**Exhibit 10.1**

 

**CUBIC CORPORATION**

 

**2005 EQUITY INCENTIVE PLAN**

 

**APPROVED BY THE BOARD ON:  NOVEMBER 29, 2005**

**APPROVED BY THE STOCKHOLDERS:  [FEBRUARY 21, 2006]**

**TERMINATION DATE: NOVEMBER 29, 2015**

 

**1.****             GENERAL.**

 

**(a)****           Successor and Continuation of Prior Plan.**  This Cubic Corporation 2005 Equity Incentive Plan(the “***Plan***”) is intended as thesuccessor to and continuation of the Cubic Corporation 1998 Stock Option Plan****(the “***PriorPlan***”).  Following theEffective Date of this Plan, no additional stock awards shall be granted underthe Prior Plan.  Any shares remainingavailable for issuance pursuant to the exercise of options or settlement ofstock awards under the Prior Plan shall be added to the share reserve of thisPlan and available for issuance pursuant to Stock Awards grantedhereunder.  All outstanding stock awardsgranted under the Prior Plan shall remain subject to the terms of the PriorPlan, except that the Board may elect to extend one or more of the features ofthe Plan to stock awards granted under the Prior Plan.  Any shares subject to outstanding stockawards granted under the Prior Plan that expire or terminate for any reasonprior to exercise or settlement shall be added to the share reserve of thisPlan and become available for issuance pursuant to Stock Awards grantedhereunder.  All Stock Awards grantedsubsequent to the Effective Date of this Plan shall be subject to the terms ofthis Plan.

 

**(b)****           Eligible Stock Award Recipients.**  The persons eligible to receive Awards areEmployees, Directors and Consultants.

 

**(c)****           Available Stock Awards.**  The Plan provides for the grant of thefollowing Stock Awards: (i) Incentive Stock Options, (ii) NonstatutoryStock Options, (iii) Stock Purchase Awards, (iv) Restricted StockAwards, (v) Stock Appreciation Rights, (vi) Restricted Stock UnitAwards, and (vii) Other Stock Awards.

 

**(d)****           General Purpose.**  The Company, by means of the Plan, seeks tosecure and retain the services of the group of persons eligible to receiveAwards as set forth in Section 1(a), to provide incentives for suchpersons to exert maximum efforts for the success of the Company and anyAffiliate and to provide a means by which such eligible recipients may be givenan opportunity to benefit from increases in value of the Common Stock throughthe granting of Awards.

 

**2.****             DEFINITIONS.**

 

As used in the Plan, thefollowing definitions shall apply to the capitalized terms indicated below:

 

**(a)****           *“Affiliate”*** means, at the time of determination, any “parent”or “subsidiary” as such terms are defined in Rule 405 of the SecuritiesAct.  The Board shall have the authorityto 

 

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determine the time or times at which “parent” or “subsidiary”status is determined within the foregoing definition.

 

**(b)****           *“Award”*** means a Stock Award or a Performance Cash Award.

 

**(c)****           *“Board”*** means the Board of Directors of the Company.

 

**(d)****           *“Capitalization Adjustment”*** has the meaning ascribed tothat term in Section 11(a).

 

**(i)****            *“Cause”***meanswith respect to a Participant, the occurrence of any of the following:  (i) such Participant’s conviction (whichhas become final) or entry of a plea of guilty or *nolocontendere* regarding an act that would be deemed a felony underCalifornia or Federal criminal statutes (or any comparable criminal laws of anyjurisdiction in which the Participant is permanently employed by the Company oran Affiliate) and that is injurious to the Company; (ii) the Participant’sgross negligence or breach of fiduciary duty to the Company involving personalprofit, personal dishonesty or recklessness, (iii) the Participant’smaterial breach of any agreement with the Company, including a materialviolation of Company policies and procedures or of any statutory duty owed tothe Company; (iv)  such Participant’s unauthorized use or disclosureof the Company’s confidential information or trade secrets; or (v) suchParticipant’s gross misconduct. The determination that a termination of theParticipant’s Continuous Service is either for Cause or without Cause shall bemade by the Company in its sole discretion. Any determination by the Company that the Continuous Service of aParticipant was terminated by reason of dismissal without Cause for thepurposes of outstanding Awards held by such Participant shall have no effectupon any determination of the rights or obligations of the Company or suchParticipant for any other purpose.

 

**(e)****           *“Change in Control”*** means the occurrence, in a singletransaction or in a series of related transactions, of any one or more of thefollowing events:

 

**(i)****           **anyExchange Act Person becomes the Owner, directly or indirectly, of securities ofthe Company representing more than 50%of the combined voting power of the Company’s then outstanding securities otherthan by virtue of a merger, consolidation or similar transaction.  Notwithstandingthe foregoing, a Change in Control shall not be deemed to occur (A) onaccount of the acquisition of securities of the Company by an investor, anyaffiliate thereof or any other Exchange Act Person from the Company in atransaction or series of related transactions the primary purpose of which isto obtain financing for the Company through the issuance of equity securitiesor (B) solely because the level of Ownership held by any Exchange ActPerson (the “***SubjectPerson***”) exceeds thedesignated percentage threshold of the outstanding voting securities as aresult of a repurchase or other acquisition of voting securities by the Companyreducing the number of shares outstanding, provided that if a Change in Controlwould occur (but for the operation of this sentence) as a result of theacquisition of voting securities by the Company, and after such shareacquisition, the Subject Person becomes the Owner of any additional votingsecurities that, assuming the repurchase or other acquisition had not occurred,increases the percentage of the then outstanding voting securities Owned by theSubject Person over the designated percentage threshold, then a Change inControl shall be deemed to occur;

 

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**(ii)****          **thereis consummated a merger, consolidation or similar transaction involving(directly or indirectly) the Company and, immediately after the consummation ofsuch merger, consolidation or similar transaction, the stockholders of theCompany immediately prior thereto, as such, do not Own, directly or indirectly,either (A) outstanding voting securities representing more than 50% of the combined outstanding votingpower of the surviving Entity in such merger, consolidation or similartransaction or (B) more than 50%of the combined outstanding voting power of the parent of the surviving Entityin such merger, consolidation or similar transaction;

 

**(iii)****        **thestockholders of the Company approve or the Board approves a plan of completedissolution or liquidation of the Company, or a complete dissolution orliquidation of the Company shall otherwise occur;

 

**(iv)****         **thereis consummated a sale, lease, exclusive license or other disposition of all orsubstantially all of the consolidated assets of the Company and itsSubsidiaries, other than a sale, lease, license or other disposition of all orsubstantially all of the consolidated assets of the Company and itsSubsidiaries to an Entity, more than 50%of the combined voting power of the voting securities of which are Owned bystockholders of the Company in substantially the same proportions as theirOwnership of the outstanding voting securities of the Company immediately priorto such sale, lease, license or other disposition; or

 

**(v)****           **individualswho, on the date this Plan is adopted by the Board, are members of the Board(the “***Incumbent Board***”)cease for any reason to constitute at least a majority of the members of theBoard; *provided, however,* that if theappointment or election (or nomination for election) of any new Board memberwas approved or recommended by a majority vote of the members of the IncumbentBoard then still in office, such new member shall, for purposes of this Plan,be considered as a member of the Incumbent Board.

 

The term Change inControl shall not include a sale of assets, merger or other transactioneffected exclusively for the purpose of changing the domicile of the Company.

 

Notwithstanding theforegoing or any other provision of this Plan, the definition of Change inControl (or any analogous term) in an individual written agreement between theCompany or any Affiliate and the Participant shall supersede the foregoingdefinition with respect to Awards subject to such agreement; *provided, however,* that if no definitionof Change in Control or any analogous term is set forth in such an individualwritten agreement, the foregoing definition shall apply.

 

**(f)****            *“Code”*** means the Internal Revenue Code of 1986, asamended.

 

**(g)****           *“Committee”*** means a committee of one or more Directorsto whom authority has been delegated by the Board in accordance with Section 3(c).

 

**(h)****           *“Common Stock”*** means the common stock of the Company.

 

**(i)****            *“Company”*** means Cubic Corporation, a Delawarecorporation.

 

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**(j)****            *“Consultant”***means any person, including an advisor, who is (i) engaged by the Companyor an Affiliate to render consulting or advisory services and is compensatedfor such services, or (ii) serving as a member of the board of directorsof an Affiliate and is compensated for such services.  However, service solely as a Director, orpayment of a fee for such service, shall not cause a Director to be considereda “Consultant” for purposes of the Plan.

 

**(k)****           *“Continuous Service”*** means that the Participant’sservice with the Company or an Affiliate, whether as an Employee, Director orConsultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to theCompany or an Affiliate as an Employee, Consultant or Director or a change inthe entity for which the Participant renders such service, provided that thereis no interruption or termination of the Participant’s service with the Companyor an Affiliate, shall not terminate a Participant’s Continuous Service.  For example, a change in status from anemployee of the Company to a consultant to an Affiliate or to a Director shallnot constitute an interruption of Continuous Service.  To the extent permitted by law, the Board orthe chief executive officer of the Company, in that party’s sole discretion,may determine whether Continuous Service shall be considered interrupted in thecase of any leave of absence approved by that party, including sick leave,military leave or any other personal leave. Notwithstanding the foregoing, a leave of absence shall be treated asContinuous Service for purposes of vesting in a Stock Award only to such extentas may be provided in the Company’s leave of absence policy, in the writtenterms of any leave of absence agreement or policy applicable to theParticipant, or as otherwise required by law.

 

**(l)****            *“Corporate Transaction”*** means the occurrence, in asingle transaction or in a series of related transactions, of any one or moreof the following events:

 

**(i)****           **asale****or other disposition of all orsubstantially all, as determined by the Board in its sole discretion, of theconsolidated assets of the Company and its Subsidiaries;

 

**(ii)****          **asale or other disposition of at least 90%of the outstanding securities of the Company;

 

**(iii)****        **theconsummation of a merger, consolidation or similar transaction following whichthe Company is not the surviving corporation; or

 

**(iv)****         **theconsummation of a merger, consolidation or similar transaction following whichthe Company is the surviving corporation but the shares of Common Stockoutstanding immediately preceding the merger, consolidation or similartransaction are converted or exchanged by virtue of the merger, consolidationor similar transaction into other property, whether in the form of securities,cash or otherwise.

 

**(m)****          *“Covered Employee”*** shall have the meaning provided in Section 162(m)(3) ofthe Code and the regulations promulgated thereunder.

 

**(n)****           *“Director”*** means a member of the Board.

 

**(o)****           *“Disability”*** means the permanent and total disability ofa person within the meaning of Section 22(e)(3) of the Code.

 

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**(p)****          **“***Effective Date***” meansthe effective date of this Plan document, which is the date that this Plan isfirst approved by the Company’s stockholders.

 

**(q)****           *“Employee”***means any person employed by the Company or an Affiliate.  However, service solely as a Director, orpayment of a fee for such services, shall not cause a Director to be consideredan “Employee” for purposes of the Plan.

 

**(r)****           *“Entity”*** means a corporation, partnership, limitedliability company or other entity.

 

**(s)****           *“Exchange Act”*** means the Securities Exchange Act of1934, as amended.

 

**(t)****            *“Exchange Act Person”***means any natural person, Entityor “group” (within the meaning of Section 13(d) or 14(d) of theExchange Act), except that “Exchange Act Person” shall not include (i) theCompany or any Subsidiary of the Company, (ii) any employee benefit planof the Company or any Subsidiary of the Company or any trustee or otherfiduciary holding securities under an employee benefit plan of the Company orany Subsidiary of the Company, (iii) an underwriter temporarily holdingsecurities pursuant to an offering of such securities, (iv) an EntityOwned, directly or indirectly, by the stockholders of the Company insubstantially the same proportions as their Ownership of stock of the Company;or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or14(d) of the Exchange Act) that, as of the Effective Date of the Plan asset forth in Section 13, is the Owner, directly or indirectly, ofsecurities of the Company representing more than 50% of the combined votingpower of the Company’s then outstanding securities.

 

**(u)****           *“Fair Market Value”*** means, as of any date, the value ofthe Common Stock determined as follows:

 

**(i)****           **Ifthe Common Stock is listed on any established stock exchange or traded on theNasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value ofa share of Common Stock shall be the closing sales price for such stock (or theclosing bid, if no sales were reported) as quoted on such exchange or market(or the exchange or market with the greatest volume of trading in the CommonStock) on the date of determination, as reported in *The WallStreet Journal*****or such other sourceas the Board deems reliable.  Unlessotherwise provided by the Board, if there is no closing sales price (or closingbid if no sales were reported) for the Common Stock on the date ofdetermination, then the Fair Market Value shall be the closing selling price(or closing bid if no sales were reported) on the last preceding date for whichsuch quotation exists.

 

**(ii)****          **Inthe absence of such markets for the Common Stock, the Fair Market Value shallbe determined by the Board in good faith.

 

**(v)****            *“Incentive Stock Option”*** means an Option intended toqualify as an “incentive stock option” within the meaning of Section 422of the Code and the regulations promulgated thereunder.

 

**(w)****           *“Non-Employee Director”***means a Director who either (i) isnot a current employee or officer of the Company or an Affiliate, does notreceive compensation, either 

 

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directly or indirectly, from the Company or anAffiliate for services rendered as a consultant or in any capacity other thanas a Director (except for an amount as to which disclosure would not berequired under Item 404(a) of Regulation S-K promulgated pursuant to theSecurities Act (“***RegulationS-K***”)), does not possess an interest in any other transactionfor which disclosure would be required under Item 404(a) of RegulationS-K, and is not engaged in a business relationship for which disclosure wouldbe required pursuant to Item 404(b) of Regulation S-K; or (ii) isotherwise considered a “non-employee director” for purposes of Rule 16b-3.

 

**(x)****           *“Nonstatutory Stock Option”*** means any Option other thanan Incentive Stock Option.

 

**(y)****           *“Officer”*** means a person who is an officer of theCompany within the meaning of Section 16 of the Exchange Act and the rules andregulations promulgated thereunder.

 

**(z)****           *“Option”*** means an Incentive Stock Option or aNonstatutory Stock Option to purchase shares of Common Stock granted pursuantto the Plan.

 

**(aa)****         *“Option Agreement”*** means a written agreement between theCompany and an Optionholder evidencing the terms and conditions of an Optiongrant.  Each Option Agreement shall besubject to the terms and conditions of the Plan.

 

**(bb)****         *“Optionholder”*** means a person to whom an Option isgranted pursuant to the Plan or, if permitted under the terms of this Plan,such other person who holds an outstanding Option.

 

**(cc)****         *“Other Stock Award”***means an award based in whole or in part by reference to the Common Stock whichis granted pursuant to the terms and conditions of Section 7(e).

 

**(dd)****         *“Other Stock AwardAgreement”***means a written agreement between the Company and aholder of an Other Stock Award evidencing the terms and conditions of an OtherStock Award grant.  Each Other StockAward Agreement shall be subject to the terms and conditions of the Plan.

 

**(ee)****         *“Outside Director”*** means a Director who either (i) isnot a current employee of the Company or an “affiliated corporation” (withinthe meaning of Treasury Regulations promulgated under Section 162(m) ofthe Code), is not a former employee of the Company or an “affiliatedcorporation” who receives compensation for prior services (other than benefitsunder a tax-qualified retirement plan) during the taxable year, has not been anofficer of the Company or an “affiliated corporation,” and does not receiveremuneration from the Company or an “affiliated corporation,” either directlyor indirectly, in any capacity other than as a Director, or (ii) isotherwise considered an “outside director” for purposes of Section 162(m)of the Code.

 

**(ff)****           *“Own,” “Owned,” “Owner,” “Ownership”*  **A person or Entity shall be deemed to “Own,”to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” ofsecurities if such person or Entity, directly or indirectly, through anycontract, arrangement, understanding, relationship or otherwise, has or sharesvoting power, which includes the power to vote or to direct the voting, withrespect to such securities.

 

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**(gg)****         *“Participant”*** means a person to whom an Award is grantedpursuant to the Plan or, if applicable, such other person who holds anoutstanding Stock Award.

 

**(hh)****         *“Performance Cash Award”*** means an award of cash grantedpursuant to the terms and conditions of Section 7(e)(ii).

 

**(ii)****           *“Performance Criteria”***means the one or more criteria that the Board shall select for purposes ofestablishing the Performance Goals for a Performance Period.  The Performance Criteria that shall be usedto establish such Performance Goals may be based on any one of, or combinationof, the following: (i) earnings per share; (ii) earnings beforeinterest, taxes and depreciation; (iii) earnings before interest, taxes,depreciation and amortization; (iv) total stockholder return; (v) returnon equity; (vi) return on assets, investment, or capital employed; (vii) operatingmargin; (viii) gross margin; (ix) operating income; (x) net income(before or after taxes); (xi) net operating income; (xii) net operating incomeafter tax; (xiii) pre-tax profit; (xiv) operating cash flow; (xv) sales orrevenue targets; (xvi) increases in revenue or product revenue; (xvii) expensesand cost reduction goals; (xviii) improvement in or attainment of workingcapital levels; (xix) economic value added (or an equivalent metric); (xx)market share; (xxi) cash flow; (xxii) cash flow per share; (xxiii) share priceperformance; (xxiv) debt reduction; (xxv) implementation or completion ofprojects or processes; (xxvi) customer satisfaction; (xxvii); stockholders’equity; and (xxviii) other measures of performance selected by the Board.  Partial achievement of the specified criteriamay result in the payment or vesting corresponding to the degree of achievementas specified in the Stock Award Agreement or the written terms of a PerformanceCash Award.  The Board shall, in its solediscretion, define the manner of calculating the Performance Criteria itselects to use for such Performance Period.

 

**(jj)****           *“Performance Goals”***means, for a Performance Period, the one or more goals established by the Boardfor the Performance Period based upon the Performance Criteria.  Performance Goals may be based on aCompany-wide basis, with respect to one or more business units, divisions,Affiliates, or business segments, and in either absolute terms or relative tothe performance of one or more comparable companies or a relevant index.  At the time of the grant of any Award, theBoard is authorized to determine whether, when calculating the attainment ofPerformance Goals for a Performance Period: (i) to exclude restructuringand/or other nonrecurring charges; (ii) to exclude exchange rate effects,as applicable, for non-U.S. dollar denominated net sales and operatingearnings; (iii) to exclude the effects of changes to generally acceptedaccounting standards required by the Financial Accounting Standards Board; (iv) toexclude the effects of any statutory adjustments to corporate tax rates; and (v) toexclude the effects of any “extraordinary items” as determined under generallyaccepted accounting principles.  Inaddition, the Board retains the discretion to reduce or eliminate thecompensation or economic benefit due upon attainment of Performance Goals.

 

**(kk)****        *“Performance Period”***means the period of time selected by the Board over which the attainment of oneor more Performance Goals will be measured for the purpose of determining aParticipant’s right to and the payment of a Stock Award or a Performance CashAward.  Performance Periods may be ofvarying and overlapping duration, at the sole discretion of the Board.

 

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**(ll)****           *“Performance Stock Award”*** means a Stock Award grantedunder the terms and conditions of Section 7(e)(i).

 

**(mm)****       *“Restricted Stock Award”***means an award of shares of Common Stock which is granted pursuant to the termsand conditions of Section 7(b).

 

**(nn)****         *“Restricted Stock AwardAgreement”*** means a written agreement between the Company and aholder of a Restricted Stock Award evidencing the terms and conditions of aRestricted Stock Award grant.  EachRestricted Stock Award Agreement shall be subject to the terms and conditionsof the Plan.

 

**(oo)****         *“Restricted Stock UnitAward”***means a right to receive shares of Common Stock which isgranted pursuant to the terms and conditions of Section 7(c).

 

**(pp)****         *“Restricted Stock UnitAward Agreement”***means a written agreement between the Companyand a holder of a Restricted Stock Unit Award evidencing the terms andconditions of a Restricted Stock Unit Award grant.  Each Restricted Stock Unit Award Agreementshall be subject to the terms and conditions of the Plan.

 

**(qq)****         *“Retirement”*** means, with respect to a Participant, thetermination of the Participant’s employment (other than for Cause) at any timefollowing the Participant’s attainment of age 55 and completion of 5 years ofContinuous Service with the Company.

 

**(rr)****         *“Rule 16b-3”*** means Rule 16b-3 promulgatedunder the Exchange Act or any successor to Rule 16b-3, as in effect fromtime to time.

 

**(ss)****         *“Securities Act”*** means the Securities Act of 1933, asamended.

 

**(tt)****           *“Stock Appreciation Right”***means a right to receive the appreciation on Common Stock that is grantedpursuant to the terms and conditions of Section 7(d).

 

**(uu)****         *“Stock Appreciation RightAgreement”*** means a written agreement between the Company and aholder of a Stock Appreciation Right evidencing the terms and conditions of aStock Appreciation Right grant.  EachStock Appreciation Right Agreement shall be subject to the terms and conditionsof the Plan.

 

**(vv)****          *“Stock Award”***means any right granted under the Plan, including an Incentive Stock Option, a NonstatutoryStock Option, a Stock Purchase Award, a Restricted Stock Award, a StockAppreciation Right, a Restricted Stock Unit Award, a Performance Stock Award orany Other Stock Award.

 

**(ww)****        *“Stock Award Agreement”***means a written agreement between the Company and a Participant evidencing theterms and conditions of a Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditionsof the Plan.

 

**(xx)****         *“Stock Purchase Award”***means an award of shares of Common Stock which is granted pursuant to the termsand conditions of Section 7(a).

 

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**(yy)****         *“Stock Purchase AwardAgreement”*** means a written agreement between the Company and aholder of a Stock Purchase Award evidencing the terms and conditions of a StockPurchase Award grant.  Each StockPurchase Award Agreement shall be subject to the terms and conditions of thePlan.

 

**(zz)****         *“Subsidiary”*** means, with respect to the Company, (i) anycorporation of which more than 50% of the outstanding capital stock havingordinary voting power to elect a majority of the board of directors of suchcorporation (irrespective of whether, at the time, stock of any other class orclasses of such corporation shall have or might have voting power by reason of thehappening of any contingency) is at the time, directly or indirectly, Owned bythe Company, and (ii) any partnership in which the Company has a direct orindirect interest (whether in the form of voting or participation in profits orcapital contribution) of more than 50%.

 

**(aaa)****       *“Ten Percent Stockholder”*** means a person who Owns (or isdeemed to Own pursuant to Section 424(d) of the Code) stockpossessing more than 10% of the total combined voting power of all classes ofstock of the Company or any Affiliate.

 

**3.****             ADMINISTRATION.**

 

**(a)****           Administrationby Board.**  The Board shall administerthe Plan unless and until the Board delegates administration of the Plan to aCommittee or Committees, as provided in Section 3(c).

 

**(b)****           Powers ofBoard.**  The Board shall have thepower, subject to, and within the limitations of, the express provisions of thePlan:

 

**(i)****           **Todetermine from time to time (A) which of the persons eligible under thePlan shall be granted Awards; (B) when and how each Award shall begranted; (C) what type or combination of types of Award shall be granted; (D) theprovisions of each Award granted (which need not be identical), including thetime or times when a person shall be permitted to receive cash or Common Stockpursuant to a Stock Award and the Performance Criteria upon which PerformanceGoals will be based; and (E) the number of shares of Common Stock withrespect to which a Stock Award shall be granted to each such person.

 

**(ii)****          **Toconstrue and interpret the Plan and Awards granted under it, and to establish,amend and revoke rules and regulations for its administration.  The Board, in the exercise of this power, maycorrect any defect, omission or inconsistency in the Plan or in any Stock AwardAgreement or in the written terms of a Performance Cash Award, in a manner andto the extent it shall deem necessary or expedient to make the Plan or Awardfully effective.

 

**(iii)****        **Tosettle all controversies regarding the Plan and Awards granted under it.

 

**(iv)****         **Toaccelerate the time at which a Stock Award may first be exercised or the timeduring which an Award or any part thereof will vest in accordance with thePlan, notwithstanding the provisions in the Award stating the time at which itmay first be exercised or the time during which it will vest.

 

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**(v)****           **To suspend or terminate the Plan atany time.  Suspension or termination ofthe Plan shall not impair rights and obligations under any Stock Award grantedwhile the Plan is in effect except with the written consent of the affectedParticipant.

 

**(vi)****         **Toamend the Plan, subject to the limitations, if any, of applicable law. However,except as provided in Section 11(a) relating to CapitalizationAdjustments, no amendment shall be effective unless approved by thestockholders of the Company to the extent stockholder approval is necessary tosatisfy applicable law or applicable exchange listing requirements.  Rights under any Award granted beforeamendment of the Plan shall not be impaired by any amendment of the Plan unless(i) the Company requests the consent of the affected Participant, and (ii) suchParticipant consents in writing.

 

**(vii)****        **To submit any amendment to the Planfor stockholder approval, including, but not limited to, amendments to the Planintended to satisfy the requirements of Section 162(m) of the Code and theregulations thereunder regarding the exclusion of performance-basedcompensation from the limit on corporate deductibility of compensation paid toCovered Employees.

 

**(viii)****       **To amendthe Plan in any respect the Board deems necessary or advisable to provideeligible Employees with the maximum benefits provided or to be provided underthe provisions of the Code and the regulations promulgated thereunder relatingto Incentive Stock Options or to bring the Plan or Incentive Stock Optionsgranted under it into compliance therewith.

 

**(ix)****         **Toamend the terms of any one or more Awards or stock awards granted under thePrior Plan, including, but not limited to, amendments to provide terms more favorablethan previously provided in the Award Agreement, subject to any specifiedlimits in the Plan that are not subject to Board discretion; *provided, however,* that the rights under any Award shall notbe impaired by any such amendment unless (i) the Company requests theconsent of the affected Participant, and (ii) such Participant consents inwriting.

 

**(x)****          **Generally,to exercise such powers and to perform such acts as the Board deems necessaryor expedient to promote the best interests of the Company and that are not inconflict with the provisions of the Plan or Awards.

 

**(xi)****         **Toadopt such procedures and sub-plans as are necessary or appropriate to permitparticipation in the Plan by Employees, Directors or Consultants who areforeign nationals or employed outside the United States.

 

**(xii)****        **Toeffect, at any time and from time to time, with the consent of any adversely affectedOptionholder, (1) the reduction of the exercise price of any outstandingOption under the Plan, (2) the cancellation of any outstanding Optionunder the Plan and the grant in substitution therefor of (A) a new Optionunder the Plan or another equity plan of the Company covering the same or adifferent number of shares of Common Stock, (B) a Restricted Stock Award(including a stock bonus), (C) a Stock Appreciation Right, (D) RestrictedStock Unit, (E) an Other Stock Award, (F) cash and/or (G) othervaluable consideration (as determined 

 

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by the Board, in its sole discretion), or (3) anyother action that is treated as a repricing under generally accepted accountingprinciples.

 

**(c)****           Delegationto Committee.**

 

**(i)****            General.**  The Board may delegate some or all of theadministration of the Plan to a Committee or Committees.  If administration of the Plan is delegated toa Committee, the Committee shall have, in connection with the administration ofthe Plan, the powers theretofore possessed by the Board that have beendelegated to the Committee, including the power to delegate to a subcommitteeof the Committee any of the administrative powers the Committee is authorizedto exercise (and references in this Plan to the Board shall thereafter be tothe Committee or subcommittee), subject, however, to such resolutions, notinconsistent with the provisions of the Plan, as may be adopted from time totime by the Board.  The Board may retainthe authority to concurrently administer the Plan with the Committee and may,at any time, revest in the Board some or all of the powers previouslydelegated.

 

**(ii)****           Section 162(m) and Rule 16b-3Compliance.**  In the solediscretion of the Board, the Committee may consist solely of two or moreOutside Directors, in accordance with Section 162(m) of the Code, orsolely of two or more Non-Employee Directors, in accordance with Rule 16b-3.  In addition, the Board or the Committee, inits sole discretion, may (A) delegate to a Committee of Directors who neednot be Outside Directors the authority to grant Awards to eligible persons whoare either (I) not then Covered Employees and are not expected to be CoveredEmployees at the time of recognition of income resulting from such Stock Award,or (II) not persons with respect to whom the Company wishes to comply with Section 162(m)of the Code, or (B) delegate to a Committee of Directors who need not beNon-Employee Directors the authority to grant Stock Awards to eligible personswho are not then subject to Section 16 of the Exchange Act.

 

**(d)****           Effect of Board’s Decision.** Alldeterminations, interpretations and constructions made by the Board in goodfaith shall not be subject to review by any person and shall be final, bindingand conclusive on all persons.

 

**(e)****           Arbitration. ** Any dispute or claim concerning any Awards granted (or not granted) pursuant to thePlan or any disputes or claims relating to or arising out of the Plan shall befully, finally and exclusively resolved by binding and confidential arbitrationconducted by a single arbitrator who is a lawyer with at least 20 yearsBusiness law experience, pursuant to the Commercial Arbitration Rules ofthe American Arbitration Association****inSan Diego, California. The Company shall pay all arbitration fees.  In addition to any other relief, thearbitrator may award to the prevailing party recovery of its attorneys’ fees andcosts.  By accepting an Award,Participants and the Company waive their respective rights to have any suchdisputes or claims tried by a judge or jury.

 

**4.****             SHARESSUBJECT TO THE PLAN.**

 

**(a)****           ShareReserve.**  Subject to the provisionsof Section 11(a) relating to Capitalization Adjustments, the numberof shares of Common Stock that may be issued pursuant to Stock Awards shall notexceed, in the aggregate, four million five hundred thousand 

 

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(4,500,000) shares of Common Stock.  Such number of shares reserved shall beapproved by the stockholders at a Special Meeting to be called by the Board ofDirectors as part of the approval of this Plan. Shares may also be issued in connection with a merger or acquisition aspermitted by NASD Rule 4350(i)(1)(A)(iii) or, if applicable, NYSEListed Company Manual Section 303A.08, or AMEX Company Guide Section 711and such issuance shall not reduce the number of shares available for issuanceunder the Plan.

 

**(b)****          ****Reversion of Shares to the Share Reserve**.  If any (i) Stock Award shall for anyreason expire or otherwise terminate, in whole or in part, without having beenexercised in full, (ii) shares of Common Stock issued to a Participantpursuant to a Stock Award (including the Stock Awards transferred from thePrior Plan on the Effective Date of this Plan) are forfeited to or repurchasedby the Company, including any repurchase or forfeiture caused by the failure tomeet a contingency or condition required for the vesting of such shares, or (iii) StockAward is settled in cash, then the shares of Common Stock not issued under suchStock Award, or forfeited to or repurchased by the Company, shall revert to andagain become available for issuance under the Plan.  If any shares subject to a Stock Award arenot delivered to a Participant because the Stock Award is exercised through areduction of shares subject to the Stock Award (*i.e.*, “net exercised”) or an appreciation distribution inrespect of a Stock Appreciation Right is paid in shares of Common Stock, thenumber of subject to the Stock Award that are not delivered to the Participantshall remain available for subsequent issuance under the Plan.  If any shares subject to a Stock Award arenot delivered to a Participant because such shares are withheld in satisfactionof the withholding of taxes incurred in connection with the exercise of anOption, Stock Appreciation Right, or the issuance of shares under a StockPurchase Award, Restricted Stock Award, Restricted Stock Unit Award, or OtherStock Award, the number of shares that are not delivered to the Participantshall remain available for subsequent issuance under the Plan.  If the exercise price of any Stock Award issatisfied by tendering shares of Common Stock held by the Participant (eitherby actual delivery or attestation), then the number of shares so tendered shallremain available for subsequent issuance under the Plan.

 

**(c)****           Incentive Stock Option Limit. **Notwithstanding anything to thecontrary in this Section 4(b), subject to the provisions of Section 11(a) relatingto Capitalization Adjustments the aggregate maximum number of shares of CommonStock that may be issued pursuant to the exercise of Incentive Stock Optionsshall be four million five hundred thousand (4,500,000) shares of Common Stock.

 

**(d)****           Source ofShares.**  The stock issuable under thePlan shall be shares of authorized but unissued or reacquired Common Stock,including shares repurchased by the Company.

 

**5.****             ELIGIBILITY.**

 

**(a)****           Eligibilityfor Specific Stock Awards**.  IncentiveStock Options may be granted only to Employees. Stock Awards other than Incentive Stock Options may be granted toEmployees, Directors and Consultants.

 

**(b)****           TenPercent Stockholders.**  A Ten PercentStockholder shall not be granted an Incentive Stock Option unless the exerciseprice of such Option is at least 110% of the Fair 

 

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Market Value of the Common Stock on the date of grantand the Option is not exercisable after the expiration of five years from thedate of grant.

 

**(c)****           Section 162(m) Limitation on AnnualGrants**.  Subject to theprovisions of Section 11(a) relating to Capitalization Adjustments,at such time as the Company may be subject to the applicable provisions of Section 162(m)of the Code, no Employee shall be eligible to be granted during any calendaryear Stock Awards whose value is determined by reference to an increase over anexercise or strike price of at least 100% of the Fair Market Value of theCommon Stock on the date the Stock Award is granted covering more than fourmillion (4,000,000) shares of Common Stock.

 

**(d)****           Consultants.**  A Consultant shall not be eligible for thegrant of a Stock Award if, at the time of grant, a Form S-8 RegistrationStatement under the Securities Act (***“Form S-8”***) is not available to registereither the offer or the sale of the Company’s securities to such Consultantbecause of the nature of the services that the Consultant is providing to theCompany, because the Consultant is not a natural person, or because of anyother rule governing the use of Form S-8.

 

**6.****             OPTIONPROVISIONS.**

 

Each Option shall be in such form and shall containsuch terms and conditions as the Board shall deem appropriate.  All Options shall be separately designatedIncentive Stock Options or Nonstatutory Stock Options at the time of grant,and, if certificates are issued, a separate certificate or certificates shallbe issued for shares of Common Stock purchased on exercise of each type ofOption. If an Option is not specifically designated as an Incentive StockOption, then the Option shall be a Nonstatutory Stock Option. The provisions ofseparate Options need not be identical; *provided,however*, that each Option Agreement shall include (throughincorporation of provisions hereof by reference in the Option Agreement orotherwise) the substance of each of the following provisions:

 

**(a)****           Term.**  Subject to the provisions of Section 5(b),no Option shall be exercisable after the expiration of 10 years from the dateof its grant or such shorter period specified in the Option Agreement.

 

**(b)****           ExercisePrice of an Incentive Stock Option.** Subject to the provisions of Section 5(b) regarding TenPercent Stockholders, the exercise price of each Incentive Stock Option shallbe not less than 100% of the Fair Market Value of the Common Stock subject tothe Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may be grantedwith an exercise price lower than that set forth in the preceding sentence ifsuch Option is granted pursuant to an assumption or substitution for anotheroption in a manner consistent with the provisions of Section 424(a) ofthe Code.

 

**(c)****           ExercisePrice of a Nonstatutory Stock Option.** The exercise price of each Nonstatutory Stock Option shall be not lessthan 100% of the Fair Market Value of the Common Stock subject to the Option onthe date the Option is granted. Notwithstanding the foregoing, a NonstatutoryStock Option may be granted with an exercise price lower than 100% of the FairMarket Value of the Common Stock if such Option is granted pursuant to anassumption or 

 

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substitution for another option in a manner consistentwith the provisions of Section 424(a) of the Code.

 

**(d)****           Consideration.**  The purchase price of Common Stock acquiredpursuant to the exercise of an Option shall be paid, to the extent permitted byapplicable law and as determined by the Board in its sole discretion, by anycombination of the methods of payment set forth below.  The Board shall have the authority to grantOptions that do not permit all of the following methods of payment (orotherwise restrict the ability to use certain methods) and to grant Optionsthat require the consent of the Company to utilize a particular method ofpayment.  The methods of paymentpermitted by this Section 6(d) are:

 

**(i)****           **bycash or check;

 

**(ii)****          **bankdraft or money order payable to the Company;

 

**(iii)****        **pursuantto a program developed under Regulation T as promulgated by the Federal ReserveBoard that, prior to the issuance of Common Stock, results in either thereceipt of cash (or check) by the Company or the receipt of irrevocableinstructions to pay the aggregate exercise price to the Company from the sales proceeds;

 

**(iv)****         **bydelivery to the Company (either by actual delivery or attestation) of shares ofCommon Stock;

 

**(v)****           **by a“net exercise” arrangement pursuant to which the Company will reduce the numberof shares of Common Stock issued upon exercise by the largest whole number ofshares with a Fair Market Value that does not exceed the aggregate exerciseprice; *provided, however,* thatthe Company shall accept a cash or other payment from the Participant to theextent of any remaining balance of the aggregate exercise price not satisfiedby such reduction in the number of whole shares to be issued; *provided, further,* that shares of CommonStock will no longer be outstanding under an Option and will not be exercisablethereafter to the extent that (A) shares are used to pay the exerciseprice pursuant to the “net exercise,” (B) shares are delivered to theParticipant as a result of such exercise, and (C) shares are withheld tosatisfy tax withholding obligations;  or

 

**(vi)****         **in anyother form of legal consideration that may be acceptable to the Board.

 

**(e)****           Transferabilityof Options.**  The Board may, in itssole discretion, impose such limitations on the transferability of Options asthe Board shall determine.  In theabsence of such a determination by the Board to the contrary, the followingrestrictions on the transferability of Options shall apply:

 

**(i)****            Restrictionson Transfer.**  An Option shall not betransferable except by will or by the laws of descent and distribution andshall be exercisable during the lifetime of the Optionholder only by theOptionholder; provided, however, that the Board may, in its sole discretion,permit transfer of the Option in a manner consistent with applicable tax andsecurities laws upon the Optionholder’s request.

 

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**(ii)****           DomesticRelations Orders.**  Notwithstandingthe foregoing, an Option may be transferred pursuant to a domestic relationsorder.

 

**(iii)****         BeneficiaryDesignation.**  Notwithstanding theforegoing, the Optionholder may, by delivering written notice to the Company,in a form provided by or otherwise satisfactory to the Company, designate athird party who, in the event of the death of the Optionholder, shallthereafter be entitled to exercise the Option.

 

**(f)****            VestingGenerally.**  The total number ofshares of Common Stock subject to an Option may vest and therefore becomeexercisable in periodic installments that may or may not be equal.  The Option may be subject to such other termsand conditions on the time or times when it may or may not be exercised (whichmay be based on the satisfaction of Performance Goals or other criteria) as theBoard may deem appropriate.  The vestingprovisions of individual Options may vary. The provisions of this Section 6(f) are subject to any Optionprovisions governing the minimum number of shares of Common Stock as to whichan Option may be exercised.

 

**(g)****           Termination of Continuous Service.**  In the event that an Optionholder’sContinuous Service terminates (other than for Cause or Retirement or upon theOptionholder’s death or Disability), the Optionholder may exercise his or herOption (to the extent that the Optionholder was entitled to exercise suchOption as of the date of termination of Continuous Service) but only withinsuch period of time ending on the earlier of (i) the date 3 monthsfollowing the termination of the Optionholder’s Continuous Service (or suchlonger or shorter period specified in the Option Agreement), or (ii) theexpiration of the term of the Option as set forth in the Option Agreement.  If, after termination of Continuous Service,the Optionholder does not exercise his or her Option within the time specifiedherein or in the Option Agreement (as applicable), the Option shall terminate.

 

**(h)****           Extension of Termination Date.**  An Optionholder’s Option Agreement mayprovide that if the exercise of the Option following the termination of theOptionholder’s Continuous Service (other than for Cause or Retirement or uponthe Optionholder’s death or Disability) would be prohibited at any time solelybecause the issuance of shares of Common Stock would violate the registrationrequirements under the Securities Act, then the Option shall terminate on theearlier of (i) the expiration of a period of 3 months after thetermination of the Optionholder’s Continuous Service during which the exerciseof the Option would not be in violation of such registration requirements, or (ii) theexpiration of the term of the Option as set forth in the Option Agreement.

 

**(i)****            Disability of Optionholder.**  In the event that an Optionholder’sContinuous Service terminates as a result of the Optionholder’s Disability, theOptionholder may exercise his or her Option (to the extent that theOptionholder was entitled to exercise such Option as of the date of terminationof Continuous Service), but only within such period of time ending on theearlier of (i) the date 12 months following such termination of ContinuousService (or such longer or shorter period specified in the Option Agreement),or (ii) the expiration of the term of the Option as set forth in theOption Agreement.  If, after terminationof Continuous Service, the Optionholder does not exercise his or her Optionwithin the time specified herein or in the Option Agreement (as applicable),the Option shall terminate.

 

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**(j)****            Death of Optionholder.**  In the event that (i) an Optionholder’sContinuous Service terminates as a result of the Optionholder’s death, or (ii) theOptionholder dies within the period (if any) specified in the Option Agreementafter the termination of the Optionholder’s Continuous Service for a reasonother than death, then the Option may be exercised (to the extent theOptionholder was entitled to exercise such Option as of the date of death) bythe Optionholder’s estate, by a person who acquired the right to exercise theOption by bequest or inheritance or by a person designated to exercise theoption upon the Optionholder’s death, but only within the period ending on theearlier of (i) the date 18 months following the date of death (or suchlonger or shorter period specified in the Option Agreement), or (ii) theexpiration of the term of such Option as set forth in the OptionAgreement.  If, after the Optionholder’sdeath, the Option is not exercised within the time specified herein or in theOption Agreement (as applicable), the Option shall terminate.

 

**(k)****           Retirementof Optionholder. **In the event thatan Optionholder’s Continuous Service terminates as a result of the Optionholder’sRetirement, the Optionholder may exercise his or her Option (to the extent thatthe Optionholder was entitled to exercise such Option as of the date oftermination of Continuous Service), but only within such period of time endingon the earlier of (i) the date 12 months following such termination ofContinuous Service (or such longer or shorter period specified in the OptionAgreement), or (ii) the expiration of the term of the Option as set forthin the Option Agreement.  If, aftertermination of Continuous Service, the Optionholder does not exercise his orher Option within the time specified herein or in the Option Agreement (asapplicable), the Option shall terminate.

 

**(l)****            Termination for Cause.**  Except as explicitly provided otherwise in anOptionholder’s Option Agreement, in the event that an Optionholder’s ContinuousService is terminated for Cause, the Option shall terminate upon thetermination date of such Optionholder’s Continuous Service, and theOptionholder shall be prohibited from exercising his or her Option from andafter the time of such termination of Continuous Service.

 

**7.****             PROVISIONSOF STOCK AWARDS OTHER THAN OPTIONS.**

 

**(a)****           Stock Purchase Awards.**  Each Stock Purchase Award Agreement shall bein such form and shall contain such terms and conditions as the Board shalldeem appropriate.  To the extentconsistent with the Company’s Bylaws, at the Board’s election, shares of CommonStock may be (x) held in book entry form subject to the Company’s instructionsuntil any restrictions relating to the Stock Purchase Award lapse; or(y) evidenced by a certificate, which certificate shall be held in suchform and manner as determined by the Board. The terms and conditions of Stock Purchase Award Agreements may changefrom time to time, and the terms and conditions of separate Stock PurchaseAward Agreements need not be identical, *provided,however,*that each Stock Purchase Award Agreement shall include(through incorporation of the provisions hereof by reference in the Agreementor otherwise) the substance of each of the following provisions:

 

**(i)****            Purchase Price.**  At the time of the grant of a Stock PurchaseAward, the Board will determine the price to be paid by the Participant foreach share subject to the Stock Purchase Award. To the extent required by applicable law, the price to be paid by theParticipant 

 

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for each share of the Stock Purchase Award will not beless than the par value of a share of Common Stock.

 

**(ii)****           Consideration.**  At the time of the grant of a Stock PurchaseAward, the Board will determine the consideration permissible for the paymentof the purchase price of the Stock Purchase Award.  The purchase price of Common Stock acquiredpursuant to the Stock Purchase Award shall be paid either: (A) in cash orby check at the time of purchase, (B) by past services actually renderedto the Company or an Affiliate, or (C) in any other form of legalconsideration that may be acceptable to the Board in its sole discretion andpermissible under applicable law.

 

**(iii)****         Vesting.** Shares of Common Stockacquired under a Stock Purchase Award may be subject to a share repurchaseright or option in favor of the Company in accordance with a vesting schedule tobe determined by the Board.

 

**(iv)****          Termination of Participant’s ContinuousService.** In the event that a Participant’s Continuous Serviceterminates, the Company shall have the right, but not the obligation, torepurchase or otherwise reacquire, any or all of the shares of Common Stockheld by the Participant that have not vested as of the date of terminationunder the terms of the Stock Purchase Award Agreement.  At the Board’s election, the price paid forall shares of Common Stock so repurchased or reacquired by the Company may beat the lesser of: (A) the Fair Market Value on the relevant date, or (B) theParticipant’s original cost for such shares. The Company shall not be required to exercise its repurchase orreacquisition option until at least six (6) months (or such longer orshorter period of time necessary to avoid a charge to earnings for financialaccounting purposes) have elapsed following the Participant’s purchase of theshares of Common Stock acquired pursuant to the Stock Purchase Award unlessotherwise determined by the Board or provided in the Stock Purchase AwardAgreement.

 

**(v)****            Transferability.** Rights topurchase or receive shares of Common Stock granted under a Stock Purchase Awardshall be transferable by the Participant only upon such terms and conditions asare set forth in the Stock Purchase Award Agreement, as the Board shalldetermine in its sole discretion, and so long as Common Stock awarded under theStock Purchase Award remains subject to the terms of the Stock Purchase AwardAgreement.

 

**(b)****           RestrictedStock Awards.**  Each Restricted StockAward Agreement shall be in such form and shall contain such terms andconditions as the Board shall deem appropriate. To the extent consistent with the Company’s Bylaws, at the Board’selection, shares of Common Stock may be (x) held in book entry form subject tothe Company’s instructions until any restrictions relating to the RestrictedStock Award lapse; or (y) evidenced by a certificate, which certificateshall be held in such form and manner as determined by the Board.  The terms and conditions of Restricted StockAward Agreements may change from time to time, and the terms and conditions ofseparate Restricted Stock Award Agreements need not be identical, *provided, however*, that each RestrictedStock Award Agreement shall include (through incorporation of provisions hereofby reference in the agreement or otherwise) the substance of each of thefollowing provisions:

 

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**(i)****            Consideration.**  A Restricted Stock Award may be awarded in considerationfor (A) past services actually rendered to the Company or an Affiliate, or(B) any other form of legal consideration that may be acceptable to theBoard in its sole discretion and permissible under applicable law.

 

**(ii)****           Vesting.**  Shares of Common Stock awarded under theRestricted Stock Award Agreement may be subject to forfeiture to the Company inaccordance with a vesting schedule to be determined by the Board.

 

**(iii)****         Terminationof Participant’s Continuous Service.** In the event a Participant’s Continuous Service terminates, the Companymay receive via a forfeiture condition, any or all of the shares of CommonStock held by the Participant which have not vested as of the date oftermination of Continuous Service under the terms of the Restricted Stock AwardAgreement.

 

**(iv)****         ****Transferability.**  Rights to acquire shares of Common Stockunder the Restricted Stock Award Agreement shall be transferable by theParticipant only upon such terms and conditions as are set forth in theRestricted Stock Award Agreement, as the Board shall determine in its solediscretion, so long as Common Stock awarded under the Restricted Stock AwardAgreement remains subject to the terms of the Restricted Stock Award Agreement.

 

**(c)****           RestrictedStock Unit Awards. **Each RestrictedStock Unit Award Agreement shall be in such form and shall contain such termsand conditions as the Board shall deem appropriate.  The terms and conditions of Restricted StockUnit Award Agreements may change from time to time, and the terms and conditionsof separate Restricted Stock Unit Award Agreements need not be identical, *provided, however,*that each RestrictedStock Unit Award Agreement shall include (through incorporation of theprovisions hereof by reference in the Agreement or otherwise) the substance ofeach of the following provisions:

 

**(i)****            Consideration.**  At the time of grant of a Restricted StockUnit Award, the Board will determine the consideration, if any, to be paid bythe Participant upon delivery of each share of Common Stock subject to theRestricted Stock Unit Award. The consideration to be paid (if any) by theParticipant for each share of Common Stock subject to a Restricted Stock UnitAward may be paid in any form of legal consideration that may be acceptable tothe Board in its sole discretion and permissible under applicable law.

 

**(ii)****           Vesting. **At the time of the grant of a Restricted Stock Unit Award,the Board may impose such restrictions or conditions to the vesting of theRestricted Stock Unit Award as it, in its sole discretion, deems appropriate.

 

**(iii)****         Payment**.  A Restricted Stock Unit Award may be settledby the delivery of shares of Common Stock, their cash equivalent, anycombination thereof or in any other form of consideration, as determined by theBoard and contained in the Restricted Stock Unit Award Agreement.

 

**(iv)****          Additional Restrictions. **At the time of the grant of aRestricted Stock Unit Award, the Board, as it deems appropriate, may imposesuch restrictions or conditions that 

 

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delay the delivery of the shares of Common Stock (ortheir cash equivalent) subject to a Restricted Stock Unit Award to a time afterthe vesting of such Restricted Stock Unit Award.

 

**(v)****            Dividend Equivalents. **Dividend equivalents may becredited in respect of shares of Common Stock covered by a Restricted StockUnit Award, as determined by the Board and contained in the Restricted StockUnit Award Agreement.  At the solediscretion of the Board, such dividend equivalents may be converted intoadditional shares of Common Stock covered by the Restricted Stock Unit Award insuch manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Awardcredited by reason of such dividend equivalents will be subject to all theterms and conditions of the underlying Restricted Stock Unit Award Agreement towhich they relate.

 

**(vi)****          Termination of Participant’s ContinuousService. **Except as otherwiseprovided in the applicable Restricted Stock Unit Award Agreement, such portionof the Restricted Stock Unit Award that has not vested will be forfeited uponthe Participant’s termination of Continuous Service.

 

**(vii)****         Compliance with Section 409A of theCode.**   Notwithstandinganything to the contrary set forth herein, any Restricted Stock Unit Awardgranted under the Plan that is not exempt from the requirements of Section 409Aof the Code shall contain such provisions so that such Restricted Stock UnitAward will comply with the requirements of Section 409A of the Code.  Such restrictions, if any, shall bedetermined by the Board and contained in the Restricted Stock Unit AwardAgreement evidencing such Restricted Stock Unit Award.  For example, such restrictions may include,without limitation, a requirement that any Common Stock that is to be issued ina year following the year in which the Restricted Stock Unit Award vests mustbe issued in accordance with a fixed pre-determined schedule.

 

**(d)****           StockAppreciation Rights. **Each StockAppreciation Right Agreement shall be in such form and shall contain such termsand conditions as the Board shall deem appropriate.  Stock Appreciation Rights may be granted asstand-alone Stock Awards or in tandem with other Stock Awards.  The terms and conditions of StockAppreciation Right Agreements may change from time to time, and the terms andconditions of separate Stock Appreciation Right Agreements need not beidentical; *provided, however*,that each Stock Appreciation Right Agreement shall include (throughincorporation of the provisions hereof by reference in the Agreement orotherwise) the substance of each of the following provisions:

 

**(i)****            Term.**  No Stock Appreciation Right shall beexercisable after the expiration of 10 years from the date of its grant or suchshorter period specified in the Stock Appreciation Right Agreement.

 

**(ii)****           Strike Price.**Each StockAppreciation Right will be denominated in shares of Common Stockequivalents.  The strike price of eachStock Appreciation Right granted as a stand-alone or tandem Stock Award shallnot be less than 100% of the Fair Market Value of the Common Stock equivalentssubject to the Stock Appreciation Right on the date of grant.

 

**(iii)****         Calculation of Appreciation.**  The appreciation distribution payable on theexercise of a Stock Appreciation Right will be not greater than an amount equalto the excess 

 

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of (A) the aggregate Fair Market Value (on thedate of the exercise of the Stock Appreciation Right) of a number of shares ofCommon Stock equal to the number of share of Common Stock equivalents in whichthe Participant is vested under such Stock Appreciation Right, and with respectto which the Participant is exercising the Stock Appreciation Right on suchdate, over (B) the strike price that will be determined by the Board atthe time of grant of the Stock Appreciation Right.

 

**(iv)****          Vesting. **At the time of the grant of a Stock Appreciation Right, theBoard may impose such restrictions or conditions to the vesting of such StockAppreciation Right as it, in its sole discretion, deems appropriate.

 

**(v)****            Exercise.**  To exercise any outstanding StockAppreciation Right, the Participant must provide written notice of exercise tothe Company in compliance with the provisions of the Stock Appreciation RightAgreement evidencing such Stock Appreciation Right.

 

**(vi)****          Payment**.  The appreciation distribution in respect to aStock Appreciation Right may be paid in Common Stock, in cash, in anycombination of the two or in any other form of consideration, as determined bythe Board and contained in the Stock Appreciation Right Agreement evidencingsuch Stock Appreciation Right.

 

**(vii)****         Termination of Continuous Service.**  In the event that a Participant’s ContinuousService terminates (other than for Cause or Retirement), the Participant mayexercise his or her Stock Appreciation Right (to the extent that theParticipant was entitled to exercise such Stock Appreciation Right as of thedate of termination) but only within such period of time ending on the earlierof (A) the date three (3) months following the termination of theParticipant’s Continuous Service (or such longer or shorter period specified inthe Stock Appreciation Right Agreement), or (B) the expiration of the termof the Stock Appreciation Right as set forth in the Stock Appreciation RightAgreement.  If, after termination, theParticipant does not exercise his or her Stock Appreciation Right within thetime specified herein or in the Stock Appreciation Right Agreement (asapplicable), the Stock Appreciation Right shall terminate.

 

**(viii)****        Disability.**  In the event that a the Participant’sContinuous Service terminates as a result of his or her Disability, suchParticipant may exercise his or her Stock Appreciation Right (to the extentthat he or she was entitled to exercise such Stock Appreciation Right as of thedate of termination of Continuous Service), but only within such period of timeending on the earlier of (i) the date 12 months following such terminationof Continuous Service (or such longer or shorter period specified in the StockAppreciation Right Agreement), or (ii) the expiration of the term of theStock Appreciation Right as set forth in the Stock Appreciation RightAgreement.  If, after termination ofContinuous Service, the Stock Appreciation Right holder does not exercise hisor her Stock Appreciation Right within the time specified herein or in theStock Appreciation Right Agreement (as applicable), the Stock AppreciationRight shall terminate.

 

**(ix)****          Death of Participant. **In the event that (i) aParticipant’s Continuous Service terminates as a result of his or her death, or(ii) the Participant dies within the period (if 

 

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any) specified in the Stock Appreciation RightAgreement after the termination of the Participant’s Continuous Service for areason other than death, then the Stock Appreciation Right may be exercised (tothe extent the Participant was entitled to exercise such Stock AppreciationRight as of the date of death) by the Participant’s estate, by a person whoacquired the right to exercise the Stock Appreciation Right by bequest orinheritance or by a person designated to exercise the Stock Appreciation Rightupon the Participant’s death, but only within the period ending on the earlierof (i) the date 18 months following the date of death (or such longer orshorter period specified in the Stock Appreciation Right Agreement), or (ii) theexpiration of the term of such Stock Appreciation Right as set forth in theStock Appreciation Right Agreement.  If,after the Participant’s death, the Stock Appreciation Right is not exercisedwithin the time specified herein or in the Stock Appreciation Right Agreement(as applicable), the Stock Appreciation Right shall terminate.

 

**(x)****           Retirementof Participant. **In the event that anParticipant’s Continuous Service terminates as a result of his or her Retirement,he or she may exercise his or her Stock Appreciation Right (to the extent that heor she was entitled to exercise such Stock Appreciation Right as of the date oftermination of Continuous Service), but only within such period of time endingon the earlier of (i) the date 12 months following such termination ofContinuous Service (or such longer or shorter period specified in the StockAppreciation Right Agreement), or (ii) the expiration of the term of theStock Appreciation Right as set forth in the Stock Appreciation RightAgreement.  If, after termination ofContinuous Service, the Participant does not exercise his or her StockAppreciation Right within the time specified herein or in the StockAppreciation Right Agreement (as applicable), the Stock Appreciation Rightshall terminate.

 

**(xi)****          Termination for Cause.**  Except as explicitly provided otherwise in anParticipant’s Stock Appreciation Right Agreement, in the event that aParticipant’s Continuous Service is terminated for Cause, the StockAppreciation Right shall terminate upon the termination date of suchParticipant’s Continuous Service, and the Participant shall be prohibited fromexercising his or her Stock Appreciation Right from and after the time of suchtermination of Continuous Service.

 

**(xii)****         Compliance with Section 409A of theCode.  **Notwithstanding anything tothe contrary set forth herein, any Stock Appreciation Rights granted under thePlan that are not exempt from the requirements of Section 409A of the Codeshall contain such provisions so that such Stock Appreciation Rights willcomply with the requirements of Section 409A of the Code.  Such restrictions, if any, shall bedetermined by the Board and contained in the Stock Appreciation Right Agreementevidencing such Stock Appreciation Right. For example, such restrictions may include, without limitation, arequirement that a Stock Appreciation Right that is to be paid wholly or partlyin cash must be exercised and paid in accordance with a fixed pre-determinedschedule.

 

**(e)****           Performance Awards**.

 

**(i)****            Performance Stock Awards**.  A Performance Stock Award is a Stock Awardthat may be granted, may vest, or may be exercised based upon the attainmentduring a Performance Period of certain Performance Goals.  A Performance Stock Award may, but need not,require the completion of a specified period of Continuous Service. The lengthof any 

 

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Performance Period, the Performance Goals to beachieved during the Performance Period, and the measure of whether and to whatdegree such Performance Goals have been attained shall be conclusivelydetermined by the Committee in its sole discretion.  The maximum benefit to be received by anyParticipant in any calendar year attributable to Stock Awards described in thisSection 7(e) shall not exceed the value of four million (4,000,000) sharesof Common Stock.

 

**(ii)****           Performance Cash Awards**.  A Performance Cash Award is a cash award thatmay be granted upon the attainment during a Performance Period of certainPerformance Goals.  A Performance CashAward may also require the completion of a specified period of ContinuousService.  The length of any PerformancePeriod, the Performance Goals to be achieved during the Performance Period, andthe measure of whether and to what degree such Performance Goals have beenattained shall be conclusively determined by the Committee in its sole discretion.  The maximum benefit to be received by anyParticipant in any calendar year attributable to cash awards described in this Section 7(e) shallnot exceed one million six hundred thousand dollars ($1,600,000).

 

**(f)****            Other Stock Awards**.  Other forms of Stock Awards valued in wholeor in part by reference to, or otherwise based on, Common Stock may be grantedeither alone or in addition to Stock Awards provided for under Section 6and the preceding provisions of this Section 7.  Subject to the provisions of the Plan, theBoard shall have sole and complete authority to determine the persons to whomand the time or times at which such Other Stock Awards will be granted, thenumber of shares of Common Stock (or the cash equivalent thereof) to be grantedpursuant to such Other Stock Awards and all other terms and conditions of suchOther Stock Awards.

 

**8.****             COVENANTSOF THE COMPANY.**

 

**(a)****           Availabilityof Shares.**  During the terms of theStock Awards, the Company shall keep available at all times the number of sharesof Common Stock required to satisfy such Stock Awards.

 

**(b)****           SecuritiesLaw Compliance.**  The Company shallseek to obtain from each regulatory commission or agency having jurisdictionover the Plan such authority as may be required to grant Stock Awards and toissue and sell shares of Common Stock upon exercise of the Stock Awards; *provided, however,* that this undertaking shall not requirethe Company to register under the Securities Act the Plan, any Stock Award orany Common Stock issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company isunable to obtain from any such regulatory commission or agency the authoritythat counsel for the Company deems necessary for the lawful issuance and saleof Common Stock under the Plan, the Company shall be relieved from anyliability for failure to issue and sell Common Stock upon exercise of suchStock Awards unless and until such authority is obtained.

 

**9.****             USEOF PROCEEDS FROM SALES OF COMMON STOCK.**

 

Proceeds from the sale of shares of Common Stockpursuant to Stock Awards shall constitute general funds of the Company.

 

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**10.****          MISCELLANEOUS.**

 

**(a)****           Corporate Action Constituting Grant of StockAwards.**  Corporate actionconstituting an offer by the Company of Common Stock to any Participant underthe terms of a Stock Award shall only be deemed completed as of the date ofsuch corporate action, unless otherwise determined by the Board, regardless ofwhen the instrument, certificate, or letter evidencing the Stock Award isactually received or accepted by the Participant.

 

**(b)****           StockholderRights.**  No Participant shall bedeemed to be the holder of, or to have any of the rights of a holder withrespect to, any shares of Common Stock subject to any Stock Award unless anduntil such Participant has satisfied all requirements for exercise of the StockAward pursuant to its terms.

 

**(c)****           NoEmployment or Other Service Rights.** Nothing in the Plan, any Award Agreement or other instrument executedthereunder or in connection with any Award granted pursuant to the Plan shallconfer upon any Participant any right to continue to serve the Company or anAffiliate in the capacity in effect at the time the Award was granted or shallaffect the right of the Company or an Affiliate to terminate (i) theemployment of an Employee with or without notice and with or without cause, (ii) theservice of a Consultant pursuant to the terms of such Consultant’s agreementwith the Company or an Affiliate, or (iii) the service of a Director ofthe Company or an Affiliate.

 

**(d)****           IncentiveStock Option $100,000 Limitation.**  Tothe extent that the aggregate Fair Market Value (determined at the time ofgrant) of Common Stock with respect to which Incentive Stock Options areexercisable for the first time by any Optionholder during any calendar year(under all plans of the Company and any Affiliates) exceeds $100,000, theOptions or portions thereof that exceed such limit (according to the order inwhich they were granted) shall be treated as Nonstatutory Stock Options,notwithstanding any contrary provision of the applicable Option Agreement(s).

 

**(e)****           InvestmentAssurances.**  The Company may requirea Participant, as a condition of exercising or acquiring Common Stock under anyStock Award, (i) to give written assurances satisfactory to the Company asto the Participant’s knowledge and experience in financial and business mattersand/or to employ a purchaser representative reasonably satisfactory to theCompany who is knowledgeable and experienced in financial and business mattersand that he or she is capable of evaluating, alone or together with thepurchaser representative, the merits and risks of exercising the Stock Award;and (ii) to give written assurances satisfactory to the Company statingthat the Participant is acquiring Common Stock subject to the Stock Award forthe Participant’s own account and not with any present intention of selling orotherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to suchrequirements, shall be inoperative if (x) the issuance of the shares upon theexercise or acquisition of Common Stock under the Stock Award has beenregistered under a then currently effective registration statement under theSecurities Act, or (y) as to any particular requirement, a determination ismade by counsel for the Company that such requirement need not be met in thecircumstances under the then applicable securities laws.  The Company may, upon advice of counsel tothe Company, place legends on stock certificates issued under the Plan as such 

 

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counsel deems necessary or appropriate in order tocomply with applicable securities laws, including, but not limited to, legendsrestricting the transfer of the Common Stock.

 

**(f)****            WithholdingObligations.**  The Company may, in itssole discretion, satisfy any federal, state or local tax withholding obligationrelating to an Award by any of the following means (in addition to the Company’sright to withhold from any payment to the Participant by the Company) or by acombination of such means: (i) causing the Participant to tender a cashpayment; (ii)  withholding shares of Common Stock from the shares ofCommon Stock issued or otherwise issuable to the Participant in connection witha Stock Award; or (iii) by such other method as may be set forth in the AwardAgreement.

 

**(g)****           ElectronicDelivery**.  Any reference herein to a “written”agreement or document shall include any agreement or document deliveredelectronically or posted on the Company’s intranet.

 

**11.****          ADJUSTMENTSUPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.**

 

**(a)****           CapitalizationAdjustments**.  If any change is madein, or other events occur with respect to, the Common Stock subject to the Planor subject to any Stock Award after the Effective Date without the receipt ofconsideration by the Company (through merger, consolidation, reorganization,recapitalization, reincorporation, stock dividend, dividend in property otherthan cash, stock split, liquidating dividend, combination of shares, exchangeof shares, change in corporate structure or other transaction not involving thereceipt of consideration by the Company (each a “***Capitalization Adjustment***”)), the Boardshall appropriately adjust: (i) the class(es) and maximum number ofsecurities subject to the Plan pursuant to Section 4(a), (ii) theclass(es) and maximum number of securities that may be issued pursuant to theexercise of Incentive Stock Options pursuant to Section 4(c), (iii) theclass(es) and maximum number of securities that may be awarded to any personpursuant to Section 5(c) and 7(e)(i) , and (iv) theclass(es) and number of securities and price per share of stock subject tooutstanding Stock Awards.  The Boardshall make such adjustments, and its determination shall be final, binding andconclusive.  (Notwithstanding theforegoing, the conversion of any convertible securities of the Company shallnot be treated as a transaction “without receipt of consideration” by theCompany.)

 

**(b)****           Dissolutionor Liquidation**.  In the event of adissolution or liquidation of the Company, all outstanding Stock Awards (otherthan Stock Awards consisting of vested and outstanding shares of Common Stocknot subject to the Company’s right of repurchase) shall become fully vested,exercisable and/or no longer subject to repurchase or forfeiture (to the extentsuch Stock Awards have not previously expired or terminated) before thedissolution or liquidation is completed but contingent on its completion.

 

**(c)****           Corporate Transaction.**  The following provisions shall apply toAwards in the event of a Corporate Transaction unless otherwise provided in theinstrument evidencing the Award or any other written agreement between the Companyor any Affiliate and the holder of the Award or unless otherwise expresslyprovided by the Board at the time of grant of an Award.

 

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**(i)****            Awards May Be Assumed.**  In the event of a Corporate Transaction, anysurviving corporation or acquiring corporation (or the surviving or acquiringcorporation’s parent company) may assume or continue any or all Awardsoutstanding under the Plan or may substitute similar awards for Awardsoutstanding under the Plan (including but not limited to, awards to acquire thesame consideration paid to the stockholders of the Company pursuant to theCorporate Transaction), and any reacquisition or repurchase rights held by theCompany in respect of Common Stock issued pursuant to Awards may be assigned bythe Company to the successor of the Company (or the successor’s parent company,if any), in connection with such Corporate Transaction.  A surviving corporation or acquiringcorporation (or its parent) may choose to assume or continue only a portion ofan Award or substitute a similar award for only a portion of an Award.  The terms of any assumption, continuation orsubstitution shall be set by the Board in accordance with the provisions of Section 3.

 

**(ii)****           Awards Held by Current Participants.**  In the event of a Corporate Transaction inwhich the surviving corporation or acquiring corporation (or its parentcompany) does not assume or continue such outstanding Awards or substitutesimilar awards for such outstanding Awards, then with respect to Awards thathave not been assumed, continued or substituted and that are held byParticipants whose Continuous Service has not terminated prior to the effectivetime of the Corporate Transaction (referred to as the “***Current Participants***”),the vesting of such Awards (and, if applicable, the time at which Stock Awardsmay be exercised) shall (contingent upon the effectiveness of the CorporateTransaction) be accelerated in full to a date prior to the effective time ofsuch Corporate Transaction as the Board shall determine (or, if the Board shallnot determine such a date, to the date that is five days prior to the effectivetime of the Corporate Transaction), and such Awards shall terminate if notexercised (if applicable) at or prior to the effective time of the CorporateTransaction, and any reacquisition or repurchase rights held by the Companywith respect to such Awards shall lapse (contingent upon the effectiveness ofthe Corporate Transaction).

 

**(iii)****         Awards Held by Persons other than CurrentParticipants.**  In the event ofa Corporate Transaction in which the surviving corporation or acquiringcorporation (or its parent company) does not assume or continue suchoutstanding Awards or substitute similar awards for such outstanding Awards,then with respect to Awards that have not been assumed, continued orsubstituted and that are held by persons other than Current Participants, thevesting of such Awards (and, if applicable, the time at which Stock Awards maybe exercised) shall not be accelerated and such Awards (other than a StockAward consisting of vested and outstanding shares of Common Stock not subjectto the Company’s right of repurchase) shall terminate if not exercised (ifapplicable) prior to the effective time of the Corporate Transaction; *provided, however,* that any reacquisitionor repurchase rights held by the Company with respect to such Awards shall notterminate and may continue to be exercised notwithstanding the CorporateTransaction.

 

**(iv)****          Payment for Stock Awards in Lieu of Exercise.**  Notwithstanding the foregoing, in the eventan Award will terminate if not exercised prior to the effective time of aCorporate Transaction, the Board may provide, in its sole discretion, that theholder of such Award may not exercise such Stock Award but will receive apayment, in such form as may be determined by the Board, equal in value to theexcess, if any, of (A) the value of the property the 

 

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holder of the Stock Award would have received upon theexercise of the Award, over (B) any exercise price payable by such holderin connection with such exercise.

 

**(d)****           Change inControl.**  An Award may be subject toadditional acceleration of vesting and exercisability upon or after a Change inControl as may be provided in the applicable Award agreement or as may beprovided in any other written agreement between the Company or any Affiliateand the Participant, but in the absence of such provision, no such accelerationshall occur.

 

**(e)****           ParachutePayments**.

 

**(i)****           **Exceptas otherwise provided in a written agreement between the Company and aParticipant, if the acceleration of the vesting and exercisability of Awardsprovided for in Sections 11(c) and 11(d), together with payments and otherbenefits of a Participant  (collectively,the “***Payment***”)(i) constitute a “parachute payment” within the meaning of Section 280Gof the Code, or any comparable successor provisions, and (ii) but for thisSection 11(e) would be subject to the excise tax imposed by Section 4999of the Code, or any comparable successor provisions (the “***Excise Tax***”), thensuch Payment shall be either (1) provided to such Participant in full, or (2) providedto such Participant as to such lesser extent that would result in no portion ofsuch Payment being subject to the Excise Tax, whichever of the foregoingamounts, when taking into account applicable federal, state, local and foreignincome and employment taxes, the Excise Tax, and any other applicable taxes,results in the receipt by such Participant, on an after-tax basis, of thegreatest amount of the Payment, notwithstanding that all or some portion of thePayment may be subject to the Excise Tax.

 

**(ii)****          **TheCompany shall appoint a nationally recognized independent accounting firm (the ***“Accountant”***) to makethe determinations required hereunder, which accounting firm shall not then beserving as accountant or auditor for the individual, entity or group thateffected the Change in Control.  TheCompany shall bear all costs and expenses with respect to the determinationsthe Accountant may reasonably incur in connection with any calculationscontemplated by this Section 11(e).

 

**(iii)****        **Unlessthe Company and such Participant otherwise agree in writing, any determinationrequired under this Section 11(e) shall be made in writing in goodfaith by the Accountant.  If a reductionin the Payment is to be made as provided above, reductions shall occur in thefollowing order unless the Participant elects in writing a different order (*provided, however,* that such electionshall be subject to Company approval if made on or after the date that triggersthe Payment or a portion thereof):(A) reduction of cash payments; (B) cancellationof accelerated vesting of Options and other Awards; and (C) reduction ofother benefits paid to the Participant. If acceleration of vesting of Awards is to be reduced, such accelerationof vesting shall be cancelled in the reverse order of date of grant of theAwards (*i.e.*, the earliestgranted Award cancelled last) unless the Participant elects in writing adifferent order for cancellation.

 

**(iv)****         **Forpurposes of making the calculations required by this Section 11(e), theAccountant may make reasonable assumptions and approximations concerningapplicable taxes and may rely on reasonable, good faith interpretationsconcerning the application of the Code 

 

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and other applicable legal authority.  The Company and the Participant shall furnishto the Accountant such information and documents as the Accountant mayreasonably request in order to make such a determination.  The Company shall bear all costs that theAccountant may reasonably incur in connection with any calculations contemplatedby this Section 11(e).

 

**(v)****           **If,notwithstanding any reduction described above, the Internal Revenue Service(the “***IRS***”)determines that the Participant is liable for the Excise Tax as a result of thePayment, then the Participant shall be obligated to pay back to the Company,within thirty (30) days after a final IRS determination or, in the event thatthe Participant challenges the final IRS determination, a final judicialdetermination, a portion of the Payment (the “***Repayment Amount***”).  The Repayment Amount with respect to thePayment shall be the smallest such amount, if any, as shall be required to bepaid to the Company so that the Participant’s net after-tax proceeds withrespect to the Payment (after taking into account the payment of the Excise Taxand all other applicable taxes imposed on the Payment) shall be maximized.  The Repayment Amount with respect to thePayment shall be zero if a Repayment Amount of more than zero would not resultin the Participant’s net after-tax proceeds with respect to the Payment beingmaximized.  If the Excise Tax is noteliminated pursuant to this paragraph, the Optionholder shall pay the ExciseTax.

 

**(vi)****         **Notwithstandingany other provision of this Section 11(e), if (A) there is areduction in the Payment as described above, (B) the IRS later determinesthat the Participant is liable for the Excise Tax, the payment of which wouldresult in the maximization of the Participant’s net after-tax proceeds of thePayment (calculated as if the Payment had not previously been reduced), and (C) theParticipant the Excise Tax, then the Company shall pay or otherwise provide tothe Participant that portion of the Payment that was reduced pursuant to this Section 11(e) contemporaneouslyor as soon as administratively possible after the Optionholder pays the ExciseTax so that the Participant’s net after-tax proceeds with respect to thePayment are maximized.

 

**(vii)****        **If theParticipant either (A) brings any action to enforce rights pursuant tothis Section 11(e), or (B) defends any legal challenge to his or herrights under this Section 11(e), the Participant shall be entitled torecover attorneys’ fees and costs incurred in connection with such action,regardless of the outcome of such action; *provided,however,*that if such action is commenced by the Participant, the courtfinds that the action was brought in good faith.

 

**12.****          TERMINATIONOR SUSPENSION OF THE PLAN.**

 

**(a)****           PlanTerm.**  Unless sooner terminated bythe Board pursuant to Section 3, the Plan shall automatically terminate onthe day before the 10th anniversary of the date the Plan is adopted by theBoard.  No Awards may be granted underthe Plan while the Plan is suspended or after it is terminated.

 

**(b)****           NoImpairment of Rights.**  Termination ofthe Plan shall not impair rights and obligations under any Award granted whilethe Plan is in effect except with the written consent of the affectedParticipant.

 

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**13.****                               EFFECTIVEDATE OF PLAN.**

 

This Plan shall becomeeffective on the Effective Date.

 

**14.****                               CHOICEOF LAW.**

 

The law of the State ofCalifornia shall govern all questions concerning the construction, validity andinterpretation of this Plan, without regard to such state’s conflict of lawsrules.

 

As Adopted By

 

The Board of Directors on November 29, 2005

 

The Shareholders on [February 21, 2006]

 

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