**Exhibit 10.2**

 

**INVESTORS FINANCIAL SERVICES CORP.**

 

**2005 EQUITY INCENTIVE PLAN**

 

1.             **Purpose**

 

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

 

2.             **Definitions**

 

As used in this Plan, the following terms shall have the followingmeanings:

 

2.1.  *Accelerate*, *Accelerated*,and *Acceleration*, means:(a) when used with respect to an Option or Stock Appreciation Right, thatas of the time of reference the Option or Stock Appreciation Right will becomeexercisable with respect to some or all of the shares of Stock for which it wasnot then otherwise exercisable by its terms; (b) when used with respect toRestricted Stock or Restricted Stock Units, that the Risk of Forfeitureotherwise applicable to the Stock or Units shall expire with respect to some orall of the shares of Restricted Stock or Units then still otherwise subject tothe Risk of Forfeiture; and (c) when used with respect to PerformanceUnits, that the applicable Performance Goals shall be deemed to have been metas to some or all of the Units.

 

2.2.  *Acquisition* means a merger or consolidation of the Companyinto another person (*i.e.*, whichmerger or consolidation the Company does not survive) or the sale, transfer, orother disposition of all or substantially all of the Company’s assets to one ormore other persons in a single transaction or series of related transactions.

 

2.3.  *Affiliate* means any corporation, partnership, limitedliability company, business trust, or other entity controlling, controlled byor under common control with the Company.

 

2.4.  *Award* means any grant or sale pursuant to the Plan ofOptions, Stock Appreciation Rights, Performance Units, Restricted Stock,Restricted Stock Units, or Stock Grants.

 

2.5.  *Award Agreement* means an agreement between the Company andthe recipient of an Award, setting forth the terms and conditions of the Award.

 

2.6.  *Board* means the Company’s Board of Directors.

 

2.7.  Change in Control means theoccurrence of any of the following after the date of the approval of the Planby the Board:

 

(a)       anAcquisition, unless securities possessing more than 50% of the total combinedvoting power of the survivor’s or acquiror’s outstanding securities (or thesecurities of any parent thereof) are held by a person or persons who heldsecurities possessing more than 50% of the total combined voting power of theCompany’s outstanding securities immediately prior to that transaction, or

 

(b)       anyperson or group of persons (within the meaning of Section 13(d)(3) of theSecurities Exchange Act of 1934, as amended and in effect from time to time)directly or indirectly acquires, including but not limited to by means of amerger or consolidation, beneficial ownership (determined pursuant toSecurities and Exchange Commission Rule 13d-3 promulgated under the

 

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said Exchange Act) of securities possessingmore than 20% of the total combined voting power of the Company’s outstandingsecurities pursuant to a tender or exchange offer made directly to the Company’sstockholders that the Board does not recommend such stockholders accept, otherthan (i) the Company or an Affiliate, (ii) an employee benefit planof the Company or any of its Affiliates, (iii) a trustee or otherfiduciary holding securities under an employee benefit plan of the Company orany of its Affiliates, or (iv) an underwriter temporarily holdingsecurities pursuant to an offering of such securities, or

 

(c)       overa period of 36 consecutive months or less, there is a change in the compositionof the Board such that a majority of the Board members (rounded up to the nextwhole number, if a fraction) ceases, by reason of one or more proxy contestsfor the election of Board members, to be composed of individuals who either(i) have been Board members continuously since the beginning of thatperiod, or (ii) have been elected or nominated for election as Board membersduring such period by at least a majority of the Board members described in thepreceding clause (i) who were still in office at the time that election ornomination was approved by the Board; or

 

(d)       amajority of the Board votes in favor of a decision that a Change in Control hasoccurred.

 

2.8.  *Code* means the Internal Revenue Code of 1986, as amendedfrom time to time, or any successor statute thereto, and any regulations issuedfrom time to time thereunder.

 

2.9.  *Committee* means the Compensation Committee of the Board,which in general is responsible for the administration of the Plan, as providedin Section 5 of the Plan. For any period during which no such committee isin existence “Committee” shall mean the Board and all authority andresponsibility assigned to the Committee under the Plan shall be exercised, ifat all, by the Board.

 

2.10.  *Company* means Investors Financial Services Corp., acorporation organized under the laws of the State of Delaware.

 

2.11.  Covered Employee means anemployee who is a “covered employee” within the meaning of Section 162(m)of the Code.

 

2.12.  *Grant Date* means the date as of which an Option is granted,as determined under Section 7.1(a).

 

2.13.  *Incentive Option* means an Option which by its terms is to betreated as an “incentive stock option” within the meaning of Section 422of the Code.

 

2.14.  *Market Value* means the value of a share of Stock on aparticular date determined by such methods or procedures as may be establishedby the Committee. Unless otherwise determined by the Committee, the MarketValue of Stock as of any date is the closing price for the Stock as reported onthe NASDAQ Stock market (or on any national securities exchange on which theStock is then listed) for that date or, if no closing price is reported forthat date, the closing price on the next preceding date for which a closingprice was reported. For purposes of Awards effective as of the effective dateof the Company’s initial public offering, Market Value of Stock shall be theprice at which the Company’s Stock is offered to the public in its initialpublic offering.

 

2.15.  *Non-Employee Director* means a director that is not anemployee of the Company.

 

2.16.  *Nonstatutory Option* means any Option that is not anIncentive Option.

 

2.17.  *Option* means an option to purchase shares of Stock.

 

2.18.  *Optionee* means a Participant to whom an Option shall havebeen granted under the Plan.

 

2.19.  *Participant* means any holder of an outstanding Award underthe Plan.

 

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2.20.  *Performance Criteria* means the criteria that the Committeeselects for purposes of establishing the Performance Goal or Performance Goalsfor a Participant for a Performance Period. The Performance Criteria used toestablish Performance Goals are limited to: pre- or after-tax net earnings,sales growth, operating earnings, operating cash flow, return on net assets,return on stockholders’ equity, return on assets, return on capital, Stockprice growth, stockholder returns, gross or net profit margin, earnings pershare, price per share of Stock, and market share, any of which may be measuredeither in absolute terms or as compared to any incremental increase or ascompared to results of a peer group. The Committee will, but within the time prescribedby Section 162(m) of the Code in the case of Qualified Performance-BasedAwards, objectively define the manner of calculating the Performance Criteriait selects to use for such Performance Period for such Participant.

 

2.21.  *Performance Goals* means, for a Performance Period, thewritten goals established by the Committee for the Performance Period basedupon the Performance Criteria. Depending on the Performance Criteria used toestablish such Performance Goals, the Performance Goals may be expressed interms of overall Company performance or the performance of a division, businessunit, subsidiary, or an individual.

 

2.22.  *Performance Period* means the one or more periods of time,which may be of varying and overlapping durations, selected by the Committee,over which the attainment of one or more Performance Goals will be measured forpurposes of determining a Participant’s right to, and the payment of, aPerformance Unit.

 

2.23.  *Performance Unit* means a right granted to a Participantunder Section 7.5, to receive cash, Stock or other Awards, the payment ofwhich is contingent on achieving Performance Goals established by theCommittee.

 

2.24.  *Plan* means this 2005 Equity Incentive Plan of the Company,as amended from time to time, and including any attachments or addenda hereto.

 

2.25.  *Qualified Performance-Based Awards* means Awards intended toqualify as “performance-based compensation” under Section 162(m) of theCode.

 

2.26.  *Restricted Stock* means a grant or sale of shares of Stock toa Participant subject to a Risk of Forfeiture.

 

2.27.  *Restriction Period* means the period of time, established bythe Committee in connection with an Award of Restricted Stock, during which theshares of Restricted Stock are subject to a Risk of Forfeiture described in theapplicable Award Agreement.

 

2.28.  *Risk of Forfeiture* means a limitation on the right of theParticipant to retain Restricted Stock or Restricted Stock Units, including aright in the Company to reacquire shares of Restricted Stock at less than theirthen Market Value, arising because of the occurrence or non-occurrence ofspecified events or conditions.

 

2.29.  *Restricted Stock Units* means rights to receive shares ofStock at the close of a Restriction Period, subject to a Risk of Forfeiture.

 

2.30.  *Stock* means common stock, par value $.01 per share, of theCompany, and such other securities as may be substituted for Stock pursuant toSection 8.

 

2.31.  *Stock Appreciation Right* means a right to receive any excessin the Market Value of shares of Stock (except as otherwise provided inSection 7.2(c)) over a specified exercise price.

 

2.32.  *Stock Grant* means the grant of shares of Stock not subjectto restrictions or other forfeiture conditions.

 

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2.33  *Ten Percent Owner* means a person who owns, or is deemedwithin the meaning of Section 422(b)(6) of the Code to own, stockpossessing more than 10% of the total combined voting power of all classes ofstock of the Company (or any parent or subsidiary corporations of the Company,as defined in Sections 424(e) and (f), respectively, of the Code). Whether aperson is a Ten Percent Owner shall be determined with respect to an Optionbased on the facts existing immediately prior to the Grant Date of the Option.

 

3.             **Term of the Plan**

 

Unless the Plan shall have been earlier terminated by the Board, Awardsmay be granted under this Plan at any time in the period commencing on the dateof approval of the Plan by the Board and ending immediately prior to the tenthanniversary of the earlier of the adoption of the Plan by the Board or approvalof the Plan by the Company’s stockholders. Awards granted pursuant to the Planwithin that period shall not expire solely by reason of the termination of thePlan. Awards of Incentive Options granted prior to stockholder approval of thePlan are expressly conditioned upon such approval, but in the event of thefailure of the stockholders to approve the Plan shall thereafter and for allpurposes be deemed to constitute Nonstatutory Options.

 

4.             **Stock Subject to the Plan**

 

At no time shall the number of shares of Stock issued pursuant to orsubject to outstanding Awards granted under the Plan exceed the excess of(i) 18,080,000 shares of stock over (ii) the number of shares ofStock issued pursuant to or subject to outstanding awards granted under theCompany’s Amended and Restated 1995 Stock Plan and 1995 Non-Employee DirectorStock Option Plan; *subject, however*,to the provisions of Section 8 of the Plan. At no time shall the number ofshares of Stock issued pursuant to or subject to the outstanding IncentiveOptions granted under the Plan exceed 5,489,245 shares of Stock; *subject, however,* to the provisions ofSection 8 of the Plan. For purposes of applying the foregoing limitation,(a) if any Option or Stock Appreciation Right expires, terminates, or iscancelled for any reason without having been exercised in full, or if any otherAward is forfeited by the recipient, the shares not purchased by the Optioneeor which are forfeited by the recipient shall again be available for Awards tobe granted under the Plan and (b) if any Option is exercised by deliveringpreviously owned shares in payment of the exercise price therefore, only thenet number of shares, that is, the number of shares issued minus the numberreceived by the Company in payment of the exercise price, shall be consideredto have been issued pursuant to an Award granted under the Plan. In addition,settlement of any Award shall not count against the foregoing limitationsexcept to the extent settled in the form of Stock. Shares of Stock issuedpursuant to the Plan may be either authorized but unissued shares or sharesheld by the Company in its treasury.

 

5.             **Administration**

 

The Plan shall be administered by the Committee; *provided, however*, that at any time and onany one or more occasions the Board may itself exercise any of the powers andresponsibilities assigned the Committee under the Plan and when so acting shallhave the benefit of all of the provisions of the Plan pertaining to theCommittee’s exercise of its authorities hereunder. Subject to the provisions ofthe Plan, the Committee shall have complete authority, in its discretion, tomake or to select the manner of making all determinations with respect to eachAward to be granted by the Company under the Plan including the employee,consultant or director to receive the Award and the form of Award. In makingsuch determinations, the Committee may take into account the nature of theservices rendered by the respective employees, consultants, and directors,their present and potential contributions to the success of the Company and itsAffiliates, and such other factors as the Committee in its discretion shalldeem relevant. Subject to the provisions of the Plan, the Committee shall alsohave complete authority to interpret the Plan, to prescribe, amend and rescindrules and regulations relating to it, to determine the 

 

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terms and provisions of the respective Award Agreements (which need notbe identical), and to make all other determinations necessary or advisable forthe administration of the Plan. The Committee’s determinations made in goodfaith on matters referred to in the Plan shall be final, binding and conclusiveon all persons having or claiming any interest under the Plan or an Award madepursuant hereto.

 

6.             **Authorization of Grants**

 

6.1.  *Eligibility.* The Committee may grant from time to time andat any time prior to the termination of the Plan one or more Awards, eitheralone or in combination with any other Awards, to any employee of or consultantto one or more of the Company and its Affiliates or to non-employee members ofthe Board or of any board of directors (or similar governing authority) of anyAffiliate. However, only employees of the Company, and of any parent orsubsidiary corporations of the Company, as defined in Sections 424(e) and (f),respectively, of the Code, shall be eligible for the grant of an IncentiveOption. Further, in no event shall the number of shares of Stock covered byOptions or other Awards granted to any one person in any one calendar yearexceed 25% of the aggregate number of shares of Stock subject to the Plan.

 

6.2.  *General Terms of Awards*. Each grant of an Award shall besubject to all applicable terms and conditions of the Plan (including but notlimited to any specific terms and conditions applicable to that type of Awardset out in the following Section), and such other terms and conditions, notinconsistent with the terms of the Plan, as the Committee may prescribe. Noprospective Participant shall have any rights with respect to an Award, unlessand until such Participant has executed an agreement evidencing the Award,delivered a fully executed copy thereof to the Company, and otherwise compliedwith the applicable terms and conditions of such Award.

 

6.3.  *Effect of Termination of Employment, Etc*. Unless theCommittee shall provide otherwise with respect to any Award, if the Participant’semployment or other association with the Company and its Affiliates ends forany reason, including because of the Participant’s employer ceasing to be anAffiliate, (a) any outstanding Option or SAR of the Participant shallcease to be exercisable in any respect not later than 90 days followingthat event and, for the period it remains exercisable following that event,shall be exercisable only to the extent exercisable at the date of that event,and (b) any other outstanding Award of the Participant shall be forfeitedor otherwise subject to return to or repurchase by the Company on the termsspecified in the applicable Award Agreement. Military or sick leave or otherbona fide leave shall not be deemed a termination of employment or otherassociation, *provided* that itdoes not exceed the longer of ninety (90) days or the period during whichthe absent Participant’s reemployment rights, if any, are guaranteed by statuteor by contract.

 

6.4.  *Non-Transferability of Awards.* Except as otherwise providedin this Section 6.4, Awards shall not be transferable, and no Award orinterest therein may be sold, transferred, pledged, assigned, or otherwisealienated or hypothecated, other than by will or by the laws of descent anddistribution. All of a Participant’s rights in any Award may be exercisedduring the life of the Participant only by the Participant or the Participant’slegal representative. However, the Committee may, at or after the grant of anAward of a Nonstatutory Option, or shares of Restricted Stock, provide thatsuch Award may be transferred by the recipient to a family member; *provided, however*, that any such transferis without payment of any consideration whatsoever and that no transfer shallbe valid unless first approved by the Committee, acting in its sole discretion.For this purpose, “family member” means any child, stepchild, grandchild,parent, stepparent, spouse, former spouse, sibling, niece, nephew,mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, orsister-in-law, including adoptive relationships, any person sharing theemployee’s household (other than a tenant or employee), a trust in which theforegoing persons have more than fifty (50) percent of the beneficialinterests, a foundation in which the foregoing persons (or the Participant)control the management of assets, and 

 

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any other entity in which these persons (or the Participant) own morethan fifty (50) percent of the voting interests.

 

7.             **Specific Terms of Awards**

 

7.1.  *Options*.

 

(a)*       Dateof Grant.* The granting of an Option shall take place at the time specifiedin the Award Agreement. Only if expressly so provided in the applicable AwardAgreement shall the Grant Date be the date on which the Award Agreement shallhave been duly executed and delivered by the Company and the Optionee.

 

(b)*       ExercisePrice.* The price at which shares of Stock may be acquired under eachIncentive Option shall be not less than 100% of the Market Value of Stock onthe Grant Date, or not less than 110% of the Market Value of Stock on the GrantDate if the Optionee is a Ten Percent Owner. The price at which shares may beacquired under each Nonstatutory Option shall not be so limited solely byreason of this Section.

 

(c)*       OptionPeriod.* No Incentive Option may be exercised on or after the tenthanniversary of the Grant Date, or on or after the fifth anniversary of theGrant Date if the Optionee is a Ten Percent Owner. The Option period under eachNonstatutory Option shall not be so limited solely by reason of this Section.

 

(d)*       Exercisability.*An Option may be immediately exercisable or become exercisable in suchinstallments, cumulative or non-cumulative, as the Committee may determine. Inthe case of an Option not otherwise immediately exercisable in full, theCommittee may Accelerate such Option in whole or in part at any time; *provided, however,* that in the case of anIncentive Option, any such Acceleration of the Option would not cause theOption to fail to comply with the provisions of Section 422 of the Code orthe Optionee consents to the Acceleration.

 

(e)*       Methodof Exercise.* An Option may be exercised by the Optionee giving writtennotice, in the manner provided in Section 16, specifying the number ofshares with respect to which the Option is then being exercised. Payment of thepurchase price may be made by one or more of the following methods to theextent provided in the Award Agreement:

 

1.       In cash, by certified orbank check or other instrument acceptable to the Administrator;

 

2.       Through the delivery (orattestation to the ownership) of shares of Stock that have been purchased bythe Optionee on the open market or that have been beneficially owned by theOptionee for at least six months and are not then subject to restrictions underany Company plan. Such surrendered shares shall be valued at Market Value onthe exercise date; or

 

3.       By the Optionee deliveringto the Company a properly executed exercise notice together with irrevocableinstructions to a broker to promptly deliver to the Company cash or a checkpayable and acceptable to the Company for the purchase price; provided that inthe event the Optionee chooses to pay the purchase price as so provided, theOptionee and the broker shall comply with such procedures and enter into suchagreements of indemnity and other agreements as the Committee shall prescribeas a condition of such payment procedure.

 

Within thirty (30) days thereafter but subject to the remainingprovisions of the Plan, the Company shall deliver or cause to be delivered tothe Optionee or his agent a certificate or certificates for the number ofshares then being purchased. Such shares shall be fully paid and nonassessable.In the event an Optionee chooses to pay the purchase price by previously-ownedshares of Stock through the

 

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attestation method, the number of shares of Stock transferred to theOptionee upon the exercise of the Stock Option shall be net of the number ofshares attested to.

 

(f)*        Limiton Incentive Option Characterization.* An Incentive Option shall beconsidered to be an Incentive Option only to the extent that the number ofshares of Stock for which the Option first becomes exercisable in a calendaryear do not have an aggregate Market Value (as of the date of the grant of theOption) in excess of the “current limit”. The current limit for any Optioneefor any calendar year shall be $100,000 *minus*the aggregate Market Value at the date of grant of the number of shares ofStock available for purchase for the first time in the same year under eachother Incentive Option previously granted to the Optionee under the Plan, andunder each other incentive stock option previously granted to the Optioneeunder any other incentive stock option plan of the Company and its Affiliates,after December 31, 1986. Any shares of Stock which would cause theforegoing limit to be violated shall be deemed to have been granted under aseparate Nonstatutory Option, otherwise identical in its terms to those of theIncentive Option.

 

(g)*       Notificationof Disposition.* Each person exercising any Incentive Option granted underthe Plan shall be deemed to have covenanted with the Company to report to theCompany any disposition of such shares prior to the expiration of the holdingperiods specified by Section 422(a)(1) of the Code and, if and to theextent that the realization of income in such a disposition imposes upon theCompany federal, state, local or other withholding tax requirements, or anysuch withholding is required to secure for the Company an otherwise availabletax deduction, to remit to the Company an amount in cash sufficient to satisfythose requirements.

 

7.2.  *Stock Appreciation Rights.*

 

(a)*       Tandemor Stand-Alone.* Stock Appreciation Rights may be granted in tandem with anOption (at or, in the case of a Nonstatutory Option, after, the award of theOption), or alone and unrelated to an Option. Stock Appreciation Rights intandem with an Option shall terminate to the extent that the related Option isexercised, and the related Option shall terminate to the extent that the tandemStock Appreciation Rights are exercised.

 

(b)*       ExercisePrice.* Stock Appreciation Rights shall have an exercise price of not lessthan fifty percent (50%) of the Market Value of the Stock on the date of award,or in the case of Stock Appreciation Rights in tandem with Options, theexercise price of the related Option.

 

(c)*       OtherTerms.* Except as the Committee may deem inappropriate or inapplicable inthe circumstances, Stock Appreciation Rights shall be subject to terms andconditions substantially similar to those applicable to a Nonstatutory Option.In addition, an SAR related to an Option which can only be exercised duringlimited periods following a Change in Control may entitle the Participant to receivean amount based upon the highest price paid or offered for Stock in anytransaction relating to the Change in Control or paid during the thirty(30) day period immediately preceding the occurrence of the change incontrol in any transaction reported in the stock market in which the Stock isnormally traded.

 

7.3.  *Restricted Stock.*

 

(a)*       PurchasePrice.* Shares of Restricted Stock shall be issued under the Plan for suchconsideration, in cash, other property or services, or any combination thereof,as is determined by the Committee.

 

(b)*       Issuanceof Certificates.* Each Participant receiving a Restricted Stock Award,subject to subsection (c) below, shall be issued a stock certificate inrespect of such shares of Restricted Stock. Such certificate shall beregistered in the name of such Participant, and, if applicable, shall

 

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bear an appropriate legend referring to the terms, conditions, andrestrictions applicable to such Award substantially in the following form:

 

The transferability of this certificate andthe shares represented by this certificate are subject to the terms andconditions of Investors Financial Services Corp. 2005 Equity Incentive Plan andan Award Agreement entered into by the registered owner and Investors FinancialServices Corp. Copies of such Plan and Agreement are on file in the offices ofInvestors Financial Services Corp.

 

(c)*       Escrowof Shares.* The Committee may require that the stock certificates evidencingshares of Restricted Stock be held in custody by a designated escrow agent(which may but need not be the Company) until the restrictions thereon shallhave lapsed, and that the Participant deliver a stock power, endorsed in blank,relating to the Stock covered by such Award.

 

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

 

(e)*       RightsPending Lapse of Risk of Forfeiture or Forfeiture of Award.* Except asotherwise provided in the Plan or the applicable Award Agreement, at all timesprior to lapse of any Risk of Forfeiture applicable to, or forfeiture of, anAward of Restricted Stock, the Participant shall have all of the rights of astockholder of the Company, including the right to vote, and the right toreceive any dividends with respect to, the shares of Restricted Stock. TheCommittee, as determined at the time of Award, may permit or require thepayment of cash dividends to be deferred and, if the Committee so determines,reinvested in additional Restricted Stock to the extent shares are availableunder Section 4.

 

(f)*        Lapseof Restrictions.* If and when the Restriction Period expires without a priorforfeiture of the Restricted Stock, the certificates for such shares shall bedelivered to the Participant promptly if not theretofore so delivered.

 

7.4.  *Restricted Stock Units.*

 

(a)*       Character.*Each Restricted Stock Unit shall entitle the recipient to a share of Stock at aclose of such Restriction Period as the Committee may establish and subject toa Risk of Forfeiture arising on the basis of such conditions relating to theperformance of services, Company or Affiliate performance or otherwise as theCommittee may determine and provide for in the applicable Award Agreement. Anysuch Risk of Forfeiture may be waived or terminated, or the Restriction Periodshortened, at any time by the Committee on such basis as it deems appropriate.

 

(b)*       Formand Timing of Payment.* Payment of earned Restricted Stock Units shall bemade in a single lump sum following the close of the applicable RestrictionPeriod. At the discretion of the Committee, Participants may be entitled toreceive payments equivalent to any dividends declared with respect to Stockreferenced in grants of Restricted Stock Units but only following the close ofthe applicable Restriction Period and then only if the underlying Stock shallhave been earned. Unless the Committee shall provide otherwise, any suchdividend equivalents shall be paid, if at all, without interest or otherearnings.

 

7.5.  *Performance Units.*

 

(a)*       Character.*Each Performance Unit shall entitle the recipient to the value of a specifiednumber of shares of Stock, over the initial value for such number of shares, ifany, established by the Committee at the time of grant, at the close of aspecified Performance Period to the extent specified Performance Goals shallhave been achieved.

 

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(b)*       Earningof Performance Units.* The Committee shall set Performance Goals in itsdiscretion which, depending on the extent to which they are met within theapplicable Performance Period, will determine the number and value ofPerformance Units that will be paid out to the Participant. After theapplicable Performance Period has ended, the holder of Performance Units shallbe entitled to receive payout on the number and value of Performance Unitsearned by the Participant over the Performance Period, to be determined as afunction of the extent to which the corresponding Performance Goals have beenachieved.

 

(c)*       Formand Timing of Payment.* Payment of earned Performance Units shall be made ina single lump sum following the close of the applicable Performance Period. Atthe discretion of the Committee, Participants may be entitled to receive anydividends declared with respect to Stock which have been earned in connection withgrants of Performance Units which have been earned, but not yet distributed toParticipants. The Committee may permit or, if it so provides at grant require,a Participant to defer such Participant’s receipt of the payment of cash or thedelivery of Stock that would otherwise be due to such Participant by virtue ofthe satisfaction of any requirements or goals with respect to PerformanceUnits. If any such deferral election is required or permitted, the Committeeshall establish rules and procedures for such payment deferrals.

 

7.6.  *Stock Grants.* Stock Grants shall be awarded solely inrecognition of significant contributions to the success of the Company or itsAffiliates, in lieu of compensation otherwise already due and in such otherlimited circumstances as the Committee deems appropriate. Stock Grants shall bemade without forfeiture conditions of any kind.

 

7.7.  *Qualified Performance-Based Awards.*

 

(a)*       Purpose.*The purpose of this Section 7.7 is to provide the Committee the ability toqualify Awards as “performance-based compensation” under Section 162(m) ofthe Code. If the Committee, in its discretion, decides to grant an Award as aQualified Performance-Based Award, the provisions of this Section 7.7 willcontrol over any contrary provision contained in the Plan. In the course ofgranting any Award, the Committee may specifically designate the Award asintended to qualify as a Qualified Performance-Based Award. However, no Awardshall be considered to have failed to qualify as a Qualified Performance-BasedAward solely because the Award is not expressly designated as a QualifiedPerformance-Based Award, if the Award otherwise satisfies the provisions ofthis Section 7.7 and the requirements of Section 162(m) of the Codeand the regulations thereunder applicable to “performance-based compensation.”

 

(b)*       Authority.*All grants of Awards intended to qualify as Qualified Performance-Based Awardsand determination of terms applicable thereto shall be made by the Committeeor, if not all of the members thereof qualify as “outside directors” within themeaning of applicable IRS regulations under Section 162 of the Code, asubcommittee of the Committee consisting of such of the members of theCommittee as do so qualify. Any action by such a subcommittee shall beconsidered the action of the Committee for purposes of the Plan.

 

(b)*       Applicability.*This Section 7.7 will apply only to those Covered Employees, or to thosepersons who the Committee determines are reasonably likely to become CoveredEmployees in the period covered by an Award, selected by the Committee toreceive Qualified Performance-Based Awards. The Committee may, in itsdiscretion, grant Awards to Covered Employees that do not satisfy therequirements of this Section 7.7.

 

(c)*       Discretionof Committee with Respect to Qualified Performance-Based Awards.* Optionsmay be granted as Qualified Performance-Based Awards in accordance withSection 7.1, except that the exercise price of any Option intended toqualify as a Qualified Performance-Based Award shall in no event be less thatthe Market Value of the Stock on the date of grant. With regard to other Awardsintended to qualify as Qualified Performance-Based Awards, such as RestrictedStock, 

 

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Restricted Stock Units, or Performance Units, the Committee will havefull discretion to select the length of any applicable Restriction Period orPerformance Period, the kind and/or level of the applicable Performance Goal,and whether the Performance Goal is to apply to the Company, a Subsidiary orany division or business unit or to the individual. Any Performance Goal orGoals applicable to Qualified Performance-Based Awards shall be objective,shall be established not later than ninety (90) days after the beginningof any applicable Performance Period (or at such other date as may be requiredor permitted for “performance-based compensation” under Section 162(m) ofthe Code) and shall otherwise meet the requirements of Section 162(m) ofthe Code, including the requirement that the outcome of the Performance Goal orGoals be substantially uncertain (as defined in the regulations underSection 162(m) of the Code) at the time established.

 

(d)*       Paymentof Qualified Performance-Based Awards.* A Participant will be eligible toreceive payment under a Qualified Performance-Based Award which is subject toachievement of a Performance Goal or Goals only if the applicable PerformanceGoal or Goals period are achieved within the applicable Performance Period, asdetermined by the Committee. In determining the actual size of an individualQualified Performance-Based Award, the Committee may reduce or eliminate theamount of the Qualified Performance-Based Award earned for the PerformancePeriod, if in its sole and absolute discretion, such reduction or eliminationis appropriate.

 

(e)*       MaximumAward Payable.* The maximum Qualified Performance-Based Award payment to anyone Participant under the Plan for a Performance Period is 5,489,245 shares ofStock (subject to the provisions of Section 8 of the Plan) or, if theQualified Performance-Based Award is paid in cash, that number of sharesmultiplied by the Market Value of the Stock as of the date the QualifiedPerformance-Based Award is granted.

 

(f)*        Limitationon Adjustments for Certain Events.* No adjustment of any QualifiedPerformance-Based Award pursuant to Section 8 shall be made except on suchbasis, if any, as will not cause such Award to provide other than “performance-basedcompensation” within the meaning of Section 162(m) of the Code.

 

7.8.  *Awards to Participants Outside the United States.* TheCommittee may modify the terms of any Award under the Plan granted to aParticipant who is, at the time of grant or during the term of the Award,resident or primarily employed outside of the United States in any mannerdeemed by the Committee to be necessary or appropriate in order that the Awardshall conform to laws, regulations, and customs of the country in which theParticipant is then resident or primarily employed, or so that the value andother benefits of the Award to the Participant, as affected by foreign tax lawsand other restrictions applicable as a result of the Participant’s residence oremployment abroad, shall be comparable to the value of such an Award to aParticipant who is resident or primarily employed in the United States. TheCommittee may establish supplements to, or amendments, restatements, oralternative versions of the Plan for the purpose of granting and administratingany such modified Award. No such modification, supplement, amendment,restatement or alternative version may increase the share limit ofSection 4.

 

8.             **Adjustment Provisions**

 

8.1.  *Adjustment for Corporate Actions.* All of the share numbersset forth in the Plan reflect the capital structure of the Company as ofFebruary 18, 2005. Subject to Section 8.2, if subsequent to that datethe outstanding shares of Stock (or any other securities covered by the Plan byreason of the prior application of this Section) are increased, decreased, orexchanged for a different number or kind of shares or other securities, or ifadditional shares or new or different shares or other securities aredistributed with respect to shares of Stock, through merger, consolidation,sale of all or substantially all the property of the Company, reorganization,recapitalization, reclassification, stock dividend, stock

 

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split, reverse stock split, or other similar distribution with respectto such shares of Stock, an appropriate and proportionate adjustment will bemade in (i) the maximum numbers and kinds of shares provided inSection 4, (ii) the numbers and kinds of shares or other securitiessubject to the then outstanding Awards, (iii) the exercise price for eachshare or other unit of any other securities subject to then outstanding Optionsand Stock Appreciation Rights (without change in the aggregate purchase priceas to which such Options or Rights remain exercisable), and (iv) therepurchase price of each share of Restricted Stock then subject to a Risk ofForfeiture in the form of a Company repurchase right.

 

8.2.  *Change in Control.* The Committee may, in the AwardAgreement, provide for the effect of a Change in Control on an Award. Suchprovisions may include but are not limited to any one or more of the followingwith respect to any or all Awards: (i) the specific consequences of aChange in Control on the Awards; (ii) the acceleration or extension oftime periods for purposes of exercising, vesting in, or realizing gain from,the Awards; (iii) a reservation of the Committee’s right to determine inits discretion at any time that there shall be full acceleration or noacceleration of benefits under the Awards; (iv) that only certain orlimited benefits under the Awards shall be accelerated; (v) that theAwards shall be accelerated for a limited time only; or (vi) thatacceleration of the Awards shall be subject to additional conditions precedent(such as a termination of employment following a Change in Control).

 

In addition to any action required or authorized by the terms of anAward, the Committee may take any other action it deems appropriate to ensurethe equitable treatment of Participants in the event of or in anticipation of aChange in Control, including but not limited to any one or more of thefollowing with respect to any or all Awards: (i) the waiver of conditionson the Awards that were imposed for the benefit of the Corporation;(ii) provision for the cash settlement of the Awards for their equivalentcash value, as determined by the Committee, as of the date of the Change inControl; (iii) provision for Awards to be assumed or replaced bycomparable Awards referencing shares of the capital stock of the successor oracquiring entity or parent thereof; or (iv) such other modification oradjustment to the Awards as the Committee deems appropriate to maintain andprotect the rights and interests of Participants upon or following the Changein Control. The Committee also may accord any Participant a right to refuse anyacceleration of exercisability, vesting or benefits, whether pursuant to theAward Agreement or otherwise, in such circumstances as the Committee mayapprove.

 

Notwithstanding the foregoing provisions of this Section 7(b) orany provision in an Award Agreement to the contrary, if any Award to anyInsider is accelerated to a date that is less than six months after the Date ofGrant, the Committee may prohibit a sale of the underlying Stock (other than asale by operation or law in exchange for or through conversion into othersecurities), and the Corporation may impose legend and other restrictions onthe Stock to enforce this prohibition.

 

8.3.  *Dissolution or Liquidation.* Upon dissolution or liquidationof the Company, other than as part of an Acquisition or similar transaction,each outstanding Option and SAR shall terminate, but the Optionee or SAR holdershall have the right, immediately prior to the dissolution or liquidation, toexercise the Option or SAR to the extent exercisable on the date of dissolutionor liquidation.

 

8.4.  *Adjustment of Awards Upon the Occurrence of Certain Unusual orNonrecurring Events.* In the event of any corporate action notspecifically covered by the preceding Sections, including but not limited to anextraordinary cash distribution on Stock, a corporate separation or otherreorganization or liquidation, the Committee may make such adjustment ofoutstanding Awards and their terms, if any, as it, in its sole discretion, maydeem equitable and appropriate in the circumstances. The Committee may makeadjustments in the terms and conditions of, and the criteria included in,Awards in recognition of unusual or nonrecurring events (including, withoutlimitation, the events described in this Section) affecting the Company or thefinancial statements of the Company or of changes in applicable laws,regulations, or accounting principles, whenever the Committee determines thatsuch

 

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adjustments are appropriate in order to prevent dilution or enlargementof the benefits or potential benefits intended to be made available under thePlan.

 

8.5.  *Related Matters.* Any adjustment in Awards made pursuant tothis Section 8 shall be determined and made, if at all, by the Committeeand shall include any correlative modification of terms, including of Optionexercise prices, rates of vesting or exercisability, Risks of Forfeiture,applicable repurchase prices for Restricted Stock, and Performance Goals andother financial objectives which the Committee may deem necessary orappropriate so as to ensure the rights of the Participants in their respectiveAwards are not substantially diminished nor enlarged as a result of theadjustment and corporate action other than as expressly contemplated in thisSection 8. No fraction of a share shall be purchasable or deliverable uponexercise, but in the event any adjustment hereunder of the number of sharescovered by an Award shall cause such number to include a fraction of a share,such number of shares shall be adjusted to the nearest smaller whole number ofshares. No adjustment of an Option exercise price per share pursuant to thisSection 8 shall result in an exercise price which is less than the parvalue of the Stock.

 

9.             **Settlement of Awards**

 

9.1.  *In General.* Options and Restricted Stock shall be settled inaccordance with their terms. All other Awards may be settled in cash, Stock, orother Awards, or a combination thereof, as determined by the Committee at orafter grant and subject to any contrary Award Agreement. The Committee may notrequire settlement of any Award in Stock pursuant to the immediately precedingsentence to the extent issuance of such Stock would be prohibited orunreasonably delayed by reason of any other provision of the Plan.

 

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

 

(a)       theshares are at the time of the issue of such shares effectively registered underthe Securities Act of 1933; or

 

(b)       theCompany shall have determined, on such basis as it deems appropriate (includingan opinion of counsel in form and substance satisfactory to the Company) thatthe sale, transfer, assignment, pledge, encumbrance or other disposition ofsuch shares or such beneficial interest, as the case may be, does not requireregistration under the Securities Act of 1933, as amended or any applicableState securities laws.

 

The Company shall make all reasonable efforts to bring about theoccurrence of said events.

 

9.3.  *Corporate Restrictions on Rights in Stock.* Any Stock to beissued pursuant to Awards granted under the Plan shall be subject to allrestrictions upon the transfer thereof which may be now or hereafter imposed bythe charter, certificate or articles, and by-laws, of the Company.

 

9.4.  *Registration.* If the Company shall deem it necessary ordesirable to register under the Securities Act of 1933, as amended or otherapplicable statutes any shares of Stock issued or to be issued pursuant toAwards granted under the Plan, or to qualify any such shares of Stock forexemption from the Securities Act of 1933, as amended or other applicablestatutes, then the Company shall take such action at its own expense. TheCompany may require from each recipient of an Award, or each

 

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holder of shares of Stock acquired pursuant to the Plan, suchinformation in writing for use in any registration statement, prospectus,preliminary prospectus or offering circular as is reasonably necessary for thatpurpose and may require reasonable indemnity to the Company and its officersand directors from that holder against all losses, claims, damage andliabilities arising from use of the information so furnished and caused by anyuntrue statement of any material fact therein or caused by the omission tostate a material fact required to be stated therein or necessary to make the statementstherein not misleading in the light of the circumstances under which they weremade. In addition, the Company may require of any such person that he or sheagree that, without the prior written consent of the Company or the managingunderwriter in any public offering of shares of Stock, he or she will not sell,make any short sale of, loan, grant any option for the purchase of, pledge orotherwise encumber, or otherwise dispose of, any shares of Stock during the180 day period commencing on the effective date of the registrationstatement relating to the underwritten public offering of securities. Withoutlimiting the generality of the foregoing provisions of this Section 10.4,if in connection with any underwritten public offering of securities of theCompany the managing underwriter of such offering requires that the Company’sdirectors and officers enter into a lock-up agreement containing provisionsthat are more restrictive than the provisions set forth in the precedingsentence, then (a) each holder of shares of Stock acquired pursuant to thePlan (regardless of whether such person has complied or complies with theprovisions of clause (b) below) shall be bound by, and shall be deemed tohave agreed to, the same lock-up terms as those to which the Company’sdirectors and officers are required to adhere; and (b) at the request ofthe Company or such managing underwriter, each such person shall execute anddeliver a lock-up agreement in form and substance equivalent to that which isrequired to be executed by the Company’s directors and officers.

 

9.5.  *Placement of Legends; Stop Orders; etc.* Each share of Stockto be issued pursuant to Awards granted under the Plan may bear any applicablerestriction under the Plan, the terms of the Award or applicable law. Allcertificates for shares of Stock or other securities delivered under the Planshall be subject to such stock transfer orders and other restrictions as theCommittee may deem advisable under the rules, regulations, and otherrequirements of any stock exchange upon which the Stock is then listed, and anyapplicable federal or state securities law, and the Committee may cause alegend or legends to be put on any such certificates to make appropriatereference to such restrictions.

 

9.6.  *Tax Withholding.* Whenever shares of Stock are issued or tobe issued pursuant to Awards granted under the Plan, the Company shall have theright to require the recipient to remit to the Company an amount sufficient tosatisfy federal, state, local or other withholding tax requirements if, when,and to the extent required by law (whether so required to secure for theCompany an otherwise available tax deduction or otherwise) prior to thedelivery of any certificate or certificates for such shares. The obligations ofthe Company under the Plan shall be conditional on satisfaction of all suchwithholding obligations and the Company shall, to the extent permitted by law,have the right to deduct any such taxes from any payment of any kind otherwisedue to the recipient of an Award. However, in such cases Participants mayelect, subject to the approval of the Committee, acting in its sole discretion,to satisfy an applicable withholding requirement, in whole or in part, byhaving the Company withhold shares to satisfy their tax obligations.Participants may only elect to have Shares withheld having a Market Value onthe date the tax is to be determined equal to the minimum statutory total taxwhich could be imposed on the transaction. All elections shall be irrevocable,made in writing, signed by the Participant, and shall be subject to anyrestrictions or limitations that the Committee deems appropriate.

 

10.    **Reservation of Stock**

 

The Company shall at all times during the term of the Plan and anyoutstanding Awards granted hereunder reserve or otherwise keep available suchnumber of shares of Stock as will be sufficient to

 

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satisfy the requirements of the Plan (if then in effect) and the Awardsand shall pay all fees and expenses necessarily incurred by the Company inconnection therewith.

 

11.           **Limitation of Rights in Stock; No Special ServiceRights**

 

A Participant shall not be deemed for any purpose to be a stockholderof the Company with respect to any of the shares of Stock subject to an Award,unless and until a certificate shall have been issued therefore and deliveredto the Participant or his agent. Any Stock to be issued pursuant to Awardsgranted under the Plan shall be subject to all restrictions upon the transferthereof which may be now or hereafter imposed by the Certificate ofIncorporation and the By-laws of the Company. Nothing contained in the Plan orin any Award Agreement shall confer upon any recipient of an Award any rightwith respect to the continuation of his or her employment or other associationwith the Company (or any Affiliate), or interfere in any way with the right ofthe Company (or any Affiliate), subject to the terms of any separate employmentor consulting agreement or provision of law or corporate articles or by-laws tothe contrary, at any time to terminate such employment or consulting agreementor to increase or decrease, or otherwise adjust, the other terms and conditionsof the recipient’s employment or other association with the Company and itsAffiliates.

 

12.           **Unfunded Status of Plan**

 

The Plan is intended to constitute an “unfunded” plan for incentivecompensation, and the Plan is not intended to constitute a plan subject to theprovisions of the Employee Retirement Income Security Act of 1974, as amended.With respect to any payments not yet made to a Participant by the Company,nothing contained herein shall give any such Participant any rights that aregreater than those of a general creditor of the Company. In its solediscretion, the Committee may authorize the creation of trusts or otherarrangements to meet the obligations created under the Plan to deliver Stock orpayments with respect to Options, Stock Appreciation Rights and other Awardshereunder, *provided, however*,that the existence of such trusts or other arrangements is consistent with theunfunded status of the Plan.

 

13.           **Nonexclusivity of the Plan**

 

Neither the adoption of the Plan by the Board nor the submission of thePlan to the stockholders of the Company shall be construed as creating anylimitations on the power of the Board to adopt such other incentivearrangements as it may deem desirable, including without limitation, thegranting of stock options and restricted stock other than under the Plan, andsuch arrangements may be either applicable generally or only in specific cases.

 

14.           **Termination and Amendment of the Plan**

 

The Board may at any time terminate, suspend or discontinue the Plan.The Board of Directors may amend this Plan at any time, provided that any materialamendment to the Plan will not be effective unless approved by the Corporation’sstockholders. For this purpose, a material amendment is any amendment thatwould (i) materially increase the number of shares of Stock availableunder the Plan or issuable to a Participant (other than a change in the numberof shares made pursuant to Section 8); (ii) change the types ofawards that may be granted under the Plan; (iii) expand the class ofpersons eligible to receive awards or otherwise participate in the Plan;(iv) reduce the price at which an Option is exercisable by amendment of anAward Agreement (other than as permitted in Section 8); or(v) require stockholder approval pursuant to the requirements of Nasdaq orany exchange on which the Company is then listed or applicable law. Unless theBoard otherwise expressly provides, no amendment of the Plan shall affect theterms of any Award outstanding on the date of such amendment. In any case, notermination or amendment of the Plan may, without the consent of any recipientof an Award granted hereunder, adversely affect the rights of the recipientunder such Award.

 

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The Committee may amend the terms of any Award theretofore granted,prospectively or retroactively, provided that the Award as amended isconsistent with the terms of the Plan, but no such amendment shall impair therights of the recipient of such Award without his or her consent.

 

15.           **Notices and Other Communications**

 

Any notice, demand, request or other communication hereunder to anyparty shall be deemed to be sufficient if contained in a written instrumentdelivered in person or duly sent by first class registered, certified orovernight mail, postage prepaid, or telecopied with a confirmation copy byregular, certified or overnight mail, addressed or telecopied, as the case maybe, (i) if to the recipient of an Award, at his or her residence addresslast filed with the Company and (ii) if to the Company, at its principalplace of business, addressed to the attention of its Treasurer, or to suchother address or telecopier number, as the case may be, as the addressee mayhave designated by notice to the addressor. All such notices, requests, demandsand other communications shall be deemed to have been received: (i) in thecase of personal delivery, on the date of such delivery; (ii) in the caseof mailing, when received by the addressee; and (iii) in the case offacsimile transmission, when confirmed by facsimile machine report.

 

16.           **Governing Law**

 

The Plan and all Award Agreements and actions taken thereunder shall begoverned, interpreted and enforced in accordance with the laws of the State ofDelaware, without regard to the conflict of laws principles thereof.

 

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