exv4w2



 




Exhibit 4.2





ENTERASYS NETWORKS, INC.



1998 EQUITY INCENTIVE PLAN



(Amended Effective December 20,
2002)




1.     Introduction;
Purpose


     
This Equity Incentive Plan (the “Plan”)
amends and restates the Cabletron Systems, Inc. 1998 Equity
Incentive Plan, in part to reflect the change in name of
Cabletron Systems, Inc. to Enterasys Networks, Inc. (the
“Company”) and in part to make other changes. The Plan
has been established and is hereby continued to advance the
interests of the Company and its subsidiaries and affiliates by
enhancing their ability to attract and retain employees and
other individuals or entities who are in a position to make
significant contributions to the success of the Company and its
subsidiaries through awards based on the Company’s common
stock, $.01 par value (“Stock”), and cash incentives.



     
The Plan is intended to accomplish these goals by
enabling the Company to grant awards (“Awards”) in the
form of Options, Stock Appreciation Rights, Restricted Stock or
Unrestricted Stock Awards, Deferred Stock Awards, Performance
Awards, Other Stock-Based Awards or loans or supplemental
grants, or combinations thereof, all as more fully described
below.




2.     Administration


     
Unless otherwise determined by the Board of
Directors of the Company (the “Board”), the Plan will
be administered by a committee of the Board designated for such
purpose (the “Committee”). During such period as the
Plan is administered by the Board rather than by a committee of
the Board, all references herein to the “Committee”
shall be deemed to refer to the Board.



     
Except as otherwise determined by the Board (and
in all events, with respect to any action by the Committee that
is intended to satisfy the requirements for exemption under
Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the “1934 Act”) or
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”)), the Committee shall consist of
at least two directors. A majority of the members of the
Committee, if more than one, shall constitute a quorum, and all
determinations of the Committee shall be made by a majority of
its members (or by the sole member of the Committee, if there is
only one member). Any determination of the Committee under the
Plan may be made without notice or meeting of the Committee by a
writing signed by a majority of the Committee members (or by the
Committee’s sole member, if there is only one member).



     
With respect to any action by the Committee that
is intended to satisfy the requirements for exemption under
Rule 16b-3 under the 1934 Act, the Committee shall consist
solely of “non-employee directors” as defined in such
Rule (“Non-Employee Directors”). With respect to any
action that is intended to qualify for the
“performance-based compensation” exemption under
Section 162(m) of the Code, the Committee shall consist
solely of “outside directors” as that term is defined
in Section 162(m) of the Code (“Outside
Directors”). Notwithstanding the foregoing, in any
circumstance described in the immediately preceding two
sentences where the Committee consists of at least two members
who qualify as Non-Employee Directors or Outside Directors, as
the case may be (“Qualifying Directors”), and one or
more other members who do not so qualify, a sub-committee (the
“Sub-Committee”) consisting solely of the Qualifying
Directors shall act in lieu of the full Committee. Any
references to the “Committee” in this Plan shall also
mean the Sub-Committee.



     
The Committee will have authority, not
inconsistent with the express provisions of the Plan and in
addition to other authority granted under the Plan, to:
(a) grant Awards at such time or times as it may choose;
(b) determine the size of each Award, including the number
of shares of Stock subject to the Award; (c) determine the
type or types of each Award; (d) determine the terms and
conditions of each Award; (e) waive compliance by a holder
of an Award with any obligations to be performed by such holder
under an




1






 




Award and waive any terms or conditions of an
Award; (f) amend or cancel an existing Award in whole or in
part (and if an award is canceled, grant another Award in its
place on such terms and conditions as the Committee shall
specify), except that the Committee may not, without the consent
of the holder of an Award, take any action under this clause
with respect to such Award if such action would adversely affect
the rights of such holder; (g) prescribe the form or forms
of any instruments to be used under the Plan, including any
written notices and elections required of Participants (as
defined in Section 5), and change such forms from time to
time; (h) adopt, amend and rescind rules and regulations
for the administration of the Plan; and (i) interpret the
Plan and decide any questions and settle all controversies and
disputes that may arise in connection with the Plan. Such
determinations and actions of the Committee, and all other
determinations and actions of the Committee made or taken under
authority granted by any provision of the Plan, will be
conclusive and will bind all parties. Nothing in this paragraph
shall be construed as limiting the power of the Committee to
make adjustments under Sections 7.3 or 8.6.




     
The Committee may delegate to one or more senior
officers of the Company who are also directors of the Company
its duties under the Plan subject to such conditions and
limitations as the Committee may prescribe, except that only the
Committee may designate and make grants to Participants
(i) who are subject to Section 16 of the 1934 Act or
any successor statute, including, without limitation, decisions
on timing, amount and pricing of Awards, or (ii) who at the
time of grant are (or are expected to be) “covered
employees” within the meaning of Section 162(m)(3) of
the Code.




3.     Term of
Plan


     
No Award may be granted under the Plan after
May 14, 2008, but Awards previously granted may extend
beyond that date.




4.     Shares Subject
to the Plan


     
(a) Number of Shares. Subject to
adjustment as provided in Section 8.6, the aggregate number
of shares of Stock that may be delivered under the Plan from and
after its original effective date will be
19,500,000. If any Award requiring exercise by the
Participant for delivery of Stock terminates without having been
exercised in full, or if any Award payable in Stock or cash is
satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash
was substituted will be available for future grants.



     
(b) Shares to be Delivered. Stock
delivered under the Plan may be either authorized but unissued
Stock or previously issued Stock acquired by the Company and
held in treasury. No fractional shares of Stock will be
delivered under the Plan.



     
(c) Special Limitations. No
Participant may be granted Options or Stock Appreciation Rights
in any three-calendar-year period with respect to more than (in
the case of each such type of award) 2,000,000 shares of Stock
or, if less, the total number of shares of Stock then available
for awards under the Plan. For purposes of the preceding
sentence, the regrant of a canceled Option or Stock Appreciation
Right, or the repricing of an Option or Stock Appreciation
Right, shall be treated as a separate Award to the extent
required under Section 162(m)(4)(C) of the Code.




5.     Eligibility
and Participation


     
Each key employee of the Company or any of its
subsidiaries or affiliates (an “Employee”) and each
other individual or entity (other than employees of the Company
or any of its subsidiaries or affiliates, but including, without
limitation, directors of the Company or any of its subsidiaries
or affiliates) who, in the opinion of the Committee, is in a
position to make a significant contribution to the success of
the Company or its subsidiaries will be eligible to receive
Awards under the Plan (each such Employee, other individual or





2







 




entity receiving an Award, a
“Participant”). Without limiting the foregoing,
Participants may also include individuals who have accepted an
offer of employment from the Company or its subsidiaries or
affiliates and who the Company or its subsidiaries or affiliates
reasonably believe will be key employees upon commencing such
employment (each a “New Hire”).





6.     Types of
Awards


     
6.1.     Options


     
(a) Nature of Options. An option
(“Option”) is an Award giving the recipient the right
on exercise thereof to purchase Stock. Both “incentive
stock options” as defined in Section 422(b) of the
Code (any Option intended to qualify as an incentive stock
option being hereinafter referred to as an “ISO”) and
Options that are not ISOs may be granted under the Plan. ISOs
shall be awarded only to individuals who are employed by the
Company or by a parent or subsidiary corporation as those terms
are defined in Section 424 of the Code. Each Option awarded
under the Plan shall be a non-ISO unless it is expressly
designated as an ISO at time of grant.



     
(b) Exercise Price. The exercise
price of an Option will be determined by the Committee subject
to the following:




		
	 	     
    (1) The exercise price of an ISO or an
    Option intended to qualify as performance-based compensation
    under Section 162(m) of the Code shall not be less than
    100% of the fair market value of the Stock subject to the
    Option, determined as of the time the Option is granted.
    
	 
	 	     
    (2) In no case may the exercise price paid
    for Stock which is part of an original issue of authorized Stock
    be less than the par value per share of the Stock.
    




     
(c) Duration of Options. The latest
date on which an Option may be exercised will be the tenth
anniversary of the day immediately preceding the date the Option
was granted, or such earlier date as may have been specified by
the Committee at the time the Option was granted.



     
(d) Exercise of Options. An Option
will become exercisable at such time or times, and on such
conditions, as the Committee may specify. The Committee may at
any time and from time to time accelerate the time at which all
or any part of the Option may be exercised. Except as otherwise
determined by the Committee or as required by law, there shall
be added to any period taken into account in determining the
vesting or exercisability of an Option periods during which a
Participant who is an Employee is on an unpaid leave of absence
(or other unpaid absence) from the Company. For example, if a
portion of an Option would otherwise vest and/or become
exercisable on the first anniversary of the date of grant
assuming that the Participant continues in employment and if,
during the one-year period immediately following the date of
grant, the Participant is given and takes an unpaid three-month
leave of absence, the portion of the Option that would otherwise
have vested and/or become exercisable on the first anniversary
of the date of grant will vest and/or become exercisable on the
date which follows such anniversary by three months, assuming
continued employment by the Participant and except as otherwise
determined by the Committee, and subsequent
vesting/exercisability dates will similarly be moved back by
three months. Any exercise of an Option must be in writing,
signed by the proper person and delivered or mailed to the
Company, accompanied by (i) any documents required by the
Committee and (ii) payment in full in accordance with
paragraph (e) below for the number of shares for which the
Option is exercised.



     
(e) Payment for Stock. Stock
purchased on exercise of an Option must be paid for as follows:
(i) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank
draft or money order payable to the order of the Company; or
(ii) if so permitted by the Committee, (A) by delivery
of shares of Stock which have been held for at least six months
(unless the Committee approves a shorter period) and which have
a fair market value equal to the exercise price, (B) by
delivery of a full recourse promissory note of the Participant
to the Company containing such terms as are specified by the
Committee, (C) by delivery of an unconditional and
irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price, or
(D) by any combination of the foregoing permissible forms
of payment.





3






 



     
6.2.     Stock
Appreciation Rights.


     
(a) Nature of Stock Appreciation
Rights. A Stock Appreciation Right (“Stock Appreciation
Right”) is an Award entitling the holder on exercise to
receive an amount in cash or Stock or a combination thereof
(such form to be determined by the Committee) determined in
whole or in part by reference to appreciation, from and after
the date of grant, in the fair market value of a share of Stock.
Stock Appreciation Rights may be based solely on appreciation in
the fair market value of Stock or on a comparison of such
appreciation with some other measure of market growth such as
(but not limited to) appreciation in a recognized market index.
The date as of which such appreciation or other measure is
determined shall be the exercise date unless another date is
specified by the Committee.



     
(b) Grant of Stock Appreciation
Rights. Stock Appreciation Rights may be granted in tandem
with, or independently of, Options granted under the Plan.




		
	 	     
    (i) Rules Applicable to Tandem
    Awards. When Stock Appreciation Rights are granted in tandem
    with Options: (A) the Stock Appreciation Right will be
    exercisable only at such time or times, and to the extent, that
    the related Option is exercisable and will be exercisable in
    accordance with the procedure required for exercise of the
    related Option; (B) the Stock Appreciation Right will
    terminate and no longer be exercisable upon the termination or
    exercise of the related Option, except that a Stock Appreciation
    Right granted with respect to fewer than the full number of
    shares covered by an Option will not be reduced until the number
    of shares as to which the related Option has been exercised or
    has terminated exceeds the number of shares not covered by the
    Stock Appreciation Right; (C) the Option will terminate and
    no longer be exercisable upon the exercise of the related Stock
    Appreciation Right; and (D) the Stock Appreciation Right
    will be transferable only with the related Option.
    
	 
	 	     
    (ii) Exercise of Independent Stock
    Appreciation Rights. A Stock Appreciation Right not granted
    in tandem with an Option will become exercisable at such time or
    times, and on such conditions, as the Committee may specify.
    Except as otherwise determined by the Committee or as required
    by law, there shall be added to any period taken into account in
    determining the vesting or exercisability of a Stock
    Appreciation Right periods during which a Participant who is an
    Employee is on an unpaid leave of absence (or other unpaid
    absence) from the Company. The Committee may at any time
    accelerate the time at which all or any part of the Stock
    Appreciation Right may be exercised.
    




     
Any exercise of an independent Stock Appreciation
Right must be in writing, signed by the proper person and
delivered or mailed to the Company, accompanied by any other
documents required by the Committee.



     
6.3.     Restricted
and Unrestricted Stock.


     
(a) Grant of Restricted Stock.
Subject to the terms and provisions of the Plan, the Committee
may grant shares of Stock in such amounts and upon such terms
and conditions as the Committee shall determine subject to the
restrictions described below (“Restricted Stock”).



     
(b) Restricted Stock Agreement. The
Committee may require, as a condition to an Award, that a
recipient of a Restricted Stock Award enter into a Restricted
Stock Award Agreement, setting forth the terms and conditions of
the Award. In lieu of a Restricted Stock Award Agreement, the
Committee may provide the terms and conditions of an Award in a
notice to the Participant of the Award, in the resolution
approving the Award, or in such other manner as it deems
appropriate. Any stock certificate representing the Restricted
Stock shall bear an appropriate legend to reflect the applicable
restrictions.



     
(c) Transferability and Other
Restrictions. Except as otherwise provided in this
Section 6.3, the shares of Restricted Stock granted herein
may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the end of the applicable period
or periods established by the Committee and the satisfaction of
any other conditions or restrictions established by the
Committee (such period during which a share of Restricted Stock
is subject to such restrictions and conditions is referred to as
the “Restricted Period”). Except as the Committee may
otherwise determine under Sections 7.1 or 7.2, if a
Participant dies or suffers a Status Change (as defined in
Section 7.2) for any reason during the Restricted Period,
the Company may purchase the shares of Restricted Stock subject
to such restrictions and conditions for the amount of cash





4






 




paid by the Participant for such shares;
provided, that if no cash was paid by the Participant
such shares of Restricted Stock shall be automatically forfeited
to the Company.




     
During the Restricted Period with respect to any
shares of Restricted Stock, the Company shall have the right to
retain in the Company’s possession the certificate or
certificates representing such shares.



     
(d) Removal of Restrictions. Except
as otherwise provided in this Section 6.3, a share of
Restricted Stock covered by a Restricted Stock Award shall
become free from restrictions under the Plan upon completion of
the Restricted Period, including the passage of any applicable
period of time and satisfaction of any conditions to vesting.
Except as otherwise determined by the Committee or as required
by law, there shall be added to any Restricted Period required
to be satisfied in determining the vesting or exercisability of
an Award of Restricted Stock periods during which a Participant
who is an Employee is on an unpaid leave of absence (or other
unpaid absence) from the Company. The Committee shall have the
right at any time, in its sole discretion, immediately to waive
all or any part of the restrictions and conditions with regard
to all or any part of the shares held by any Participant.



     
(e) Voting Rights, Dividends and Other
Distributions. During the Restricted Period, Participants
holding shares of Restricted Stock granted hereunder may
exercise full voting rights and shall receive all regular cash
dividends paid with respect to such shares. Except as the
Committee shall otherwise determine, any other cash dividends
and other distributions paid to Participants with respect to
shares of Restricted Stock, including any dividends and
distributions paid in shares, shall be subject to the same
restrictions and conditions as the shares of Restricted Stock
with respect to which they were paid.



     
(f) Other Awards Settled with Restricted
Stock. The Committee may, at the time any Award described in
this Section 6 is granted, provide that any or all of the
Stock delivered pursuant to the Award will be Restricted Stock.



     
(g) Unrestricted Stock. Subject to
the terms and provisions of the Plan, the Committee may grant
shares of Stock free of restrictions under the Plan
(“Unrestricted Stock”) in such amounts and upon such
terms and conditions as the Committee shall determine.



     
6.4.     Deferred
Stock.


     
A Deferred Stock Award is an unfunded and
unsecured promise by the Company to deliver shares of Stock in
the future (“Deferred Stock”). Delivery of the Stock
will take place at such time or times, and on such conditions,
as the Committee may specify. The Committee may at any time
accelerate the time at which delivery of all or any part of the
Stock will take place. At the time any Award described in this
Section 6 is granted, the Committee may provide that any or
all of the Stock delivered pursuant to the Award will be
Deferred Stock.



     
6.5.     Performance
Awards.


     
The Committee may, at the time an Award described
in Sections 6.1, 6.2, 6.3, 6.4 or 6.7 is granted, impose
the additional condition that performance goals must be met
prior to the Participant’s realization of any vesting,
payment or benefit under the Award. In addition, the Committee
may make awards entitling the Participant to receive an amount
in cash upon attainment of specified performance goals (a
“Cash Incentive”). Any Award or Cash Incentive made
subject to performance goals as described in the preceding two
sentences shall be a “Performance Award” subject to
the provisions of this Section 6.5 in addition to any other
applicable provisions of the Plan or the Award. Performance
Awards may consist of Cash Incentives or Awards that are
intended to qualify for the performance-based compensation
exception under Section 162(m) of the Code, other than Options
or Stock Appreciation Rights intended to qualify for such
exception by reason of the special rules under
Section 162(m) of the Code applicable to stock options and
stock appreciation rights granted at an exercise price not less
than fair market value on the date of grant, (“Qualified
Performance Awards”) or Cash Incentives or Awards that
either are not intended so to qualify or are Options or Stock
Appreciation Rights intended to qualify for such exception by
reason of the special rules under Section 162(m) of the
Code applicable to stock options and stock appreciation rights
granted at an exercise price not less than fair market value on
the date of grant (“Other Performance Awards”). The
Committee will





5






 




determine the performance measures, the period or
periods during which performance is to be measured and all other
terms and conditions applicable to the Performance Award. The
performance measures to which a Performance Award is subject may
be related to personal performance, corporate performance,
departmental performance or any other category of performance
established by the Committee. In the case of a Qualified
Performance Award, payment under the Award or of the Cash
Incentive must be conditioned on the satisfaction of one or more
“qualified performance measures” preestablished by the
Committee in accordance with the rules under Section 162(m)
of the Code and on certification (within the meaning of the
rules under Section 162(m) of the Code) by the Committee
that such measure or measures have been met or exceeded. For
purposes of the preceding sentence, a qualified performance
measure is an objectively determinable measure of performance
based on any one or more of the following (on a consolidated,
divisional, subsidiary, line of business or geographical basis
or in combinations thereof): (a) sales; revenues; assets;
expenses; earnings before or after deduction for all or any
portion of interest, taxes, depreciation or amortization,
whether or not on a continuing operations or an aggregate or per
share basis; return on equity, investment, capital or assets;
inventory level or turns; one or more operating ratios;
borrowing levels, leverage ratios or credit rating; market
share; capital expenditures; cash flow; stock price; stockholder
return; or any combination of the foregoing; or
(b) acquisitions and divestitures (in whole or in part);
joint ventures and strategic alliances; spin-offs, split-ups and
the like; reorganizations; recapitalizations, restructurings,
financings (issuance of debt or equity) and refinancings;
transactions that would constitute a change of control; or any
combination of the foregoing. A qualified performance measure
and targets with respect thereto determined by the Committee
need not be based upon an increase, a positive or improved
result or avoidance of loss. The maximum number of shares of
Stock subject to Performance Awards (other than Cash Incentives)
awarded to any Participant in any three-calendar-year period
shall be 2,000,000 shares. The maximum amount payable under Cash
Incentives to any Participant for any year shall be $1,000,000.




     
6.6.     Loans and
Supplemental Grants.



     
(a) Loans. The Company may make a
full recourse loan to a Participant, either at the time of or
after the grant to him or her of any Award. Such a loan may be
made in connection with either the purchase of Stock under the
Award or the payment of any federal income tax in respect of
income recognized as a result of the Award. The Committee will
have full authority to decide whether to make such a loan and to
determine the amount, terms and conditions of the loan,
including the interest rate (which may be zero), whether the
loan is to be secured or unsecured, the terms on which the loan
is to be repaid and the conditions, if any, under which it may
be forgiven. However, no loan may have a term (including
extensions) exceeding ten years in duration.



     
(b) Cash Grants. In connection with
any Award, the Committee may at the time such Award is made or
at a later date provide for and make a cash payment to the
Participant not to exceed an amount equal to (i) the amount
of any federal, state and local income tax on ordinary income
for which the Participant will be liable with respect to the
Award, plus (ii) an additional amount on a grossed-up basis
necessary to make him or her whole after tax, discharging all
the Participant’s income tax liabilities arising from all
payments under this Section 6, all based on such reasonable
estimates of applicable tax rates as the Committee may determine.



     
6.7.     Other
Stock-Based Awards.


     
(a) Nature of Awards. The Committee
may grant other Awards under which Stock is or may in the future
be acquired (“Other Stock-Based Awards”). Such Awards
may include, without limitation, debt securities convertible
into or exchangeable for shares of Stock upon such conditions,
including attainment of performance goals, as the Committee
shall determine. Such convertible or exchangeable securities may
have such terms and conditions as the Committee may determine at
the time of grant. However, no convertible or exchangeable debt
shall be issued unless the Committee shall have provided (by
Company right of repurchase, right to require conversion or
exchange, or other means deemed appropriate by the Committee) a
means of avoiding any right of the holders of such debt to
prevent a Company transaction by reason of covenants in such
debt.



     
(b) Purchase Price; Form of Payment.
The Committee may determine the consideration, if any, payable
upon the issuance or exercise of an Other Stock-Based Award. The
Committee may permit payment





6






 




by certified check or bank check or other
instrument acceptable to the Committee or by surrender of other
shares of Stock (excluding shares then subject to restrictions
under the Plan).




     
(c) Forfeiture of Awards; Repurchase of
Stock; Acceleration or Waiver of Restrictions. The Committee
may determine the conditions under which an Other Stock-Based
Award shall be forfeited or, in the case of an Award involving a
payment by the recipient, the conditions under which the Company
may or must repurchase such Award or related Stock. At any time
the Committee may in its sole discretion accelerate, waive or
amend any or all of the limitations or conditions imposed under
any Other Stock-Based Award.




7.     Events
Affecting Outstanding Awards


     
7.1.     Death.


     
Except as the Committee may otherwise determine,
if a Participant dies the following will apply:




		
	 	     
    (a) All Options and Stock Appreciation
    Rights held by the Participant immediately prior to death,
    whether or not otherwise exercisable, may be exercised by the
    Participant’s executor or administrator or the person or
    persons to whom the Option or Stock Appreciation Right is
    transferred by will or the applicable laws of descent and
    distribution, at any time within the one year period ending with
    the first anniversary of the Participant’s death (or such
    shorter or longer period as the Committee may determine), and
    shall thereupon terminate. In no event, however, shall an Option
    or Stock Appreciation Right remain exercisable beyond the latest
    date on which it could have been exercised without regard to
    this Section 7.
    
	 
	 	     
    (b) All Restricted Stock held by the
    Participant must be transferred to the Company (and, in the
    event the certificates representing such Restricted Stock are
    held by the Company, such Restricted Stock will be so
    transferred without any further action by the Participant) in
    accordance with Section 6.3(c).
    
	 
	 	     
    (c) Any payment or benefit under a Deferred
    Stock Award, Performance Award or Other Stock-Based Award to
    which the Participant was not irrevocably entitled prior to
    death will be forfeited and the Award canceled as of the time of
    death.
    




     
7.2.     Termination
of Service (Other Than By Death).


     
If a Participant who is an Employee ceases to be
an Employee for any reason other than death, or there is a
termination (other than by reason of death or satisfactory
completion of the project or service as determined by the
Committee) of the consulting, service or similar relationship in
respect of which a non-Employee Participant was granted an Award
hereunder, or a New Hire’s offer of employment is
terminated prior to the New Hire commencing employment with the
Company or the New Hire does not commence his or her employment
with the Company within two months after receipt of an Award
hereunder (such termination of the employment or other
relationship being hereinafter referred to as a “Status
Change”), then, except as the Committee may otherwise
determine, the following will apply:




		
	 	     
    (a) All Options and Stock Appreciation
    Rights held by the Participant that were not exercisable
    immediately prior to the Status Change shall terminate at the
    time of the Status Change. Any Options or Stock Appreciation
    Rights that were exercisable immediately prior to the Status
    Change will continue to be exercisable for a period of ninety
    (90) days and shall thereupon terminate, unless the Award
    provides by its terms for immediate termination in the event of
    a Status Change or unless the Status Change results from a
    discharge for cause which in the opinion of the Committee casts
    such discredit on the Participant as to justify immediate
    termination of the Award. In no event, however, shall an Option
    or Stock Appreciation Right remain exercisable beyond the latest
    date on which it could have been exercised without regard to
    this Section 7. For purposes of this Section, in the case
    of a Participant who is an Employee, a Status Change shall not
    be deemed to have resulted by reason of (i) a sick leave or
    other bona fide leave of absence approved for purposes of the
    Plan by the Committee, so long as the Employee’s right to
    reemployment is guaranteed either by statute or by contract, or
    (ii) a transfer of employment between the Company and a
    subsidiary or between subsidiaries, or to the employment of a
    





7






 


		
	 	
    corporation (or a parent or subsidiary
    corporation of such corporation) issuing or assuming an option
    in a transaction to which Section 424(a) of the Code applies.
    
	 
	 	     
    (b) All Restricted Stock held by the
    Participant at the time of the Status Change must be transferred
    to the Company (and, in the event the certificates representing
    such Restricted Stock are held by the Company, such Restricted
    Stock will be so transferred without any further action by the
    Participant) in accordance with Section 6.3(c) above.
    
	 
	 	     
    (c) Any payment or benefit under a Deferred
    Stock Award, Performance Award or Other Stock-Based Award to
    which the Participant was not irrevocably entitled prior to the
    Status Change will be forfeited and the Award canceled as of the
    date of such Status Change.
    




     
7.3.     Certain
Corporate Transactions.


     
Except as otherwise provided by the Committee, in
the event of a consolidation or merger in which the Company is
not the surviving corporation or which results (or that is part
of a series of related transactions that results) in the
acquisition of substantially all the Company’s outstanding
Stock by a single person or entity or by a group of persons or
entities acting in concert, or in the event of the sale or
transfer of substantially all the Company’s assets or a
dissolution or liquidation of the Company (a “covered
transaction”), the following rules shall apply:




		
	 	     
    (a) Subject to paragraph (b) below, all
    outstanding Awards requiring exercise will cease to be
    exercisable, and all other Awards to the extent not fully vested
    (including Awards subject to conditions not yet satisfied or
    determined) will be forfeited, as of the effective time of the
    covered transaction; provided, that the Committee may in
    its sole discretion, on or prior to the effective date of the
    covered transaction, (i) make any outstanding Option and
    Stock Appreciation Right exercisable in full, (ii) remove
    the restrictions from any Restricted Stock, (iii) cause the
    Company to make any payment and provide any benefit under any
    Deferred Stock Award or Performance Award or (iv) remove
    any performance or other conditions or restrictions on any
    Award; or
    
	 
	 	     
    (b) With respect to an outstanding Award
    held by a Participant who, following the covered transaction,
    will be employed by or otherwise providing services to an entity
    which is a surviving or acquiring entity in the covered
    transaction or an affiliate of such an entity, the Committee may
    at or prior to the effective time of the covered transaction and
    in lieu of the action described in paragraph (a) above,
    arrange to have such surviving or acquiring entity or affiliate
    assume any Award held by such Participant outstanding hereunder
    or grant a replacement award which, in the judgment of the
    Committee, is substantially equivalent to any Award being
    replaced.
    





The Committee may also grant Awards under the
Plan in substitution for awards held by directors, employees,
consultants or advisors of another company who concurrently
become directors, employees, consultants or advisors of the
Company or a subsidiary of the Company as the result of a merger
or consolidation of that other company with the Company or a
subsidiary of the Company, or as the result of the acquisition
by the Company or a subsidiary of the Company of property or
stock of that other company. Awards granted under the preceding
sentence may be granted on such terms and conditions as the
Committee considers appropriate in the circumstances.




8.     General
Provisions


     
8.1.     Documentation
of awards.


     
Awards will be evidenced by such written
instruments, if any, as may be prescribed by the Committee from
time to time. Such instruments may be in the form of agreements
to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be
executed by the Participant but acceptance of which will
evidence agreement to the terms thereof.





8






 



     
8.2.     Rights as a
Stockholder; Dividend Equivalents.


     
Except as specifically provided by the Plan, the
receipt of an Award will not give a Participant rights as a
stockholder; the Participant will obtain such rights, subject to
any limitations imposed by the Plan or the instrument evidencing
the Award, only upon the issuance of Stock. However, the
Committee may, on such conditions as it deems appropriate,
provide that a Participant will receive a benefit in lieu of
cash dividends that would have been payable on any or all Stock
subject to the Participant’s Award had such Stock been
outstanding. Without limitation, the Committee may provide for
payment to the Participant of amounts representing such
dividends, either currently or in the future, or for the
investment of such amounts on behalf of the Participant.



     
8.3. Conditions on Delivery of
Stock.


     
The Company will not be obligated to deliver any
shares of Stock pursuant to the Plan or to remove restrictions
from shares previously delivered under the Plan (a) until
all conditions of the Award have been satisfied or removed,
(b) until, in the opinion of the Company’s counsel,
all applicable federal and state laws and regulation have been
complied with, (c) if the outstanding Stock is at the time
listed on any stock exchange or The Nasdaq National Market,
until the shares to be delivered have been listed or authorized
to be listed on such exchange or market upon official notice of
issuance, and (d) until all other legal matters in
connection with the issuance and delivery of such shares have
been approved by the Company’s counsel. If the sale of
Stock has not been registered under the Securities Act of 1933,
as amended, the Company may require, as a condition to exercise
of the Award, such representations or agreements as counsel for
the Company may consider appropriate to avoid violation of such
Act and may require that the certificates evidencing such Stock
bear an appropriate legend restricting transfer.



     
If an Award is exercised by the
Participant’s legal representative, the Company will be
under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such
representative.



     
8.4.     Tax
Withholding.


     
The Company will withhold from any cash payment
made pursuant to an Award an amount sufficient to satisfy all
federal, state and local withholding tax requirements (the
“withholding requirements”).



     
In the case of an Award pursuant to which Stock
may be delivered, the Committee will have the right to require
that the Participant or other appropriate person remit to the
Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the
delivery of any Stock or removal of restrictions thereon. If and
to the extent that such withholding is required, the Committee
may permit the Participant or such other person to elect at such
time and in such manner as the Committee provides to have the
Company hold back from the shares to be delivered, or to deliver
to the Company, Stock having a value calculated to satisfy the
withholding requirement, but not in excess of the minimum
required to satisfy such withholding requirements. The Committee
may make such share withholding mandatory with respect to any
Award at the time such Award is made to a Participant.



     
If at the time an ISO is exercised the Committee
determines that the Company could be liable for withholding
requirements with respect to the exercise or with respect to a
disposition of the Stock received upon exercise, the Committee
may require as a condition of exercise that the person
exercising the ISO agree (a) to provide for withholding
under the preceding paragraph of this Section 8.4, if the
Committee determines that a withholding responsibility may arise
in connection with the exercise, (b) to inform the Company
promptly of any disposition (within the meaning of
Section 424(c) of the Code) of Stock received upon exercise
and (c) to give such security as the Committee deems
adequate to meet the potential liability of the Company for
other withholding requirements and to augment such security from
time to time in any amount reasonably deemed necessary by the
Committee to preserve the adequacy of such security.





9






 



     
8.5.     Transferability
of Awards.


     
Unless otherwise permitted by the Committee, no
Award (other than an Award in the form of an outright transfer
of cash or Unrestricted Stock) may be transferred other than by
will or by the laws of descent and distribution.



     
8.6.     Adjustments
in the Event of Certain Transactions.


     
(a) In the event of a stock dividend, stock
split or combination of shares, recapitalization or other change
in the Company’s capitalization, or other distribution to
holders of Stock other than normal cash dividends, after the
effective date of the Plan, the Committee will make any
appropriate adjustments to the maximum number of shares that may
be delivered under the Plan under Section 4(a) and to the
limits described in Sections 4(c) and 6.5.



     
(b) In any event referred to in
paragraph (a) above, the Committee will also make any
appropriate adjustments to the number and kind of shares of
Stock or securities subject to Awards then outstanding or
subsequently granted, any exercise prices relating to Awards and
any other provision of Awards affected by such change. The
Committee may also make such adjustments to take into account
material changes in law or in accounting practices or
principles, mergers, consolidations, acquisitions, dispositions
or similar corporate transactions, or any other event, if it is
determined by the Committee that adjustments are appropriate to
avoid distortion in the operation of the Plan.



     
(c) In the case of ISOs or Awards intended
to qualify for the “performance-based compensation”
exception under Section 162(m)(4)(C) of the Code, the
adjustments described in paragraphs (a) and (b) above
will be made only to the extent consistent with continued
qualification of the Option or other Award under
Section 422 or 162(m) of the Code, as the case may be.



     
8.7.     Employment
Rights, Etc.


     
Neither the adoption of the Plan nor the grant of
Awards will confer upon any person any right to continued
retention by the Company or any of its subsidiaries or
affiliates, as an Employee or otherwise, or affect in any way
the right of the Company or any of its subsidiaries or
affiliates to terminate an employment, service or similar
relationship at any time. Except as specifically provided by the
Committee in any particular case, the loss of existing or
potential profit in Awards granted under the Plan will not
constitute an element of damages in the event of termination of
an employment, service or similar relationship even if the
termination is in violation of an obligation of the Company or
any of its subsidiaries or affiliates to the Participant.



     
8.8.     Deferral of
Payments.


     
The Committee may agree at any time, upon request
of the Participant, to defer the date on which any payment under
an Award will be made.



     
8.9.     Past
Services as Consideration.


     
Where a Participant purchases Stock under an
Award for a price equal to the par value of the Stock, the
Committee may determine that such price has been satisfied by
past services rendered by the Participant.




9.     Change in
Control Provisions


     
The provisions of this Section 9 shall apply
notwithstanding any other provision in the Plan to the contrary.



     
If a Sale (as hereinafter defined) of the Company
occurs, the following provisions shall apply to every Option,
and to every other Award to the extent provided in such other
Award:




		
	 	     
    (a) Each Award granted prior to the Sale (an
    “affected Award”) shall be vested (and, in the case of
    an Award requiring exercise, exercisable) (vesting and
    exercisability being referred to for purposes of this
    Section 9, without distinction, as “vesting”),
    immediately prior to the Sale, for the “applicable number
    of shares” as hereinafter defined. In the case of an
    affected Award requiring exercise, the Company shall give the
    holder of the Award adequate notice and opportunity to exercise
    any portion of
    






10






 


		
	 	
    the affected Award that becomes exercisable by
    reason of this subsection. For purposes of this
    paragraph (a), the term “applicable number of
    shares” means, in the case of any Award, that number of
    shares for which the Award would have been vested by the end of
    the ten (10)-month period following the Sale had the Participant
    holding the Award immediately prior to the Sale continued in
    service during such ten (10)-month period.
    
	 
	 	     
    (b) Upon consummation of the Sale, if the
    Sale also constitutes a covered transaction as defined in
    Section 7.3 each affected Award requiring exercise will
    cease to be exercisable, and all other affected Awards to the
    extent not fully vested will be forfeited, except as otherwise
    provided pursuant to Section 7.3. If the acquiror entity or
    an affiliate thereof assumes an affected Award, the assumed
    Award shall be vested from and after the Sale to the extent
    provided under paragraph (a) above and as to any portion
    that is not vested by operation of paragraph (a) above
    shall become vested from and after the Sale in accordance with
    the vesting schedule that would have applied during the period
    beginning on the first day following ten (10) months after
    the date of the Sale, accelerated by ten (10) months. For
    the avoidance of doubt, in no event shall the assumed Award
    become vested for more than the total number of Shares subject
    thereto. If the acquiror entity or an affiliate thereof provides
    a substitute Award in lieu of assuming an affected Award, such
    substitute Award shall vest in the same manner as it would have
    vested had it been an assumed Award.
    
	 
	 	     
    (c) A “Sale” of the Company shall
    be deemed to have occurred if:
    





		
	 	     
    (i) any Person (defined for the purposes
    hereof as any individual, entity or other person, including a
    group within the meaning of Section 13(d) or 14(d)(2) of
    the 1934 Act) acquires beneficial ownership (within the meaning
    of Rule 13d-3 promulgated under the 1934 Act) of 30% or
    more of either (A) the then outstanding shares of common
    stock of the Company (the “Outstanding Company Common
    Stock”) or (B) the combined voting power of the then
    outstanding voting securities of the Company entitled to vote
    generally in the election of directors (the “Outstanding
    Company Voting Securities”); provided, that for
    purposes of this clause (i) the following acquisitions
    shall not constitute a Sale: (1) any acquisition directly
    from the Company, (2) any acquisition by the Company,
    (3) any acquisition by an employee benefit plan (or related
    trust) sponsored or maintained by the Company or its direct or
    indirect subsidiaries, or (4) any Business Combination as
    defined at clause (iii) below (but except as provided in
    said clause (iii) a Business Combination may nevertheless
    constitute a Sale under said clause (iii)); and provided
    further, that an acquisition by a Person of 30% or more but
    less than 50% of the Outstanding Company Common Stock or of the
    combined voting power of the Outstanding Company Voting
    Securities shall not constitute a Sale under this
    clause (i) if within 15 days of the Board’s being
    advised that such ownership level has been reached, a majority
    of the “Incumbent Directors” (as hereinafter defined)
    then in office adopt a resolution approving the acquisition of
    that level of securities ownership by such Person; or
    
	 
	 	     
    (ii) Individuals who, as of August 7,
    2001, constituted the Board (the “Incumbent
    Directors”) cease for any reason to constitute at least a
    majority of the Board; provided, that any individual who
    becomes a member of the Board subsequent to August 7, 2001
    and whose election or nomination for election was approved by a
    vote of at least two-thirds of the Incumbent Directors shall be
    treated as an Incumbent Director unless he or she assumed office
    as a result of an actual or threatened election contest with
    respect to the election or removal of directors; or
    
	 
	 	     
    (iii) There is consummated a reorganization,
    merger or consolidation involving the Company, or a sale or
    other disposition of all or substantially all of the assets of
    the Company (a “Business Combination”), in each case
    unless, following such Business Combination, (A) the
    Persons who were the beneficial owners, respectively, of the
    Outstanding Company Common Stock and of the combined voting
    power of the Outstanding Company Voting Securities immediately
    prior to the Business Combination beneficially own, directly or
    indirectly, more than 50% of, respectively, the then outstanding
    shares of common stock and the combined voting power of the then
    outstanding voting securities entitled to vote generally in the
    election of directors, as the case may be, of the entity
    resulting from such Business Combination in substantially the
    same proportions as their
    






11






 


		
	 	
    ownership immediately prior to such Business
    Combination of the Outstanding Company Common Stock and of the
    combined voting power of the Outstanding Company Voting
    Securities, as the case may be, (B) no Person (excluding
    any entity resulting from such Business Combination or any
    employee benefit plan (or related trust) of the Employer or of
    such corporation resulting from such Business Combination)
    beneficially owns, directly or indirectly, 30% or more of,
    respectively, the then outstanding shares of common stock of the
    corporation resulting from such Business Combination or the
    combined voting power of the then outstanding voting securities
    of such corporation entitled to vote generally in the election
    of directors, except to the extent that such ownership existed
    prior to the Business Combination and (C) at least a
    majority of the members of the Board resulting from such
    Business Combination were Incumbent Directors at the time of the
    execution of the initial agreement, or of the action of the
    Board, providing for such Business Combination; or
    
	 
	 	     
    (iv) The shareholders of the Company approve
    a complete liquidation or dissolution of the Company.
    





10.     Effect,
Amendment and Termination


     
Neither adoption of the Plan nor the grant of
Awards to a Participant will affect the Company’s right to
grant to such Participant awards that are not subject to the
Plan, to issue to such Participant Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which
Stock may be issued to Employees.



     
The Committee may at any time or times amend the
Plan or any outstanding Award for any purpose which may at the
time be permitted by law, or may at any time terminate the Plan
as to any further grants of Awards, provided that (except to the
extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the
Company, effectuate a change for which stockholder approval is
required in order for the Plan to continue to qualify for the
award of ISOs under Section 422 of the Code or for the
award of performance-based compensation under
Section 162(m) of the Code.





12