**Exhibit 10.4**

 

**EZENIA! INC.**

 

**2004 EQUITY INCENTIVE PLAN**

 

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**TABLE OF CONTENTS**

 
| 1.     | Purpose                                                   |   |
|--------|-----------------------------------------------------------|--------|
|   |                                                      |   |
| 2.     | Definitions                                               |   |
|   |                                                      |   |
| 3.     | Term of the Plan                                          |   |
|   |                                                      |   |
| 4.     | Stock Subject to the Plan                                 |   |
|   |                                                      |   |
| 5.     | Administration                                            |   |
|   |                                                      |   |
| 6.     | Authorization of Grants                                   |   |
|   |                                                      |   |
| 7.     | Specific Terms of Awards                                  |   |
|   |                                                      |   |
| 8.     | Adjustment Provisions                                     |   |
|   |                                                      |   |
| 9.     | Settlement of Awards                                      |   |
|   |                                                      |   |
| 10.    | Reservation of Stock                                      |   |
|   |                                                      |   |
| 11.    | Limitation of Rights in Stock; No Special  Service Rights |   |
|   |                                                      |   |
| 12.    | Unfunded Status of Plan                                   |   |
|   |                                                      |   |
| 13.    | Nonexclusivity of the Plan                                |   |
|   |                                                      |   |
| 14.    | Termination and Amendment of the Plan                     |   |
|   |                                                      |   |
| 15.    | Notices and Other Communications                          |   |
|   |                                                      |   |
| 16.    | Governing  Law                                            |   |

 

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**EZENIA!INC.**

** **

**2004EQUITY INCENTIVE PLAN**

** **

# **1.**                                      Purpose

 

ThisPlan is intended to encourage ownership of Stock by employees, consultants,advisors and directors of the Company and its Affiliates and to provideadditional incentive for them to promote the success of the Company’s businessthrough the grant of Awards of or pertaining to shares of the Company’sStock.  The Plan is intended to be anincentive stock option plan within the meaning of Section 422 of the Code,but not all Awards are required to be Incentive Options.

 

# **2.**                                      Definitions

 

Asused in this Plan, the following terms shall have the following meanings:

 

2.1.                              Accelerate, Accelerated, and Acceleration,means: (a) when used with respect to an Option, that as of the time ofreference the Option will become exercisable with respect to some or all of theshares of Stock for which it was not then otherwise exercisable by its terms;and (b) when used with respect to Restricted Stock, that the Risk ofForfeiture otherwise applicable to the Stock shall expire with respect to someor all of the shares of Restricted Stock then still otherwise subject to theRisk of Forfeiture.

 

2.2.                              Acquisition means a merger or consolidation ofthe Company into another person (i.e., in which merger or consolidation theCompany does not survive) or the sale, transfer, or other disposition of all orsubstantially all of the Company’s assets to one or more other persons in asingle transaction or series of related transactions, unless securitiespossessing more than 50% of the total combined voting power of the survivor’sor acquiror’s outstanding securities (or the securities of any parent thereof)are held by a person or persons who held securities possessing more than 50% ofthe total combined voting power of the Company immediately prior to thattransaction.

 

2.3.                              Affiliate means any corporation, partnership,limited liability company, business trust, or other entity controlling,controlled by or under common control with the Company.

 

2.4.                              Award means any grant or sale pursuant tothe Plan of Options, Restricted Stock, or Stock Grants.

 

2.5.                              AwardAgreement means an agreementbetween the Company and the recipient of an Award, setting forth the terms andconditions of the Award.

 

2.6.                              Board means the Company’s Board ofDirectors.

 

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2.7.                              ChangeofControl means anyof the following transactions:

 

(a)                                  any Acquisition, or

 

(b)                                 any person or group of persons(within the meaning of Section 13(d)(3) of the Securities ExchangeAct of 1934, as amended and in effect from time to time), other than theCompany or an Affiliate, directly or indirectly acquires, including but not limitedto by means of merger or consolidation, beneficial ownership (determinedpursuant to Securities and Exchange Commission Rule 13d-3promulgated under the said Exchange Act) of securities possessing more than 50%of the total combined voting power of the Company’s outstanding securitiespursuant to a tender or exchange offer made directly to the Company’sstockholders that the Board does not recommend such stockholders to accept,other than a person or group of persons who fall into the following categories (i) theCompany or an Affiliate, (ii) an employee benefit plan of the Company orany of its Affiliates, (iii) a trustee or other fiduciary holdingsecurities under an employee benefit plan of the Company or any of itsAffiliates, or (iv) an underwriter temporarily holding securities pursuantto an offering of such securities, or

 

(c)                                  over a period of 36 consecutivemonths or less, there is a change in the composition of the Board such that amajority of the Board members (rounded up to the next whole number, if afraction) ceases, by reason of one or more proxy contests for the election ofBoard members, to be composed of individuals who either (A) have beenBoard members continuously since the beginning of that period, or (B) havebeen elected or nominated for election as Board members during such period byat least a majority of the Board members described in the preceding clause (A) whowere still in office at the time that election or nomination was approved bythe Board, or

 

(d)                                 a majority of the Board votes infavor of a decision that a Change in Control has occurred.

 

2.8.                              Code means the Internal Revenue Code of1986, as amended from time to time, or any successor statute thereto, and anyregulations issued from time to time thereunder.

 

2.9.                              Committee means any committee of the Boarddelegated the responsibility for the administration of the Plan, as provided inSection 5 of the Plan.  For anyperiod during which no such committee is in existence “Committee” shall meanthe Board and all authority and responsibility assigned to the Committee underthe Plan shall be exercised, if at all, by the Board.

 

2.10.                        Company means Ezenia! Inc., a corporation organized under the laws of the State ofDelaware.

 

2.11.                        GrantDate means the date as ofwhich an Option is granted, as determined under Section 7.1(a).

 

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2.12.                        IncentiveOption means an Option whichby its terms is to be treated as an “incentive stock option” within the meaningof Section 422 of the Code.

 

2.13.                        MarketValue means the value of ashare of Stock on a particular date determined by such methods or procedures asmay be established by the Committee. Unless otherwise determined by the Committee, the Market Value of Stockas of any date is the closing price for the Stock as reported on the OTCBulletin Board (or on any national securities exchange or quotation system onwhich the Stock is then listed) for that date or, if no closing price isreported for that date, the closing price on the next preceding date for whicha closing price was reported.

 

2.14.                        NonstatutoryOption means any Option thatis not an Incentive Option.

 

2.15.                        Option means an option to purchase sharesof Stock.

 

2.16.                        Optionee means a Participant to whom anOption shall have been granted under the Plan.

 

2.17.                        Participant means any holder of an outstandingAward under the Plan.

 

2.18.                        Plan means this 2004 Equity Incentive Plan of the Company, as amended from time totime, and including any attachments or addenda hereto.

 

2.19.                        RestrictedStock means a grant or saleof shares of Stock to a Participant subject to a Risk of Forfeiture.

 

2.20.                        RestrictionPeriodmeans the period of time, established by the Committee inconnection with an Award of Restricted Stock, during which the shares ofRestricted Stock are subject to a Risk of Forfeiture described in theapplicable Award Agreement.

 

2.21.                        RiskofForfeiture means alimitation on the right of the Participant to retain Restricted Stock,including a right in the Company to reacquire shares of Restricted Stock atless than their then Market Value, arising because of the occurrence ornon-occurrence of specified events or conditions.

 

2.22.                        Stock means common stock, par value $.01 per share, of the Company.

 

2.23.                        StockGrant means the grant ofshares of Stock not subject to restrictions or other forfeiture conditions.

 

2.24.                        Stockholders’Agreement means anyagreement by and among the holders of at least a majority of the outstandingvoting securities of the Company and setting forth, among other provisions,restrictions upon the transfer of shares of Stock or on the exercise of rightsappurtenant thereto (including but not limited to voting rights).

 

2.25.                        TenPercentOwner means aperson who owns, or is deemed within the meaning of Section 422(b)(6) ofthe Code to own, stock possessing more than 10% of the

 

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total combined voting power of all classes of stock of theCompany (or any parent or subsidiary corporations of the Company, as defined inSections 424(e) and (f), respectively, of the Code).  Whether a person is a Ten Percent Owner shallbe determined with respect to an Option based on the facts existing immediatelyprior to the Grant Date of the Option.

 

# **3.**                                      Term of the Plan

 

Unlessthe Plan shall have been earlier terminated by the Board, Awards may be grantedunder this Plan at any time in the period commencing on the date of approval ofthe Plan by the Board and ending immediately prior to the tenth anniversary ofthe adoption of the Plan by the Board. Awards granted pursuant to the Plan within that period shall not expiresolely by reason of the termination of the Plan.  Awards of Incentive Options granted prior tostockholder approval of the Plan are expressly conditioned upon such approval,but in the event of the failure of the stockholders to approve the Plan shallthereafter and for all purposes be deemed to constitute Nonstatutory Options.

 

# **4.**                                      StockSubject to the Plan

 

Atno time shall the number of shares of Stock issued pursuant to or subject tooutstanding Awards granted under the Plan (including pursuant to IncentiveOptions), nor the number of shares of Stock issued pursuant to IncentiveOptions, exceed 7,500,000 sharesof Stock; *subject, however*, to the provisions of Section 8of the Plan.  For purposes of applyingthe foregoing limitation, (a) if any Option expires, terminates, or iscancelled for any reason without having been exercised in full, or if any Awardof Restricted Stock is forfeited by the recipient, the shares not purchased bythe Optionee or which are forfeited by the recipient shall again be availablefor Awards to be granted under the Plan and (b) if any Option is exercisedby delivering previously owned shares in payment of the exercise price therefor,only the net number of shares, that is, the number of shares issued minus thenumber received by the Company in payment of the exercise price, shall beconsidered to have been issued pursuant to an Award granted under the Plan.  In addition, settlement of any Award shallnot count against the foregoing limitations except to the extent settled in theform of Stock.  Shares of Stock issuedpursuant to the Plan may be either authorized but unissued shares or shares heldby the Company in its treasury.

 

# **5.**                                      Administration

 

ThePlan shall be administered by the Committee; *provided,however*, that at any time and on any one or more occasions the Boardmay itself exercise any of the powers and responsibilities assigned theCommittee under the Plan and when so acting shall have the benefit of all ofthe provisions of the Plan pertaining to the Committee’s exercise of itsauthorities hereunder**;**and *provided further, however,*that the Committee may delegate to an executive officer or officers theauthority to grant Awards hereunder to employees who are not officers, and toconsultants, in accordance with such guidelines as

 

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the Committee shall set forth at any time or from time totime.  Subject to the provisions of thePlan, the Committee shall have complete authority, in its discretion, to makeor to select the manner of making all determinations with respect to each Awardto be granted by the Company under the Plan including the employee, consultantor director to receive the Award and the form of Award.  In making such determinations, the Committeemay take into account the nature of the services rendered by the respectiveemployees, consultants, and directors, their present and potentialcontributions to the success of the Company and its Affiliates, and such otherfactors as the Committee in its discretion shall deem relevant.  Subject to the provisions of the Plan, theCommittee shall also have complete authority to interpret the Plan, toprescribe, amend and rescind rules and regulations relating to it, to determinethe terms and provisions of the respective Award Agreements (which need not beidentical), and to make all other determinations necessary or advisable for theadministration of the Plan.  TheCommittee’s determinations made in good faith on matters referred to in thePlan shall be final, binding and conclusive on all persons having or claimingany interest under the Plan or an Award made pursuant hereto.

 

# **6.**                                      Authorizationof Grants

 

6.1.                              Eligibility. The Committee may grant from time to time and at any time prior to thetermination of the Plan one or more Awards, either alone or in combination withany other Awards, to any employee of or consultant or advisor to one or more ofthe Company and its Affiliates or to any non-employee member of the Board or ofany board of directors (or similar governing authority) of any Affiliate.However, only employees of the Company, and of any parent or subsidiarycorporations of the Company, as defined in Sections 424(e) and (f),respectively, of the Code, shall be eligible for the grant of an IncentiveOption.  Further, in no event shall thenumber of shares of Stock covered by Options or other Awards granted to any oneperson in any one calendar year exceed 25% of the aggregate number of shares ofStock subject to the Plan.

 

6.2.                              GeneralTermsofAwards.  Each grant of an Award shall be subject toall applicable terms and conditions of the Plan (including but not limited toany specific terms and conditions applicable to that type of Award set out inthe following Section), and such other terms and conditions, not inconsistentwith the terms of the Plan, as the Committee may prescribe.  No prospective Participant shall have any rightswith respect to an Award, unless and until such Participant has executed anagreement evidencing the Award, delivered a fully executed copy thereof to theCompany, and otherwise complied with the applicable terms and conditions ofsuch Award.

 

6.3.                              EffectofTerminationofEmployment,Etc. Unless the Committee shall provide otherwisewith respect to any Award, if the Participant’s employment or other associationwith the Company and its Affiliates ends for any reason, including because ofthe Participant’s employer ceasing to be an Affiliate, (a) any outstandingOption of the Participant shall cease to be exercisable in any respect notlater than 90 days following that event and, for the period it remainsexercisable following that event, shall be exercisable only to the extentexercisable at the date of that event, and (b) any other

 

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outstanding Award of the Participant shall be forfeited orotherwise subject to return to or repurchase by the Company on the termsspecified in the applicable Award Agreement. Military or sick leave or other bona fide leave shall not be deemed atermination of employment or other association, *provided*that it does not exceed the longer of ninety (90) days or the period duringwhich the absent Participant’s reemployment rights, if any, are guaranteed bystatute or by contract.

 

6.4.                              Non-TransferabilityofAwards.  Except as otherwise provided in this Section 6.4,Awards shall not be transferable, and no Award or interest therein may be sold,transferred, pledged, assigned, or otherwise alienated or hypothecated, otherthan by will or by the laws of descent and distribution.  All of a Participant’s rights in any Awardmay be exercised during the life of the Participant only by the Participant orthe Participant’s legal representative. However, the Committee may, at or after the grant of an Award of aNonstatutory Option, or shares of Restricted Stock, provide that such Award maybe transferred by the recipient to a family member; *provided,however*, that any such transfer is without payment of anyconsideration whatsoever and that no transfer shall be valid unless firstapproved by the Committee, acting in its sole discretion.  For this purpose, “family member” means anychild, stepchild, grandchild, parent, stepparent, spouse, former spouse,sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,daughter-in-law, brother-in-law, or sister-in-law, including adoptiverelationships, any person sharing the employee’s household (other than a tenantor employee), a trust in which the foregoing persons have more than fifty (50)percent of the beneficial interests, a foundation in which the foregoingpersons (or the Participant) control the management of assets, and any otherentity in which these persons (or the Participant) own more than fifty (50)percent of the voting interests.

 

# **7.**                                      SpecificTerms of Awards

 

7.1.                              Options.

 

(a)                                  DateofGrant.  The granting of an Option shall take place atthe time specified in the Award Agreement. Only if expressly so provided in the applicable Award Agreement shallthe Grant Date be the date on which the Award Agreement shall have been dulyexecuted and delivered by the Company and the Optionee.

 

(b)                                 ExercisePrice.  The price at which shares of Stock may beacquired under each Incentive Option shall be not less than 100% of the MarketValue of Stock on the Grant Date, or not less than 110% of the Market Value ofStock on the Grant Date if the Optionee is a Ten Percent Owner.  The price at which shares may be acquiredunder each Nonstatutory Option shall not be so limited solely by reason of thisSection.

 

(c)                                  OptionPeriod.  No Incentive Option may be exercised on orafter the tenth anniversary of the Grant Date, or on or after the fifthanniversary of the Grant Date if the Optionee is a Ten Percent Owner.  The Option period under each NonstatutoryOption shall not be so limited solely by reason of this Section.

 

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(d)                                 Exercisability. An Option may be immediately exercisable or become exercisable in suchinstallments, cumulative or non-cumulative, as the Committee maydetermine.  In the case of an Option nototherwise immediately exercisable in full, the Committee may Accelerate suchOption in whole or in part at any time; *provided, however,*that in the case of an Incentive Option, any such Acceleration of the Optionwould not cause the Option to fail to comply with the provisions of Section 422of the Code or the Optionee consents to the Acceleration.

 

(e)                                  MethodofExercise.  An Option may be exercised by the Optioneegiving written notice, in the manner provided in Section 16, specifyingthe number of shares with respect to which the Option is then beingexercised.  The notice shall beaccompanied by payment in the form of cash or check payable to the order of theCompany in an amount equal to the exercise price of the shares to be purchasedor, unless prohibited by applicable law, the Optionee’s executed full recoursepromissory note at a market rate of interest in the principal amount equal tothe exercise price of the shares to be purchased and otherwise in such form asthe Committee shall have approved.

 

Receipt by the Company of such notice and payment in anyauthorized or combination of authorized means shall constitute the exercise ofthe Option.  Within thirty (30) daysthereafter but subject to the remaining provisions of the Plan, the Companyshall deliver or cause to be delivered to the Optionee or his agent acertificate or certificates for the number of shares then being purchased.  Such shares shall be fully paid andnonassessable.

 

(f)            LimitonIncentiveOptionCharacterization.  An Incentive Option shall be considered to bean Incentive Option only to the extent that the number of shares of Stock forwhich the Option first becomes exercisable in a calendar year do not have anaggregate Market Value (as of the date of the grant of the Option) in excess ofthe “current limit”.  The current limitfor any Optionee for any calendar year shall be $100,000 *minus*the aggregate Market Value at the date of grant of the number of shares ofStock available for purchase for the first time in the same year under eachother Incentive Option previously granted to the Optionee under the Plan, andunder each other incentive stock option previously granted to the Optioneeunder any other incentive stock option plan of the Company and its Affiliates,after December 31, 1986.  Any sharesof Stock which would cause the foregoing limit to be violated shall be deemedto have been granted under a separate Nonstatutory Option, otherwise identicalin its terms to those of the Incentive Option.

 

(g)                                 NotificationofDisposition.  Each person exercising any Incentive Optiongranted under the Plan shall be deemed to have covenanted with the Company toreport to the Company any disposition of such shares prior to the expiration ofthe holding periods specified by Section 422(a)(1) of the Code and,if and to the extent that the realization of income in such a dispositionimposes upon the Company federal, state, local or other withholding taxrequirements, or any such withholding is required to secure 

 

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for the Company an otherwise available tax deduction, toremit to the Company an amount in cash sufficient to satisfy thoserequirements.

 

7.2.                              RestrictedStock.

 

(a)                                  PurchasePrice.  Shares of Restricted Stock shall be issuedunder the Plan for such consideration, in cash, other property or services, orany combination thereof, as is determined by the Committee.

 

(b)                                 IssuanceofCertificates.  Each Participant receiving a Restricted StockAward, subject to subsection (c) below, shall be issued a stockcertificate in respect of such shares of Restricted Stock.  Such certificate shall be registered in thename of such Participant, and, if applicable, shall bear an appropriate legendreferring to the terms, conditions, and restrictions applicable to such Awardsubstantially in the following form:

 

Thetransferability of this certificate and the shares represented by thiscertificate are subject to the terms and conditions of Ezenia! Inc. 2004 Equity Incentive Plan and an AwardAgreement entered into by the registered owner and****Ezenia! Inc.  Copies of such Plan and Agreement are on filein the offices of the Company.

 

(c)                                  EscrowofShares.  The Committee may require that the stockcertificates evidencing shares of Restricted Stock be held in custody by adesignated escrow agent (which may but need not be the Company) until therestrictions thereon shall have lapsed, and that the Participant deliver astock power, endorsed in blank, relating to the Stock covered by such Award.

 

(d)                                 RestrictionsandRestrictionPeriod.  During the Restriction Period applicable toshares of Restricted Stock, such shares shall be subject to limitations ontransferability and a Risk of Forfeiture arising on the basis of suchconditions related to the performance of services, Company or Affiliateperformance or otherwise as the Committee may determine and provide for in theapplicable Award Agreement.  Any suchRisk of Forfeiture may be waived or terminated, or the Restriction Periodshortened, at any time by the Committee on such basis as it deems appropriate.

 

(e)                                  RightsPendingLapseofRiskofForfeitureorForfeitureofAward.  Except as otherwise provided in the Plan orthe applicable Award Agreement, at all times prior to lapse of any Risk ofForfeiture applicable to, or forfeiture of, an Award of Restricted Stock, theParticipant shall have all of the rights of a stockholder of the Company,including the right to vote, and the right to receive any dividends withrespect to, the shares of Restricted Stock. The Committee, as determined at the time of Award, may permit or requirethe payment of cash dividends to be deferred and, if the Committee sodetermines, reinvested in additional Restricted Stock to the extent shares areavailable under Section 4.

 

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(f)                                    LapseofRestrictions.  If and when the Restriction Period expireswithout a prior forfeiture of the Restricted Stock, the certificates for suchshares shall be delivered to the Participant promptly if not theretofore sodelivered.

 

7.3.                              StockGrants. Stock Grants shallbe awarded solely in recognition of significant contributions to the success ofthe Company or its Affiliates, in lieu of compensation otherwise already dueand in such other limited circumstances as the Committee deemsappropriate.  Stock Grants shall be madewithout forfeiture conditions of any kind.

 

7.4.                              AwardstoParticipantsOutsidetheUnitedStates. The Committee may modify the terms of any Award under the Plan grantedto a Participant who is, at the time of grant or during the term of the Award,resident or primarily employed outside of the United States in any mannerdeemed by the Committee to be necessary or appropriate in order that the Awardshall conform to laws, regulations, and customs of the country in which theParticipant is then resident or primarily employed, or so that the value andother benefits of the Award to the Participant, as affected by foreign tax lawsand other restrictions applicable as a result of the Participant’s residence oremployment abroad, shall be comparable to the value of such an Award to aParticipant who is resident or primarily employed in the United States.  An Award may be modified under this Section 7.4in a manner that is inconsistent with the express terms of the Plan, so long assuch modifications will not contravene any applicable law or regulation.  The Committee may establish supplements to,or amendments, restatements, or alternative versions of the Plan for thepurpose of granting and administrating any such modified Award.  No such modification, supplement, amendment,restatement or alternative version may increase the share limit of Section 4.

 

# **8.**                                      Adjustment Provisions

 

8.1.                              AdjustmentforCorporateActions.All of the share numbers set forth in the Plan reflect the capital structure ofthe Company as of****December 31, 2004.  Subjectto Section 8.2, if subsequent to that date the outstanding shares of Stock(or any other securities covered by the Plan by reason of the prior applicationof this Section) are increased, decreased, or exchanged for a different numberor kind of shares or other securities, or if additional shares or new ordifferent shares or other securities are distributed with respect to shares ofStock, through merger, consolidation, sale of all or substantially all theproperty of the Company, reorganization, recapitalization, reclassification,stock dividend, stock split, reverse stock split, or other similar distributionwith respect to such shares of Stock, an appropriate and proportionateadjustment will be made in (i) the maximum numbers and kinds of sharesprovided in Section 4, (ii) the numbers and kinds of shares or othersecurities subject to the then outstanding Awards, (iii) the exerciseprice for each share or other unit of any other securities subject to thenoutstanding Options (without change in the aggregate purchase price as to whichsuch Options remain exercisable), and (iv) the repurchase price of eachshare of Restricted Stock then subject to a Risk of Forfeiture in the form of aCompany repurchase right.

 

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8.2.                              ChangeinControl. Subjectto any provisions of then outstanding Awards granting greater rights to theholders thereof, in the event of a Change in Control (including a Change ofControl which is an Acquisition), (a) any then outstanding Options shallAccelerate in full, whether or not assumed by the acquiring entity or replacedby comparable options to purchase shares of the capital stock of the successoror acquiring entity or parent thereof, and to the extent not assumed orreplaced on the Acquisition shall then (or after a reasonable period followingthe Acquisition, as determined by the Committee) terminate to the extent notexercised and (b) any then Restricted Stock shall Accelerate in full,whether or not the Company’s rights to reacquire such shares of RestrictedStock on occurrence of the applicable Risk of Forfeiture with respect to thoseshares are assigned to the acquiring entity. Each outstanding Option that is assumed in connection with anAcquisition, or is otherwise to continue in effect subsequent to theAcquisition, will be appropriately adjusted, immediately after the Acquisition,as to the number and class of securities and the price at which it may beexercised in accordance with Section 8.1.

 

8.3.                              DissolutionorLiquidation.  Upon dissolution or liquidation of the Company,other than as part of an Acquisition or similar transaction, each outstandingOption shall terminate, but the Optionee shall have the right, immediatelyprior to the dissolution or liquidation, to exercise the Option to the extentexercisable on the date of dissolution or liquidation.

 

8.4.                              AdjustmentofAwardsUpontheOccurrenceofCertainUnusualorNonrecurringEvents. In the event of any corporate action not specifically covered bythe preceding Sections, including but not limited to an extraordinary cashdistribution on Stock, a corporate separation or other reorganization orliquidation, the Committee may make such adjustment of outstanding Awards andtheir terms, if any, as it, in its sole discretion, may deem equitable andappropriate in the circumstances.  TheCommittee may make adjustments in the terms and conditions of, and the criteriaincluded in, Awards in recognition of unusual or nonrecurring events(including, without limitation, the events described in this Section) affectingthe Company or the financial statements of the Company or of changes inapplicable laws, regulations, or accounting principles, whenever the Committeedetermines that such adjustments are appropriate in order to prevent dilutionor enlargement of the benefits or potential benefits intended to be madeavailable under the Plan.

 

8.5.                              RelatedMatters.  Any adjustment in Awards made pursuant tothis Section 8 shall be determined and made, if at all, by the Committeeand shall include any correlative modification of terms, including of Optionexercise prices, rates of vesting or exercisability, Risks of Forfeiture andapplicable repurchase prices for Restricted Stock, which the Committee may deemnecessary or appropriate so as to ensure the rights of the Participants intheir respective Awards are not substantially diminished nor enlarged as aresult of the adjustment and corporate action other than as expresslycontemplated in this Section 8.  Nofraction of a share shall be purchasable or deliverable upon exercise, but inthe event any adjustment hereunder of the number of shares covered by an Awardshall cause such number to include a fraction of a share, such number of sharesshall be

 

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adjusted to the nearest smaller whole number of shares.  No adjustment of an Option exercise price pershare pursuant to this Section 8 shall result in an exercise price whichis less than the par value of the Stock.

 

# **9.**                                      Settlement of Awards

 

9.1.                              ViolationofLaw.  Notwithstanding any other provision of thePlan or the relevant Award Agreement, if, at any time, in the reasonableopinion of the Company, the issuance of shares of Stock covered by an Award mayconstitute a violation of law, then the Company may delay such issuance and thedelivery of a certificate for such shares until (i) approval shall havebeen obtained from such governmental agencies, other than the Securities andExchange Commission, as may be required under any applicable law, rule, orregulation and (ii) in the case where such issuance would constitute aviolation of a law administered by or a regulation of the Securities andExchange Commission, one of the following conditions shall have been satisfied:

 

(a)                                  the shares are at the time of theissue of such shares effectively registered under the Securities Act of 1933;or

 

(b)                                 the Company shall have determined,on such basis as it deems appropriate (including an opinion of counsel in formand substance satisfactory to the Company) that the sale, transfer, assignment,pledge, encumbrance or other disposition of such shares or such beneficialinterest, as the case may be, does not require registration under theSecurities Act of 1933, as amended or any applicable state securities laws.

 

TheCompany shall make all reasonable efforts to bring about the occurrence of saidevents.

 

9.2.                              CorporateRestrictionsonRightsinStock. Any Stock to be issued pursuant to Awards granted underthe Plan shall be subject to all restrictions upon the transfer thereof whichmay be now or hereafter imposed by the charter, certificate or articles, andby-laws, of the Company.  Whenever Stockis to be issued pursuant to an Award, if the Committee so directs at or aftergrant, the Company shall be under no obligation to issue such shares until suchtime, if ever, as the recipient of the Award (and any person who exercises anyOption, in whole or in part), shall have become a party to and bound by theStockholders’ Agreement, if any.  In theevent of any conflict between the provisions of this Plan and the provisions ofthe Stockholders’ Agreement, the provisions of the Stockholders’ Agreementshall control except as required to fulfill the intention that this Planconstitute an incentive stock option plan within the meaning of Section 422of the Code, but insofar as possible the provisions of the Plan and suchAgreement shall be construed so as to give full force and effect to all suchprovisions.

 

9.3.                              InvestmentRepresentations.  The Company shall be under no obligation toissue any shares covered by any Award unless the shares to be issued pursuantto Awards granted under the Plan have been effectively registered under theSecurities Act of 1933, as amended, or the Participant shall have made suchwritten representations to the Company (upon which the Company believes it mayreasonably rely) as the Company

 

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may deem necessary or appropriate for purposes of confirmingthat the issuance of such shares will be exempt from the registrationrequirements of that Act and any applicable state securities laws and otherwisein compliance with all applicable laws, rules and regulations, includingbut not limited to that the Participant is acquiring the shares for his or herown account for the purpose of investment and not with a view to, or for salein connection with, the distribution of any such shares.

 

9.4.                              Registration. If the Company shall deem it necessary or desirable to register underthe Securities Act of 1933, as amended or other applicable statutes any sharesof Stock issued or to be issued pursuant to Awards granted under the Plan, orto qualify any such shares of Stock for exemption from the Securities Act of1933, as amended or other applicable statutes, then the Company shall take suchaction at its own expense.  The Companymay require from each recipient of an Award, or each holder of shares of Stockacquired pursuant to the Plan, such information in writing for use in anyregistration statement, prospectus, preliminary prospectus or offering circularas is reasonably necessary for that purpose and may require reasonableindemnity to the Company and its officers and directors from that holderagainst all losses, claims, damage and liabilities arising from use of theinformation so furnished and caused by any untrue statement of any materialfact therein or caused by the omission to state a material fact required to bestated therein or necessary to make the statements therein not misleading inthe light of the circumstances under which they were made.  In addition, the Company may require of anysuch person that he or she agree that, without the prior written consent of theCompany or the managing underwriter in any public offering of shares of Stock,he or she will not sell, make any short sale of, loan, grant any option for thepurchase of, pledge or otherwise encumber, or otherwise dispose of, any sharesof Stock during the 180 day period commencing on the effective date of theregistration statement relating to the underwritten public offering ofsecurities. Without limiting the generality of the foregoing provisions of thisSection 9.4, if in connection with any underwritten public offering ofsecurities of the Company the managing underwriter of such offering requiresthat the Company’s directors and officers enter into a lock-up agreementcontaining provisions that are more restrictive than the provisions set forthin the preceding sentence, then (a) each holder of shares of Stockacquired pursuant to the Plan (regardless of whether such person has compliedor complies with the provisions of clause (b) below) shall be bound by,and shall be deemed to have agreed to, the same lock-up terms as those to whichthe Company’s directors and officers are required to adhere; and (b) atthe request of the Company or such managing underwriter, each such person shallexecute and deliver a lock-up agreement in form and substance equivalent tothat which is required to be executed by the Company’s directors and officers.

 

9.5.                              PlacementofLegends;StopOrders;etc.  Each share ofStock to be issued pursuant to Awards granted under the Plan may bear areference to the investment representation made in accordance with Section 9.3in addition to any other applicable restriction under the Plan, the terms of theAward and if applicable under the Stockholders’ Agreement and to the fact thatno registration statement has been filed with the Securities and ExchangeCommission in respect to such shares of Stock. All certificates for shares of Stock or other securities delivered underthe Plan shall be subject

 

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to such stock transfer orders and other restrictions as theCommittee may deem advisable under the rules, regulations, and otherrequirements of any stock exchange upon which the Stock is then listed, and anyapplicable federal or state securities law, and the Committee may cause alegend or legends to be put on any such certificates to make appropriatereference to such restrictions.

 

9.6.                              TaxWithholding. Whenever sharesof Stock are issued or to be issued pursuant to Awards granted under the Plan,the Company shall have the right to require the recipient to remit to theCompany an amount sufficient to satisfy federal, state, local or otherwithholding tax requirements if, when, and to the extent required by law(whether so required to secure for the Company an otherwise available taxdeduction or otherwise) prior to the delivery of any certificate orcertificates for such shares.  Theobligations of the Company under the Plan shall be conditional on satisfactionof all such withholding obligations and the Company shall, to the extentpermitted by law, have the right to deduct any such taxes from any payment ofany kind otherwise due to the recipient of an Award.  However, in such cases Participants mayelect, subject to the approval of the Committee, acting in its sole discretion,to satisfy an applicable withholding requirement, in whole or in part, byhaving the Company withhold shares to satisfy their tax obligations.  Participants may only elect to have Shareswithheld having a Market Value on the date the tax is to be determined equal tothe minimum statutory total tax which could be imposed on the transaction.  All elections shall be irrevocable, made in writing,signed by the Participant, and shall be subject to any restrictions orlimitations that the Committee deems appropriate.

 

# **10.**                               Reservation of Stock

 

TheCompany shall at all times during the term of the Plan and any outstandingAwards granted hereunder reserve or otherwise keep available such number ofshares of Stock as will be sufficient to satisfy the requirements of the Plan(if then in effect) and the Awards and shall pay all fees and expensesnecessarily incurred by the Company in connection therewith.

 

# **11.**                               Limitationof Rights in Stock; No Special Service Rights

 

AParticipant shall not be deemed for any purpose to be a stockholder of theCompany with respect to any of the shares of Stock subject to an Award, unlessand until a certificate shall have been issued therefor and delivered to theParticipant or his agent.  Any Stock tobe issued pursuant to Awards granted under the Plan shall be subject to allrestrictions upon the transfer thereof which may be now or hereafter imposed bythe Certificate of Incorporation and the By-laws of the Company.  Nothing contained in the Plan or in any AwardAgreement shall confer upon any recipient of an Award any right with respect tothe continuation of his or her employment or other association with the Company(or any Affiliate), or interfere in any way with the right of the Company (orany Affiliate), subject to the terms of any separate employment or consultingagreement or provision of law or corporate articles or by-laws to the contrary,at any time to terminate such employment or consulting agreement or to increaseor decrease, or

 

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otherwise adjust, the other terms and conditions of therecipient’s employment or other association with the Company and itsAffiliates.

 

# **12.**                               UnfundedStatus of Plan

 

ThePlan is intended to constitute an “unfunded” plan for incentive compensation,and the Plan is not intended to constitute a plan subject to the provisions ofthe Employee Retirement Income Security Act of 1974, as amended.  With respect to any payments not yet made toa Participant by the Company, nothing contained herein shall give any suchParticipant any rights that are greater than those of a general creditor of theCompany.  In its sole discretion, the Committeemay authorize the creation of trusts or other arrangements to meet theobligations created under the Plan to deliver Stock or payments with respect toOptions hereunder, *provided, however*,that the existence of such trusts or other arrangements is consistent with theunfunded status of the Plan.

 

# **13.**                               Nonexclusivityof the Plan

 

Neitherthe adoption of the Plan by the Board nor the submission of the Plan to thestockholders of the Company shall be construed as creating any limitations onthe power of the Board to adopt such other incentive arrangements as it maydeem desirable, including without limitation, the granting of stock options andrestricted stock other than under the Plan, and such arrangements may be eitherapplicable generally or only in specific cases.

 

# **14.**                               Terminationand Amendment of the Plan

# ** **

TheBoard may at any time terminate the Plan or make such modifications of the Planas it shall deem advisable.  Unless theBoard otherwise expressly provides, no amendment of the Plan shall affect theterms of any Award outstanding on the date of such amendment.  In any case, no termination or amendment ofthe Plan may, without the consent of any recipient of an Award grantedhereunder, adversely affect the rights of the recipient under such Award.

 

TheCommittee may amend the terms of any Award theretofore granted, prospectivelyor retroactively, provided that the Award as amended is consistent with theterms of the Plan, but no such amendment shall impair the rights of therecipient of such Award without his or her consent.

 

# **15.**                               Notices andOther Communications

 

Anynotice, demand, request or other communication hereunder to any party shall bedeemed to be sufficient if contained in a written instrument delivered inperson or duly sent by first class registered, certified or overnight mail,postage prepaid, or telecopied with a confirmation copy by regular, certifiedor overnight mail, addressed or telecopied, as the case may be, (i) if tothe recipient of an Award, at his or her residence address last filed with theCompany and (ii) if to the Company, at its principal place of business,addressed to the attention of its Treasurer, or to such other address ortelecopier number,

 

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as the case may be, as the addressee may have designated bynotice to the addressor.  All suchnotices, requests, demands and other communications shall be deemed to havebeen received: (i) in the case of personal delivery, on the date of suchdelivery; (ii) in the case of mailing, when received by the addressee; and(iii) in the case of facsimile transmission, when confirmed by facsimilemachine report.

 

# **16.**                               Governing Law

 

ThePlan and all Award Agreements and actions taken thereunder shall be governed,interpreted and enforced in accordance with the laws of the****State of Delaware, without regard to theconflict of laws principles thereof.

 

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