SCOLR,
INC.
 
 2004
EQUITY INCENTIVE PLAN
 (As Amended May 5, 2006)
 
 TABLE
OF CONTENTS
  1.
              Establishment,
      Purpose and Term of Plan.
              2
  2.
              Definitions
      and Construction.
              2
  3.
              Administration.
              6
  4.
              Shares
      Subject to Plan.
              8
  5.
              Eligibility
      and Award Limitations.
              8
  6.
              Terms
      and Conditions of Options.
              9
  7.
              Terms
      and Conditions of Stock Appreciation Rights.
              11
  8.
              Terms
      and Conditions of Stock Awards.
              12
  9.
              Terms
      and Conditions of Performance Awards.
              13
  10.
              Director
      Fee Awards
              16
  11.
              Terms
      and Conditions of Outside Director Options.
              20
  12.
              Standard
      Forms of Award Agreement.
              21
  13.
              Change
      in Control.
              21
  14.
              Compliance
      with Securities Law.
              22
  15.
              Tax
      Withholding.
              23
  16.
              Termination
      or Amendment of Plan.
              23
  17.
              Stockholder
      Approval.
              23
  18.
              Miscellaneous
      Provisions.
              23
  1
  2004
Equity Incentive Plan
  1. Establishment, Purpose and
Term of Plan.
  1.1           Establishment.  SCOLR,
Inc., a Delaware corporation, hereby establishes the SCOLR, Inc. 2004 Equity
Incentive Plan (the “Plan”)
effective as of June 25, 2004, the date of its approval by the stockholders of
the Company (the “Effective
Date”).
  1.2           Purpose.  The
purpose of the Plan is to advance the interests of the Participating Company
Group and its stockholders by providing an incentive to attract, retain and
reward persons performing services for the Participating Company Group and by
motivating such persons to contribute to the growth and profitability of the
Participating Company Group.  The Plan seeks to achieve this purpose
by providing for Awards in the form of Options, Stock Appreciation Rights, Stock
Awards, Performance Awards, Outside Director Options, and Director Fee
Awards.
  1.3           Term of Plan.  The
Plan shall continue in effect until the earlier of its termination by the Board
or the date on which all of the shares of Stock available for issuance under the
Plan have been issued and all restrictions on such shares under the terms of the
Plan and the agreements evidencing Awards granted under the Plan have
lapsed.  However, all Incentive Stock Options shall be granted, if at
all, within ten (10) years from the earlier of the date the Plan is adopted
by the Board or the date the Plan is duly approved by the stockholders of the
Company.
  2. Definitions and
Construction.
  2.1           Definitions.Whenever used
herein, the following terms shall have their respective meanings set forth
below:
  (a)           “Affiliate”
means (i) an entity, other than a Parent Corporation, that directly, or
indirectly through one or more intermediary entities, controls the Company or
(ii) an entity, other than a Subsidiary Corporation, that is controlled by the
Company directly, or indirectly through one or more intermediary
entities.  For this purpose, the term “control”
(including the term “controlled
by”) means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of the relevant entity,
whether through the ownership of voting securities, by contract or otherwise; or
shall have such other meaning assigned such term for the purposes of
registration on Form S-8 under the Securities Act.
  (b)           “Award”
means any Option, SAR, Stock Award, Performance Award, Outside Director Option,
or Director Fee Award granted under the Plan.
  (c)           “Award
Agreement” means a written agreement between the Company and a
Participant setting forth the terms, conditions and restrictions of the Award
granted to the Participant.  An Award Agreement may be an “Option
Agreement,” an “SAR
Agreement,” a “Stock Purchase
Agreement,” a “Stock Bonus
Agreement,” a “Performance Share
Agreement,” a “Performance Unit
Agreement,” a “Nonemployee
Director Option Agreement,” or “Stock Units
Agreement,” or an “Outside Director
Option Agreement.”
  (d)           “Board”
means the Board of Directors of the Company.  If one or more
Committees have been appointed by the Board to administer the Plan, “Board”
also means such Committee(s).
  (e)           “Code”
means the Internal Revenue Code of 1986, as amended, and any applicable
regulations promulgated thereunder.
  (f)           “Committee”
shall mean the Board or the Compensation Committee or other committee of the
Board duly appointed to administer the Plan and having such powers as shall be
specified by the Board.  Unless the powers of the Committee have been
specifically limited, the Committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law.
  2
  (g)           “Company”
means SCOLR, Inc., a Delaware corporation, or any successor corporation
thereto.
  (h)           “Consultant”
means a person engaged to provide consulting or advisory services (other than as
an Employee or a Director) to a Participating Company, provided that the
identity of such person, the nature of such services or the entity to which such
services are provided would not preclude the Company from offering or selling
securities to such person pursuant to the Plan in reliance on registration on a
Form S-8 Registration Statement under the Securities Act.
  (i)      “Director”
means a member of the Board or of the board of directors of any other
Participating Company.
  (j)      “Director Fee
Award” means any Nonemployee Director Option or Stock Unit granted
pursuant to Section 10.
  (k)           “Disability”
means the inability of the Optionee, in the opinion of a qualified physician
acceptable to the Company, to perform the major duties of the Optionee’s
position with the Participating Company Group because of the sickness or injury
of the Optionee.
  (l)      “Dividend
Equivalent” means a credit, made at the discretion of the Committee or as
otherwise provided by the Plan, to the account of a Participant in an amount
equal to the cash dividends paid on one share of Stock for each share of Stock
represented by an Award held by such Participant.
  (m)           “Employee”
means any person treated as an employee (including an Officer or a Director who
is also treated as an employee) in the records of a Participating Company and,
with respect to any Incentive Stock Option granted to such person, who is an
employee for purposes of Section 422 of the Code; provided, however, that
neither service as a Director nor payment of a director’s fee shall be
sufficient to constitute employment for purposes of the Plan.  The
Company shall determine in good faith and in the exercise of its discretion
whether an individual has become or has ceased to be an Employee and the
effective date of such individual’s employment or termination of employment, as
the case may be.  For purposes of an individual’s rights, if any,
under the Plan as of the time of the Company’s determination, all such
determinations by the Company shall be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency
subsequently makes a contrary determination;
  (n)           “Exchange
Act”
means the Securities Exchange Act of 1934, as amended.
  (o)           “Fair Market
Value”
means, as of any date, the value of a share of Stock or other property as
determined by the Board, in its discretion, or by the Company, in its
discretion, if such determination is expressly allocated to the Company herein,
subject to the following:
  (i)           If,
on such date, the Stock is listed on a national or regional securities exchange
or market system, the Fair Market Value of a share of Stock shall be the closing
price of a share of Stock (or the mean of the closing bid and asked prices of a
share of Stock if the Stock is so quoted instead) as quoted on the American
Stock Exchange or such other national or regional securities exchange or market
system constituting the primary market for the Stock, as reported in The Wall Street
Journal or such other source as the Company deems reliable.  If
the relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded
prior to the relevant date, or such other appropriate day as shall be determined
by the Board, in its discretion.
  (ii)           If,
on such date, the Stock is not listed on a national or regional securities
exchange or market system, the Fair Market Value of a share of Stock shall be as
determined by the Board in good faith without regard to any restriction other
than a restriction which, by its terms, will never lapse.
  3
  (p)           “Incentive Stock
Option”
means an Option intended to be (as set forth in the Award Agreement) and which
qualifies as an incentive stock option within the meaning of Section 422(b)
of the Code.
  (q)           “Insider”
means an Officer, Director of the Company, or other person whose transactions in
Stock are subject to Section 16 of the Exchange Act.
  (r)           “Nonemployee
Director” means
a Director who is not an Employee.
  (s)           “Nonemployee
Director Option” means a Director Fee Award in the form of Nonstatutory
Stock Option granted pursuant to the terms and conditions of
Section 10.
  (t)      “Nonstatutory
Stock Option”
means an Option not intended to be (as set forth in the Award Agreement) or
which does not qualify as an Incentive Stock Option within the meaning of
Section 422(b) of the Code.
  (u)           “Officer”
means any person designated by the Board as an officer of the
Company.
  (v)           “Option”
means the right to purchase Stock at a stated price for a specified period of
time granted to a Participant pursuant to the terms and conditions of the Plan,
including an Outside Director Option.  An Option may be either an
Incentive Stock Option or a Nonstatutory Stock Option.
  (w)           “Outside
Director” means a Director of the Company who is not an
Employee.
  (x)           “Outside Director
Option” means an Option granted to an Outside Director pursuant to
Section 11 below.  Outside Director Options shall be Nonstatutory
Stock Options.
  (y)           “Parent
Corporation”
means any present or future “parent corporation” of the Company, as defined in
Section 424(e) of the Code.
  (z)           “Participant”
means any eligible person who has been granted one or more Awards.
  (aa)           “Participating
Company”
means the Company or any Parent Corporation, Subsidiary Corporation or
Affiliate.
  (bb)           “Participating
Company Group”
means, at any point in time, all corporations collectively which are then
Participating Companies.
  (cc)           “Performance
Award” means an Award of Performance Shares or Performance
Units.
  (dd)           “Performance Award
Formula” means, for any Performance Award, a formula or table established
by the Committee pursuant to Section 9.3 of the Plan which provides the
basis for computing the value of a Performance Award at one or more threshold
levels of attainment of the applicable Performance Goal(s) measured as of the
end of the applicable Performance Period.
  (ee)           “Performance
Goal” means a performance goal established by the Committee pursuant to
Section 9.3 of the Plan.
  (ff)           “Performance
Period” means a period established by the Committee pursuant to
Section 9.3 of the Plan at the end of which one or more Performance Goals
are to be measured.
  4
  (gg)           “Performance
Share” means a bookkeeping entry representing a right granted to a
Participant pursuant to Section 9 of the Plan to receive a payment equal to
the value of a Performance Share, as determined by the Committee, based on
performance.
  (hh)           “Performance
Unit” means a bookkeeping entry representing a right granted to a
Participant pursuant to Section 9 of the Plan to receive a payment equal to
the value of a Performance Unit, as determined by the Committee, based upon
performance.
  (ii)           “Prior Plan
Option” means any option granted pursuant to the Company’s 1995 Stock
Option Plan, as amended, which is outstanding on or after the Effective
Date.
  (jj)           “Restriction
Period” means the period established in accordance with Section 8.5
of the Plan during which shares subject to a Stock Award are subject to Vesting
Conditions.
  (kk)           “Rule
16b-3”
means Rule 16b-3 under the Exchange Act, as amended from time to time, or
any successor rule or regulation.
  (ll)           “SAR” or
“Stock
Appreciation Right” means a bookkeeping entry representing, for each
share of Stock subject to such SAR, a right granted to a Participant pursuant to
Section 7 of the Plan to receive payment of an amount equal to the excess,
if any, of the Fair Market Value of a share of Stock on the date of exercise of
the SAR over the exercise price.
  (mm)           “Section 162(m)” means Section 162(m)
of the Code.
  (nn)           “Securities
Act”
means the Securities Act of 1933, as amended.
  (oo)           “Service”
means a Participant’s employment or service with the Participating Company
Group, whether in the capacity of an Employee, a Director or a
Consultant.  Unless otherwise determined by the Board, a Participant’s
Service shall not be deemed to have terminated merely because of a change in the
capacity in which the Participant renders Service to the Participating Company
Group or a change in the Participating Company for which the Participant renders
such Service, provided that there is no interruption or termination of the
Participant’s Service.  Furthermore, a Participant’s Service with the
Participating Company Group shall not be deemed to have terminated if the
Participant takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the ninety-first (91st) day of such leave the
Participant’s Service shall be deemed to have terminated unless the
Participant’s right to return to Service with the Participating Company Group is
guaranteed by statute or contract.  Notwithstanding the foregoing,
unless otherwise designated by the Company or required by law, a leave of
absence shall not be treated as Service for purposes of determining vesting
under the Participant’s Award Agreement.  A Participant’s Service
shall be deemed to have terminated either upon an actual termination of Service
or upon the corporation for which the Participant performs Service ceasing to be
a Participating Company.  Subject to the foregoing, the Company, in
its discretion, shall determine whether the Participant’s Service has terminated
and the effective date of such termination.
  (pp)           “Stock”
means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.2.
  (qq)           “Stock
Award” means an Award of a Stock Bonus or a Stock Purchase
Right.
  (rr)           “Stock
Bonus” means Stock granted to a Participant pursuant to Section 8 of
the Plan.
  (ss)           “Stock Purchase
Right” means a right to purchase Stock granted to a Participant pursuant
to Section 8 of the Plan.
  (tt)           “Stock
Unit” means a Director Fee Award in the form of a bookkeeping entry
representing a right granted to a Participant pursuant to the terms and
conditions of Section 10 to receive payment of one (1) share of
Stock.
  5
  (uu)           “Subsidiary
Corporation”
means any present or future “subsidiary corporation” of the Company, as defined
in Section 424(f) of the Code.
  (vv)           “Ten Percent
Owner”
means a Participant who, at the time an Option is granted to the Participant,
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of a Participating Company (other than an
Affiliate) within the meaning of Section 422(b)(6) of the
Code.
  (ww)           “Vesting
Conditions” mean those conditions established in accordance with
Section 8.5 of the Plan prior to the satisfaction of which shares subject
to a Stock Award remain subject to forfeiture or a repurchase option in favor of
the Company.
  2.2           Construction.  Captions
and titles contained herein are for convenience only and shall not affect the
meaning or interpretation of any provision of the Plan.  Except when
otherwise indicated by the context, the singular shall include the plural and
the plural shall include the singular.  Use of the term “or” is not
intended to be exclusive, unless the context clearly requires
otherwise.
  3. Administration.
  3.1           Administration by the
Board.  The Plan shall be administered by the
Board.  All questions of interpretation of the Plan or of any Award
shall be determined by the Board, and such determinations shall be final and
binding upon all persons having an interest in the Plan or such
Award.
  3.2           Authority of
Officers.  Any Officer shall have the authority to act on
behalf of the Company with respect to any matter, right, obligation,
determination or election which is the responsibility of or which is allocated
to the Company herein, provided the Officer has apparent authority with respect
to such matter, right, obligation, determination or election.  The
Board may, in its discretion, delegate to a committee comprised of one or more
Officers the authority to grant one or more Options, SARs or Stock Awards
without further approval of the Board or the Committee, to any person eligible
pursuant to Section 5, other than a person who, at the time of such grant,
is an Insider; provided, however, that (i) such Awards shall not be granted
for shares in excess of the maximum aggregate number of shares of Stock
authorized for issuance pursuant to Section 4.1, (ii) the exercise
price per share of each Option, SAR or Stock Purchase Right shall be equal to
the Fair Market Value per share of the Stock on the effective date of grant (or,
if the Stock has not traded on such date, on the last day preceding the
effective date of grant on which the Stock was traded), and (iii) each such
Award shall be subject to the terms and conditions of the appropriate standard
form of Award Agreement approved by the Board or the Committee and shall conform
to the provisions of the Plan and such other guidelines as shall be established
from time to time by the Board or the Committee.
  3.3           Powers of the Board.  In
addition to any other powers set forth in the Plan and subject to the provisions
of the Plan, the Board shall have the full and final power and authority, in its
discretion:
  (a)           to
determine the persons to whom, and the time or times at which, Awards shall be
granted and the number of shares of Stock or units to be subject to each
Award;
  (b)           to
determine the type of Award granted and to designate Options as Incentive Stock
Options or Nonstatutory Stock Options;
  (c)           to
determine the Fair Market Value of shares of Stock or other
property;
  (d)           to
determine the terms, conditions and restrictions applicable to each Award (which
need not be identical) and any shares acquired pursuant thereto, including,
without limitation, (i) the exercise or purchase price of shares purchased
pursuant to any Award, (ii) the method of payment for shares purchased upon
the exercise or purchase of shares purchased pursuant to any Award,
(iii) the method for satisfaction of any tax withholding obligation arising
in connection with any Award, including by the withholding or delivery of shares
of Stock, (iv) the timing, terms and conditions of the exercisability or
vesting of any Award or any shares acquired pursuant thereto, (v) the
Performance Award Formula and Performance Goals applicable to any Award and the
  6
 extent
to which such Performance Goals have been attained, (vi) the time of the
expiration of any Award, (vii) the effect of the Participant’s termination
of Service on any of the foregoing, and (viii) all other terms, conditions
and restrictions applicable to any Award or shares acquired pursuant thereto not
inconsistent with the terms of the Plan;
  (e)           to
determine whether an Award of SARs, Performance Shares or Performance Units will
be settled in shares of Stock, cash, or in any combination thereof;
  (f)           to
approve one or more forms of Award Agreement;
  (g)           to
amend, modify, extend, cancel or renew any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired pursuant
thereto;
  (h)           to
accelerate, continue, extend or defer the exercisability or the vesting of any
Award or any shares acquired pursuant thereto, including with respect to the
period following a Participant’s termination of Service with the Participating
Company Group;
  (i)      to
prescribe, amend or rescind rules, guidelines and policies relating to the Plan,
or to adopt supplements to, or alternative versions of, the Plan, including,
without limitation, as the Board deems necessary or desirable to comply with the
laws of, or to accommodate the tax policy or custom of, foreign jurisdictions
whose citizens may be granted Awards; and
  (j)      to
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award Agreement and to make all other determinations and take such
other actions with respect to the Plan or any Award as the Board may deem
advisable to the extent not inconsistent with the provisions of the Plan or
applicable law.
  3.4           Compliance with
Section 162(m).  If a Participating Company is a “publicly
held corporation” within the meaning of Section 162(m), the Board may
establish a Committee of “outside directors” within the meaning of
Section 162(m) to approve the grant of any Award which might reasonably be
anticipated to result in the payment of employee remuneration that would
otherwise exceed the limit on employee remuneration deductible for income tax
purposes pursuant to Section 162(m).
  3.5           Administration with Respect to
Insiders.  With respect to participation by Insiders in the
Plan, at any time that any class of equity security of the Company is registered
pursuant to Section 12 of the Exchange Act, the Plan shall be administered
in compliance with the requirements, if any, of Rule 16b-3.
  3.6           Option
Repricing.  Without the affirmative vote of holders of a
majority of the shares of Stock cast in person or by proxy at a meeting of the
stockholders of the Company at which a quorum representing a majority of all
outstanding shares of Stock is present or represented by proxy, the Board shall
not approve a program providing for either (a) the cancellation of
outstanding Options and the grant in substitution therefore of new Options
having a lower exercise price or (b) the amendment of outstanding Options
to reduce the exercise price thereof.  This paragraph shall not be
construed to apply to (a) “issuing or assuming a stock option in a
transaction to which section 424(a) applies,” within the meaning of
Section 424 of the Code or (b) the cancellation of Prior Plan Options
and the grant in substitution therefore of new Options having a lower exercise
price under this Plan.
  3.7           Indemnification.  In
addition to such other rights of indemnification as they may have as members of
the Board or officers or employees of the Participating Company Group, members
of the Board and any officers or employees of the Participating Company Group to
whom authority to act for the Board or the Company is delegated shall be
indemnified by the Company against all reasonable expenses, including attorneys’
fees, actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan, or any right granted hereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such person is liable for gross negligence, bad faith or
  7
 intentional
misconduct in duties; provided, however, that within sixty (60) days after the
institution of such action, suit or proceeding, such person shall offer to the
Company, in writing, the opportunity at its own expense to handle and defend the
same.
  4. Shares Subject to
Plan.
  4.1           Maximum Number of Shares
Issuable.
  General.  Subject to
adjustment as provided in Section 4.2, the maximum aggregate number of
shares of Stock that may be issued under the Plan shall be 4,000,000 shares,
plus shares which were previously reserved for issuance under the Prior Plan but
not subject to outstanding options, and shares subject to outstanding options
under the Prior Plan, to the extent shares of Stock are not issued pursuant to
such options.  If an outstanding Award for any reason expires or is
terminated or canceled without having been exercised or settled in full, or if
shares of Stock are acquired pursuant to an Award subject to forfeiture or
repurchase are forfeited or repurchased by the Company at the Participant’s
purchase price, the shares of Stock allocable to the terminated portion of such
Award or such forfeited or repurchased shares of Stock shall again be available
for issuance under the Plan.  However, except as adjusted pursuant to
Section 4.2, in no event shall more than Six Million Four Hundred
Seven Thousand Eight Hundred Fifty-Seven (6,407,857) shares of Stock be
available for issuance pursuant to the exercise of Incentive Stock Options
(the“ISO Share
Issuance Limit”).  Shares of
Stock shall not be deemed to have been issued pursuant to the Plan (i) with
respect to any portion of an Award that is settled in cash or (ii) to the
extent such shares are withheld in satisfaction of tax withholding obligations
pursuant to Section 15.2.  Upon payment in shares of Stock
pursuant to the exercise of an SAR, the number of shares available for issuance
under the Plan shall be reduced only by the number of shares actually issued in
such payment.  If the exercise price of an Option is paid by tender to
the Company, or attestation to the ownership, of shares of Stock owned by the
Participant, the number of shares available for issuance under the Plan shall be
reduced by the gross number of shares for which the Option is
exercised.
 4.2           Adjustments for Changes in Capital
Structure.  In
the event of any change in the Stock through merger, consolidation,
reorganization, reincorporation, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, split-up, split-off, spin-off,
combination, exchange of shares or similar change in the capital structure of
the Company or in the event of payment of a dividend or distribution to the
stockholders of the Company in a form other than Stock (except normal cash
dividends) that has a material effect on the Fair Market Value of shares of
Stock, appropriate adjustments shall be made in the number and class of shares
subject to the Plan, in the ISO Share Issuance Limit set forth in
Section 4.1, in the Award Limits set forth in Section 5.4 and to any
outstanding Awards, and in the exercise or purchase price per share under any
outstanding Award.  Notwithstanding the foregoing, any fractional
share resulting from an adjustment pursuant to this Section 4.2 shall be
rounded down to the nearest whole number, and in no event may the exercise or
purchase price under any Award be decreased to an amount less than the par
value, if any, of the stock subject to such Award.  The adjustments
determined by the Board pursuant to this Section 4.2 shall be final,
binding and conclusive.
  5. Eligibility and Award
Limitations.
  5.1           Persons Eligible for
Awards.  Awards
may be granted only to Employees, Consultants, and Directors.  For
purposes of the foregoing sentence, “Employees,” “Consultants” and “Directors” shall include
prospective Employees, prospective Consultants and prospective Directors to whom
Awards are granted in connection with written offers of an employment or other
service relationship with the Participating Company Group; provided, however,
that no Stock subject to any Award shall vest, become exercisable or be issued
prior to the date on which such person commences Service.  Awards are
granted solely at the discretion of the Board.  Eligible persons may
be granted more than one (1) Award.  However, eligibility in
accordance with this Section shall not entitle any person to be granted an
Award, or, having been granted an Award, to be granted an additional
Award.  A Director Fee Award and Outside Director Options may be
granted only to a person who, at the time of the grant, is a Nonemployee
Director.  Eligible persons may be granted more than one (1)
Award.
  5.2           Option Grant Restrictions.  Any
person who is not an Employee on the effective date of the grant of an Option to
such person may be granted only a Nonstatutory Stock Option.  An
Incentive Stock Option granted to a prospective Employee upon the condition that
such person become an Employee shall be deemed
  8
 granted
effective on the date such person commences Service with a Participating
Company, with an exercise price determined as of such date in accordance with
Section 6.1.
  5.3           Fair Market Value
Limitation.  To
the extent that options designated as Incentive Stock Options (granted under all
stock option plans of the Participating Company Group, including the Plan)
become exercisable by a Participant for the first time during any calendar year
for stock having a Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portion of such options which exceeds such amount shall be
treated as Nonstatutory Stock Options.  For purposes of this
Section 5.3, options designated as Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of stock shall be determined as of the time the option with respect to such
stock is granted.  If the Code is amended to provide for a different
limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the
Code.  If an Option is treated as an Incentive Stock Option in part
and as a Nonstatutory Stock Option in part by reason of the limitation set forth
in this Section 5.3, the Participant may designate which portion of such
Option the Participant is exercising.  In the absence of such
designation, the Participant shall be deemed to have exercised the Incentive
Stock Option portion of the Option first.  Separate certificates
representing each such portion shall be issued upon the exercise of the
Option.
  5.4           Award Limits.
  (a)           Aggregate Limit on Stock Awards and
Performance Awards.  Subject to adjustment as provided in
Section 4.2, in no event shall more than Five Hundred Thousand (500,000)
shares in the aggregate be issued under the Plan pursuant to the exercise or
settlement of Stock Awards and Performance Awards.
  (b)           Section 162(m) Award
Limits.  The following limits shall apply to the grant of any
Award if, at the time of grant, the Company is a “publicly held corporation”
within the meaning of Section 162(m).
  (i)           Options and
SARs.  Subject to adjustment as provided in Section 4.2,
no Employee shall be granted within any fiscal year of the Company one or more
Options or Freestanding SARs which in the aggregate are for more than Five
Hundred Thousand (500,000) shares of Stock.  An Option which is
canceled (or a Freestanding SAR as to which the exercise price is reduced to
reflect a reduction in the Fair Market Value of the Stock) in the same fiscal
year of the Company in which it was granted shall continue to be counted against
such limit for such fiscal year.
  (ii)           Stock
Awards.  Subject to adjustment as provided in Section 4.2,
no Employee shall be granted within any fiscal year of the Company one or more
Stock Awards, subject to Vesting Conditions based on the attainment of
Performance Goals, for more than three hundred thousand (300,000) shares of
Stock.
  (iii)           Performance
Awards.  Subject to adjustment as provided in Section 4.2,
no Employee shall be granted (A) Performance Shares which could result in
such Employee receiving more than three hundred thousand (300,000) shares of
Stock for each full fiscal year of the Company contained in the Performance
Period for such Award, or (B) Performance Units which could result in such
Employee receiving more than two million five hundred thousand dollars
($2,500,000) for each full fiscal year of the Company contained in the
Performance Period for such Award.  No Participant may be granted more
than one Performance Award for the same Performance Period.
  6. Terms and Conditions of
Options.
  Options
shall be evidenced by Award Agreements specifying the number of shares of Stock
covered thereby, in such form as the Board shall from time to time
establish.  No Option or purported Option shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Award
Agreement.  Award Agreements evidencing Options may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:
  9
  6.1           Exercise Price.  The
exercise price for each Option shall be established in the discretion of the
Board; provided, however, that (a) the exercise price per share for an
Incentive Stock Option shall be not less than the Fair Market Value of a share
of Stock on the effective date of grant of the Option and (b) no Incentive
Stock Option granted to a Ten Percent Owner shall have an exercise price per
share less than one hundred ten percent (110%) of the Fair Market Value of a
share of Stock on the effective date of grant of the
Option.  Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than the minimum exercise price set forth above if such
Option is granted pursuant to an assumption or substitution for another option
in a manner qualifying under the provisions of Section 424(a) of the
Code.
  6.2           Exercisability and Term of
Options.  Options
shall be exercisable at such time or times, or upon such event or events, and
subject to such terms, conditions, performance criteria and restrictions as
shall be determined by the Board and set forth in the Award Agreement evidencing
such Option; provided, however, that (a) no Incentive Stock Option shall be
exercisable after the expiration of ten (10) years after the effective date of
grant of such Option, (b) no Incentive Stock Option granted to a Ten
Percent Owner shall be exercisable after the expiration of five (5) years after
the effective date of grant of such Option, and (c) no Option granted to a
prospective Employee, prospective Consultant or prospective Director may become
exercisable prior to the date on which such person commences Service with a
Participating Company.  Subject to the foregoing, unless otherwise
specified by the Board in the grant of an Option, any Option granted hereunder
shall terminate ten (10) years after the effective date of grant of the Option,
unless earlier terminated in accordance with its provisions.
  6.3           Payment of Exercise
Price.
  (a)           Forms of Consideration
Authorized.  Except
as otherwise provided below, payment of the exercise price for the number of
shares of Stock being purchased pursuant to any Option shall be made (i) in
cash, by check or cash equivalent, (ii) by tender to the Company, or
attestation to the ownership, of shares of Stock owned by the Participant having
a Fair Market Value not less than the exercise price, (iii) by delivery of
a properly executed notice of exercise together with irrevocable instructions to
a broker providing for the assignment to the Company of the proceeds of a sale
or loan with respect to some or all of the shares being acquired upon the
exercise of the Option (including, without limitation, through an exercise
complying with the provisions of Regulation T as promulgated from time to
time by the Board of Governors of the Federal Reserve System) (a “Cashless
Exercise”),
(iv) by such other consideration as may be approved by the Board from time
to time to the extent permitted by applicable law, or (v) by any
combination thereof.  The Board may at any time or from time to time,
by approval of or by amendment to the standard forms of Option Agreement
described in Section 12, or by other means, grant Options which do not
permit all of the foregoing forms of consideration to be used in payment of the
exercise price or which otherwise restrict one or more forms of
consideration.
  (b)           Limitations on Forms of
Consideration.
  (i)           Tender of
Stock.  Notwithstanding the foregoing, an Option may not be
exercised by tender to the Company, or attestation to the ownership, of shares
of Stock to the extent such tender or attestation would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption
of the Company’s stock.  Unless otherwise provided by the Board, an
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock unless such shares either have been owned by the
Participant for more than six (6) months (and not used for another Option
exercise by attestation during such period).  The Company reserves, at
any and all times, the right, in the Company’s sole and absolute discretion, to
refuse to allow the exercise by tender to the Company, or attestation to the
ownership, of shares of Stock.
  (ii)           Cashless
Exercise.  The Company reserves, at any and all times, the
right, in the Company’s sole and absolute discretion, to establish, decline to
approve or terminate any program or procedures for the exercise of Options by
means of a Cashless Exercise.  Cashless exercise shall not be
permitted if the exercise by means of a Cashless Exercise would be a violation
of any law, including Sarbanes-Oxley Act of 2002, which prohibits public
companies from making personal loans to any director or executive
officer.
  10
  6.4           Transferability of
Options.  During the lifetime of the Participant, an Option
shall be exercisable only by the Participant or the Participant’s guardian or
legal representative.  No Option shall be assignable or transferable
by the Participant, except by will or by the laws of descent and
distribution.  Notwithstanding the foregoing, to the extent permitted
by the Board, in its discretion, and set forth in the Award Agreement evidencing
such Option, an Option shall be assignable or transferable subject to the
applicable limitations, if any, described in the General Instructions to
Form S-8 Registration Statement under the Securities Act.
  7. Terms and Conditions of
Stock Appreciation Rights.
  SARs
shall be evidenced by Award Agreements specifying the number of shares of Stock
subject to the Award, in such form as the Committee shall from time to time
establish.  No SAR or purported SAR shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Award
Agreement.  Award Agreements evidencing SARs may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:
  7.1           Types of SARs
Authorized.  SARs may be granted in tandem with all or any
portion of a related Option (a “Tandem
SAR”) or may be granted independently of any Option (a “Freestanding
SAR”).  A Tandem SAR may be granted either concurrently with
the grant of the related Option or at any time thereafter prior to the complete
exercise, termination, expiration or cancellation of such related
Option.
  7.2           Exercise Price.  The
exercise price for each SAR shall be established in the discretion of the
Committee; provided, however, that the exercise price per share subject to a
Tandem SAR shall be the exercise price per share under the related
Option.
  7.3           Exercisability and Term of
SARs.
  (a)           Tandem SARs.  Tandem
SARs shall be exercisable only at the time and to the extent, and only to the
extent, that the related Option is exercisable, subject to such provisions as
the Committee may specify where the Tandem SAR is granted with respect to less
than the full number of shares of Stock subject to the related
Option.  The Committee may, in its discretion, provide in any Award
Agreement evidencing a Tandem SAR that such SAR may not be exercised without the
advance approval of the Company and, if such approval is not given, then the
Option shall nevertheless remain exercisable in accordance with its
terms.  A Tandem SAR shall terminate and cease to be exercisable no
later than the date on which the related Option expires or is terminated or
canceled.  Upon the exercise of a Tandem SAR with respect to some or
all of the shares subject to such SAR, the related Option shall be canceled
automatically as to the number of shares with respect to which the Tandem SAR
was exercised.  Upon the exercise of an Option related to a Tandem SAR
as to some or all of the shares subject to such Option, the related Tandem SAR
shall be canceled automatically as to the number of shares with respect to which
the related Option was exercised.
  (b)           Freestanding
SARs.  Freestanding SARs shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Committee
and set forth in the Award Agreement evidencing such SAR; provided, however,
that no Freestanding SAR shall be exercisable after the expiration of eight (8)
years after the effective date of grant of such SAR.
  7.4           Exercise of
SARs.  Upon the exercise (or deemed exercise pursuant to
Section 7.5) of an SAR, the Participant (or the Participant’s legal
representative or other person who acquired the right to exercise the SAR by
reason of the Participant’s death) shall be entitled to receive payment of an
amount for each share with respect to which the SAR is exercised equal to the
excess, if any, of the Fair Market Value of a share of Stock on the date of
exercise of the SAR over the exercise price.  Payment of such amount
shall be made in cash, shares of Stock, or any combination thereof as determined
by the Committee.  Unless otherwise provided in the Award Agreement
evidencing such SAR, payment shall be made in a lump sum as soon as practicable
following the date of exercise of the SAR.  The Award Agreement
evidencing any SAR may provide for deferred payment in a lump sum or in
installments.  When payment is to be made in shares of Stock, the
number of shares to be issued shall be determined on the basis of the Fair
Market Value of a share of Stock on the date of exercise of the
SAR.  For purposes of
  11
 Section 7,
an SAR shall be deemed exercised on the date on which the Company receives
notice of exercise from the Participant.
  7.5           Deemed Exercise of
SARs.  If, on the date on which an SAR would otherwise
terminate or expire, the SAR by its terms remains exercisable immediately prior
to such termination or expiration and, if so exercised, would result in a
payment to the holder of such SAR, then any portion of such SAR which has not
previously been exercised shall automatically be deemed to be exercised as of
such date with respect to such portion.
  7.6           Effect of Termination of
Service.  An SAR shall be exercisable after a Participant’s
termination of Service to such extent and during such period as determined by
the Committee, in its discretion, and set forth in the Award Agreement
evidencing such SAR.
  7.7           Nontransferability of
SARs.  SARs may not be assigned or transferred in any manner
except by will or the laws of descent and distribution, and, during the lifetime
of the Participant, shall be exercisable only by the Participant.
  8. Terms and Conditions of
Stock Awards.
  Stock
Awards shall be evidenced by Award Agreements specifying whether the Award is a
Stock Bonus or a Stock Purchase Right and the number of shares of Stock subject
to the Award, in such form as the Committee shall from time to time
establish.  No Stock Award or purported Stock Award shall be a valid
and binding obligation of the Company unless evidenced by a fully executed Award
Agreement.  Award Agreements evidencing Stock Awards may incorporate
all or any of the terms of the Plan by reference and shall comply with and be
subject to the following terms and conditions:
  8.1           Types of Stock Awards
Authorized.  Stock Awards may be in the form of either a Stock
Bonus or a Stock Purchase Right.  Stock Awards may be granted upon
such conditions as the Committee shall determine, including, without limitation,
upon the attainment of one or more Performance Goals described in
Section 9.4.  If either the grant of a Stock Award or the lapsing
of the Restriction Period is to be contingent upon the attainment of one or more
Performance Goals, the Committee shall follow procedures substantially
equivalent to those set forth in Sections 9.3 through 9.5(a).
  8.2           Purchase Price.  The
purchase price for shares of Stock issuable under each Stock Purchase Right
shall be established by the Committee in its discretion.  No monetary
payment (other than applicable tax withholding) shall be required as a condition
of receiving shares of Stock pursuant to a Stock Bonus, the consideration for
which shall be services actually rendered to a Participating Company or for its
benefit.  Notwithstanding the foregoing, the Participant shall furnish
consideration in the form of cash or past services rendered to a Participating
Company or for its benefit having a value not less than the par value of the
shares of Stock subject to such Stock Award.
  8.3           Purchase Period.  A
Stock Purchase Right shall be exercisable within a period established by the
Committee, which shall in no event exceed thirty (30) days from the effective
date of the grant of the Stock Purchase Right; provided, however, that no Stock
Purchase Right granted to a prospective Employee, prospective Director or
prospective Consultant may become exercisable prior to the date on which such
person commences Service.
  8.4           Payment of Purchase
Price.  Except as otherwise provided below, payment of the
purchase price for the number of shares of Stock being purchased pursuant to any
Stock Purchase Right shall be made (i) in cash, by check, or cash
equivalent, (ii) by such other consideration as may be approved by the
Committee from time to time to the extent permitted by applicable law, or
(iii) by any combination thereof.  The Committee may at any time
or from time to time grant Stock Purchase Rights which do not permit all of the
foregoing forms of consideration to be used in payment of the purchase price or
which otherwise restrict one or more forms of consideration.  Stock
Bonuses shall be issued in consideration for past services actually rendered to
a Participating Company or for its benefit.
  12
  8.5           Vesting and Restrictions on
Transfer.  Shares issued pursuant to any Stock Award may or may
not be made subject to vesting conditioned upon the satisfaction of such Service
requirements, conditions, restrictions or performance criteria, including,
without limitation, Performance Goals as described in Section 9.4 (the
“Vesting
Conditions”), as shall be established by the Committee and set forth in
the Award Agreement evidencing such Award.  During any period (the
“Restriction
Period”) in which shares acquired pursuant to a Stock Award remain
subject to Vesting Conditions, such shares may not be sold, exchanged,
transferred, pledged, assigned or otherwise disposed of other than pursuant to
an Ownership Change Event, as defined in Section 13.1, or as provided in
Section 8.8.  Upon request by the Company, each Participant shall
execute any agreement evidencing such transfer restrictions prior to the receipt
of shares of Stock hereunder and shall promptly present to the Company any and
all certificates representing shares of Stock acquired hereunder for the
placement on such certificates of appropriate legends evidencing any such
transfer restrictions.
  8.6           Voting Rights; Dividends and
Distributions.  Except as provided in this Section and
Section 8.5, during the Restriction Period applicable to shares subject to
a Stock Award, the Participant shall have all of the rights of a stockholder of
the Company holding shares of Stock, including the right to vote such shares and
to receive all dividends and other distributions paid with respect to such
shares.  However, in the event of a dividend or distribution paid in
shares of Stock or any other adjustment made upon a change in the capital
structure of the Company as described in Section 4.2, then any and all new,
substituted or additional securities or other property (other than normal cash
dividends) to which the Participant is entitled by reason of the Participant’s
Stock Award shall be immediately subject to the same Vesting Conditions as the
shares subject to the Stock Award with respect to which such dividends or
distributions were paid or adjustments were made.
  8.7           Effect of Termination of
Service.  Unless otherwise provided by the Committee in the
grant of a Stock Award and set forth in the Award Agreement, if a Participant’s
Service terminates for any reason, whether voluntary or involuntary (including
the Participant’s death or disability), then (i) the Company shall have the
option to repurchase for the purchase price paid by the Participant any shares
acquired by the Participant pursuant to a Stock Purchase Right which remain
subject to Vesting Conditions as of the date of the Participant’s termination of
Service and (ii) the Participant shall forfeit to the Company any shares
acquired by the Participant pursuant to a Stock Bonus which remain subject to
Vesting Conditions as of the date of the Participant’s termination of
Service.  The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to
one or more persons as may be selected by the Company.
  8.8           Nontransferability of Stock Award
Rights.  Rights to acquire shares of Stock pursuant to a Stock
Award may not be subject in any manner to anticipation, alienation, sale,
exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors
of the Participant or the Participant’s beneficiary, except by will or the laws
of descent and distribution, and, during the lifetime of the Participant, shall
be exercisable only by the Participant.
  9. Terms and Conditions of
Performance Awards.
  Performance
Awards shall be evidenced by Award Agreements in such form as the Committee
shall from time to time establish.  No Performance Award or purported
Performance Award shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement.  Award Agreements
evidencing Performance Awards may incorporate all or any of the terms of the
Plan by reference and shall comply with and be subject to the following terms
and conditions:
  9.1           Types of Performance Awards
Authorized.  Performance Awards may be in the form of either
Performance Shares or Performance Units.  Each Award Agreement
evidencing a Performance Award shall specify the number of Performance Shares or
Performance Units subject thereto, the Performance Award Formula, the
Performance Goal(s) and Performance Period applicable to the Award, and the
other terms, conditions and restrictions of the Award.
  9.2           Initial Value of Performance Shares
and Performance Units.  Unless otherwise provided by the
Committee in granting a Performance Award, each Performance Share shall have an
initial value equal to the Fair Market Value of one (1) share of Stock, subject
to adjustment as provided in Section 4.2, on the effective date of grant of
the Performance Share, and each Performance Unit shall have an initial value of
one
   13
 hundred
dollars ($100).  The final value payable to the Participant in
settlement of a Performance Award determined on the basis of the applicable
Performance Award Formula will depend on the extent to which Performance Goals
established by the Committee are attained within the applicable Performance
Period established by the Committee.
  9.3           Establishment of Performance Period,
Performance Goals and Performance Award Formula.  In granting
each Performance Award, the Committee shall establish in writing the applicable
Performance Period, Performance Award Formula and one or more Performance Goals
which, when measured at the end of the Performance Period, shall determine on
the basis of the Performance Award Formula the final value of the Performance
Award to be paid to the Participant.  Unless otherwise permitted in
compliance with the requirements under Section 162(m) with respect to
“performance-based compensation,” the Committee shall establish the Performance
Goal(s) and Performance Award Formula applicable to each Performance Award no
later than the earlier of (a) the date ninety (90) days after the
commencement of the applicable Performance Period or (b) the date on which
25% of the Performance Period has elapsed, and, in any event, at a time when the
outcome of the Performance Goals remains substantially
uncertain.  Once established, the Performance Goals and Performance
Award Formula shall not be changed during the Performance Period.  The
Company shall notify each Participant granted a Performance Award of the terms
of such Award, including the Performance Period, Performance Goal(s) and
Performance Award Formula.
  9.4           Measurement of Performance
Goals.  Performance Goals shall be established by the Committee
on the basis of targets to be attained (“Performance
Targets”) with respect one or more measures of business or financial
performance (each, a “Performance
Measure”), subject to the following:
  (a)           Performance
Measures.  Performance Measures shall have the same meanings as
used in the Company’s financial statements, or, if such terms are not used in
the Company’s financial statements, they shall have the meaning applied pursuant
to generally accepted accounting principles, or as used generally in the
Company’s industry.  Performance Measures shall be calculated with
respect to the Company and each Subsidiary Corporation consolidated therewith
for financial reporting purposes or such division or other business unit as may
be selected by the Committee.  For purposes of the Plan, the
Performance Measures applicable to a Performance Award shall be calculated in
accordance with generally accepted accounting principles, but prior to the
accrual or payment of any Performance Award for the same Performance Period and
excluding the effect (whether positive or negative) of any change in accounting
standards or any extraordinary, unusual or nonrecurring item, as determined by
the Committee, occurring after the establishment of the Performance Goals
applicable to the Performance Award.  Performance Measures may be one
or more of the following, as determined by the Committee:
  (i)           growth
in revenue;
  (ii)           operating
margin;
  (iii)           total
return on shares of Stock relative to the increase in an appropriate index as
may be selected by the Committee;
  (iv)           earnings
per share;
  (v)           return
on stockholder equity;
  (vi)           return
on net assets; and
  (vii)           cash
flow, as indicated by book earnings before interest, taxes, depreciation and
amortization.
  (b)           Performance
Targets.Performance Targets may include a minimum, maximum,
target level and intermediate levels of performance, with the final value of a
Performance Award determined under the applicable Performance Award Formula by
the level attained during the applicable Performance Period.  A
  14
 Performance
Target may be stated as an absolute value or as a value determined relative to a
standard selected by the Committee.
  9.5           Settlement of Performance
Awards.
  (a)           Determination of Final
Value.  As soon as practicable following the completion of the
Performance Period applicable to a Performance Award, the Committee shall
certify in writing the extent to which the applicable Performance Goals have
been attained and the resulting final value of the Award earned by the
Participant and to be paid upon its settlement in accordance with the applicable
Performance Award Formula.
  (b)           Discretionary Adjustment of Award
Formula.  In its discretion, the Committee may, either at the
time it grants a Performance Award or at any time thereafter, provide for the
positive or negative adjustment of the Performance Award Formula applicable to a
Performance Award granted to any Participant who is not a “covered employee”
within the meaning of Section 162(m) (a “Covered
Employee”) to reflect such Participant’s individual performance in his or
her position with the Company or such other factors as the Committee may
determine.  If permitted under a Covered Employee’s Award Agreement,
the Committee shall have the discretion, on the basis of such criteria as may be
established by the Committee, to reduce some or all of the value of the
Performance Award that would otherwise be paid to the Covered Employee upon its
settlement notwithstanding the attainment of any Performance Goal and the
resulting value of the Performance Award determined in accordance with the
Performance Award Formula.  No such reduction may result in an
increase in the amount payable upon settlement of another Participant’s
Performance Award.
  (c)           Effect of Leaves of
Absence.  Unless otherwise required by law, payment of the
final value, if any, of a Performance Award held by a Participant who has taken
in excess of thirty (30) days of leaves of absence during a Performance Period
shall be prorated on the basis of the number of days of the Participant’s
Service during the Performance Period during which the Participant was not on a
leave of absence.
  (d)           Notice to
Participants.  As soon as practicable following the Committee’s
determination and certification in accordance with Sections 9.5(a) and (b),
the Company shall notify each Participant of the determination of the
Committee.
  (e)           Payment in Settlement of Performance
Awards.  As soon as practicable following the Committee’s
determination and certification in accordance with Sections 9.5(a) and (b),
payment shall be made to each eligible Participant of the final value of the
Participant’s Performance Award.  Payment of such amount shall be made
in cash, shares of Stock, or a combination thereof as determined by the
Committee.  Unless otherwise provided in the Award Agreement
evidencing a Performance Award, payment shall be made in a lump
sum.  An Award Agreement may provide for deferred payment in a lump
sum or in installments.  If any payment is to be made on a deferred
basis, the Committee may, but shall not be obligated to, provide for the payment
during the deferral period of Dividend Equivalents or interest.
  (f)           Provisions Applicable to Payment in
Shares.  If payment is to be made in shares of Stock, the
number of such shares shall be determined by dividing the final value of the
Performance Award by the value of a share of Stock determined by the method
specified in the Award Agreement.  Such methods may include, without
limitation, the closing market price on a specified date (such as the settlement
date) or an average of market prices over a series of trading
days.  Shares of Stock issued in payment of any Performance Award may
be fully vested and freely transferable shares or may be shares of Stock subject
to Vesting Conditions as provided in Section 8.5.  Any shares
subject to Vesting Conditions shall be evidenced by an appropriate Award
Agreement and shall be subject to the provisions of Sections 8.5 through
8.8 above.
  9.6           Dividend
Equivalents.  In its discretion, the Committee may provide in
the Award Agreement evidencing any Performance Share Award that the Participant
shall be entitled to receive Dividend Equivalents with respect to the payment of
cash dividends on Stock having a record date prior to the date on which the
Performance Shares are settled or forfeited.  Dividend Equivalents may
be paid currently or may be accumulated and paid to the extent that Performance
Shares become nonforfeitable, as determined by the
Committee.  Settlement of Dividend Equivalents may be made in cash,
shares of Stock, or a combination thereof as determined by the
  15
 Committee,
and may be paid on the same basis as settlement of the related Performance Share
as provided in Section 9.5.  Dividend Equivalents shall not be
paid with respect to Performance Units.
  9.7           Effect of Termination of
Service.  The effect of a Participant’s termination of Service
on the Participant’s Performance Award shall be as determined by the Committee,
in its discretion, and set forth in the Award Agreement evidencing such
Performance Award.
  9.8           Nontransferability of Performance
Awards.  Prior to settlement in accordance with the provisions
of the Plan, no Performance Award may be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participant’s beneficiary,
except by will or by the laws of descent and distribution.  All rights
with respect to a Performance Award granted to a Participant hereunder shall be
exercisable during his or her lifetime only by such Participant.
  10. Director Fee
Awards.
  10.1           Effective Date and Duration of this
Section.  This Section 10 shall become effective on the first
day (the “Section 10
Effective Date”) of the first calendar quarter beginning after the
Effective Date, provided that elections with respect to the Initial Plan Year
pursuant to Section 10.2 may be made prior to the Section 10 Effective
Date.  This Section 10 shall continue in effect for the remainder
of the calendar year commencing on the Section 10 Effective Date (the
“Initial
Plan Year”) and for each subsequent calendar year commencing during the
term (as provided in Section 1.3) of the Plan (a “Plan
Year”).  Notwithstanding any Participant’s prior election
pursuant to Section 10.2, no Director Fee Award shall be granted after
termination of the Plan, and all Director Fees (as defined below) with respect
to which Director Fee Awards have not been granted prior to termination of the
Plan shall thereafter be paid in cash in accordance with the Company’s normal
Director Fee payment procedures.  However, subject to compliance with
applicable law as provided in Section 14, all Director Fee Awards granted
prior to termination of the Plan shall continue to be governed by and may be
exercised or settled in accordance with the terms of the Plan and the Award
Agreement evidencing such Director Fee Award.
  10.2           Mandatory and Elective Director Fee
Awards.  Each Nonemployee Director may elect to receive one or
more Director Fee Awards in lieu of payment in cash of all or any portion of
such Participant’s annual retainer fee, meeting fees and other compensation
payable with respect to such Participant’s service as a Director (“Director
Fees”) for the Initial Plan Year and each subsequent Plan Year or
applicable portion thereof.  A Participant shall be entitled to elect
one (but not both) of the following alternative forms of payment of the value of
the Participant’s Director Fees:
  (a)           Option Payment.  A
Nonemployee Director may elect to receive up to a maximum of one hundred percent
(100%) of the Participant’s Director Fees to be paid in the form of a
Nonemployee Director Option (an “Option
Payment”) and the balance, if any, to  be paid in cash in
accordance with the Company’s normal Director Fee payment
procedures.
  (b)           Stock Units
Payment.  A Nonemployee Director may elect to receive up to a
maximum of one hundred percent (100%) of the Participant’s Director Fees to be
paid in the form of Stock Units (a “Stock Units
Payment”) and the balance, if any, to be paid in cash in accordance with
the Company’s normal Director Fee payment procedures.  In connection
with an election to receive a Stock Units Payment, the Participant may elect an
“Early
Settlement Date” (as defined below) upon which the Stock Units will be
settled in accordance with Section 10.6(d); provided, however, that upon
termination of the Participant’s Service as a Director prior to the Early
Settlement Date, settlement shall be made as provided in Section
10.6(d).  Any “Early Settlement
Date” elected by the Participant shall become irrevocable as provided in
Section 10.3(b) and shall be December 1 of the third Plan Year following the
Plan Year of the Stock Units Payment or December 1 of any subsequent Plan
Year.
  10.3           Time and
Manner of Election.
  (a)           Time of
Election.  Each Nonemployee Director shall make an election
pursuant to Section 10.2:
  16
  (i)           for
the Initial Plan Year: prior to the earlier of (1) the date thirty (30) days
following the Effective Date or (2) the Section 10 Effective Date;
  (ii)           for
each subsequent Plan Year: prior to the first day of such Plan Year;
and
  (iii)           in
the case of a newly appointed or elected Nonemployee Director: on the date of
such appointment or election for the remainder of the Initial Plan Year or
subsequent Plan Year of appointment or election, as the case may
be.
  (b)           Election
Irrevocable.  An election pursuant to Section 10.2 shall
become irrevocable as of the commencement of the Plan Year or portion thereof to
which it applies.
  (c)           Failure to Timely
Elect.  Any Nonemployee Director who fails to make an election
in accordance with this Section for any Plan Year (or the Initial Plan Year, as
the case may be) shall be deemed to have elected pursuant to Section 10.2
to receive Option Payments for zero percent (0%) of the value of such
Participant’s Director Fees earned during such Plan Year (or Initial Plan Year)
and to receive all of such Participant’s Director Fees in cash in accordance
with the Company’s normal Director Fee payment procedures.
  (d)           Manner of
Election.  Each election in accordance with this Section shall
be made on a form prescribed by the Company for this purpose and filed with the
Chief Financial Officer of the Company.
  10.4           Automatic
Grant of Director Fee Awards.  Subject to the
provisions of Sections 1.3, 4 and 5, effective as of the last day of each
quarter during any Plan Year (or the Initial Plan Year, as the case may be),
each Nonemployee Director shall be granted automatically and without further
action of the Committee a Director Fee Award in lieu of that portion of the
Director Fees earned by the Participant during such quarter and specified by the
Participant’s election under Section 10.2 for such Plan Year (or Initial
Plan Year) and any fractional share amount carried over from the prior quarter
as provided in Section 10.7 (the “Quarterly
Director Fees”).  In accordance with the Participant’s election
under Section 10.2 for the Plan Year (or Initial Plan Year), the Director
Fee Award shall be either in the form of an Option Payment pursuant to
Section 10.5 or a Stock Units Payment pursuant to
Section 10.6.
  10.5           Option
Payment.  Each Option
Payment shall be in the form of a Nonemployee Director Option and shall be
evidenced by an Award Agreement that shall specify the exercise price, the
duration of the Nonemployee Director Option, the number of shares of Stock to
which the Nonemployee Director Option pertains, and such other provisions as the
Committee shall determine.  No such Nonemployee Director Option or
purported Nonemployee Director Option shall be a valid and binding obligation of
the Company unless evidenced by a fully executed Award
Agreement.  Such Award Agreements may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the terms
and conditions of Section 6 to the extent not inconsistent with this
Section and the terms and conditions set forth in Sections 10.5(a) through
10.5(d) below:
  (a)           Exercise Price.  The
exercise price per share for each Nonemployee Director Option shall be fifty
percent (50%) of the average of the Fair Market Values of a share of Stock for
the ten (10) trading days preceding the effective date of grant of the
Nonemployee Director Option.
  (b)           Number of Shares Subject to
Nonemployee Director Option.  The number of shares of Stock
subject to a Nonemployee Director Option shall be determined by the following
formula (with any resulting fractional share being disregarded):
  X  =
A ÷ (B x 50%)
 
 where,
 
 “X” is
the number of shares subject to the Nonemployee Director Option;
  17
 
 “A” is
the amount of Quarterly Director Fees in lieu of which the Option Payment is
made; and
 
 “B” is
the average of the Fair Market Values of a share of Stock for the ten (10)
trading days preceding the effective date of grant of the Nonemployee Director
Option.
 
 (c)           Exercise
Period.  Each Nonemployee Director Option shall be vested and
exercisable on and after the date of grant of the Nonemployee Director Option
and shall terminate and cease to be exercisable on the date ten (10) years after
the date of grant of the Nonemployee Director Option, unless earlier terminated
pursuant to the terms of the Plan or the Award Agreement.
  (d)           Effect of Termination of
Service.
  (i)           Nonemployee Director Option
Grant.  No Participant shall be granted a Nonemployee Director
Option following the date on which such Participant’s Service as a Director
terminates for any reason.  All of such Participant’s Director Fees
with respect to which Director Fee Awards have not been granted prior to the
Participant’s termination of Service as a Director shall be paid in cash in
accordance with the Company’s normal Director Fee payment
procedures.
  (ii)           Nonemployee Director Option
Exercisability.  Subject to earlier termination as otherwise
provided herein, a Nonemployee Director Option shall remain exercisable after a
Participant’s termination of Service at any time prior to the expiration of
thirty-six (36) months after the date on which the Participant’s Service
terminated, but in any event no later than the Option Expiration
Date.
  (iii)           Extension if Exercise Prevented by
Law.  Notwithstanding the foregoing, if the exercise of a
Nonemployee Director Option within the applicable time period set forth in
Section 10.5(d)(ii) is prevented by the provisions of Section 14 below, the
Nonemployee Director Option shall remain exercisable until thirty (30) days
after the date the Participant is notified by the Company that the Nonemployee
Director Option is exercisable, but in any event no later than the Option
Expiration Date.
  (iv)           Extension if Participant Subject to
Section 16(b).Notwithstanding the foregoing, if a sale within
the applicable time period set forth in Section 10.5(d)(ii) of shares acquired
upon the exercise of the Nonemployee Director Option would subject the
Participant to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth
(10th) day following the date on which a sale of such shares by the Participant
would no longer be subject to such suit, (ii) the one hundred and ninetieth
(190th) day after the Participant’s termination of Service, or (iii) the
Option Expiration Date.
  10.6           Stock
Units Payment.  Each Stock Units
Payment shall be evidenced by an Award Agreement that shall specify the number
of Stock Units to which such agreement pertains, the form and time of settlement
of such Stock Units and such other provisions as the Committee shall
determine.  No such Stock Units Award or purported Stock Units Award
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Award Agreement.  Such Award Agreements may incorporate
all or any of the terms of the Plan by reference and shall comply with and be
subject to the terms and conditions set forth in Sections 10.6(a) through
10.6(f) below:
  (a)           Payment.  No
additional cash consideration shall be required upon settlement of a Stock Units
Award.
  (b)           Number of Stock Units Subject to
Stock Units Award.  The number of Stock Units subject to a
Stock Units Award shall be determined by the following formula (with any
resulting fractional Stock Unit being disregarded):
  18
  X  =
A ÷ B
 
 where,
 
 “X” is
the number of Stock Units subject to the Stock Units Award;
 
 “A” is
the amount of Quarterly Director Fees in lieu of which the Stock Units Payment
is made; and
 
 “B” is
the average of the Fair Market Values of a share of Stock for the ten (10)
trading days preceding the effective date of grant of the Stock Units
Award.
 
 (c)           Voting and Dividend Equivalent
Rights.  Participants shall have no voting rights with respect
to shares of Stock represented by Stock Units until the date of the issuance of
a certificate for such shares (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the
Company).  Prior to settlement of a Stock Units Award, such Award
shall include the right to Dividend Equivalents, pursuant to which the
Participant shall be credited with additional whole and/or fractional Stock
Units as of the record date of any payment of cash dividends with respect to the
Stock occurring prior to such settlement date.  Such additional Stock
Units shall be subject to the same terms and conditions and shall be settled in
the same manner and at the same time as the Stock Units originally subject to
the Stock Units Award.  The number of such whole and/or fractional
Stock Units to be credited with respect to any Stock Units Award on the record
date of any cash dividend paid on the Stock shall be determined by the following
formula:
  X  =
(A x B) ÷ C
 
 where,
 
 “X” is
the number of whole and/or fractional Stock Units to be credited with respect to
the Stock Units Award;
 
 “A” is
the amount of cash dividends paid on one share of Stock;
 
 “B” is
the number of whole and fractional Stock Units subject to the Stock Units Award
as of the cash dividend record date; and
 
 “C” is
the Fair Market Value of a share of Stock on the cash dividend record
date.
 
 (d)           Settlement of Stock
Units.  Subject to the provisions of Section 14 below, the
Company shall issue to the Participant, within thirty (30) days following the
earlier of (i) the Early Settlement Date elected by the Participant with
respect to the Stock Units Award or (ii) the date of termination of the
Participant’s Service as a Director, a number of whole shares of Stock equal to
the number of whole Stock Units subject to the Stock Units
Award.  Such shares of Stock shall not be subject to any restriction
on transfer other than any such restriction as may be required pursuant to
Section 14 or any applicable law, rule or regulation.  On the
same settlement date, the Company shall pay to the Participant cash in lieu of
any fractional Stock Unit subject to the Stock Units Award in an amount equal to
the Fair Market Value on the settlement date of such fractional share of
Stock.
  (e)           Effect of Termination of
Service.  No Participant shall be granted a Stock Units Award
following the date on which such Participant’s Service as a Director terminates
for any reason.  All of such Participant’s Director Fees with respect
to which Director Fee Awards have not been granted prior to the Participant’s
termination of Service as a Director shall be paid in cash in accordance with
the Company’s normal Director Fee payment procedures.
  19
  (f)           Nontransferability of Stock
Units.  Prior to their settlement pursuant to
Section 10.6(d), no Stock Units granted to a Participant shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s
beneficiary, except by will or by the laws of descent and
distribution.
  10.7           Fractional
Shares.  No fractional shares of Stock shall be issued upon the
exercise of any Nonemployee Director Option or settlement of any Stock
Units.  Any portion of a Participant’s Quarterly Director Fees subject
to the Participant’s election under Section 10.2 representing a fractional
share amount that would otherwise be paid in the form of an Option Payment or a
Stock Units Payment shall instead be carried over and combined with the
Quarterly Director Fees for the following quarter of the Plan Year (or Initial
Plan year, as the case may be) or the subsequent Plan Year.  Any such
fractional share amount remaining upon termination of a Participant’s Service as
a Director shall be paid to the Participant in cash, without
interest.
  11.Terms and
Conditions of Outside Director Options.
  Outside
Director Options shall be evidenced by Option Agreements specifying the number
of shares of Stock covered thereby, in such form as the Board shall from time to
time establish.  Such Option Agreements may incorporate all or any of
the terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
  11.1           Automatic
Grant.  Outside Director Options shall be granted automatically
and without further action of the Board, as follows:
  (a)           Annual Option
Grant.  Effective on October 1st of each calendar year on or
after the Effective Date, each person who is the serving as an Outside Director
shall be granted an Option to purchase Thirty Thousand shares of Stock, subject
to adjustment as provided in Section 4.2; provided, however, that for the
first calendar year in which a person serves as an Outside Director, they shall
be granted, instead of the foregoing Option grant, an Option to purchase that
number of shares equal to two thousand five hundred (2,500) shares of Stock for
each full month of Service before the first October 1st during such Director’s
tenure, subject to adjustment as provided in Section 4.2.
  (b)           Right to Decline
Outside Director Option.  Notwithstanding the foregoing, any
person may elect not to receive an Outside Director Option by delivering written
notice of such election to the Board no later than the day prior to the date
such Outside Director Option would otherwise be granted.  A person so
declining an Outside Director Option shall receive no payment or other
consideration in lieu of such declined Outside Director Option.  A
person who has declined an Outside Director Option may revoke such election by
delivering written notice of such revocation to the Board no later than the day
prior to the date such Outside Director Option would be granted pursuant to this
Section 11.1.
  11.2           Exercise Price.  The
exercise price per share of Stock subject to an Outside Director Option shall be
the Fair Market Value of a share of Stock on the date the Outside Director
Option is granted.
  11.3           Exercise
Period.  Each Outside Director Option shall terminate and cease
to be exercisable on the date five (5) years after the date of grant of the
Outside Director Option unless earlier terminated pursuant to the terms of the
Plan or the Option Agreement.
  11.4           Right to Exercise Outside Director
Options.  Except as otherwise provided in the Plan or in the
Option Agreement, each Outside Director Option shall become fully vested and
exercisable, on the date such Option was granted pursuant to
Section 11.1(a).
  11.5           Effect of Termination of Service on
Outside Director Options.
  (a)           Option
Exercisability.  Subject to
earlier termination of the Outside Director Option as otherwise provided herein,
if the Optionee’s Service with the Participating Company Group terminates for
any reason, including the Disability or death of the Optionee, the Outside
Director Option, to the extent unexercised and
  20
 exercisable
on the date on which the Optionee’s Service terminated, may be exercised by the
Optionee (or the Optionee’s guardian, legal representative or other person who
acquired the right to exercise the Outside Director Option by reason of the
Optionee’s death) at any time prior to the expiration of two (2) years after the
date on which the Optionee’s Service terminated, but in any event no later than
the Option Expiration Date.
  (b)           Extension if
Exercise Prevented by Law.  Notwithstanding
the foregoing, if the exercise of an Outside Director Option within the
applicable time periods set forth in Section 11.5(a) is prevented by the
provisions of Section 14 below, the Outside Director Option shall remain
exercisable until three (3) months after the date the Optionee is notified by
the Company that the Outside Director Option is exercisable, but in any event no
later than the Option Expiration Date.
  11.6           Extension if
Optionee Subject to Section 16(b).  Notwithstanding
the foregoing, if a sale within the applicable time periods set forth in
Section 11.5(a) of shares acquired upon the exercise of the Outside
Director Option would subject the Optionee to suit under Section 16(b) of
the Exchange Act, the Outside Director Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the date on which a
sale of such shares by the Optionee would no longer be subject to such suit,
(ii) the one hundred and ninetieth (190th) day after the Optionee’s
termination of Service, or (iii) the Option Expiration Date.
  12.Standard Forms of Award
Agreement.
  12.1           Award Agreements.  Each
Award shall comply with and be subject to the terms and conditions set forth in
the appropriate form of Award Agreement approved by the Committee and as amended
from time to time.  Any Award Agreement may consist of an appropriate
form of Notice of Grant and a form of Agreement incorporated therein by
reference, or such other form or forms as the Committee may approve from time to
time.
  12.2           Authority to Vary Terms.  The
Committee shall have the authority from time to time to vary the terms of any
standard form of Award Agreement described in this Section 12 either in
connection with the grant or amendment of an individual Award or in connection
with the authorization of a new standard form or forms; provided, however, that
the terms and conditions of any such new, revised or amended standard form or
forms of Award Agreement are not inconsistent with the terms of the
Plan.
  13. Change in
Control.
  13.1           Definitions.
  (a)           An
“Ownership Change
Event”
shall be deemed to have occurred if any of the following occurs with respect to
the Company:  (i) the direct or indirect sale or exchange in a
single or series of related transactions by the stockholders of the Company of
more than fifty percent (50%) of the voting stock of the Company; (ii) a
merger or consolidation in which the Company is a party; (iii) the sale,
exchange, or transfer of all or substantially all of the assets of the Company
(other than a sale, exchange or transfer to one or more subsidiaries of the
Company); or (iv) a liquidation or dissolution of the Company.
  (b)           A
“Change in
Control”
shall mean an Ownership Change Event or a series of related Ownership Change
Events (collectively, a “Transaction”)
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction direct or indirect beneficial
ownership of more than fifty percent (50%) of the total combined voting power of
the outstanding voting securities of the Company or, in the case of a an
Ownership Change Event described in Section 13.1(a)(iii), the corporation
or other business entity to which the assets of the Company were transferred
(the “Transferee”),
as the case may be.  For purposes of the preceding sentence, indirect
beneficial ownership shall include, without limitation, an interest resulting
from ownership of the voting securities of one or more corporations or other
business entities which own the Company or the Transferee, as the case may be,
either directly or through one or more subsidiary corporations or other business
entities.  The Board shall have the right to determine whether
multiple sales or exchanges of the voting securities of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
  21
 
 13.2           Effect of Change in Control on
Options and SARs.  In
the event of a Change in Control, the surviving, continuing, successor, or
purchasing entity or other business entity or parent thereof, as the case may be
(the “Acquiror”),
may, without the consent of any Participant, either assume the Company’s rights
and obligations under outstanding Options and SARs or substitute for outstanding
Options and SARs substantially equivalent options and SARs (as the case may be)
for the Acquiror’s stock.  Any Options or SARs which are neither
assumed or substituted for by the Acquiror in connection with the Change in
Control nor exercised as of the date of the Change in Control shall terminate
and cease to be outstanding effective as of the date of the Change in Control,
provided, that, the Board may,
in its discretion, provide in any Award Agreement that, in the event of a Change
in Control, the exercisability and vesting of the outstanding Option and any
shares acquired upon the exercise thereof or any SAR shall accelerate upon such
circumstances and to such extent as specified in such Award
Agreement.  Notwithstanding the foregoing, shares acquired upon
exercise of an Option prior to the Change in Control and any consideration
received pursuant to the Change in Control with respect to such shares shall
continue to be subject to all applicable provisions of the Option Agreement
evidencing such Option except as otherwise provided in such Option
Agreement.  Furthermore, notwithstanding the foregoing, if the
corporation the stock of which is subject to the outstanding Options immediately
prior to an Ownership Change Event described in Section 13.1(a)(i)
constituting a Change in Control is the surviving or continuing corporation and
immediately after such Ownership Change Event less than fifty percent (50%) of
the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the outstanding Options shall
not terminate unless the Board otherwise provides in its
discretion.
  13.3           Effect of Change in Control on Stock
Awards.  The Committee may, in its discretion, provide in any
Award Agreement evidencing a Stock Award that, in the event of a Change in
Control, the lapsing of the Restriction Period applicable to the shares subject
to the Stock Award held by a Participant whose Service has not terminated prior
to such date shall be accelerated effective as of the date of the Change in
Control to such extent as specified in such Award Agreement.  Any
acceleration of the lapsing of the Restriction Period that was permissible
solely by reason of this Section 13.3 and the provisions of such Award
Agreement shall be conditioned upon the consummation of the Change in
Control.
  13.4           Effect of Change in Control on
Performance Awards.  The Committee may, in its discretion,
provide in any Award Agreement evidencing a Performance Award that, in the event
of a Change in Control, the Performance Award held by a Participant whose
Service has not terminated prior to such date shall become payable effective as
of the date of the Change in Control to such extent as specified in such Award
Agreement.
  13.5           Effect of Change in Control on
Directors Fee Awards.  Any Directors Fees with respect to which
the Company has not made either an Option Payment or a Stock Units Payment
pursuant to Section 11 prior to the effective date of the Change in Control
shall be paid in cash immediately prior to such effective date.
  13.6           Effect of Change in Outside Director
Options.  Notwithstanding any other provision of this Plan to
the contrary, in the event of a change in control, any unexercised portion of
any such Option shall be immediately exercisable and vested in full as of the
date ten (10) days prior to the date of the Change in Control.  Any
exercise of the Option that was permissible solely by reason of this
Section 13.6 shall be conditioned upon the consummation of the Change in
Control.  The Option shall terminate and cease to be outstanding
effective as of the date of the Change in Control to the extent that the Option
is neither assumed or substituted for by the Acquiror in connection with the
Change in Control nor exercised as of the date of the Change in
Control.
  14. Compliance with Securities
Law.
  The grant
of Awards and the issuance of shares of Stock pursuant to any Award shall be
subject to compliance with all applicable requirements of federal, state and
foreign law with respect to such securities and the requirements of any stock
exchange or market system upon which the Stock may then be listed.  In
addition, no Award may be exercised or shares issued pursuant to an Award unless
(a) a registration statement under the Securities Act shall at the time of
such exercise or issuance be in effect with respect to the shares issuable
pursuant to the Award or (b) in the opinion of legal counsel to the
Company, the shares issuable pursuant to the Award may be issued in accordance
with the terms of an applicable exemption from the registration requirements of
the
  22
 Securities
Act.  The inability of the Company to obtain from any regulatory body
having jurisdiction the authority, if any, deemed by the Company’s legal counsel
to be necessary to the lawful issuance and sale of any shares hereunder shall
relieve the Company of any liability in respect of the failure to issue or sell
such shares as to which such requisite authority shall not have been
obtained.  As a condition to the issuance of any Stock, the Company
may require the Participant to satisfy any qualifications that may be necessary
or appropriate, to evidence compliance with any applicable law or regulation and
to make any representation or warranty with respect thereto as may be requested
by the Company.
  15. Tax
Withholding.
  15.1           Tax Withholding in
General.  The Company shall have the right to deduct from any
and all payments made under the Plan, or to require the Participant, through
payroll withholding, cash payment or otherwise, including by means of a Cashless
Exercise of an Option, to make adequate provision for, the federal, state, local
and foreign taxes, if any, required by law to be withheld by the Participating
Company Group with respect to an Award or the shares acquired pursuant
thereto.  The Company shall have no obligation to deliver shares of
Stock, to release shares of Stock from an escrow established pursuant to an
Award Agreement, or to make any payment in cash under the Plan until the
Participating Company Group’s tax withholding obligations have been satisfied by
the Participant.
  15.2           Withholding in
Shares.  The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable to a Participant upon
the exercise or settlement of an Award, or to accept from the Participant the
tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group.  The Fair Market Value
of any shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates.
  16. Termination or Amendment of
Plan.
  The Board
may terminate or amend the Plan at any time.  However, subject to
changes in applicable law, regulations or rules that would permit otherwise,
without the approval of the Company’s stockholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Section 4.2),
(b) no change in the class of persons eligible to receive Incentive Stock
Options, and (c) no other amendment of the Plan that would require approval
of the Company’s stockholders under any applicable law, regulation or
rule.  No termination or amendment of the Plan shall affect any then
outstanding Award unless expressly provided by the Board.  In any
event, no termination or amendment of the Plan may adversely affect any then
outstanding Award without the consent of the Participant, unless such
termination or amendment is required to enable an Option designated as an
Incentive Stock Option to qualify as an Incentive Stock Option or is necessary
to comply with any applicable law, regulation or rule.
  17. Stockholder
Approval.
  The Plan
or any increase in the maximum aggregate number of shares of Stock issuable
thereunder as provided in Section 4.1 (the “Authorized
Shares”)
shall be approved by the stockholders of the Company within twelve (12) months
of the date of adoption thereof by the Board.  Options granted prior
to stockholder approval of the Plan or in excess of the Authorized Shares
previously approved by the stockholders shall become exercisable no earlier than
the date of stockholder approval of the Plan or such increase in the Authorized
Shares, as the case may be.
  18. Miscellaneous
Provisions.
  18.1           Repurchase
Rights.  Shares issued under the Plan may be subject to one or
more repurchase options, or other conditions and restrictions as determined by
the Committee in its discretion at the time the Award is granted.  The
Company shall have the right to assign at any time any repurchase right it may
have, whether or not such right is then exercisable, to one or more persons as
may be selected by the Company.  Upon request by the Company, each
Participant shall execute any agreement evidencing such transfer restrictions
prior to
  23
 the
receipt of shares of Stock hereunder and shall promptly present to the Company
any and all certificates representing shares of Stock acquired hereunder for the
placement on such certificates of appropriate legends evidencing any such
transfer restrictions.
  18.2           Rights as Employee, Director or
Consultant.  No person, even though eligible pursuant to
Section 5, shall have a right to be selected as a Participant, or, having
been so selected, to be selected again as a Participant.  Nothing in
the Plan or any Award granted under the Plan shall confer on any Participant a
right to remain an Employee, Director or Consultant, or interfere with or limit
in any way any right of a Participating Company to terminate the Participant’s
Service at any time.
  18.3           Rights as a
Stockholder.  A Participant shall have no rights as a
stockholder with respect to any shares covered by an Award until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the
Company).  No adjustment shall be made for dividends, distributions or
other rights for which the record date is prior to the date such shares are
issued, except as provided in Section 4.2 or another provision of the
Plan.
  18.4           Fractional
Shares.  The Company shall not be required to issue fractional
shares upon the exercise or settlement of any Award.
  18.5           Beneficiary
Designation.  Each Participant may file with the Company a
written designation of a beneficiary who is to receive any benefit under the
Plan to which the Participant is entitled in the event of such Participant’s
death before he or she receives any or all of such benefit.  Each
designation will revoke all prior designations by the same Participant, shall be
in a form prescribed by the Company, and will be effective only when filed by
the Participant in writing with the Company during the Participant’s
lifetime.  If a married Participant designates a beneficiary other
than the Participant’s spouse, the effectiveness of such designation shall be
subject to the consent of the Participant’s spouse.  If a Participant
dies without an effective designation of a beneficiary who is living at the time
of the Participant’s death, the Company will pay any remaining unpaid benefits
to the Participant’s legal representative.
  18.6           Unfunded
Obligation.  Participants shall have the status of general
unsecured creditors of the Company.  Any amounts payable to
Participants pursuant to the Plan shall be unfunded and unsecured obligations
for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974.  No Participating Company
shall be required to segregate any monies from its general funds, or to create
any trusts, or establish any special accounts with respect to such
obligations.  The Company shall retain at all times beneficial
ownership of any investments, including trust investments, which the Company may
make to fulfill its payment obligations hereunder.  Any investments or
the creation or maintenance of any trust or any Participant account shall not
create or constitute a trust or fiduciary relationship between the Committee or
any Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participant’s creditors in any
assets of any Participating Company.  The Participants shall have no
claim against any Participating Company for any changes in the value of any
assets which may be invested or reinvested by the Company with respect to the
Plan.
  IN
WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the
foregoing sets forth the SCOLR, Inc. 2004 Equity Incentive Plan as duly adopted
by the Board on April 14, 2004.
    _____________________________________________
                Secretary
  24