exv10w6xdy



 





Exhibit 10.6(d)




SYNAPTICS INCORPORATED




 






AMENDED AND RESTATED

2001 INCENTIVE COMPENSATION PLAN

(As amended through January 23, 2007)




 









 





SYNAPTICS, INCORPORATED




 






AMENDED AND RESTATED

2001 INCENTIVE COMPENSATION PLAN

(As amended through January 23, 2007)




	 	 	 
	1. Purpose 
	 	1
	2. Definitions 
	 	1
	3. Administration 
	 	5
	(a) Authority of the Committee
	 	5
	(b) Manner of Exercise of Committee Authority
	 	6
	(c) Limitation of Liability
	 	6
	4. Stock Subject to Plan
	 	6
	(a) Limitation on Overall Number of Shares Subject to Awards
	 	6
	(b) Limitation on Number of Incentive Stock Option Shares
	 	7
	(c) Application of Limitations
	 	7
	5. Eligibility; Per-Person Award Limitations 
	 	7
	6. Specific Terms of Awards 
	 	7
	(a) General
	 	7
	(b) Options
	 	8
	(c) Stock Appreciation Rights
	 	10
	(d) Restricted Stock
	 	11
	(e) Deferred Stock
	 	12
	(f) Bonus Stock and Awards in Lieu of Obligations
	 	13
	(g) Dividend Equivalents
	 	13
	(h) Other Stock-Based Awards
	 	13
	7. Performance and Annual Incentive Awards
	 	14
	(a) Performance Conditions
	 	14
	(b) Performance Awards Granted to Designated Covered Employees
	 	14
	(c) Annual Incentive Awards Granted to Designated Covered Employees
	 	15
	(d) Written Determinations
	 	16
	(e) Status of Section 7(b) and Section 7(c) Awards Under Code Section 162(m)
	 	17
	8. Certain Provisions Applicable to Awards or Sales
	 	17
	(a) Stand-Alone, Additional, Tandem, and Substitute Awards
	 	17
	(b) Term of Awards
	 	17
	(c) Purchase Prices
	 	17
	(d) Form and Timing of Payment Under Awards; Deferrals
	 	18
	(e) Exemptions from Section 16(b) Liability
	 	18
	9. Change in Control
	 	19
	(a) Effect of “Change in Control.”
	 	19
	(b) Definition of ”Change in Control
	 	19
	(c) Definition of “Change in Control Price.”
	 	19






 









 






	 	 	 
	10. General Provisions
	 	19
	(a) Compliance With Legal and Other Requirements
	 	19
	(b) Limits on Transferability; Beneficiaries
	 	19
	(c) Adjustments
	 	20
	(d) Taxes
	 	22
	(e) Changes to the Plan and Awards
	 	22
	(f) Reporting of Financial Information
	 	22
	(g) Limitation on Rights Conferred Under Plan
	 	22
	(h) Unfunded Status of Awards; Creation of Trusts
	 	23
	(i) Nonexclusivity of the Plan
	 	23
	(j) Payments in the Event of Forfeitures; Fractional Shares
	 	23
	(k) Governing Law
	 	23
	(l) Plan Effective Date and Stockholder Approval; Termination of Plan
	 	23






 









 





SYNAPTICS, INCORPORATED




AMENDED AND RESTATED

2001 INCENTIVE COMPENSATION PLAN

(As amended through January 23, 2007)




     1. Purpose. The purpose of this AMENDED AND RESTATED 2001 INCENTIVE COMPENSATION PLAN (the
“Plan”) is to assist SYNAPTICS INCORPORATED, a California corporation (the “Company”) and its
Related Entities in attracting, motivating, retaining and rewarding high-quality executives and
other Employees, officers, Directors and independent Contractors by enabling such persons to
acquire or increase a proprietary interest in the Company in order to strengthen the mutuality of
interests between such persons and the Company’s shareholders, and providing such persons with
annual and long term performance incentives to expend their maximum efforts in the creation of
shareholder value. In the event that the Company is or becomes a Publicly Held Corporation (as
hereinafter defined), the Plan is intended to qualify certain compensation awarded under the Plan
for tax deductibility under Section 162(m) of the Code (as hereafter defined) to the extent deemed
appropriate by the Committee (or any successor committee) of the Board of Directors of the Company.



     2. Definitions. For purposes of the Plan, the following terms shall be defined as set forth
below, in addition to such terms defined in Section 1 hereof.



          (a) “Annual Incentive Award” means a conditional right granted to a Participant under Section
8(c) hereof to receive a cash payment, Stock or other Award, unless otherwise determined by the
Committee, after the end of a specified fiscal year.




          (b) “Award” means any Option, Stock Appreciation Right (including Limited Stock Appreciation
Right), Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another award,
Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual Incentive Award, together
with any other right or interest, granted to a Participant under the Plan.




          (c) “Beneficiary” means the person, persons, trust or trusts which have been designated by a
Participant in his or her most recent written beneficiary designation filed with the Committee to
receive the benefits specified under the Plan upon such Participant’s death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b) hereof. If, upon a
Participant’s death, there is no designated Beneficiary or surviving designated Beneficiary, then
the term Beneficiary means the person, persons, trust or trusts entitled by will or the laws of
descent and distribution to receive such benefits.




          (d) “Beneficial Owner”, “Beneficially Owning” and “Beneficial Ownership” shall have the
meanings ascribed to such terms in Rule 13d3 under the Exchange Act and any successor to such Rule.




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




 









 





          (f) “Cause” shall, with respect to any Participant, have the equivalent meaning (or the same
meaning as “cause” or “for cause”) set forth in any employment agreement between the Participant
and the Company or a Related Entity or, in the absence of any such agreement, such term shall mean
(i) the failure by the Participant to perform his or her duties as assigned by the Company (or a
Related Entity) in a reasonable manner, (ii) any violation or breach by the Participant of his or
her employment agreement with the Company (or a Related Entity), if any, (iii) any violation or
breach by the Participant of his or her non-competition and/or non-disclosure agreement with the
Company (or a Related Entity), if any, (iv) any act by the Participant of dishonesty or bad faith
with respect to the Company (or a Related Entity), (v) chronic addiction to alcohol, drugs or other
similar substances affecting the Participant’s work performance, or (vi) the commission by the
Participant of any act, misdemeanor, or crime reflecting unfavorably upon the Participant or the
Company. The good faith determination by the Committee of whether the Participant’s Continuous
Service was terminated by the Company for “Cause” shall be final and binding for all purposes
hereunder.




          (g) “Change in Control” means a Change in Control as defined with related terms in Section 9
of the Plan.




          (h) “Change in Control Price” means the amount calculated in accordance with Section 9(c) of
the Plan.




          (i) “Code” means the Internal Revenue Code of 1986, as amended from time to time, including
regulations thereunder and successor provisions and regulations thereto.




          (j) “Committee” means a committee designated by the Board to administer the Plan; provided,
however, that the Committee shall consist of at least two directors, and, in the event the Company
is or becomes a Publicly Held Corporation (as hereinafter defined), each member of which shall be
(i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, unless
administration of the Plan by “non-employee directors” is not then required in order for exemptions
under Rule 16b-3 to apply to transactions under the Plan, and (ii) an “outside director” within the
meaning of Section 162(m) of the Code, unless administration of the Plan by “outside directors” is
not then required in order to qualify for tax deductibility under Section 162(m) of the Code.




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




          (l) “Continuous Service” means uninterrupted provision of services to the Company in any
capacity of Employee, Director, or Consultant. Continuous Service shall not be considered to be
interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any
Related Entities, or any successor entities, in any capacity of Employee Director, or Consultant,
or (iii) any change in status as long as the individual remains in the service of the Company or a
Related Entity in any capacity of Employee, Director, or Consultant (except as otherwise provided
in the Option Agreement). An approved leave of absence shall include sick leave, military leave,
or any other authorized personal leave.




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          (m) [Reserved]




          (n) “Covered Employee” means an Eligible Person who is a Covered Employee as specified in
Section 7(e) of the Plan.




          (o) “Deferred Stock” means a right, granted to a Participant under Section 6(e) hereof, to
receive Stock, cash or a combination thereof at the end of a specified deferral period.




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




          (q) “Disability” means a permanent and total disability (within the meaning of Section 22(e)
of the Code), as determined by a medical doctor satisfactory to the Committee.




          (r) “Dividend Equivalent” means a right, granted to a Participant under Section 6(g) hereof,
to receive cash, Stock, other Awards or other property equal in value to dividends paid with
respect to a specified number of shares of Stock, or other periodic payments.




          (s) “Effective Date” means the effective date of the Plan, which shall be March 7, 2001.




          (t) “Eligible Person” means each Executive Officer of the Company (as defined under the
Exchange Act) and other officers, Directors and Employees of the Company or of any Related Entity,
and independent contractors with the Company or any Related Entity. The foregoing notwithstanding,
only employees of the Company, the Parent, or any Subsidiary shall be Eligible Persons for purposes
of receiving any Incentive Stock Options. An Employee on leave of absence may be considered as
still in the employ of the Company or a Related Entity for purposes of eligibility for
participation in the Plan.




          (u) “Employee” means any person, including an officer or Director, who is an employee of the
Company or any Related Entity. The Payment of a director’s fee by the Company or a Related Entity
shall not be sufficient to constitute “employment” by the Company.




          (v) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time,
including rules thereunder and successor provisions and rules thereto.




          (w) “Executive Officer” means an executive officer of the Company as defined under the
Exchange Act.




          (x) “Fair Market Value” means the fair market value of Stock, Awards or other property as
determined by the Committee or the Board, or under procedures established by the Committee or the
Board. Unless otherwise determined by the Committee or the Board, the Fair Market Value of Stock
as of any given date after which the Company is a Publicly Held Corporation shall be the closing
sale price per share reported on a consolidated basis for stock listed on the principal stock
exchange or market on which Stock is traded on the date as of which such value is being determined
or, if there is no sale on that date, then on the last previous day on which a sale was reported.




3









 





          (y) “Good Reason” shall, with respect to any Participant, have the equivalent meaning (or the
same meaning as “good reason” or “for good reason”) set forth in any employment agreement between
the Participant and the Company or a Related Entity or, in the absence of any such agreement, such
term shall mean (i) the assignment to the Participant of any duties inconsistent in any respect
with the Participant’s position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities as assigned by the Company (or a Related Entity), or any
other action by the Company (or a Related Entity) which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company (or a Related
Entity) promptly after receipt of notice thereof given by the Participant; (ii) any failure by the
Company (or a Related Entity) to comply with its obligations to the Participant as agreed upon,
other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which
is remedied by the Company (or a Related Entity) promptly after receipt of notice thereof given by
the Participant; (iii) the Company’s (or Related Entity’s) requiring the Participant to be based
at any office or location outside of fifty miles from the location of employment as of the date of
Award, except for travel reasonably required in the performance of the Participant’s
responsibilities; (iv) any purported termination by the Company (or a Related Entity) of the
Participant’s Continuous Service otherwise than for Cause as defined in Section 2(f), or by reason
of the Participant’s Disability as defined in Section 2(o), prior to the Expiration Date. For
purposes of this Section 2(v), any good faith determination of “Good Reason” made by the Company
shall be conclusive.




          (z) “Incentive Stock Option” means any Option intended to be designated as an incentive stock
option within the meaning of Section 422 of the Code or any successor provision thereto.




          (aa) [Reserved]




          (bb) “Limited Stock Appreciation Right” means a right granted to a Participant under Section
6(c) hereof.




          (cc) “Option” means a right granted to a Participant under Section 6(b) hereof, to purchase
Stock or other Awards at a specified price during specified time periods.




          (dd) “Optionee” means a person to whom an Option or Incentive Stock Option is granted under
this Plan or any person who succeeds to the rights of such person under this Plan.




          (ee) “Other Stock-Based Awards” means Awards granted to a Participant under Section 6(h)
hereof.




          (ff) “Parent” means any corporation (other than the Company), whether now or hereafter
existing, in an unbroken chain of corporations ending with the Company, if each of the corporations
in the chain (other than the Company) owns stock possessing 50 percent or more of the combined
voting power of all classes of stock in one of the other corporations in the chain.




4









 





          (gg) “Participant” means a person who has been granted an Award under the Plan which remains
outstanding, including a person who is no longer an Eligible Person.




          (hh) “Performance Award” means a right, granted to an Eligible Person under Section 8 hereof,
to receive Awards based upon performance criteria specified by the Committee or the Board.




          (ii) “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange
Act and used in Sections 13(d) and 14(d) thereof, and shall include a “group” as defined in Section
13(d) thereof.




          (jj) “Publicly Held Corporation” shall mean a publicly held corporation as that term is used
under Section 162(m)(2) of the Code.




          (kk) “Related Entity” means any Parent, Subsidiary and any business, corporation, partnership,
limited liability company or other entity in which the Company, a Parent or a Subsidiary holds a
substantial ownership interest, directly or indirectly.




          (ll) “Restricted Stock” means Stock granted to a Participant under Section 6(d) hereof, that
is subject to certain restrictions and to a risk of forfeiture.




          (mm) “Rule 16b-3” and “Rule 16a-1(c)(3)” means Rule 16b-3 and Rule 16a-1(c)(3), as from time
to time in effect and applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.




          (nn) “Stock” means the Company’s Common Stock, and such other securities as may be substituted
(or resubstituted) for Stock pursuant to Section 10(c) hereof.




          (oo) “Stock Appreciation Right” means a right granted to a Participant under Section 6(c)
hereof.




          (pp) “Subsidiary” means any corporation (other than the Company), whether now or hereafter
existing, in an unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the other corporations
in such chain.




     3. Administration.



          (a) Authority of the Committee. The Plan shall be administered by the Committee; provided,
however, that except as otherwise expressly provided in this Plan or, during the period that the
Company is a Publicly Held Corporation, in order to comply with Code Section 162(m) or Rule 16b-3
under the Exchange Act, the Board may exercise any power or authority granted to the Committee
under this Plan. The Committee or the Board shall have full and final authority, in each case
subject to and consistent with the provisions of the Plan, to select Eligible Persons to become
Participants, grant Awards, determine the type, number and other terms and conditions of, and all
other matters relating to, Awards, prescribe Award agreements (which need not be identical for each
Participant) and rules and regulations for the




5









 




administration of the Plan, construe and interpret the Plan and Award agreements and correct
defects, supply omissions or reconcile inconsistencies therein, and to make all other decisions and
determinations as the Committee or the Board may deem necessary or advisable for the administration
of the Plan. In exercising any discretion granted to the Committee or the Board under the Plan or
pursuant to any Award, the Committee or the Board shall not be required to follow past practices,
act in a manner consistent with past practices, or treat any Eligible Person in a manner consistent
with the treatment of other Eligible Persons.




          (b) Manner of Exercise of Committee Authority. In the event that the Company is or becomes a
Publicly Held Corporation, the Committee, and not the Board, shall exercise sole and exclusive
discretion on any matter relating to a Participant then subject to Section 16 of the Exchange Act
with respect to the Company to the extent necessary in order that transactions by such Participant
shall be exempt under Rule 16b-3 under the Exchange Act. Any action of the Committee or the Board
shall be final, conclusive and binding on all persons, including the Company, its Related Entities,
Participants, Beneficiaries, transferees under Section 10(b) hereof or other persons claiming
rights from or through a Participant, and shareholders. The express grant of any specific power to
the Committee or the Board, and the taking of any action by the Committee or the Board, shall not
be construed as limiting any power or authority of the Committee or the Board. The Committee or
the Board may delegate to officers or managers of the Company or any Related Entity, or committees
thereof, the authority, subject to such terms as the Committee or the Board shall determine, (i) to
perform administrative functions, (ii) with respect to Participants not subject to Section 16 of
the Exchange Act, to perform such other functions as the Committee or the Board may determine, and
(iii) with respect to Participants subject to Section 16, to perform such other functions of the
Committee or the Board as the Committee or the Board may determine to the extent performance of
such functions will not result in the loss of an exemption under Rule 16b-3 otherwise available for
transactions by such persons, in each case to the extent permitted under applicable law and subject
to the requirements set forth in Section 7(d). The Committee or the Board may appoint agents to
assist it in administering the Plan.




          (c) Limitation of Liability. The Committee and the Board, and each member thereof, shall be
entitled to, in good faith, rely or act upon any report or other information furnished to him or
her by any Executive Officer, other officer or Employee, the Company’s independent auditors,
Consultants or any other agents assisting in the administration of the Plan. Members of the
Committee and the Board, and any officer or Employee acting at the direction or on behalf of the
Committee or the Board, shall not be personally liable for any action or determination taken or
made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action or determination.




     4. Stock Subject to Plan.



          (a) Limitation on Overall Number of Shares Subject to Awards. Subject to adjustment as
provided in Section 10(c) hereof, the total number of shares of Stock reserved and available for
delivery in connection with Awards under the Plan shall be the sum of (i) 1,000,000, plus (ii) the
number of shares with respect to Awards previously granted under the Plan that terminate without
being exercised, expire, are forfeited or canceled, and the number of




6









 




shares of Stock that are surrendered in payment of any Awards or any tax withholding with
regard thereto. In the event an Initial Public Offering (“IPO”) of the shares of the Company’s
Stock occurs, the overall number of shares of the Company’s Stock subject to Awards shall be
further increased by 6% of the total number of shares of the Company’s Stock outstanding
immediately following the IPO, plus, on the first day of each subsequent calendar quarter, an
additional 1.5% of the total number of shares of the Company’s Stock outstanding on that day,
provided, however, that at no time shall the number of shares of the Company’s Stock subject to
Awards exceed 30% of the then outstanding shares of the Company’s Stock (counting convertible
preferred and convertible senior common shares as if converted), unless a greater percentage is
approved by a vote of at least two-thirds of the securities entitled to vote, or a determination is
made by counsel for the Company that such restriction is not required by applicable federal or
state securities laws under the circumstances. Any shares of Stock delivered under the Plan may
consist, in whole or in part, of authorized and unissued shares or treasury shares.




          (b) Limitation on Number of Incentive Stock Option Shares. Subject to adjustment as provided
in Section 10(c) hereof, the number of shares of Stock which may be issued pursuant to Incentive
Stock Options shall be the lesser of (i) the number of Shares that may be subject to Awards under
Section 4(a), or (ii) 15,000,000.




          (c) Application of Limitations. The limitation contained in this Section 4 shall apply not
only to Awards that are settleable by the delivery of shares of Stock but also to Awards relating
to shares of Stock but settleable only in cash (such as cash-only Stock Appreciation Rights). The
Committee or the Board may adopt reasonable counting procedures to ensure appropriate counting,
avoid double counting (as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs from the number of shares
previously counted in connection with an Award.




     5. Eligibility; Per-Person Award Limitations. Awards may be granted under the Plan only to
Eligible Persons. In each fiscal year during any part of which the Plan is in effect, an Eligible
Person may not be granted Awards relating to more than 1,000,000 shares of Stock, subject to
adjustment as provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g),
6(h), 7(b) and 7(c). In addition, the maximum amount that may be earned as an Annual Incentive
Award or other cash Award in any fiscal year by any one Participant shall be $2,000,000, and the
maximum amount that may be earned as a Performance Award or other cash Award in respect of a
performance period by any one Participant shall be $5,000,000.



     6. Specific Terms of Awards.



          (a) General. Awards may be granted on the terms and conditions set forth in this Section 6.
In addition, the Committee or the Board may impose on any Award or the exercise thereof, at the
date of grant or thereafter (subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee or the Board shall determine,
including terms requiring forfeiture of Awards in the event of termination of Continuous Service by
the Participant and terms permitting a Participant to make elections relating to his or her Award.
The Committee or the Board shall retain full power and discretion to accelerate, waive or modify,
at any time, any term or condition of an Award that is not




7









 




mandatory under the Plan. Except in cases in which the Committee or the Board is authorized
to require other forms of consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of California law, no consideration other
than services may be required for the grant (but not the exercise) of any Award.




          (b) Options. The Committee and the Board each is authorized to grant Options to Participants
on the following terms and conditions:





     (i) Stock Option Agreement. Each grant of an Option under the Plan shall be
evidenced by a Stock Option Agreement. Such Stock Option Agreement shall be subject
to all applicable terms and conditions of the Plan and may be subject to any other
terms and conditions which are not inconsistent with the Plan and which the
Committee or the Board deems appropriate for inclusion in a Stock Option Agreement.
The provisions of the various Stock Option Agreements entered into under the Plan
need not be identical.




     (ii) Number of Shares. Each Stock Option Agreement shall specify the number of shares of Stock that are subject to the Option and shall provide for the adjustment
of such number in accordance with Section 10(c) hereof. The Stock Option Agreement
shall also specify whether the Stock Option is an Incentive Stock Option or a
Non-Qualified Stock Option.




     (iii) Exercise Price.




          (A) In General. Each Stock Option Agreement shall state the price at which shares of Stock subject to the Option may be purchased (the “Exercise Price”), which
shall be, with respect to Incentive Stock Options, not less than 100% of the Fair
Market Value of the Stock on the date of grant. In the case of Non-Qualified Stock
Options, the Exercise Price shall be determined in the sole discretion of the
Committee or the Board; provided, however, that the Exercise Price shall be no less
than 85% of the Fair Market Value of the shares of Stock on the date of grant of the
Non-Qualified Stock Option.




          (B) Ten Percent Shareholder. If an individual owns or is deemed to own (by
reason of the attribution rules applicable under Section 424(d) of the Code) more
than 10% of the combined voting power of all classes of stock of the Company or any
Related Entity, any Option granted to such individual must comply with the
following: (1) the Exercise Price of a Non-Qualified Stock Option must be at least
110% of the Fair Market Value of a share of Stock on the date of grant, or (2) in
the case of an Incentive Stock Option, the Exercise Price must be at least 110% of
the Fair Market Value of a share of Stock on the date of grant and such Incentive
Stock Option by its terms is not exercisable after the expiration of five years from
the date of grant.




          (C) Non-Applicability. The Exercise Price restriction applicable to
Non-Qualified Stock Options required by Sections 6(b)(iii)(A) and 6(b)(iii)(B) shall
be inoperative if (1) the offer and sale of the shares of Stock to



8









 







be issued upon payment of the Exercise Price have been registered under a then
currently effective registration statement under applicable federal or state
securities laws, or (2) a determination is made by counsel for the Company that such
Exercise Price restrictions are not required in the circumstances under applicable
federal or state securities laws.




     (iv) Time and Method of Exercise. The Committee or the Board shall determine
the time or times at which or the circumstances under which an Option may be
exercised in whole or in part (including based on achievement of performance goals
and/or future service requirements), provided that in the case of an Optionee who is
not an officer, Director, or Consultant of the Company or a Related Entity, his or
her Options shall become exercisable at least as rapidly as 20% per year, over a 5
year period commencing on the date of the grant, unless a determination is made by
counsel for the Company that such vesting requirements are not required in the
circumstances under applicable federal or state securities laws. The Board or the
Committee may also determine the time or times at which Options shall cease to be or
become exercisable following termination of Continuous Service or upon other
conditions; provided, however, if the Optionee’s Continuous Service is terminated
for any reason other than Cause, that portion of the Option that is exercisable as
of the date of termination shall remain exercisable for at least 6 months from the
date of termination if by reason of death or Disability, and for at least 30 days
from the date of termination if by reason other than the Optionee’s death or
Disability. The Board or the Committee may determine the methods by which such
exercise price may be paid or deemed to be paid (including in the discretion of the
Committee or the Board a cashless exercise procedure), the form of such payment,
including, without limitation, cash, Stock, other Awards or awards granted under
other plans of the Company or a Related Entity, or other property (including notes
or other contractual obligations of Participants to make payment on a deferred
basis), and the methods by or forms in which Stock will be delivered or deemed to be
delivered to Participants.




     (v) Incentive Stock Options. The terms of any Incentive Stock Option granted
under the Plan shall comply in all respects with the provisions of Section 422 of
the Code. Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options (including any Stock Appreciation Rights in
tandem therewith) shall be interpreted, amended or altered, nor shall any discretion
or authority granted under the Plan be exercised, so as to disqualify either the
Plan or any Incentive Stock Option under Section 422 of the Code, unless the
Participant has first requested the change that will result in such
disqualification. Thus, if and to the extent required to comply with Section 422 of
the Code, Options granted as Incentive Stock Options shall be subject to the
following special terms and conditions:




          (A) the Option shall not be exercisable more than ten years after the date such
Incentive Stock Option is granted; provided, however, that if a Participant owns or
is deemed to own (by reason of the attribution rules of Section



9









 







424(d) of the Code) more than 10% of the combined voting power of all classes
of stock of the Company or any Parent Corporation and the Incentive Stock Option is
granted to such Participant, the term of the Incentive Stock Option shall be (to the
extent required by the Code at the time of the grant) for no more than five years
from the date of grant; and




          (B) The aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of the shares of stock with respect to which Incentive
Stock Options granted under the Plan and all other option plans of the Company or
its Parent Corporation during any calendar year exercisable for the first time by
the Participant during any calendar year shall not (to the extent required by the
Code at the time of the grant) exceed $100,000.




     (vi) Repurchase Rights. The Committee and the Board shall have the discretion
to grant Options which are exercisable for unvested shares of Common Stock. Should
the Optionee’s Continuous Service cease while holding such unvested shares, the
Company shall have the right to repurchase, at the exercise price paid per share,
any or all of those unvested shares. The terms upon which such repurchase right
shall be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by the
Committee or the Board and set forth in the document evidencing such repurchase
right.



          (c) Stock Appreciation Rights. The Committee and the Board each is authorized to grant Stock
Appreciation Rights to Participants on the following terms and conditions:





     (i) Right to Payment. A Stock Appreciation Right shall confer on the
Participant to whom it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one share of stock on the date of exercise
(or, in the case of a “Limited Stock Appreciation Right” that may be exercised only
in the event of a Change in Control, the Fair Market Value determined by reference
to the Change in Control Price, as defined under Section 9(c) hereof), over (B) the
grant price of the Stock Appreciation Right as determined by the Committee or the
Board. The grant price of a Stock Appreciation Right shall not be less than the
Fair Market Value of a share of Stock on the date of grant except as provided under
Section 8(a) hereof.




     (ii) Other Terms. The Committee or the Board shall determine at the date of
grant or thereafter, the time or times at which and the circumstances under which a
Stock Appreciation Right may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the time or
times at which Stock Appreciation Rights shall cease to be or become exercisable
following termination of Continuous Service or upon other conditions, the method of
exercise, method of settlement, form of consideration payable in settlement, method
by or forms in which Stock will be delivered or deemed to be delivered to
Participants, whether or not a Stock Appreciation Right shall be in



10









 







tandem or in combination with any other Award, and any other terms and
conditions of any Stock Appreciation Right. Limited Stock Appreciation Rights that
may only be exercised in connection with a Change in Control or other event as
specified by the Committee or the Board, may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee or the Board may determine.
Stock Appreciation Rights and Limited Stock Appreciation Rights may be either
freestanding or in tandem with other Awards.



          (d) Restricted Stock. The Committee and the Board each is authorized to grant Restricted
Stock to Participants on the following terms and conditions:





     (i) Grant and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions, if any,
as the Committee or the Board may impose, or as otherwise provided in this Plan.
The restrictions may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals and/or future
service requirements), in such installments or otherwise, as the Committee or the
Board may determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any Award agreement relating to the
Restricted Stock, a Participant granted Restricted Stock shall have all of the
rights of a shareholder, including the right to vote the Restricted Stock and the
right to receive dividends thereon (subject to any mandatory reinvestment or other
requirement imposed by the Committee or the Board). During the restricted period
applicable to the Restricted Stock, subject to Section 10(b) below, the Restricted
Stock may not be sold, transferred, pledged, hypothecated, margined or otherwise
encumbered by the Participant.




     (ii) Forfeiture. Except as otherwise determined by the Committee or the Board
at the time of the Award, upon termination of a Participant’s Continuous Service
during the applicable restriction period, the Participant’s Restricted Stock that is
at that time subject to restrictions shall be forfeited and reacquired by the
Company; provided that the Committee or the Board may provide, by rule or regulation
or in any Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock shall be waived
in whole or in part in the event of terminations resulting from specified causes,
and the Committee or the Board may in other cases waive in whole or in part the
forfeiture of Restricted Stock.




     (iii) Certificates for Stock. Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee or the Board shall determine. If
certificates representing Restricted Stock are registered in the name of the
Participant, the Committee or the Board may require that such certificates bear an
appropriate legend referring to the terms, conditions and restrictions applicable to
such Restricted Stock, that the Company retain physical possession of the
certificates, and that the Participant deliver a stock power to the Company,
endorsed in blank, relating to the Restricted Stock.



11









 






     (iv) Dividends and Splits. As a condition to the grant of an Award of
Restricted Stock, the Committee or the Board may require that any cash dividends
paid on a share of Restricted Stock be automatically reinvested in additional shares
of Restricted Stock or applied to the purchase of additional Awards under the Plan.
Unless otherwise determined by the Committee or the Board, Stock distributed in
connection with a Stock split or Stock dividend, and other property distributed as a
dividend, shall be subject to restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which such Stock or other property
has been distributed.



          (e) Deferred Stock. The Committee and the Board each is authorized to grant Deferred Stock to
Participants, which are rights to receive Stock, cash, or a combination thereof at the end of a
specified deferral period, subject to the following terms and conditions:





     (i) Award and Restrictions. Satisfaction of an Award of Deferred Stock shall
occur upon expiration of the deferral period specified for such Deferred Stock by
the Committee or the Board (or, if permitted by the Committee or the Board, as
elected by the Participant). In addition, Deferred Stock shall be subject to such
restrictions (which may include a risk of forfeiture) as the Committee or the Board
may impose, if any, which restrictions may lapse at the expiration of the deferral
period or at earlier specified times (including based on achievement of performance
goals and/or future service requirements), separately or in combination, in
installments or otherwise, as the Committee or the Board may determine. Deferred
Stock may be satisfied by delivery of Stock, cash equal to the Fair Market Value of
the specified number of shares of Stock covered by the Deferred Stock, or a
combination thereof, as determined by the Committee or the Board at the date of
grant or thereafter. Prior to satisfaction of an Award of Deferred Stock, an Award
of Deferred Stock carries no voting or dividend or other rights associated with
share ownership.




     (ii) Forfeiture. Except as otherwise determined by the Committee or the Board,
upon termination of a Participant’s Continuous Service during the applicable
deferral period thereof to which forfeiture conditions apply (as provided in the
Award agreement evidencing the Deferred Stock), the Participant’s Deferred Stock
that is at that time subject to deferral (other than a deferral at the election of
the Participant) shall be forfeited; provided that the Committee or the Board may
provide, by rule or regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to Deferred
Stock shall be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee or the Board may in other cases waive in
whole or in part the forfeiture of Deferred Stock.




     (iii) Dividend Equivalents. Unless otherwise determined by the Committee or
the Board at date of grant, any Dividend Equivalents that are granted with respect
to any Award of Deferred Stock shall be either (A) paid with respect to such
Deferred Stock at the dividend payment date in cash or in shares



12









 







of unrestricted Stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such Deferred Stock and the amount or
value thereof automatically deemed reinvested in additional Deferred Stock, other
Awards or other investment vehicles, as the Committee or the Board shall determine
or permit the Participant to elect.



          (f) Bonus Stock and Awards in Lieu of Obligations. The Committee and the Board each is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of Company
obligations to pay cash or deliver other property under the Plan or under other plans or
compensatory arrangements, provided that, in the case of Participants subject to Section 16 of the
Exchange Act, the amount of such grants remains within the discretion of the Committee to the
extent necessary to ensure that acquisitions of Stock or other Awards are exempt from liability
under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall be subject to
such other terms as shall be determined by the Committee or the Board.




          (g) Dividend Equivalents. The Committee and the Board each is authorized to grant Dividend
Equivalents to a Participant entitling the Participant to receive cash, Stock, other Awards, or
other property equal in value to dividends paid with respect to a specified number of shares of
Stock, or other periodic payments. Dividend Equivalents may be awarded on a free-standing basis or
in connection with another Award. The Committee or the Board may provide that Dividend Equivalents
shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional
Stock, Awards, or other investment vehicles, and subject to such restrictions on transferability
and risks of forfeiture, as the Committee or the Board may specify.




          (h) Other Stock-Based Awards. The Committee and the Board each is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards that may be
denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or
related to, Stock, as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment
contingent upon performance of the Company or any other factors designated by the Committee or the
Board, and Awards valued by reference to the book value of Stock or the value of securities of or
the performance of specified Related Entities or business units. The Committee or the Board shall
determine the terms and conditions of such Awards. Stock delivered pursuant to an Award in the
nature of a purchase right granted under this Section 6(h) shall be purchased for such
consideration (including without limitation loans from the Company or a Related Entity), paid for
at such times, by such methods, and in such forms, including, without limitation, cash, Stock,
other Awards or other property, as the Committee or the Board shall determine. The Committee and
the Board shall have the discretion to grant such other Awards which are exercisable for unvested
shares of Common Stock. Should the Optionee’s Continuous Service cease while holding such unvested
shares, the Company shall have the right to repurchase, at the exercise price paid per share, any
or all of those unvested shares. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Committee or the Board and set forth in the document
evidencing such repurchase right. Cash awards, as an element of or supplement to any other Award
under the Plan, may also be granted pursuant to this Section 6(h).




13









 





     7. Performance and Annual Incentive Awards.



          (a) Performance Conditions. The right of a Participant to exercise or receive a grant or
settlement of any Award, and the timing thereof, may be subject to such performance conditions as
may be specified by the Committee or the Board. The Committee or the Board may use such business
criteria and other measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts payable under any
Award subject to performance conditions, except as limited under Sections 7(b) and 7(c) hereof in
the case of a Performance Award or Annual Incentive Award intended to qualify under Code Section
162(m). At such times as the Company is a Publicly Held Corporation, if and to the extent required
under Code Section 162(m), any power or authority relating to a Performance Award or Annual
Incentive Award intended to qualify under Code Section 162(m), shall be exercised by the Committee
and not the Board.




          (b) Performance Awards Granted to Designated Covered Employees. If and to the extent that the
Committee determines that a Performance Award to be granted to an Eligible Person who is designated
by the Committee as likely to be a Covered Employee should qualify as “performance-based
compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such
Performance Award shall be contingent upon achievement of pre-established performance goals and
other terms set forth in this Section 7(b).





     (i) Performance Goals Generally. The performance goals for such Performance
Awards shall consist of one or more business criteria and a targeted level or levels
of performance with respect to each of such criteria, as specified by the Committee
consistent with this Section 7(b). Performance goals shall be objective and shall
otherwise meet the requirements of Code Section 162(m) and regulations thereunder
including the requirement that the level or levels of performance targeted by the
Committee result in the achievement of performance goals being “substantially
uncertain.” The Committee may determine that such Performance Awards shall be
granted, exercised and/or settled upon achievement of any one performance goal or
that two or more of the performance goals must be achieved as a condition to grant,
exercise and/or settlement of such Performance Awards. Performance goals may differ
for Performance Awards granted to any one Participant or to different Participants.




     (ii) Business Criteria. One or more of the following business criteria for the
Company, on a consolidated basis, and/or specified Related Entities or business
units of the Company (except with respect to the total shareholder return and
earnings per share criteria), shall be used exclusively by the Committee in
establishing performance goals for such Performance Awards: (1) total shareholder
return; (2) such total shareholder return as compared to total return (on a
comparable basis) of a publicly available index such as, but not limited to, the
Standard & Poor’s 500 Stock Index or the S&P Specialty Retailer Index; (3) net
income; (4) pretax earnings; (5) earnings before interest expense, taxes,
depreciation and amortization; (6) pretax operating earnings after interest expense
and before bonuses, service fees, and extraordinary or special items; (7) operating
margin; (8) earnings per share; (9) return on equity; (10) return on capital; (11)



14









 







return on investment; (12) operating earnings; (13) working capital or
inventory; and (14) ratio of debt to shareholders’ equity. One or more of the
foregoing business criteria shall also be exclusively used in establishing
performance goals for Annual Incentive Awards granted to a Covered Employee under
Section 7(c) hereof that are intended to qualify as “performanced-based compensation
under Code Section 162(m).




     (iii) Performance Period; Timing For Establishing Performance Goals.
Achievement of performance goals in respect of such Performance Awards shall be
measured over a performance period of up to ten years, as specified by the
Committee. Performance goals shall be established not later than 90 days after the
beginning of any performance period applicable to such Performance Awards, or at
such other date as may be required or permitted for “performance-based compensation”
under Code Section 162(m).




     (iv) Performance Award Pool. The Committee may establish a Performance Award
pool, which shall be an unfunded pool, for purposes of measuring Company performance
in connection with Performance Awards. The amount of such Performance Award pool
shall be based upon the achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 7(b)(ii) hereof during the given
performance period, as specified by the Committee in accordance with Section
7(b)(iii) hereof. The Committee may specify the amount of the Performance Award
pool as a percentage of any of such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.




     (v) Settlement of Performance Awards; Other Terms. Settlement of such
Performance Awards shall be in cash, Stock, other Awards or other property, in the
discretion of the Committee. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with such Performance
Awards. The Committee shall specify the circumstances in which such Performance
Awards shall be paid or forfeited in the event of termination of Continuous Service
by the Participant prior to the end of a performance period or settlement of
Performance Awards.



          (c) Annual Incentive Awards Granted to Designated Covered Employees. The Committee may,
within its discretion, grant one or more Annual Incentive Awards to any Eligible Person, subject to
the terms and conditions set forth in this Section 7(c).





     (i) Annual Incentive Award Pool. The Committee may establish an Annual
Incentive Award pool, which shall be an unfunded pool, for purposes of measuring
Company performance in connection with Annual Incentive Awards. In the case of
Annual Incentive Awards intended to qualify as “performance-based compensation” for
purposes of Code Section 162(m), the amount of such Annual Incentive Award pool
shall be based upon the achievement of a performance goal or goals based on one or
more of the business criteria set forth



15









 







in Section 7(b)(ii) hereof during the given performance period, as specified by
the Committee in accordance with Section 7(b)(iii) hereof. The Committee may
specify the amount of the Annual Incentive Award pool as a percentage of any such
business criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship to such
business criteria.




     (ii) Potential Annual Incentive Awards. Not later than the end of the 90th day
of each fiscal year, or at such other date as may be required or permitted in the
case of Awards intended to be “performance-based compensation” under Code Section
162(m), the Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable thereunder, for
that fiscal year, either out of an Annual Incentive Award pool established by such
date under Section 7(c)(i) hereof or as individual Annual Incentive Awards. In the
case of individual Annual Incentive Awards intended to qualify under Code Section
162(m), the amount potentially payable shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria set forth in
Section 7(b)(ii) hereof in the given performance year, as specified by the
Committee; in other cases, such amount shall be based on such criteria as shall be
established by the Committee. In all cases, the maximum Annual Incentive Award of
any Participant shall be subject to the limitation set forth in Section 5 hereof.




     (iii) Payout of Annual Incentive Awards. After the end of each fiscal year,
the Committee shall determine the amount, if any, of (A) the Annual Incentive Award
pool, and the maximum amount of potential Annual Incentive Award payable to each
Participant in the Annual Incentive Award pool, or (B) the amount of potential
Annual Incentive Award otherwise payable to each Participant. The Committee may, in
its discretion, determine that the amount payable to any Participant as an Annual
Incentive Award shall be reduced from the amount of his or her potential Annual
Incentive Award, including a determination to make no Award whatsoever. The
Committee shall specify the circumstances in which an Annual Incentive Award shall
be paid or forfeited in the event of termination of Continuous Service by the
Participant prior to the end of a fiscal year or settlement of such Annual Incentive
Award.



          (d) Written Determinations. All determinations by the Committee as to the establishment of
performance goals, the amount of any Performance Award pool or potential individual Performance
Awards and as to the achievement of performance goals relating to Performance Awards under Section
7(b), and the amount of any Annual Incentive Award pool or potential individual Annual Incentive
Awards and the amount of final Annual Incentive Awards under Section 7(c), shall be made in writing
in the case of any Award intended to qualify under Code Section 162(m). The Committee may not
delegate any responsibility relating to such Performance Awards or Annual Incentive Awards if and
to the extent required to comply with Code Section 162(m).




16









 





          (e) Status of Section 7(b) and Section 7(c) Awards Under Code Section 162(m). It is the
intent of the Company that Performance Awards and Annual Incentive Awards under Section 7(b) and
7(c) hereof granted to persons who are designated by the Committee as likely to be Covered
Employees within the meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute “qualified performance-based compensation” within the
meaning of Code Section 162(m) and regulations thereunder. Accordingly, the terms of Sections
7(b), (c), (d) and (e), including the definitions of Covered Employee and other terms used therein,
shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder.
The foregoing notwithstanding, because the Committee cannot determine with certainty whether a
given Participant will be a Covered Employee with respect to a fiscal year that has not yet been
completed, the term Covered Employee as used herein shall mean only a person designated by the
Committee, at the time of grant of Performance Awards or an Annual Incentive Award, as likely to be
a Covered Employee with respect to that fiscal year. If any provision of the Plan or any agreement
relating to such Performance Awards or Annual Incentive Awards does not comply or is inconsistent
with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be
construed or deemed amended to the extent necessary to conform to such requirements.




     8. Certain Provisions Applicable to Awards or Sales.



          (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan
may, in the discretion of the Committee or the Board, be granted either alone or in addition to, in
tandem with, or in substitution or exchange for, any other Award or any award granted under another
plan of the Company, any Related Entity, or any business entity to be acquired by the Company or a
Related Entity, or any other right of a Participant to receive payment from the Company or any
Related Entity. Such additional, tandem, and substitute or exchange Awards may be granted at any
time. If an Award is granted in substitution or exchange for another Award or award, the Committee
or the Board shall require the surrender of such other Award or award in consideration for the
grant of the new Award. In addition, Awards may be granted in lieu of cash compensation, including
in lieu of cash amounts payable under other plans of the Company or any Related Entity, in which
the value of Stock subject to the Award is equivalent in value to the cash compensation (for
example, Deferred Stock or Restricted Stock), or in which the exercise price, grant price or
purchase price of the Award in the nature of a right that may be exercised is equal to the Fair
Market Value of the underlying Stock minus the value of the cash compensation surrendered (for
example, Options granted with an exercise price “discounted” by the amount of the cash compensation
surrendered).




          (b) Term of Awards. The term of each Award shall be for such period as may be determined by
the Committee or the Board; provided that in no event shall the term of any Option or Stock
Appreciation Right exceed a period of ten years (or such shorter term as may be required in respect
of an Incentive Stock Option under Section 422 of the Code).




          (c) Purchase Prices.





     (i) In General. In the case of an Award under this Plan, other than an Option,
which grants an Employee, Director, or Consultant of the Company the right to
purchase Stock, the Board or the Committee shall have discretion to set



17









 







the purchase price, provided that in no event shall the purchase price per
share of Stock be less than 85% of the Fair Market Value of such share on the date
of the Award or the date of the purchase, and in the case of an Award made to an
Employee who owns or is deemed to own (by reason of the attribution rules applicable
under Section 424(d) of the Code) more than 10% of the combined voting power of all
classes of Stock of the Company, the Parent Corporation or a Subsidiary, the
purchase price of such Stock shall be no less than 100% of the Fair Market Value of
the Stock on the date of such award or the date of the purchase.




     (ii) Non-Applicability of Restrictions. The Purchase Price restrictions
contained in Section 8(c)(i) applicable to Awards under this Plan, other than
Options, which grant an Employee, Director, or Consultant of the Company the right
to purchase Stock, shall be inoperative if (A) the offer and sale of the shares of
Stock to be issued upon payment of the Exercise Price have been registered under a
then currently effective registration statement under applicable federal or state
securities laws, or (B) a determination is made by counsel for the Company that such
Exercise Price restrictions are not required in the circumstances under applicable
federal or state securities laws.



          (d) Form and Timing of Payment Under Awards; Deferrals. Subject to the terms of the Plan and
any applicable Award agreement, payments to be made by the Company or a Related Entity upon the
exercise of an Option or other Award or settlement of an Award may be made in such forms as the
Committee or the Board shall determine, including, without limitation, cash, other Awards or other
property, and may be made in a single payment or transfer, in installments, or on a deferred basis.
The settlement of any Award may be accelerated, and cash paid in lieu of Stock in connection with
such settlement, in the discretion of the Committee or the Board or upon occurrence of one or more
specified events (in addition to a Change in Control). Installment or deferred payments may be
required by the Committee or the Board (subject to Section 10(e) of the Plan) or permitted at the
election of the Participant on terms and conditions established by the Committee or the Board.
Payments may include, without limitation, provisions for the payment or crediting of a reasonable
interest rate on installment or deferred payments or the grant or crediting of Dividend Equivalents
or other amounts in respect of installment or deferred payments denominated in Stock.




          (e) Exemptions from Section 16(b) Liability. If and to the extent that the Company is or
becomes a Publicly Held Corporation, it is the intent of the Company that this Plan comply in all
respects with applicable provisions of Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to
ensure that neither the grant of any Awards to nor other transaction by a Participant who is
subject to Section 16 of the Exchange Act is subject to liability under Section 16(b) thereof
(except for transactions acknowledged in writing to be non-exempt by such Participant).
Accordingly, if any provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any such transaction, such
provision will be construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall avoid liability under
Section 16(b). In addition, the purchase price of any Award conferring a right to purchase Stock
shall be not less than any specified percentage of the




18









 




Fair Market Value of Stock at the date of grant of the Award then required in order to comply
with Rule 16b-3.




               9. Change in Control.



               (a) Effect of “Change in Control.” The effect of a “Change in Control,” as defined in Section
9(b) below, shall be as provided, if at all, (1) in an employment, compensation, or severance
agreement, if any, between the Company or any Related Entity and the Participant, relating to the
Participant’s employment, compensation, or severance with or from the Company or such Related
Entity, or (2) in the agreement evidencing the Award.



               (b) Definition of “Change in Control.” A “Change in Control” shall be defined as it is
defined, if at all, (1) in an employment, compensation, or severance agreement, if any, between the
Company or any Related Entity and the Participant, relating to the Participant’s employment,
compensation, or severance with or from the Company or such Related Entity, or (2) in the agreement
evidencing the Award to such Participant.



               (c) Definition of “Change in Control Price.” The “Change in Control Price” shall be defined
as it is defined, if at all, (1) in an employment, compensation, or severance agreement, if any,
between the Company or any Related Entity and the Participant, relating to the Participant’s
employment, compensation, or severance with or from the Company or such Related Entity, or (2) in
the agreement evidencing the Award to such Participant.”



     10. General Provisions.



          (a) Compliance With Legal and Other Requirements. The Company may, to the extent deemed
necessary or advisable by the Committee or the Board, postpone the issuance or delivery of Stock or
payment of other benefits under any Award until completion of such registration or qualification of
such Stock or other required action under any federal or state law, rule or regulation, listing or
other required action with respect to any stock exchange or automated quotation system upon which
the Stock or other Company securities are listed or quoted, or compliance with any other obligation
of the Company, as the Committee or the Board, may consider appropriate, and may require any
Participant to make such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the issuance or delivery of
Stock or payment of other benefits in compliance with applicable laws, rules, and regulations,
listing requirements, or other obligations. The foregoing notwithstanding, in connection with a
Change in Control, the Company shall take or cause to be taken no action, and shall undertake or
permit to arise no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Stock or payment of benefits under any Award or the
imposition of any other conditions on such issuance, delivery or payment, to the extent that such
postponement or other condition would represent a greater burden on a Participant than existed on
the 90th day preceding the Change in Control.




          (b) Limits on Transferability; Beneficiaries.





     (i) General. Except as provided herein, a Participant may not assign, sell,
transfer, or otherwise encumber or subject to any lien any Award or other



19









 






right or interest granted under this Plan, in whole or in part, including any
Award or right which constitutes a derivative security as generally defined in Rule
16a1(c) under the Exchange Act, other than by will or by operation of the laws of
descent and distribution, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant or his or
her guardian or legal representative.




     (ii) Permitted Transfer of Option. The Committee or Board, in its sole
discretion, may permit the transfer of an Option (but not an Incentive Stock Option,
or any other right to purchase Stock other than an Option) as follows: (A) by gift
to a member of the Participant’s Immediate Family or (B) by transfer by instrument
to a trust providing that the Option is to be passed to beneficiaries upon death of
the Optionee. For purposes of this Section 10(b)(ii), “Immediate Family” shall mean
the Optionee’s spouse (including a former spouse subject to terms of a domestic
relations order); child, stepchild, grandchild, child-in-law; parent, stepparent,
grandparent, parent-in-law; sibling and sibling-in-law, and shall include adoptive
relationships. If a determination is made by counsel for the Company that the
restrictions contained in this Section 10(b)(ii) are not required by applicable
federal or state securities laws under the circumstances, then the Committee or
Board, in its sole discretion, may permit the transfer of Awards (other than
Incentive Stock Options and Stock Appreciation Rights in tandem therewith) to one or
more Beneficiaries or other transferees during the lifetime of the Participant,
which may be exercised by such transferees in accordance with the terms of such
Award, but only if and to the extent permitted by the Committee or the Board
pursuant to the express terms of an Award agreement (subject to any terms and
conditions which the Committee or the Board may impose thereon, and further subject
to any prohibitions and restrictions on such transfers pursuant to Rule 16b-3). A
Beneficiary, transferee, or other person claiming any rights under the Plan from or
through any Participant shall be subject to all terms and conditions of the Plan and
any Award agreement applicable to such Participant, except as otherwise determined
by the Committee or the Board, and to any additional terms and conditions deemed
necessary or appropriate by the Committee or the Board.



          (c) Adjustments.





     (i)
Adjustments to Awards. In the event that any stock dividend or
other extraordinary distribution (whether in the form of cash, Stock,
or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange, liquidation, dissolution or other similar
corporate transaction or event affects the Stock and/or such other
securities of the Company or any other issuer, then the Committee or
the Board shall equitably and proportionately substitute, exchange,
or adjust as necessary (A) the number and kind of shares of
Stock which may be delivered in connection with Awards granted
thereafter, (B) the number and kind of shares of Stock by which
annual per-person Award limitations are measured under Section 5
hereof, (C) the number and kind of shares of Stock subject to or
deliverable in respect of outstanding Awards, (E) the exercise
price, grant price or purchase price relating to any Award and/or
make provision for payment of cash or other property in respect of
any outstanding Award, and (F) other aspects of an Award as
appropriate.



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     (ii) Adjustments in Case of Certain Corporate Transactions. In the event of a
proposed sale of all or substantially all of the Company’s assets or any
reorganization, merger, consolidation, or other form of corporate transaction in
which the Company does not survive, or in which the shares of Stock are exchanged
for or converted into securities issued by another entity, then the successor or
acquiring entity or an affiliate thereof may, with the consent of the Committee or
the Board, assume each outstanding Option or substitute an equivalent option or
right. If the successor or acquiring entity or an affiliate thereof, does not cause
such an assumption or substitution, then each Option shall terminate upon the
consummation of sale, merger, consolidation, or other corporate transaction. The
Committee or the Board shall give written notice of any proposed transaction
referred to in this Section 10(c)(ii) a reasonable period of time prior to the
closing date for such transaction (which notice may be given either before or after
the approval of such transaction), in order that Optionees may have a reasonable
period of time prior to the closing date of such transaction within which to
exercise any Options that are then exercisable (including any Options that may
become exercisable upon the closing date of such transaction). An Optionee may
condition his exercise of any Option upon the consummation of the transaction.




     (iii) Other Adjustments. In addition, the Committee (and the Board if and only
to the extent such authority is not required to be exercised by the Committee to
comply with Code Section 162(m)) is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards (including Performance Awards
and performance goals, and Annual Incentive Awards and any Annual Incentive Award
pool or performance goals relating thereto) in recognition of unusual or
nonrecurring events (including, without limitation, acquisitions and dispositions of
businesses and assets) affecting the Company, any Related Entity or any business
unit, or the financial statements of the Company or any Related Entity, or in
response to changes in applicable laws, regulations, accounting principles, tax
rates and regulations or business conditions or in view of the Committee’s
assessment of the business strategy of the Company, any Related Entity or business
unit thereof, performance of comparable organizations, economic and business
conditions, personal performance of a Participant, and any other circumstances
deemed relevant; provided that no such adjustment shall be authorized or made if and
to the extent that such authority or the making of such adjustment would cause
Options, Stock Appreciation Rights, Performance Awards granted under Section 8(b)
hereof or Annual Incentive Awards granted under Section 8(c) hereof to Participants
designated by the Committee as Covered Employees and intended to qualify as
“performance-based compensation” under Code Section 162(m) and the regulations
thereunder to



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otherwise fail to qualify as “performance-based compensation” under Code
Section 162(m) and regulations thereunder.



          (d) Taxes. The Company and any Related Entity are authorized to withhold from any Award
granted, any payment relating to an Award under the Plan, including from a distribution of Stock,
or any payroll or other payment to a Participant, amounts of withholding and other taxes due or
potentially payable in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company and Participants to
satisfy obligations for the payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or receive Stock or other property and
to make cash payments in respect thereof in satisfaction of a Participant’s tax obligations, either
on a mandatory or elective basis in the discretion of the Committee.




          (e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue or
terminate the Plan, or the Committee’s authority to grant Awards under the Plan, without the
consent of shareholders or Participants, except that any amendment or alteration to the Plan shall
be subject to the approval of the Company’s shareholders not later than the annual meeting next
following such Board action if such shareholder approval is required by any federal or state law or
regulation (including, without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any
stock exchange or automated quotation system on which the Stock may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to
shareholders for approval; provided that, without the consent of an affected Participant, no such
Board action may materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee or the Board may waive any conditions or
rights under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted and
any Award agreement relating thereto, except as otherwise provided in the Plan; provided that,
without the consent of an affected Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant under such Award. Notwithstanding
anything in the Plan to the contrary, if any right under this Plan would cause a transaction to be
ineligible for pooling of interest accounting that would, but for the right hereunder, be eligible
for such accounting treatment, the Committee or the Board may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution of Stock having a
Fair Market Value equal to the cash otherwise payable hereunder for the right which caused the
transaction to be ineligible for pooling of interest accounting.




          (f) Reporting of Financial Information. The Company shall provide to the recipient of any
Award under this Plan, no less frequently than annually, the financial statements of the Company,
until such time as a determination is made by counsel for the Company that such reports are not
required by applicable federal or state securities laws under the circumstances.




          (g) Limitation on Rights Conferred Under Plan. Neither the Plan nor any action taken
hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue
as an Eligible Person or Participant or in the employ of the Company or a Related Entity; (ii)
interfering in any way with the right of the Company or a Related Entity to




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terminate any Eligible Person’s or Participant’s Continuous Service at any time, (iii) giving
an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated
uniformly with other Participants and Employees, or (iv) conferring on a Participant any of the
rights of a shareholder of the Company unless and until the Participant is duly issued or
transferred shares of Stock in accordance with the terms of an Award.




          (h) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an
“unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made
to a Participant or obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may authorize the creation of trusts and
deposit therein cash, Stock, other Awards or other property, or make other arrangements to meet the
Company’s obligations under the Plan. Such trusts or other arrangements shall be consistent with
the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of
each affected Participant. The trustee of such trusts may be authorized to dispose of trust assets
and reinvest the proceeds in alternative investments, subject to such terms and conditions as the
Committee or the Board may specify and in accordance with applicable law.




          (i) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its
submission to the shareholders of the Company for approval shall be construed as creating any
limitations on the power of the Board or a committee thereof to adopt such other incentive
arrangements as it may deem desirable including incentive arrangements and awards which do not
qualify under Code Section 162(m).




          (j) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by
the Committee or the Board, in the event of a forfeiture of an Award with respect to which a
Participant paid cash or other consideration, the Participant shall be repaid the amount of such
cash or other consideration. No fractional shares of Stock shall be issued or delivered pursuant
to the Plan or any Award. The Committee or the Board shall determine whether cash, other Awards or
other property shall be issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.




          (k) Governing Law. The validity, construction and effect of the Plan, any rules and
regulations under the Plan, and any Award agreement shall be determined in accordance with the laws
of the State of California without giving effect to principles of conflicts of laws, and applicable
federal law.




          (l) Plan Effective Date and Shareholder Approval; Termination of Plan. The Plan shall become
effective on the Effective Date, subject to subsequent approval within 12 months of its adoption by
the Board by shareholders of the Company eligible to vote in the election of directors, by a vote
sufficient to meet the requirements of Code Sections 162(m) (if applicable) and 422, Rule 16b-3
under the Exchange Act (if applicable), applicable NASDAQ requirements, and other laws,
regulations, and obligations of the Company applicable to the Plan. Awards may be granted subject
to shareholder approval, but may not be exercised or otherwise settled in the event shareholder
approval is not obtained. The Plan shall terminate no later than




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10 years from the date the Plan is adopted by the Board or 10 years from the date the Plan is
approved by the Shareholders, whichever is earlier.





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