the administration of stock option
and stock award plans under U.S. federal and state laws, any stock exchange or quotation
system on which the Company has listed or submitted for quotation the Common Stock to the
extent provided under the terms of the Company’s agreement with such exchange or quotation
system and, with respect to Awards subject to the laws of any foreign jurisdiction where
Awards are, or will be, granted under the Plan, the laws of such jurisdiction.




(d) “Automatic Director Option” means a Nonstatutory Stock Option that is automatically
granted to an Outside Director at the times and subject to the terms and conditions provided
for under Section 12.




(e) “Award” means a Stock Award or Option granted in accordance with the terms of the Plan.




(f) “Awardee” means an Employee, Consultant or Director of the Company or any Affiliate who
has been granted an Award under the Plan.




(g) “Award Agreement” means a Stock Award Agreement and/or Option Agreement, which may be
in written or electronic format, in such form and with such terms and conditions as may be
specified by the Administrator, evidencing the terms and
conditions of an individual Award. Each Award Agreement is subject to the terms and
conditions of the Plan.



 









 






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




(i) “Change in Control” means, unless such term or an equivalent term is otherwise defined
with respect to an Award by the Awardee’s Option Agreement, Stock Award Agreement or written
contract of employment or service, the occurrence of any of the following:




(i) the sale, lease, conveyance or other disposition of all or substantially all of
the Company’s assets to any “person” (as such term is used in Section 13(d) of the
Exchange Act), entity or group of persons acting in concert;




(ii) any person or group of persons becoming the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 50% or more of the total voting power represented by the
Company’s then outstanding voting securities;




(iii) a merger, consolidation or other transaction of the Company with or into any
other corporation, entity or person, other than a transaction in which the holders
of at least 50% of the shares of capital stock of the Company outstanding
immediately prior thereto continue to hold (either by voting securities remaining
outstanding or by their being converted into voting securities of the surviving
entity or its controlling entity) at least 50% of the total voting power represented
by the voting securities of the Company or such surviving entity (or its controlling
entity) outstanding immediately after such transaction; or




(iv) a contest for the election or removal of members of the Board that results in
the removal from the Board of at least 50% of the incumbent members of the Board.




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




(k) “Committee” means the compensation committee of the Board or a committee of Directors
appointed by the Board in accordance with Section 4 of the Plan.




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




(m) “Company” means Phoenix Technologies Ltd., a Delaware corporation, or its successor.




(n) “Consultant” means any person engaged by the Company or any Affiliate to render services
to such entity as an advisor or consultant.




(o) “Conversion Award” has the meaning set forth in Section 4(b)(xii) of the Plan.




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




(q) “Employee” means a regular, active employee of the Company or any Affiliate, including
an Officer and/or Inside Director. The Administrator shall determine whether



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or not the
chairman of the Board qualifies as an “Employee.” Within the limitations of Applicable Law,
the Administrator shall have the discretion to determine the effect upon an Award and upon
an individual’s status as an Employee in the case of (i) any individual who is classified by
the Company or its Affiliate as leased from or otherwise employed by a third party or as
intermittent or temporary, even if any such classification is changed retroactively as a
result of an audit, litigation or otherwise, (ii) any leave of absence approved by the
Company or an Affiliate, (iii) any transfer between locations of employment with the Company
or an Affiliate or between the Company and any Affiliate or between any Affiliates, (iv) any
change in the Awardee’s status from an Employee to a Consultant or Director, and (v) at the
request of the Company or an Affiliate an Employee becomes employed by any partnership,
joint venture or corporation not meeting the requirements of an Affiliate in which the
Company or an Affiliate is a party.




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




(s) “Fair Market Value” means, as of any date, the value of a share of Common Stock or
other property as determined by the Administrator, in its discretion, subject to the
following:




(i) If, on such date, the Common Stock is listed on a national or regional
securities exchange or market system, including without limitation the Nasdaq Global
Market, the Fair Market Value of a share of Common Stock shall be the closing price
on such date of a share of Common Stock (or the mean of the closing bid and asked
prices of a share of Common Stock if the stock is so quoted instead) as quoted on
such exchange or market system constituting the primary market for the Common Stock,
as reported in The Wall Street Journal or such other source as the
Administrator deems reliable. If the relevant date does not fall on a day on which
the Common Stock has traded on such securities exchange or market system, the date
on which the Fair Market Value shall be established shall be the last day on which
the Common Stock was so traded prior to the relevant date, or such other appropriate
day as shall be determined by the Administrator, in its discretion.




(ii) If, on such date, the Common Stock is not listed on a national or regional
securities exchange or market system, the Fair Market Value of a share of Common
Stock shall be as determined by the Administrator in good faith using a reasonable
application of a reasonable valuation method without regard to any restriction other
than a restriction which, by its terms, will never lapse.




(t) “Grant Date” means, for all purposes, the date on which the Administrator approves the
grant of an Award, or such other date as is determined by the Administrator, provided that
in the case of any Incentive Stock Option, the grant date shall be the later of the date on
which the Administrator makes the determination granting such Incentive
Stock Option or the date of commencement of the Awardee’s employment relationship with the
Company.



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(u) “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations promulgated
thereunder.




(v) “Insider Director” means a Director who is an Employee.




(w) “Nasdaq” means the Nasdaq Global Market or its successor.




(x) “1999 Plan” means the Company’s 1999 Stock Plan, as amended.




(y) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive
Stock Option.




(z) “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.




(aa) “Option” means a right granted under Section 8 to purchase a number of Shares at such
exercise price, at such times, and on such other terms and conditions as are specified in
the agreement or other documents evidencing the Option (the “Option Agreement”). Both
Options intended to qualify as Incentive Stock Options and Nonstatutory Stock Options may be
granted under the Plan.




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




(cc) “Participant” means the Awardee or any person (including any estate) to whom an Award
has been assigned or transferred as permitted hereunder.




(dd) “Qualifying Performance Criteria” shall have the meaning set forth in Section 13(b) of
the Plan.




(ee) “Plan” means this Phoenix Technologies Ltd. 2007 Equity Incentive Plan.




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




(gg) “Stock Appreciation Right” means a right to receive cash and/or shares of Common Stock
based on a change in the Fair Market Value of a specific number of shares of Common Stock
between the grant date and the exercise date granted under Section 11.




(hh) “Stock Award” means an award or issuance of Shares, Stock Units, Stock Appreciation
Rights or other similar awards made under Section 11 of the Plan, the grant, issuance,
retention, vesting, settlement, and/or transferability of which is subject during specified
periods of time to such conditions (including continued employment or
performance conditions) and terms as are expressed in the agreement or other documents
evidencing the Award (the “Stock Award Agreement”).



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(ii) “Stock Unit” means a bookkeeping entry representing an amount equivalent to the Fair
Market Value of one Share (or a fraction or multiple of such value), payable in cash,
property or Shares. Stock Units represent an unfunded and unsecured obligation of the
Company, except as otherwise provided for by the Administrator.




(jj) “Subsidiary” means any company (other than the Company) in an unbroken chain of
companies beginning with the Company, provided each company in the unbroken chain (other
than the Company) owns, at the time of determination, stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other companies in such
chain.




(kk) “Termination of Employment” shall mean ceasing to be an Employee, Consultant or
Director, as determined in the sole discretion of the Administrator. However, for Incentive
Stock Option purposes, Termination of Employment will occur when the Awardee ceases to be an
employee (as determined in accordance with Section 3401(c) of the Code and the regulations
promulgated thereunder) of the Company or one of its Subsidiaries. The Administrator shall
determine whether any corporate transaction, such as a sale or spin-off of a division or
business unit, or a joint venture, shall be deemed to result in a Termination of Employment.




(ll) “Total and Permanent Disability” shall have the meaning set forth in Section 22(e)(3)
of the Code.



3. Stock Subject to the Plan.





(a) Aggregate Limits. Subject to the provisions of Section 14 of the Plan, the maximum
aggregate number of Shares that may be sold or issued under the Plan is 3,500,000 plus up
to 3,659,884 Shares that as of October 5, 2007 are subject to outstanding options granted
under the 1999 Plan or have been issued under the 1999 Plan but are subject to repurchase
by the Company (the “1999 Plan Shares”); provided that the 1999 Plan Shares shall only
become available for grant under the Plan if and to the extent that such outstanding options
granted under the 1999 Plan are cancelled, expire or are forfeited or such Shares issued
under the 1999 Plan are repurchased by the Company. Shares subject to Awards granted under
the Plan that are cancelled, expire or are forfeited shall be available for re-grant under
the Plan, including Shares issued pursuant to an Award granted under the Plan that are
repurchased by the Company upon the Awardee’s failure to vest in or otherwise earn the
Shares. If an Awardee pays the exercise or purchase price of an Award granted under the
Plan or the 1999 Plan through the tender of Shares, or if Shares are tendered or withheld to
satisfy any Company withholding obligations, the number of Shares so tendered or withheld
(whether issued under the Plan or the 1999 Plan) shall not become available for
re-issuance thereafter under the Plan.




(b) Code Section 162(m) Share Limits. Subject to the provisions of Section 14 of the
Plan, the aggregate number of Shares subject to Awards granted under this Plan during any
fiscal year to any one Awardee shall not exceed 175,000, except that in connection with his
or her first commencing service with the Company or an Affiliate, an Awardee may be granted
Awards covering up to an additional 125,000 Shares during the



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year in which such service
commences. Notwithstanding anything to the contrary in the Plan, the limitations set forth
in this Section 3(b) shall be subject to adjustment under Section 14 of the Plan only to the
extent that such adjustment will not affect the status of any Award intended to qualify as
“performance based compensation” under Code Section 162(m).



4. Administration of the Plan.





(a) Procedure.




(i) Multiple Administrative Bodies. The Plan shall be administered by the Board,
a Committee and/or other delegates approved by the Board consistent with Applicable
Law.




(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, Awards to “covered employees”
within the meaning of Section 162(m) of the Code or Employees that the Committee
determines may be “covered employees” in the future shall be made 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 promulgated under the Exchange Act (“Rule 16b-3”), Awards to
Officers and Directors shall be made by the entire Board or a Committee of two or
more “non-employee directors” within the meaning of Rule 16b-3.




(iv) Other Administration. Except to the extent prohibited by Applicable Law,
the Board may delegate to an authorized officer or officers of the Company the power
to approve Awards to persons eligible to receive Awards under the Plan who are not
(A) subject to Section 16 of the Exchange Act or (B) at the time of such approval,
“covered employees” under Section 162(m) of the Code or (C) any other executive
officer.




(v) Delegation of Authority for the Day-to-Day Administration of the Plan. Except
to the extent prohibited by Applicable Law, the Administrator may delegate to one or
more individuals the day-to-day administration of the Plan and any of the functions
assigned to it in this Plan. Such delegation may be revoked at any time.




(vi) Nasdaq. The Plan will be administered in a manner that complies with any
applicable Nasdaq or stock exchange listing requirements.




(b) Powers of the Administrator. Subject to the provisions of the Plan and, in the case
of a Committee or delegates acting as the Administrator, subject to the specific duties
delegated to such Committee or delegates, the Administrator shall have the authority, in its
discretion:



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(i) to select the Employees, Consultants and Directors of the Company or its
Affiliates to whom Awards are to be granted hereunder;




(ii) to determine the number of shares of Common Stock to be covered by each Award
granted hereunder;




(iii) to determine the type of Award to be granted to the selected Employees,
Consultants and Directors;




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




(v) to determine the terms and conditions, not inconsistent with the terms of the
Plan, of any Award granted hereunder. Such terms and conditions include, but are
not limited to, the exercise and/or purchase price (if applicable), the time or
times when an Award may be exercised (which may or may not be based on performance
criteria), the vesting schedule, any vesting and/or exercisability acceleration or
waiver of forfeiture restrictions, the acceptable forms of consideration, the term,
and any restriction or limitation regarding any Award or the Shares relating
thereto, based in each case on such factors as the Administrator, in its sole
discretion, shall determine and may be established at the time an Award is granted
or thereafter;




(vi) to correct administrative errors;




(vii) to construe and interpret the terms of the Plan (including sub-plans and Plan
addenda) and Awards granted pursuant to the Plan;




(viii) to adopt rules and procedures relating to the operation and administration of
the Plan to accommodate the specific requirements of local laws and procedures.
Without limiting the generality of the foregoing, the Administrator is specifically
authorized (A) to adopt the rules and procedures regarding the conversion of local
currency, withholding procedures and handling of stock certificates which vary with
local requirements and (B) to adopt sub-plans and Plan addenda as the Administrator
deems desirable, to accommodate foreign laws, regulations and practice;




(ix) to prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans and Plan addenda;




(x) to modify or amend each Award, including, but not limited to, the acceleration
of vesting and/or exercisability, provided, however, that any such amendment is
subject to Section 15 of the Plan and except as set forth in that Section, may not
impair any outstanding Award unless agreed to in writing by the Participant;




(xi) to allow Participants to satisfy withholding tax amounts by electing to have
the Company withhold from the Shares to be issued upon exercise of an Option or
vesting of a Stock Award that number of Shares having a Fair Market



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Value equal to
the amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined in such manner and on such date that the Administrator
shall determine or, in the absence of provision otherwise, on the date that the
amount of tax to be withheld is to be determined. All elections by a Participant to
have Shares withheld for this purpose shall be made in such form and under such
conditions as the Administrator may provide;




(xii) to authorize conversion or substitution under the Plan of any or all stock
options, stock appreciation rights or other stock awards held by service providers
of an entity acquired by the Company (the “Conversion Awards”). Any conversion or
substitution shall be effective as of the close of the merger, acquisition or other
transaction. The Conversion Awards may be Nonstatutory Stock Options or Incentive
Stock Options, as determined by the Administrator, with respect to options granted
by the acquired entity; provided, however, that with respect to the conversion of
stock appreciation rights in the acquired entity, the Conversion Awards shall be
Nonstatutory Stock Options. Unless otherwise determined by the Administrator at the
time of conversion or substitution, all Conversion Awards shall have the same terms
and conditions as Awards generally granted by the Company under the Plan;




(xiii) 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;




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




(xv) to provide, either at the time an Award is granted or by subsequent action,
that an Award shall contain as a term thereof, a right, either in tandem with the
other rights under the Award or as an alternative thereto, of the Participant to
receive, without payment to the Company, a number of Shares, cash or a combination
thereof, the amount of which is determined by reference to the value of the Award;
and




(xvi) to make all other determinations deemed necessary or advisable for
administering the Plan and any Award granted hereunder.




(c) Effect of Administrator’s Decision. All decisions, determinations and interpretations
by the Administrator regarding the Plan, any rules and regulations under the Plan and the
terms and conditions of any Award granted hereunder, shall be final and binding on all
Participants and on all other persons. The Administrator shall consider such factors as it
deems relevant, in its sole and absolute discretion, to making such



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decisions,
determinations and interpretations including, without limitation, the recommendations or
advice of any officer or other employee of the Company and such attorneys, consultants and
accountants as it may select.



5. Eligibility.




     Awards may be granted to Employees, Consultants and Directors of the Company or any of its
Affiliates; provided that Incentive Stock Options may be granted only to Employees of the Company
or of a Subsidiary of the Company.



6. Term of Plan.




     The Plan shall become effective on October 5, 2007, contingent upon approval of the
stockholders of the Company. It shall continue in effect for a term of ten (10) years from the
later of the date the stockholders of the Company approve the Plan or the date any
amendment to add shares to the Plan is approved by stockholders of the Company, unless terminated
earlier under Section 15 of the Plan.



7. Term of Award.




     The term of each Award shall be determined by the Administrator and stated in the Award
Agreement. In the case of an Option, the term shall be ten (10) years from the Grant Date or such
shorter term as may be provided in the Award Agreement; provided that an Incentive Stock Option
granted to an Employee who on the Grant Date owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Subsidiary shall have a term of no
more than five (5) years from the Grant Date; and provided further that the term may be ten and
one-half (10 1/2) years (or a shorter period) in the case of Options granted to Employees in certain
jurisdictions outside the United States as determined by the Administrator.



8. Options.




     The Administrator may grant an Option or provide for the grant of an Option, either from time
to time in the discretion of the Administrator or automatically upon the occurrence of specified
events, including, without limitation, the achievement of performance goals, the satisfaction of an
event or condition within the control of the Awardee or within the control of others.




(a) Option Agreement. Each Option Agreement shall contain provisions regarding (i) the
number of Shares that may be issued upon exercise of the Option, (ii) the type of
Option, (iii) the exercise price of the Shares and the means of payment for the Shares, (iv)
the term of the Option, (v) such terms and conditions on the vesting and/or exercisability
of an Option as may be determined from time to time by the Administrator, (vi) restrictions
on the transfer of the Option or the Shares issued upon exercise of the Option and
forfeiture provisions and (vii) such further terms and conditions, in each case not
inconsistent with this Plan as may be determined from time to time by the Administrator.



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(b) Exercise Price. The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be determined by the Administrator, subject to the following:




(i) In the case of an Incentive Stock Option, the per Share exercise price shall be
no less than one hundred percent (100%) of the Fair Market Value per Share on the
Grant Date; provided however, that in the case of an Incentive Stock Option granted
to an Employee who on the Grant Date owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Subsidiary,
the per Share exercise price shall be no less than one hundred ten percent (110%) of
the Fair Market Value per Share on the Grant Date.




(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall
be no less than one hundred percent (100%) of the Fair Market Value per Share on the
Grant Date.




(iii) Notwithstanding the foregoing, at the Administrator’s discretion, Conversion
Awards may be granted in substitution and/or conversion of options of an acquired
entity, with a per Share exercise price of less than 100% of the Fair Market Value
per Share on the date of such substitution and/or conversion.




(c) No Option Repricings. Other than in connection with a change in the Company’s
capitalization (as described in Section 14(a) of the Plan), the exercise price of an Option
may not be reduced without stockholder approval.




(d) Vesting Period and Exercise Dates. Options granted under this Plan shall vest and/or
be exercisable at such time and in such installments during the period prior to the
expiration of the Option’s term as determined by the Administrator. The Administrator shall
have the right to make the timing of the ability to exercise any Option granted under this
Plan subject to continued employment, the passage of time and/or such performance
requirements as deemed appropriate by the Administrator. At any time after the grant of an
Option, the Administrator may reduce or eliminate any restrictions surrounding any
Participant’s right to exercise all or part of the Option.




(e) Form of Consideration. The Administrator shall determine the acceptable form of
consideration for exercising an Option, including the method of payment, either through the
terms of the Option Agreement or at the time of exercise of an Option. Acceptable forms of
consideration may include:




(i) cash;




(ii) check or wire transfer (denominated in U.S. Dollars);




(iii) subject to the Company’s discretion to refuse for any reason and at any time
to accept such consideration and subject to any conditions or limitations
established by the Administrator, other Shares held by the Participant which (x) in
the case of Shares acquired upon exercise of an option, if required to avoid



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adverse
accounting consequences, such Shares shall have been owned by the Awardee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;




(iv) consideration received by the Company under a broker-assisted sale and
remittance program acceptable to the Administrator;




(v) cashless “net exercise” arrangement pursuant to which the Company will reduce
the number of Shares issued upon exercise by the largest whole number of Shares
having an aggregate Fair Market Value that does not exceed the aggregate exercise
price; provided that the Company shall accept a cash or other payment from the
Participant to the extent of any remaining balance of the exercise price not
satisfied by such reduction in the number of whole Shares to be issued;




(vi) such other consideration and method of payment for the issuance of Shares to
the extent permitted by Applicable Laws; or




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




(f) Effect of Termination on Options




(i) Generally. Unless otherwise provided for by the Administrator or in the
Option Agreement, upon an Awardee’s Termination of Employment other than as a result
of circumstances described in Sections 8(f)(ii)) and ((iii)) below, the Option shall
remain exercisable for three (3) months following the Awardee’s Termination of
Employment; provided that an Option granted to a Director or Officer shall remain
exercisable for six (6) months following the Awardee’s Termination of Employment.
In any case the Option shall not be exerisable beyond the expiration date of the
Option. The Option shall automatically terminate at the end of such period to the
extent the Awardee has not exercised it within such period.




(ii) Disability of Awardee. Unless otherwise provided for by the Administrator,
upon an Awardee’s Termination of Employment as a result of the Awardee’s disability,
including Total and Permanent Disability, all outstanding Options granted to such
Awardee that were vested and exercisable as of the date of the Awardee’s Termination
of Employment may be exercised by the Awardee until the earlier of (A) twelve (12)
months following Awardee’s Termination of Employment as a result of Awardee’s
disability, including Total and Permanent Disability or (B) the expiration of the
term of such Option. If the Awardee does
not exercise such Option within the time specified, the Option (to the extent not
exercised) shall automatically terminate.




(iii) Death of Awardee. Unless otherwise provided for by the Administrator, upon
an Awardee’s Termination of Employment as a result of the Awardee’s death, all
outstanding Options granted to such Awardee that were vested and exercisable as of
the date of the Awardee’s death may be exercised until the



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earlier of (A) twelve
(12) months following the Awardee’s death or (B) the expiration of the term of such
Option. If an Option is held by the Awardee when he or she dies, such Option may be
exercised, to the extent the Option is vested and exercisable, by the beneficiary
designated by the Awardee (as provided in Section 16 of the Plan), the executor or
administrator of the Awardee’s estate or, if none, by the person(s) entitled to
exercise the Option under the Awardee’s will or the laws of descent or distribution;
provided that the Company need not accept exercise of an Option by such beneficiary,
executor or administrator unless the Company has satisfactory evidence of such
person’s authority to act as such. If the Option is not so exercised within the
time specified, such Option (to the extent not exercised) shall automatically
terminate.




(iv) Other Terminations of Employment. The Administrator may provide in the
applicable Option Agreement for different treatment of Options upon Termination of
Employment of the Awardee than that specified above.




(v) Extension of Exercise Period. The Administrator shall have full power and
authority to extend the period of time for which an Option is to remain exercisable
following an Awardee’s Termination of Employment from the periods set forth in
Sections 8(f)(i)), ((ii)) and ((iii)) above or in the Option Agreement to such
greater time as the Board shall deem appropriate, provided that in no event shall
such Option be exercisable later than the date of expiration of the term of such
Option as set forth in the Option Agreement.




(g) Leave of Absence. The Administrator shall have the discretion to determine whether
and to what extent the vesting of Options shall be tolled during any unpaid leave of
absence; provided, however, that in the absence of such determination, vesting of Options
shall be tolled during any leave that is not a leave required to be provided to the Awardee
under Applicable Law. In the event of military leave, vesting shall toll during any unpaid
portion of such leave, provided that, upon an Awardee’s returning from military leave (under
conditions that would entitle him or her to protection upon such return under the Uniform
Services Employment and Reemployment Rights Act), he or she shall be given vesting credit
with respect to Options to the same extent as would have applied had the Awardee continued
to provide services to the Company throughout the leave on the same terms as he or she was
providing services immediately prior to such leave.



9. Incentive Stock Option Limitations/Terms.





(a) Eligibility. Only employees (as determined in accordance with Section 3401(c) of the
Code and the regulations promulgated thereunder) of the Company or any of its Subsidiaries
may be granted Incentive Stock Options.




(b) $100,000 Limitation. Notwithstanding the designation “Incentive Stock Option” in an
Option Agreement, if and 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
Awardee during any calendar year (under all plans of the Company and any of its



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Subsidiaries) exceeds U.S. $100,000, such Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 9(b), Incentive Stock Options shall be taken into
account in the order in which they were granted. The Fair Market Value of the Shares shall
be determined as of the Grant Date.




(c) Transferability. An Incentive Stock Option may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner by the Awardee otherwise than by will
or the laws of descent and distribution, and, during the lifetime of such Awardee, may only
be exercised by the Awardee. If the terms of an Incentive Stock Option are amended to
permit transferability, the Option will be treated for tax purposes as a Nonstatutory Stock
Option. The designation of a beneficiary by an Awardee will not constitute a transfer.




(d) Exercise Price. The per Share exercise price of an Incentive Stock Option shall be
determined by the Administrator in accordance with Section 8(b)(i)) of the Plan.




(e) Leave of Absence. For purposes of Incentive Stock Options, no leave of absence may
exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the ninety-first (91st) day of such leave any Incentive
Stock Option held by the Awardee shall be treated for tax purposes as a Nonstatutory Stock
Option.




(f) Other Terms. Option Agreements evidencing Incentive Stock Options shall contain such
other terms and conditions as may be necessary to qualify, to the extent determined
desirable by the Administrator, with the applicable provisions of Section 422 of the Code.



10. Exercise of Option.





(a) Procedure for Exercise.




(i) Any Option granted hereunder shall 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 respective Option Agreement.




(ii) An Option shall be deemed exercised when the Company receives (A) written or
electronic notice of exercise (in accordance with the Option Agreement) from the
person entitled to exercise the Option; (B) full payment for the Shares with respect
to which the related Option is exercised; and (C) payment of applicable withholding
taxes (if any).




(iii) An Option may not be exercised for a fraction of a Share.




(b) Rights as a Stockholder. The Company shall issue (or cause to be issued) such Shares as
soon as administratively practicable after the Option is exercised. Shares issued upon
exercise of an Option shall be issued in the name of the Participant or, if requested by the
Participant, in the name of the Participant and his or her spouse. Unless



13









 






provided
otherwise by the Administrator or pursuant to this Plan, until the Shares are issued (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any other rights as
a stockholder shall exist with respect to the Shares subject to an Option, notwithstanding
the exercise of the Option.



11. Stock Awards.





(a) Stock Award Agreement. Each Stock Award Agreement shall contain provisions regarding
(i) the number of Shares subject to such Stock Award or a formula for determining such
number, (ii) the purchase price of the Shares, if any, and the means of payment for the
Shares, (iii) the performance criteria (including Qualifying Performance Criteria) , if any,
and level of achievement versus these criteria that shall determine the number of Shares
granted, issued, retainable and/or vested, (iv) such terms and conditions on the grant,
issuance, vesting, settlement and/or forfeiture of the Shares as may be determined from time
to time by the Administrator, (v) restrictions on the transferability of the Stock Award and
(vi) such further terms and conditions in each case not inconsistent with this Plan as may
be determined from time to time by the Administrator.




(b) Restrictions and Performance Criteria. The grant, issuance, retention, settlement
and/or vesting of each Stock Award or the Shares subject thereto may be subject to such
performance criteria (including Qualifying Performance Criteria) and level of achievement
versus these criteria as the Administrator shall determine, which criteria may be based on
financial performance, personal performance evaluations and/or completion of service by the
Awardee. Unless otherwise permitted in compliance with the requirements of Code Section
162(m) with respect to an Award intended to comply as “performance-based compensation”
thereunder, the Committee shall establish the Qualifying Performance Criteria applicable to,
and the formula for calculating the amount payable under, the Award no later than the
earlier of (a) the date ninety (90) days after the commencement of the applicable
performance period, or (b) the date on which 25% of the performance period has elapsed, and
in any event at a time when the achievement of the applicable Qualifying Performance
Criteria remains substantially uncertain.




(c) Forfeiture. Unless otherwise provided for by the Administrator, upon the Awardee’s
Termination of Employment, the Stock Award and the Shares subject thereto
shall be forfeited, provided that to the extent that the Participant purchased or earned any
Shares, the Company shall have a right to repurchase the unvested Shares at such price and
on such terms and conditions as the Administrator determines.




(d) Rights as a Stockholder. Unless otherwise provided by the Administrator in the Award
Agreement, the Participant shall have the rights equivalent to those of a stockholder and
shall be a stockholder only after Shares are issued (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the Company) to the
Participant. Unless otherwise provided by the Administrator, a Participant holding Stock
Units shall not be entitled to receive dividend payments or any credit therefor as if he or
she was an actual stockholder.



14









 






(e) Stock Appreciation Rights.




(i) General. Stock Appreciation Rights may be granted either alone, in addition
to, or in tandem with other Awards granted under the Plan. The Board may grant
Stock Appreciation Rights to eligible Participants subject to terms and conditions
not inconsistent with this Plan and determined by the Board. The specific terms and
conditions applicable to the Participant shall be provided for in the Stock Award
Agreement. Stock Appreciation Rights shall be exercisable, in whole or in part, at
such times as the Board shall specify in the Stock Award Agreement.




(ii) Exercise of Stock Appreciation Right. Upon the exercise of a Stock
Appreciation Right, in whole or in part, the Participant shall be entitled to a
payment in an amount equal to the excess of the Fair Market Value on the date of
exercise of a fixed number of Shares covered by the exercised portion of the Stock
Appreciation Right, over the Fair Market Value on the Grant Date of the Shares
covered by the exercised portion of the Stock Appreciation Right (or such other
amount calculated with respect to Shares subject to the Award as the Board may
determine). The amount due to the Participant upon the exercise of a Stock
Appreciation Right shall be paid in such form of consideration as determined by the
Board and may be in cash, Shares or a combination thereof, over the period or
periods specified in the Stock Award Agreement. A Stock Award Agreement may place
limits on the amount that may be paid over any specified period or periods upon the
exercise of a Stock Appreciation Right, on an aggregate basis or as to any
Participant. A Stock Appreciation Right shall be considered exercised when the
Company receives written notice of exercise in accordance with the terms of the
Stock Award Agreement from the person entitled to exercise the Stock Appreciation
Right.




(iii) Nonassignability of Stock Appreciation Rights. Except as determined by the
Administrator, no Stock Appreciation Right shall be assignable or otherwise
transferable by the Participant except by will or by the laws of descent and
distribution.



12. Automatic Director Options.





	 	(a)	 	Procedure for Grants. Subject to Section 12(f) below, (i) all Automatic
Director Options under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the provisions of this Section 12 and (ii) no person
shall have any discretion to select which Outside Directors shall be granted Automatic
Director Options or to determine the number of Shares to be covered by Automatic
Director Options granted to Outside Directors.
	 
	 	(b)	 	Number of Shares Subject to Automatic Director Options.
	 
	 	 	 	(i) Each Outside Director shall be automatically granted an Option to purchase
40,000 Shares (the “First Option”) on the date on which such person




15









 






	 	 	 	first becomes an
Outside Director, whether through election by the stockholders of the Company or
appointment by the Board to fill a vacancy; provided, however, that an Inside
Director who ceases to be an Inside Director but who remains a Director shall not
receive a First Option.
	 
	 	 	 	(ii) Each Outside Director shall be automatically granted an option to purchase
15,000 Shares (a “Subsequent Option”) on the anniversary date on which each director
became an Outside Director provided he or she is then an Outside Director and if as
of such date, he or she shall have served on the Board for at least the preceding
six (6) months.
	 
	 	(c)	 	Option Agreement. Each Option Agreement for an Automatic Director Option
shall contain the following provisions: (i) the term of the Option shall be ten (10)
years; (ii) the Option shall be exercisable only while the Outside Director remains a
Director of the Company (subject to subsection (e) below); (iii) the exercise price per
Share shall be 100% of the Fair Market Value per Share on the Grant Date of the Option;
and (iv) the Option shall vest and become exercisable for 100% of the shares subject to
the Option on the Grant Date.
	 
	 	(d)	 	Shares Available in Plan. In the event that any Automatic Director Option
granted under the Plan would cause the number of Shares subject to outstanding Options
plus the number of Shares previously issued to exceed the maximum number of shares
available for issuance under the Plan pursuant to Section 0, then the remaining Shares
available for Option grants shall be granted under Automatic Director Options to the
Outside Directors on a pro rata basis. No further grants shall be made until such
time, if any, as additional Shares become available for grant under the Plan through
action of the Board or the stockholders to increase the number of Shares which may be
issued under the Plan or through cancellation or expiration of Awards previously
granted under the Plan.
	 
	 	(e)	 	Termination of Continuous Status as a Director. Subject to Section 14
hereof, in the event an Awardee’s status as a Director terminates (other than upon the
Awardee’s death or Disability), the Awardee may exercise all outstanding Options
granted to such Awardee that were vested and exercisable as of the date of the
Awardee’s termination as a Director within the lesser of (i) six (6) months following
the date of such termination and (ii) the expiration of the term of such Option as set
forth in the Option Agreement; provided that the Board shall have full power and
authority to extend the period of time for which an Automatic Director Option is to
remain exercisable to such greater time as the Board shall deem appropriate (but in no
event later than the date of expiration of the term of such Option as set forth in the
Option Agreement). To the extent that the Awardee does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
	 
	 	(f)	 	Amendment and Termination of Automatic Director Option Program. The Board
shall have sole and exclusive authority to establish, maintain, amend, suspend,




16









 






	 	 	 	and
terminate the program by which Non-Employee Directors are granted Automatic Director
Options pursuant to this Section 12(a).





13. Other Provisions Applicable to Awards.





	 	(a)	 	Non-Transferability of Awards. Unless determined otherwise by the
Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner for value other than by beneficiary designation, will or
by the laws of descent or distribution. Subject to Section 9(c), the Administrator may
in its discretion make an Award transferable to an Awardee’s family member or any other
person or entity as it deems appropriate. If the Administrator makes an Award
transferable, either at the time of grant or thereafter, such Award shall contain such
additional terms and conditions as the Administrator deems appropriate, and any
transferee shall be deemed to be bound by such terms upon acceptance of such transfer.
	 
	 	(b)	 	Qualifying Performance Criteria. For purposes of this Plan, the term
“Qualifying Performance Criteria” shall mean any one or more of the following
performance criteria, either individually, alternatively or in any combination, applied
to either the Company as a whole or to a business unit, Affiliate or business segment,
either individually, alternatively or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years’ results or to a designated comparison group,
in each case as specified by the Administrator in the Award: (i) cash flow; (ii)
earnings (including gross margin; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; earnings before stock compensation
expense pursuant to SFAS 123(R); earnings before taxes; and net earnings); (iii)
earnings per share; (iv) growth in earnings or earnings per share; (v) stock price;
(vi) return on equity or average stockholders’ equity; (vii) total stockholder return;
(viii) return on capital; (ix) return on assets
or net assets; (x) return on investment; (xi) revenue or growth in revenue; (xii)
income or net income; (xiii) operating income or net operating income, in aggregate
or per share; (xiv) operating profit or net operating profit; (xv) operating margin;
(xvi) return on operating revenue; (xvii) market share; (xviii) contract awards or
backlog; (xix) overhead or other expense reduction; (xx) growth in stockholder value
relative to the moving average of the S&P 500 Index or a peer group index; (xxi)
credit rating; (xxii) strategic plan development and implementation (including
individual performance objectives that relate to achievement of the Company’s or any
business unit’s strategic plan); (xxiii) improvement in workforce diversity; (xxiv)
growth of revenue, operating income or net income; (xxv) efficiency ratio; and
(xxvi) ratio of nonperforming assets to total assets. The Committee may
appropriately adjust any evaluation of performance under a Qualifying Performance
Criteria to exclude any of the following events that occurs during a performance
period: (A) asset write-downs; (B) litigation or claim judgments or settlements; (C)
the effect of changes in tax law, accounting principles or other such laws or
provisions affecting reported results; (D) accruals for reorganization and
restructuring programs; and (E) any




17









 






	 	 	 	gains or losses classified as extraordinary or
as discontinued operations in the Company’s financial statements.
	 
	 	(c)	 	Certification. Prior to the payment of any compensation under an Award
intended to qualify as “performance-based compensation” under Section 162(m) of the
Code, the Committee shall certify the extent to which any Qualifying Performance
Criteria and any other material terms under such Award have been satisfied (other than
in cases where such relate solely to the increase in the value of the Common Stock).
	 
	 	(d)	 	Discretionary Adjustments Pursuant to Section 162(m). Notwithstanding
satisfaction of any completion of any Qualifying Performance Criteria, to the extent
specified at the time of grant of an Award to “covered employees” within the meaning of
Section 162(m) of the Code, the number of Shares, Options or other benefits granted,
issued, retainable and/or vested under an Award on account of satisfaction of such
Qualifying Performance Criteria may be reduced by the Committee on the basis of such
further considerations as the Committee in its sole discretion shall determine.
	 
	 	(e)	 	Tax Withholding Obligation. As a condition of the grant, issuance, vesting,
exercise or settlement of an Award granted under the Plan, the Participant shall make
such arrangements as the Administrator may require for the satisfaction of any
applicable federal, state, local or foreign withholding tax obligations that may arise
in connection with such grant, issuance, vesting, exercise or settlement of the Award.
The Company shall not be required to issue any Shares under the Plan until such
obligations are satisfied.
	 
	 	(f)	 	Compliance with Section 409A. Notwithstanding anything to the contrary
contained herein, to the extent that the Administrator determines that any Award
granted under the Plan is subject to Code Section 409A and unless otherwise
specified in the applicable Award Agreement, the Award Agreement evidencing such
Award shall incorporate the terms and conditions necessary for such Award to avoid
the consequences described in Code Section 409A(a)(1), and to the maximum extent
permitted under Applicable Law (and unless otherwise stated in the applicable Award
Agreement), the Plan and the Award Agreements shall be interpreted in a manner that
results in their conforming to the requirements of Code Section 409A(a)(2), (3) and
(4) and any Department of Treasury or Internal Revenue Service regulations or other
interpretive guidance issued under Section 409A (whenever issued, the “Guidance”).
Notwithstanding anything to the contrary in this Plan (and unless the Award
Agreement provides otherwise, with specific reference to this sentence), to the
extent that a Participant holding an Award that constitutes “deferred compensation”
under Section 409A and the Guidance is a “specified employee” (also as defined
thereunder), no distribution or payment of any amount shall be made before a date
that is six (6) months following the date of such Participant’s “separation from
service” (as defined in Section 409A and the Guidance) or, if earlier, the date of
the Participant’s death.




18









 






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





14. Adjustments upon Changes in Capitalization, Dissolution or Change in Control.





	 	(a)	 	Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by each
outstanding Award, the number of shares of Common Stock which have been authorized for
issuance under the Plan, but as to which no Awards have yet been granted or which have
been returned to the Plan upon cancellation, forfeiture or expiration of an Award, the
price per Share subject to each such outstanding
Award, the number of Shares issuable pursuant to Automatic Director Options and the
share limits set forth in Section 3 and shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued shares
of Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not be
deemed to have been “effected without receipt of consideration.” Such adjustment
shall be made by the Administrator, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock subject to an
Award.
	 
	 	(b)	 	Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Participant as




19









 






	 	 	 	soon as
practicable prior to the effective date of such proposed transaction. To the extent it
has not been previously exercised or the Shares subject thereto issued to the Awardee
and unless otherwise determined by the Administrator, an Award will terminate
immediately prior to the consummation of such proposed transaction.
	 
	 	(c)	 	Change in Control. In the event there is a Change in Control of the Company,
as determined by the Board or a Committee, the Board or Committee may, in its
discretion, (i) provide for the assumption or substitution of, or adjustment (including
to the number and type of Shares and exercise or purchase price applicable) to, each
outstanding Award; (ii) accelerate the vesting of Options and terminate any
restrictions on Stock Awards and/or (iii) provide for termination of Awards as a result
of the Change in Control on such terms and conditions as it deems appropriate,
including providing for the cancellation of Awards for a cash or other payment to the
Participant.
	 
	 	 	 	For purposes of this Section 14(c), an Award shall be considered assumed, without
limitation, if, at the time of issuance of the stock or other consideration upon a
Change in Control, as the case may be, each holder of an Award would be entitled to
receive upon exercise of the Award the same number and kind of shares of stock or
the same amount of property, cash or securities as such holder would have been
entitled to receive upon the occurrence of the transaction if the holder had been,
immediately prior to such transaction, the holder of the number of Shares covered by
the Award at such time (after giving effect to any adjustments in the number of
Shares covered by the Award as provided for in Section 14(c)); provided that if such
consideration received in the transaction 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 exercise of the Award
to be solely common stock of the successor corporation equal to the Fair
Market Value of the per Share consideration received by holders of Common Stock in
the transaction.





15. Amendment and Termination of the Plan.





	 	(a)	 	Amendment and Termination. The Administrator may amend, alter or discontinue
the Plan or any Award Agreement, but any such amendment shall be subject to approval of
the stockholders of the Company in the manner and to the extent required by Applicable
Law. In addition, without limiting the foregoing, unless approved by the stockholders
of the Company, no such amendment shall be made that would:






	 	(i)	 	materially increase the maximum number of Shares for which
Awards may be granted under the Plan, other than an increase pursuant to
Section 14 of the Plan;
	 
	 	(ii)	 	reduce the minimum exercise price at which Options may be
granted under the Plan;




20









 






	 	(iii)	 	result in a repricing of Options by (x) reducing the exercise
price of outstanding Options or (y) canceling an outstanding Option held by an
Awardee and re-granting to the Awardee a new Option with a lower exercise
price, in either case other than in connection with a change in the Company’s
capitalization pursuant to Section 14 of the Plan; or
	 
	 	(iv)	 	change the class of persons eligible to receive Awards under the Plan.






	 	(b)	 	Effect of Amendment or Termination. No amendment, suspension or termination
of the Plan shall impair the rights of any Award, unless mutually agreed otherwise
between the Participant and the Administrator, which agreement must be in writing and
signed by the Participant and the Company; provided further that the Administrator may
amend an outstanding Award in order to conform it to the Administrator’s intent (in its
sole discretion) that such Award not be subject to Code Section 409A(a)(1)(B).
Termination of the Plan shall 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.
	 
	 	(c)	 	Effect of the Plan on Other Arrangements. Neither the adoption of the Plan
by the Board or a Committee nor the submission of the Plan to the stockholders of the
Company for approval shall be construed as creating any limitations on the power of the
Board or any Committee to adopt such other incentive arrangements as it or they may
deem desirable, including without limitation, the granting of restricted stock or stock
options otherwise than under the Plan, and such arrangements may be either generally
applicable or applicable only in specific cases. The value of Awards granted pursuant
to the Plan will not be included as compensation, earnings, salaries or other similar
terms used when calculating an
Awardee’s benefits under any employee benefit plan sponsored by the Company or any
Subsidiary except as such plan otherwise expressly provides.





16. Designation of Beneficiary.





	 	(a)	 	An Awardee may file a written designation of a beneficiary who is to receive
the Awardee’s rights pursuant to Awardee’s Award or the Awardee may include his or her
Awards in an omnibus beneficiary designation for all benefits under the Plan. To the
extent that Awardee has completed a designation of beneficiary while employed with the
Company, such beneficiary designation shall remain in effect with respect to any Award
hereunder until changed by the Awardee to the extent enforceable under Applicable Law.
	 
	 	(b)	 	Such designation of beneficiary may be changed by the Awardee at any time by
written notice. In the event of the death of an Awardee and in the absence of a
beneficiary validly designated under the Plan who is living at the time of such
Awardee’s death, the Company shall allow the executor or administrator of the estate of
the Awardee to exercise the Award, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its discretion, may allow
the spouse or one or more dependents or




21









 






	 	 	 	relatives of the Awardee to exercise the Award
to the extent permissible under Applicable Law or if no spouse, dependent or relative
is known to the Company, then to such other person as the Company may designate.





17. No Right to Awards or to Employment.




     No person shall have any claim or right to be granted an Award and the grant of any Award
shall not be construed as giving an Awardee the right to continue in the employ or service of the
Company or its Affiliates. Further, the Company and its Affiliates expressly reserve the right, at
any time, to dismiss any Employee, Consultant or Awardee at any time without liability or any claim
under the Plan, except as provided herein or in any Award Agreement entered into hereunder.



18. Legal Compliance.




     Subject to Section 22, shares shall not be issued pursuant to the exercise of an Option or
Stock Award unless the exercise of such Option or Stock Award and the issuance and delivery of such
Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel
for the Company with respect to such compliance.



19. Reservation of Shares.




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



20. Notice.




     Any written notice to the Company required by any provisions of this Plan shall be addressed
to the Secretary of the Company and shall be effective when received.



21. Governing Law; Interpretation of Plan and Awards.





(a) This Plan and all determinations made and actions taken pursuant hereto shall be
governed by the substantive laws, but not the choice of law rules, of the state of Delaware.




(b) In the event that any provision of the Plan or any Award granted under the Plan is
declared to be illegal, invalid or otherwise unenforceable by a court of competent
jurisdiction, such provision shall be reformed, if possible, to the extent necessary to
render it legal, valid and enforceable, or otherwise deleted, and the remainder of the terms
of the Plan and/or Award shall not be affected except to the extent necessary to reform or
delete such illegal, invalid or unenforceable provision.




(c) The headings preceding the text of the sections hereof are inserted solely for
convenience of reference, and shall not constitute a part of the Plan, nor shall they affect
its meaning, construction or effect.



22









 






(d) The terms of the Plan and any Award shall inure to the benefit of and be binding upon
the parties hereto and their respective permitted heirs, beneficiaries, successors and
assigns.




(e) All questions arising under the Plan or under any Award shall be decided by the
Administrator in its total and absolute discretion. In the event the Participant believes
that a decision by the Administrator with respect to such person was arbitrary or
capricious, the Participant may request arbitration with respect to such decision. The
review by the arbitrator shall be limited to determining whether the Administrator’s
decision was arbitrary or capricious. This arbitration shall be the sole and exclusive
review permitted of the Administrator’s decision, and the Awardee shall as a condition to
the receipt of an Award be deemed to explicitly waive any right to judicial review.




(f) Notice of demand for arbitration shall be made in writing to the Administrator within
thirty (30) days after the applicable decision by the Administrator. The arbitrator shall
be selected from amongst those members of the Board who are neither Administrators nor
Employees. If there are no such members of the Board, the arbitrator shall be selected by
the Board. The arbitrator shall be an individual who is an attorney licensed to practice
law in the State of Delaware. Such arbitrator shall be neutral within the meaning of the
Commercial Rules of Dispute Resolution of the American Arbitration Association; provided,
however, that the arbitration shall not be administered by the American Arbitration
Association. Any challenge to the neutrality of the arbitrator shall be resolved by the
arbitrator whose decision shall be final and conclusive. The arbitration shall be
administered and conducted by the arbitrator pursuant to the Commercial Rules of Dispute
Resolution of the American Arbitration Association. The
decision of the arbitrator on the issue(s) presented for arbitration shall be final and
conclusive and may be enforced in any court of competent jurisdiction.



22. Limitation on Liability.




     The Company and any Affiliate which is in existence or hereafter comes into existence shall
not be liable to a Participant, an Employee, an Awardee or any other persons as to:




(a) The Non-Issuance of Shares. The non-issuance or sale of Shares (including under
Section 18 above) as to which the Company has been unable, or the Administrator deems it
infeasible, to obtain from any regulatory body having jurisdiction the authority deemed by
the Company’s counsel to be necessary to the lawful issuance and sale of any shares
hereunder; and




(b) Tax Consequences. Any tax consequence realized by any Participant, Employee, Awardee
or other person due to the receipt, vesting, exercise or settlement of any Option or other
Award granted hereunder or due to the transfer of any Shares issued hereunder. The
Participant is responsible for, and by accepting an Award under the Plan agrees to bear, all
taxes of any nature that are legally imposed upon the Participant in connection with an
Award, and the Company does not assume, and will not be liable to any party for, any cost or
liability arising in connection with such tax liability legally imposed on the Participant.
In particular, Awards issued under the Plan may be



23









 






characterized by the Internal Revenue
Service (the “IRS”) as “deferred compensation” under the Code resulting in additional taxes,
including in some cases interest and penalties. In the event the IRS determines that an
Award constitutes deferred compensation under the Code or challenges any good faith
characterization made by the Company or any other party of the tax treatment applicable to
an Award, the Participant will be responsible for the additional taxes, and interest and
penalties, if any, that are determined to apply if such challenge succeeds, and the Company
will not reimburse the Participant for the amount of any additional taxes, penalties or
interest that result.




(c) Forfeiture. The requirement that Participant forfeit an Award, or the benefits
received or to be received under an Award, pursuant to any Applicable Law.



23. Unfunded Plan.




     Insofar as it provides for Awards, the Plan shall be unfunded. Although bookkeeping accounts
may be established with respect to Awardees who are granted Stock Awards under this Plan, any such
accounts will be used merely as a bookkeeping convenience. The Company shall not be required to
segregate any assets which may at any time be represented by Awards, nor shall this Plan be
construed as providing for such segregation, nor shall the Company nor the Administrator be deemed
to be a trustee of stock or cash to be awarded under the Plan. Any liability of the Company to any
Participant with respect to an Award shall be based solely upon any contractual obligations which
may be created by the Plan; no such obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company. Neither the Company nor the
Administrator shall be required to give any security or bond for the performance of any obligation
which may be created by this Plan.




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