**Exhibit 10.34**

 

NETWORK ENGINES, INC.

 

2009 INCENTIVEPLAN

 

1.            Purpose

 

The purpose of this 2009Incentive Plan (the “***Plan***”) ofNetwork Engines, Inc., a Delaware corporation (the “***Company***”),is to advance the interests of the Company’s stockholders by enhancing theCompany’s ability to attract, retain and motivate persons who are expected tomake important contributions to the Company and by providing such persons withequity ownership opportunities and performance-based incentives that are intendedto better align the interests of such persons with those of the Company’sstockholders.  Except where the contextotherwise requires, the term “***Company***”shall include any of the Company’s present or future parent or subsidiarycorporations as defined in Sections 424(e) or (f) of the InternalRevenue Code of 1986, as amended, and any regulations thereunder (the “***Code***”) and any other businessventure (including, without limitation, joint venture or limited liabilitycompany) in which the Company has a controlling interest, as determined by theBoard of Directors of the Company (the “***Board***”).

 

2.           Eligibility

 

All of the Company’s employees,officers, and directors are eligible to be granted options, stock appreciationrights (“***SARs***”), restricted stock,restricted stock units (“***RSUs***”) andother stock- and cash-based awards (each, an “***Award***”)under the Plan.  Consultants and advisorsto the Company (as such terms are defined and interpreted for purposes of Form S-8(or any successor form)) are also eligible to be granted Awards. Each personwho is granted an Award under the Plan is deemed a “***Participant***.”

 

3.           Administration and Delegation

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## (a)           Administrationby Board of Directors.  The Plan willbe administered by the Board.  The Boardshall have authority to grant Awards and to adopt, amend and repeal suchadministrative rules, guidelines and practices relating to the Plan as it shalldeem advisable.  The Board may construeand interpret the terms of the Plan and any Award agreements entered into underthe Plan.  The Board may correct anydefect, supply any omission or reconcile any inconsistency in the Plan or anyAward in the manner and to the extent it shall deem expedient to carry the Planinto effect and it shall be the sole and final judge of such expediency.  All decisions by the Board shall be made inthe Board’s sole discretion and shall be final and binding on all personshaving or claiming any interest in the Plan or in any Award.

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## (b)           Appointment ofCommittees.  To the extent permittedby applicable law, the Board may delegate any or all of its powers under thePlan to one or more committees or subcommittees of the Board (a “***Committee***”).  All references in the Plan to the “***Board***” shall mean the Board or aCommittee of the Board or the officers referred to in Section 3(c) tothe extent that the Board’s powers or authority under the Plan have beendelegated to such Committee or officers.

 

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## (c)           Delegationto Officers.  To the extent permittedby applicable law, the Board may delegate to one or more officers of theCompany the power to grant Options and other Awards that constitute rightsunder Delaware law (subject to any limitations under the Plan) to employees orofficers of the Company or any of its present or future subsidiary corporationsand to exercise such other powers under the Plan as the Board may determine,provided that the Board shall fix the terms of the Awards to be granted by suchofficers (including the exercise price of the Awards, which may include aformula by which the exercise price will be determined) and the maximum numberof shares subject to such Awards that the officers may grant; provided further,however, that no officer shall be authorized to grant Awards to any “executiveofficer” of the Company (as defined by Rule 3b-7 under the SecuritiesExchange Act of 1934, as amended (the “***Exchange Act***”))or to any “officer” of the Company (as defined by Rule 16a-1 under theExchange Act).  The Board may notdelegate authority under this Section 3(c) to grant restricted stock,unless Delaware law then permits such delegation.

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## (d)           Awardsto Non-Employee Directors. Discretionary Awards to non-employee directors will only be granted andadministered by a Committee, all of the members of which are independent asdefined by Section 4200(a)(15) of the Nasdaq Marketplace Rules.

 

4.           Stock Available for Awards

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## (a)           Numberof Shares; Share Counting.

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### (1)           Authorized Number of Shares.  Subject to adjustment under Section 10,Awards may be made under the Plan for up to 750,000 shares of common stock,$.01 par value per share, of the Company (the “***CommonStock***”), any or all of which Awards may be in the form ofIncentive Stock Options.  Shares issuedunder the Plan may consist in whole or in part of authorized but unissuedshares or treasury shares.

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### (2)           Share Counting. For purposes of counting the number of shares available for the grant ofAwards under the Plan and under the sublimits contained in Sections 4(b)(2) and4(b)(3), (i) all shares of Common Stock covered by independent SARs shallbe counted against the number of shares available for the grant of Awards;provided, however, that independent SARs that may be settled only in cash shallnot be so counted; (ii) if any Award (A) expires or is terminated,surrendered or canceled without having been fully exercised or is forfeited inwhole or in part (including as the result of shares of Common Stock subject tosuch Award being repurchased by the Company at the original issuance pricepursuant to a contractual repurchase right) or (B) results in any CommonStock not being issued (including as a result of an independent SAR that wassettleable either in cash or in stock actually being settled in cash), theunused Common Stock covered by such Award shall again be available for thegrant of Awards; *provided, however*, in the case ofIncentive Stock Options (as hereinafter defined), the foregoing shall besubject to any limitations under the Code; and provided further, in the case ofindependent SARs, that the full number of shares subject to any stock-settledSAR shall be counted against the shares available under the Plan and againstthe sublimits listed in the first clause of this Section in proportion tothe portion of the SAR actually exercised regardless of the number of sharesactually used to settle such SAR upon exercise; (iii) shares of CommonStock delivered (either by actual delivery, attestation, or net exercise) tothe Company by a Participant to (A) purchase shares of Common Stock uponthe exercise of an Award or (B) satisfy tax 

 

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withholding obligations(including shares retained from the Award creating the tax obligation) shallnot be added back to the number of shares available for the future grant ofAwards; and (iv) shares of Common Stock repurchased by the Company on theopen market using the proceeds from the exercise of an Award shall not increasethe number of shares available for future grant of Awards.

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## (b)           Sub-limits.  Subject to adjustment under Section 10,the following sub-limits on the number of shares subject to Awards shall apply:

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### (1)           Section 162(m) Per-Participant Limit.  The maximum number of shares of Common Stockwith respect to which Awards may be granted to any Participant under the Plan shallbe 750,000 per fiscal year.  For purposesof the foregoing limit, the combination of an Option in tandem with a SAR (aseach is hereafter defined) shall be treated as a single Award.  The per Participant limit described in this Section 4(b)(1) shallbe construed and applied consistently with Section 162(m) of the Codeor any successor provision thereto, and the regulations thereunder (“***Section 162(m)***”).

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### (2)           Limit on Awards other than Options and SARS.  The maximum number of shares with respect towhich Awards other than Options and SARs may be granted shall be 75% of themaximum number of authorized shares set forth in Section 4(a)(1).

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### (3)           Limit on Awards to Directors.  The maximum number of shares with respect towhich Awards may be granted to directors who are not employees of the Companyat the time of grant shall be 20% of the maximum number of authorized sharesset forth in Section 4(a)(1).

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## (c)           SubstituteAwards.  In connection with a mergeror consolidation of an entity with the Company or the acquisition by theCompany of property or stock of an entity, the Board may grant Awards insubstitution for any options or other stock or stock-based awards granted bysuch entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board deemsappropriate in the circumstances, notwithstanding any limitations on Awardscontained in the Plan.  Substitute Awardsshall not count against the overall share limit set forth in Section 4(a)(1) orany sublimits contained in the Plan, except as may be required by reason of Section 422and related provisions of the Code.

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5.           Stock Options

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## (a)           General.  The Board may grant options to purchaseCommon Stock (each, an “***Option***”)and determine the number of shares of Common Stock to be covered by eachOption, the exercise price of each Option and the conditions and limitationsapplicable to the exercise of each Option, including conditions relating toapplicable federal or state securities laws, as it considers necessary oradvisable.  An Option that is notintended to be an Incentive Stock Option (as hereinafter defined) shall bedesignated a “***Nonstatutory Stock Option***.”

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## (b)           IncentiveStock Options.  An Option that theBoard intends to be an “incentive stock option” as defined in Section 422of the Code (an “***Incentive Stock Option***”)shall only be granted to employees of Network Engines, Inc., any ofNetwork Engines, Inc.’s present or future parent or subsidiarycorporations as defined in Sections 424(e) or (f) of the Code, andany other 

 

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entities the employees of whichare eligible to receive Incentive Stock Options under the Code, and shall besubject to and shall be construed consistently with the requirements of Section 422of the Code.  The Company shall have noliability to a Participant, or any other party, if an Option (or any partthereof) that is intended to be an Incentive Stock Option is not an IncentiveStock Option or if the Company converts an Incentive Stock Option to a NonstatutoryStock Option.

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## (c)           ExercisePrice.  The Board shall establish theexercise price of each Option and specify the exercise price in the applicableoption agreement.  The exercise priceshall be not less than 100% of the Fair Market Value (as defined below) on thedate the Option is granted; provided that if the Board approves the grant of anOption with an exercise price to be determined on a future date, the exerciseprice shall be not less than 100% of the Fair Market Value on such future date.

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## (d)           Durationof Options.  Each Option shall beexercisable at such times and subject to such terms and conditions as the Boardmay specify in the applicable option agreement; *provided,however*, that no Option will be granted with a term in excess of 10years.

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## (e)           Exerciseof Option.  Options may be exercisedby delivery to the Company of a written notice of exercise signed by the properperson or by any other form of notice (including electronic notice) approved bythe Company, together with payment in full as specified in Section 5(f) forthe number of shares for which the Option is exercised.  Shares of Common Stock subject to the Optionwill be delivered by the Company as soon as practicable following exercise.

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## (f)            PaymentUpon Exercise.  Common Stock purchasedupon the exercise of an Option granted under the Plan shall be paid for asfollows:

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### (1)           in cash or by check, payable to the order of the Company;

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### (2)           except as may otherwise be provided in the applicableoption agreement, by (i) delivery of an irrevocable and unconditionalundertaking by a creditworthy broker to deliver promptly to the Companysufficient funds to pay the exercise price and any required tax withholding or (ii) deliveryby the Participant to the Company of a copy of irrevocable and unconditionalinstructions to a creditworthy broker to deliver promptly to the Company cashor a check sufficient to pay the exercise price and any required taxwithholding;

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### (3)           to the extent provided for in the applicable optionagreement or approved by the Board, in its sole discretion, by delivery (eitherby actual delivery or attestation) of shares of Common Stock owned by theParticipant valued at their fair market value, determined as provided below (“***Fair Market Value***”), provided (i) suchmethod of payment is then permitted under applicable law, (ii) such CommonStock, if acquired directly from the Company, was owned by the Participant forsuch minimum period of time, if any, as may be established by the Board in itsdiscretion and (iii) such Common Stock is not subject to any repurchase,forfeiture, unfulfilled vesting or other similar requirements;

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### (4)           to the extent provided for in the applicable NonstatutoryStock Option agreement or approved by the Board in its sole discretion, bydelivery of a notice of “net 

 

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exercise” to the Company, as aresult of which the Participant would receive the number of shares of CommonStock underlying the Option so exercised reduced by the number of shares ofCommon Stock equal to the aggregate exercise price of the Option divided by theFair Market Value on the date of exercise;

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### (5)           to the extent permitted by applicable law and provided forin the applicable Option agreement or approved by the Board, in its sole discretion,by payment of such other lawful consideration as the Board may determine; or

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### (6)           by any combination of the above permitted forms ofpayment.

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##### “***Fair Market Value***”of a share of Common Stock for purposes of the Plan will be determined asfollows:

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##### (A) if the Common Stocktrades on a national securities exchange, the closing sale price (for theprimary trading session) on the date of grant; or

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##### (B) if the Common Stockdoes not trade on any such exchange, the average of the closing bid and askedprices as reported by an authorized OTCBB market data vendor as listed on theOTCBB website (otcbb.com) on the date of grant; or

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##### (C) if the Common Stock isnot publicly traded, the Board will determine the Fair Market Value forpurposes of the Plan using any measure of value it determines to be appropriate(including, as it considers appropriate, relying on appraisals) in a mannerconsistent with the valuation principles under Code Section 409A, exceptas the Board or Committee may expressly determine otherwise.

 

##### For any date that is not a trading day, theFair Market Value of a share of Common Stock for such date will be determinedby using the closing sale price or average of the bid and asked prices, asappropriate, for the immediately preceding trading day and with the timing inthe formulas above adjusted accordingly. The Board can substitute a particular time of day or other measure of “closingsale price” or “bid and asked prices” if appropriate because of exchange ormarket procedures or can, in its sole discretion, use weighted averages eitheron a daily basis or such longer period as complies with Code Section 409A.

 

### The Board has sole discretion to determinethe Fair Market Value for purposes of this Plan, and all Awards are conditionedon the participants’ agreement that the Board’s determination is conclusive andbinding even though others might make a different determination.

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## (g)           Limitationon Repricing.  Unless such action isapproved by the Company’s stockholders:  (1) nooutstanding Option granted under the Plan may be amended to provide an exerciseprice per share that is lower than the then-current exercise price per share ofsuch outstanding Option (other than adjustments pursuant to Section 10)and (2) the Board may not cancel any outstanding Option (whether or notgranted under the Plan) and grant in substitution therefor new Awards under thePlan covering the same or a different number of shares of Common Stock andhaving an exercise price per share lower than the then-current exercise priceper share of the cancelled option.

 

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6.           Director Options

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## (a)           InitialGrant.  Upon the commencement ofservice on the Board by any individual who is not then an employee of theCompany or any subsidiary of the Company, the Company shall grant to suchperson a Nonstatutory Stock Option to purchase 50,000 shares of Common Stock(subject to adjustment under Section 10).

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## (b)           AnnualGrant.  On the date of each annualmeeting of stockholders of the Company, the Company shall grant to each memberof the Board of Directors of the Company who is both serving as a director ofthe Company immediately prior to and immediately following such annual meetingand who is not then an employee of the Company or any of its subsidiaries, aNonstatutory Stock Option to purchase 15,000 shares of Common Stock (subject toadjustment under Section 10); *provided, however*,that a director shall not be eligible to receive an option grant under this Section 6(b) untilsuch director has served on the Board for at least nine months.

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## (c)           Termsof Director Options.  Options grantedunder this Section 6 shall (i) have an exercise price equal to theclosing sale price (for the primary trading session) of the Common Stock on thenational securities exchange on which the Common Stock is then traded on theday of grant (or if the date of grant is not a trading day on such exchange,the trading day immediately prior to the date of grant) or if the Common Stockis not then traded on a national securities exchange, the Fair Market Value ofthe Common Stock on such date as determined by the Board, (ii) (A) inthe case of options granted under Section 6(a) shall vest in equal25% increments on each anniversary of the date of grant and (B) in thecase of options granted under Section 6(b) shall vest in full on thefirst anniversary of the date of grant, provided that in either such case theindividual is serving on the Board on such date (or in the case of an optiongranted under Section 6(b), if earlier, on the date which is one businessday prior to date of the Company’s next annual meeting), provided that ineither such case no additional vesting shall take place after the Participantceases to serve as a director and further provided that in either such case theBoard may provide for accelerated vesting in the case of death, disability,change in control, attainment of mandatory retirement age or retirementfollowing at least 10 years of service, (iii) expire on the earlier of 10years from the date of grant or three months following cessation of service onthe Board and (iv) contain such other terms and conditions as the Boardshall determine.

 

7.           Stock Appreciation Rights

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## (a)           General.  The Board may grant Awards consisting of SARsentitling the holder, upon exercise, to receive an amount of Common Stock orcash or a combination thereof (such form to be determined by the Board)determined by reference to appreciation, from and after the date of grant, inthe Fair Market Value of a share of Common Stock over the measurement priceestablished pursuant to Section 7(c). The date as of which such appreciation is determined shall be theexercise date.

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## (b)           Grants.  SARs may be granted in tandem with, orindependently of, Options granted under the Plan.

 

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### (1)           Tandem Awards. When SARs are expressly granted in tandem with Options, (i) the SARwill be exercisable only at such time or times, and to the extent, that therelated Option is exercisable (except to the extent designated by the Board inconnection with a Reorganization Event) and will be exercisable in accordancewith the procedure required for exercise of the related Option; (ii) theSAR will terminate and no longer be exercisable upon the termination orexercise of the related Option, except to the extent designated by the Board inconnection with a Reorganization Event and except that a SAR granted withrespect to less than the full number of shares covered by an Option will not bereduced until the number of shares as to which the related Option has beenexercised or has terminated exceeds the number of shares not covered by theSAR; (iii) the Option will terminate and no longer be exercisable upon theexercise of the related SAR; and (iv) the SAR will be transferable onlywith the related Option.

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### (2)           Independent SARs. A SAR not expressly granted in tandem with an Option will becomeexercisable at such time or times, and on such conditions, as the Board mayspecify in the SAR Award.

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## (c)           MeasurementPrice.  The Board shall establish themeasurement price of each SAR and specify it in the applicable SARagreement.  The measurement price shallnot be less than 100% of the Fair Market Value on the date the SAR is granted;provided that if the Board approves the grant of a SAR with a measurement priceto be determined on a future date, the measurement price shall be not less than100% of the Fair Market Value on such future date.

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## (d)           Durationof SARs.  Each SAR shall beexercisable at such times and subject to such terms and conditions as the Boardmay specify in the applicable SAR agreement; *provided,however*, that no SAR will be granted with a term in excess of 10years.

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## (e)           Exerciseof SARs.  SARs may be exercised bydelivery to the Company of a written notice of exercise signed by the properperson or by any other form of notice (including electronic notice) approved bythe Company, together with any other documents required by the Board.

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## (f)            Limitationon Repricing.  Unless such action isapproved by the Company’s stockholders: (1) no outstanding SAR grantedunder the Plan may be amended to provide an exercise price per share that islower than the then-current exercise price per share of such outstanding SAR(other than adjustments pursuant to Section 10) and (2) the Board maynot cancel any outstanding SAR (whether or not granted under the Plan) andgrant in substitution therefor new Awards under the Plan covering the same or adifferent number of shares of Common Stock and having an exercise price pershare lower than the then-current exercise price per share of the cancelledSAR.

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8.           Restricted Stock; Restricted Stock Units

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## (a)           General.  The Board may grant Awards entitlingrecipients to acquire shares of Common Stock (“***RestrictedStock***”), subject to the right of the Company to repurchase allor part of such shares at their issue price or other stated or formula price(or to require forfeiture of such shares if issued at no cost) from therecipient in the event that conditions specified by the Board in the applicableAward are not satisfied prior to the end of the applicable restriction 

 

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## period or periods established by the Boardfor such Award.  Instead of granting Awardsfor Restricted Stock, the Board may grant Awards entitling the recipient toreceive shares of Common Stock or cash to be delivered at the time such Awardvests (“***Restricted Stock Units***”)(Restricted Stock and Restricted Stock Units are each referred to herein as a “***Restricted Stock Award***”).

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## (b)           Termsand Conditions for All Restricted Stock Awards.  The Board shall determine the terms andconditions of a Restricted Stock Award, including the conditions for vestingand repurchase (or forfeiture) and the issue price.

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## (c)           AdditionalProvisions Relating to Restricted Stock.

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### (1)           Dividends. Participants holding shares of Restricted Stock will be entitled to allordinary cash dividends paid with respect to such shares, unless otherwiseprovided by the Board.  Unless otherwiseprovided by the Board, if any dividends or distributions are paid in shares, orconsist of a dividend or distribution to holders of Common Stock other than anordinary cash dividend, the shares, cash or other property will be subject tothe same restrictions on transferability and forfeitability as the shares ofRestricted Stock with respect to which they were paid.  Each dividend payment will be made no laterthan the end of the calendar year in which the dividends are paid to shareholdersof that class of stock or, if later, the 15th day of the third month following the date thedividends are paid to shareholders of that class of stock.

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### (2)           Stock Certificates. The Company may require that any stock certificates issued in respect ofshares of Restricted Stock shall be deposited in escrow by the Participant,together with a stock power endorsed in blank, with the Company (or itsdesignee).  At the expiration of theapplicable restriction periods, the Company (or such designee) shall deliverthe certificates no longer subject to such restrictions to the Participant orif the Participant has died, to the beneficiary designated, in a mannerdetermined by the Board, by a Participant to receive amounts due or exerciserights of the Participant in the event of the Participant’s death (the “***Designated Beneficiary***”).  In the absence of an effective designation bya Participant, “***Designated Beneficiary***” shallmean the Participant’s estate.

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## (d)           AdditionalProvisions Relating to Restricted Stock Units.

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### (1)           Settlement. Upon the vesting of and/or lapsing of any other restrictions (i.e.,settlement) with respect to each Restricted Stock Unit, the Participant shallbe entitled to receive from the Company one share of Common Stock or an amountof cash equal to the Fair Market Value of one share of Common Stock, asprovided in the applicable Award agreement. The Board may, in its discretion, provide that settlement of RestrictedStock Units shall be deferred, on a mandatory basis or at the election of theParticipant in a manner that complies with Code Section 409A.

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### (2)           Voting Rights. A Participant shall have no voting rights with respect to any RestrictedStock Units.

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### (3)           Dividend Equivalents.  To the extent provided by the Board, in itssole discretion, a grant of Restricted Stock Units may provide Participantswith the right to receive an amount equal to any dividends or otherdistributions declared and paid on an equal number of 

 

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### outstanding shares of Common Stock (“***Dividend Equivalents***”).  Dividend Equivalents may be paid currently orcredited to an account for the Participants, may be settled in cash and/orshares of Common Stock and may be subject to the same restrictions on transferand forfeitability as the Restricted Stock Units with respect to which paid, asdetermined by the Board in its sole discretion, subject in each case to suchterms and conditions as the Board shall establish, in each case to be set forthin the applicable Award agreement.

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9.           Other Stock-Based Awards

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## (a)           General.  Other Awards of shares of Common Stock, andother Awards that are valued in whole or in part by reference to, or areotherwise based on, shares of Common Stock or other property, may be granted hereunderto Participants (“***Other Stock-Based-Awards***”),including without limitation Awards entitling recipients to receive shares ofCommon Stock to be delivered in the future. Other Stock-Based Awards may be paid in shares of Common Stock or cash,as the Board shall determine.  TheCompany may also grant Performance Awards or other Awards denominated in cashrather than shares of Common Stock (“***Cash-Based Awards***”).

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## (b)           Termsand Conditions.  Subject to theprovisions of the Plan, the Board shall determine the terms and conditions ofeach Other Stock-Based Award or Cash-Based Awards, including any purchase priceapplicable thereto.

 

10.          Adjustmentsfor Changes in Common Stock and Certain Other Events

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## (a)           Changesin Capitalization.  In the event ofany stock split, reverse stock split, stock dividend, recapitalization,combination of shares, reclassification of shares, spin-off or other similarchange in capitalization or event, or any dividend or distribution to holdersof Common Stock other than an ordinary cash dividend, (i) the number andclass of securities available under the Plan, (ii) the sub-limits andshare counting rules set forth in Sections 4(a) and 4(b), (iii) thenumber and class of securities and exercise price per share of each outstandingOption and each Option issuable under Section 6, (iv) the share- andper-share provisions and the measurement price of each SAR, (v) the numberof shares subject to and the repurchase price per share subject to eachoutstanding Restricted Stock Award and (vi) the share- andper-share-related provisions and the purchase price, if any, of eachoutstanding Other Stock-Based Award, shall be equitably adjusted by the Company(or substituted Awards may be made, if applicable) in the manner determined bythe Board.  Without limiting thegenerality of the foregoing, in the event the Company effects a split of theCommon Stock by means of a stock dividend and the exercise price of and thenumber of shares subject to an outstanding Option are adjusted as of the dateof the distribution of the dividend (rather than as of the record date for suchdividend), then an optionee who exercises an Option between the record date andthe distribution date for such stock dividend shall be entitled to receive, onthe distribution date, the stock dividend with respect to the shares of CommonStock acquired upon such Option exercise, notwithstanding the fact that suchshares were not outstanding as of the close of business on the record date forsuch stock dividend.

 

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### (b)           Reorganization Events.

 

### (1)           Definition. A “***Reorganization Event***” shallmean:  (a) any merger orconsolidation of the Company with or into another entity as a result of whichall of the Common Stock of the Company is converted into or exchanged for theright to receive cash, securities or other property or is cancelled, (b) anytransfer or disposition of all of the Common Stock of the Company for cash,securities or other property pursuant to a share exchange or other transactionor (c) any liquidation or dissolution of the Company.

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### (2)           Consequences of a Reorganization Event on Awards Otherthan Restricted Stock Awards.  Inconnection with a Reorganization Event, the Board may take any one or more ofthe following actions as to all or any (or any portion of) outstanding Awardsother than Restricted Stock Awards on such terms as the Board determines:  (i) provide that Awards shall beassumed, or substantially equivalent Awards shall be substituted, by theacquiring or succeeding corporation (or an affiliate thereof), (ii) uponwritten notice to a Participant, provide that the Participant’s unexercisedAwards will terminate immediately prior to the consummation of suchReorganization Event unless exercised by the Participant within a specifiedperiod following the date of such notice, (iii) provide that outstandingAwards shall become exercisable, realizable, or deliverable, or restrictionsapplicable to an Award shall lapse, in whole or in part prior to or upon suchReorganization Event, (iv) in the event of a Reorganization Event underthe terms of which holders of Common Stock will receive upon consummationthereof a cash payment for each share surrendered in the Reorganization Event(the “***Acquisition Price***”), make orprovide for a cash payment to a Participant equal to the excess, if any,of  (A) the Acquisition Price timesthe number of shares of Common Stock subject to the Participant’s Awards (tothe extent the exercise price does not exceed the Acquisition Price) over (B) theaggregate exercise price of all such outstanding Awards and any applicable taxwithholdings, in exchange for the termination of such Awards, (v) providethat, in connection with a liquidation or dissolution of the Company, Awardsshall convert into the right to receive liquidation proceeds (if applicable,net of the exercise price thereof and any applicable tax withholdings) and (vi) anycombination of the foregoing.  In takingany of the actions permitted under this Section 10(b), the Board shall notbe obligated by the Plan to treat all Awards, all Awards held by a Participant,or all Awards of the same type, identically.

 

For purposes of clause (i) above,an Option shall be considered assumed if, following consummation of theReorganization Event, the Option confers the right to purchase, for each shareof Common Stock subject to the Option immediately prior to the consummation ofthe Reorganization Event, the consideration (whether cash, securities or otherproperty) received as a result of the Reorganization Event by holders of CommonStock for each share of Common Stock held immediately prior to the consummationof the Reorganization Event (and if holders were offered a choice ofconsideration, the type of consideration chosen by the holders of a majority ofthe outstanding shares of Common Stock); *provided, however*,that if the consideration received as a result of the Reorganization Event isnot solely common stock of the acquiring or succeeding corporation (or anaffiliate thereof), the Company may, with the consent of the acquiring orsucceeding corporation, provide for the consideration to be received upon theexercise of Options to consist solely of common stock of the acquiring orsucceeding corporation (or an affiliate thereof) equivalent in value (asdetermined by the Board) to the per share consideration received by holders ofoutstanding shares of Common Stock as a result of the Reorganization Event.

 

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### (3)           Consequences of a Reorganization Event on RestrictedStock Awards.  Upon the occurrence ofa Reorganization Event other than a liquidation or dissolution of the Company,the repurchase and other rights of the Company under each outstandingRestricted Stock Award shall inure to the benefit of the Company’s successor andshall, unless the Board determines otherwise, apply to the cash, securities orother property which the Common Stock was converted into or exchanged forpursuant to such Reorganization Event in the same manner and to the same extentas they applied to the Common Stock subject to such Restricted Stock Award; *provided*, *however*, thatthe Board may provide for termination or deemed satisfaction of such repurchaseor other rights under the instrument evidencing any Restricted Stock Award orany other agreement between a Participant and the Company, either initially orby amendment.  Upon the occurrence of aReorganization Event involving the liquidation or dissolution of the Company,except to the extent specifically provided to the contrary in the instrumentevidencing any Restricted Stock Award or any other agreement between aParticipant and the Company, all restrictions and conditions on all RestrictedStock Awards then outstanding shall automatically be deemed terminated orsatisfied.

 

11.          General Provisions Applicable toAwards

 

## (a)           Transferabilityof Awards.  Awards shall not be sold,assigned, transferred, pledged or otherwise encumbered by the person to whomthey are granted, either voluntarily or by operation of law, except by will orthe laws of descent and distribution or, other than in the case of an IncentiveStock Option, pursuant to a qualified domestic relations order, and, during thelife of the Participant, shall be exercisable only by the Participant; *provided, however*, that the Board may permit or provide inan Award for the gratuitous transfer of the Award by the Participant to or forthe benefit of any immediate family member, family trust or other entityestablished for the benefit of the Participant and/or an immediate familymember thereof if, with respect to such proposed transferee, the Company wouldbe eligible to use a Form S-8 for the registration of the sale of theCommon Stock subject to such Award under the Securities Act of 1933, asamended; provided, further, that the Company shall not be required to recognizeany such transfer until such time as the Participant and such permittedtransferee shall, as a condition to such transfer, deliver to the Company awritten instrument in form and substance satisfactory to the Company confirmingthat such transferee shall be bound by all of the terms and conditions of theAward.  References to a Participant, tothe extent relevant in the context, shall include references to authorizedtransferees.

##  

## (b)           Documentation.  Each Award shall be evidenced in such form(written, electronic or otherwise) as the Board shall determine.  Each Award may contain terms and conditionsin addition to those set forth in the Plan.

##  

## (c)           BoardDiscretion.  Except as otherwiseprovided by the Plan, each Award may be made alone or in addition or inrelation to any other Award.  The termsof each Award need not be identical, and the Board need not treat Participantsuniformly.

##  

## (d)           Terminationof Status.  The Board shall determinethe effect on an Award of the disability, death, termination or other cessationof employment, authorized leave of absence or other change in the employment orother status of a Participant and the extent to which, and the 

 

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period during which, theParticipant, or the Participant’s legal representative, conservator, guardianor Designated Beneficiary, may exercise rights under the Award.

 

## (e)           Withholding.  The Participant must satisfy all applicablefederal, state, and local or other income and employment tax withholdingobligations before the Company will deliver stock certificates or otherwiserecognize ownership of Common Stock under an Award.  The Company may decide to satisfy thewithholding obligations through additional withholding on salary or wages.  If the Company elects not to or cannotwithhold from other compensation, the Participant must pay the Company the fullamount, if any, required for withholding or have a broker tender to the Companycash equal to the withholding obligations. Payment of withholding obligations is due before the Company will issueany shares on exercise or release from forfeiture of an Award or, if theCompany so requires, at the same time as is payment of the exercise priceunless the Company determines otherwise. If provided for in an Award or approved by the Board in its solediscretion, a Participant may satisfy such tax obligations in whole or in partby delivery (either by actual delivery or attestation) of shares of CommonStock, including shares retained from the Award creating the tax obligation,valued at their Fair Market Value; *provided, however*,except as otherwise provided by the Board, that the total tax withholding wherestock is being used to satisfy such tax obligations cannot exceed the Company’sminimum statutory withholding obligations (based on minimum statutorywithholding rates for federal and state tax purposes, including payroll taxes,that are applicable to such supplemental taxable income).  Shares used to satisfy tax withholding requirementscannot be subject to any repurchase, forfeiture, unfulfilled vesting or othersimilar requirements.

##  

## (f)            Amendmentof Award.  The Board may amend,modify or terminate any outstanding Award, including but not limited to,substituting therefor another Award of the same or a different type, changingthe date of exercise or realization, and converting an Incentive Stock Optionto a Nonstatutory Stock Option.  TheParticipant’s consent to such action shall be required unless (i) theBoard determines that the action, taking into account any related action, wouldnot materially and adversely affect the Participant’s rights under the Plan or (ii) thechange is permitted under Section 10 hereof.

##  

## (g)           Conditionson Delivery of Stock.  The Companywill not be obligated to deliver any shares of Common Stock pursuant to thePlan or to remove restrictions from shares previously delivered under the Planuntil (i) all conditions of the Award have been met or removed to thesatisfaction of the Company, (ii) in the opinion of the Company’s counsel,all other legal matters in connection with the issuance and delivery of suchshares have been satisfied, including any applicable securities laws and anyapplicable stock exchange or stock market rules and regulations, and (iii) theParticipant has executed and delivered to the Company such representations oragreements as the Company may consider appropriate to satisfy the requirementsof any applicable laws, rules or regulations.

##  

## (h)           Acceleration.  The Board may at any time provide that anyAward shall become immediately exercisable in full or in part, free of some orall restrictions or conditions, or otherwise realizable in full or in part, asthe case may be.

 

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## (i)            PerformanceAwards.

###  

### (1)           Grants. Restricted Stock Awards and Other Stock-Based Awards under the Plan maybe made subject to the achievement of performance goals pursuant to this Section 11(i) (“***Performance Awards***”), subject to thelimit in Section 4(b)(1) on shares covered by such grants.

###  

### (2)           Committee. Grants of Performance Awards to any Covered Employee intended to qualifyas “performance-based compensation” under Section 162(m) (“***Performance-Based Compensation***”)shall be made only by a Committee (or subcommittee of a Committee) comprisedsolely of two or more directors eligible to serve on a committee making Awardsqualifying as “performance-based compensation” under Section 162(m).  In the case of such Awards granted to CoveredEmployees, references to the Board or to a Committee shall be treated asreferring to such Committee or subcommittee. “***Covered Employee***” shall meanany person who is, or whom the Committee, in its discretion, determines may be,a “covered employee” under Section 162(m)(3) of the Code.

###  

### (3)           Performance Measures.  For any Award that is intended to qualify asPerformance-Based Compensation, the Committee shall specify that the degree ofgranting, vesting and/or payout shall be subject to the achievement of one ormore objective performance measures established by the Committee, which shallbe based on the relative or absolute attainment of specified levels of one orany combination of the following:  netincome, earnings before or after discontinued operations, stock compensation,interest, taxes, depreciation and/or amortization, operating profit before orafter discontinued operations and/or taxes, sales, sales growth, earningsgrowth, cash flow or cash position, gross margins, stock price, market share,return on sales, assets, equity or investment, improvement of financialratings, achievement of balance sheet or income statement objectives or totalshareholder return. Such goals may reflect absolute entity or business unitperformance or a relative comparison to the performance of a peer group ofentities or other external measure of the selected performance criteria and maybe absolute in their terms or measured against or in relationship to othercompanies comparably, similarly or otherwise situated.  The Committee may specify that suchperformance measures shall be adjusted to exclude any one or more of (i) extraordinaryitems, (ii) gains or losses on the dispositions of discontinuedoperations, (iii) the cumulative effects of changes in accountingprinciples, (iv) the writedown of any asset, and (v) charges forrestructuring and rationalization programs. Such performance measures:  (i) mayvary by Participant and may be different for different Awards; (ii) may beparticular to a Participant or the department, branch, line of business,subsidiary or other unit in which the Participant works and may cover suchperiod as may be specified by the Committee; and (iii) shall be set by theCommittee within the time period prescribed by, and shall otherwise comply withthe requirements of, Section 162(m). Awards that are not intended to qualify as Performance-BasedCompensation may be based on these or such other performance measures as theBoard may determine.

###  

### (4)           Adjustments. Notwithstanding any provision of the Plan, with respect to anyPerformance Award that is intended to qualify as Performance-BasedCompensation, the Committee may adjust downwards, but not upwards, the cash ornumber of Shares payable pursuant to such Award, and the Committee may notwaive the achievement of the applicable performance measures except in the caseof the death or disability of the Participant or a change in control of theCompany.

 

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### (5)           Other.  TheCommittee shall have the power to impose such other restrictions on PerformanceAwards as it may deem necessary or appropriate to ensure that such Awardssatisfy all requirements for Performance-Based Compensation.

 

12.          Miscellaneous

##  

## (a)           NoRight To Employment or Other Status. No person shall have any claim or right to be granted an Award, and thegrant of an Award shall not be construed as giving a Participant the right tocontinued employment or any other relationship with the Company.  The Company expressly reserves the right atany time to dismiss or otherwise terminate its relationship with a Participantfree from any liability or claim under the Plan, except as expressly providedin the applicable Award.

##  

## (b)           NoRights As Stockholder.  Subject tothe provisions of the applicable Award, no Participant or DesignatedBeneficiary shall have any rights as a stockholder with respect to any sharesof Common Stock to be distributed with respect to an Award until becoming therecord holder of such shares.

##  

## (c)           EffectiveDate and Term of Plan.  The Planshall become effective on the date the Plan is approved by the Company’sstockholders (the “***Effective Date***”).  No Awards shall be granted under the Planafter the expiration of 10 years from the Effective Date, but Awards previouslygranted may extend beyond that date.

##  

## (d)           Amendmentof Plan.  The Board may amend,suspend or terminate the Plan or any portion thereof at any time provided that (i) tothe extent required by Section 162(m), no Award granted to a Participantthat is intended to comply with Section 162(m) after the date of suchamendment shall become exercisable, realizable or vested, as applicable to suchAward, unless and until the Company’s stockholders approve such amendment ifrequired by Section 162(m) (including the vote required under Section 162(m));(ii) no amendment that would require stockholder approval under the rules ofthe NASDAQ Stock Market (“***NASDAQ***”)may be made effective unless and until the Company’s stockholders approve suchamendment; and (iii) if NASDAQ amends its corporate governance rules sothat such rules no longer require stockholder approval of materialamendments to equity compensation plans, then, from and after the effectivedate of such amendment to the NASDAQ rules, no amendment to the Plan (A) materiallyincreasing the number of shares authorized under the Plan (other than pursuantto Section 4(c) or 10), (B) expanding the types of Awards thatmay be granted under the Plan, or (C) materially expanding the class ofparticipants eligible to participate in the Plan shall be effective unless anduntil the Company’s stockholders approve such amendment.  In addition, if at any time the approval ofthe Company’s stockholders is required as to any other modification oramendment under Section 422 of the Code or any successor provision withrespect to Incentive Stock Options, the Board may not effect such modificationor amendment without such approval. Unless otherwise specified in the amendment, any amendment to the Planadopted in accordance with this Section 12(d) shall apply to, and bebinding on the holders of, all Awards outstanding under the Plan at the timethe amendment is adopted, provided the Board determines that such amendmentdoes not materially and adversely affect the rights of Participants under thePlan.  An Award may be made that isconditioned upon stockholder approval of an amendment to the Plan.

 

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## (e)           Authorizationof Sub-Plans.  The Board may fromtime to time establish one or more sub-plans under the Plan for purposes ofsatisfying applicable securities or tax laws of various jurisdictions.  The Board shall establish such sub-plans byadopting supplements to the Plan containing (i) such limitations on theBoard’s discretion under the Plan as the Board deems necessary or desirable or (ii) suchadditional terms and conditions not otherwise inconsistent with the Plan as theBoard shall deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of thePlan, but each supplement shall apply only to Participants within the affectedjurisdiction and the Company shall not be required to provide copies of anysupplement to Participants in any jurisdiction which is not the subject of suchsupplement.

##  

## (f)            NonU.S. Employees. Awards may be granted to Participants who are non-U.S.citizens or residents employed outside the United States, or both, on suchterms and conditions different from those applicable to Awards to Participantsemployed in the United States as may, in the judgment of the Board, benecessary or desirable in order to recognize differences in local law or taxpolicy. The Board also may impose conditions on the exercise or vesting ofAwards in order to minimize the Board’s obligation with respect to taxequalization for Participants on assignments outside their home country. TheBoard may approve such supplements to or amendments, restatements oralternative versions of the Plan as it may consider necessary or appropriatefor such purposes, without thereby affecting the terms of this Plan as ineffect for any other purpose, and the Secretary or other appropriate officer ofthe Company may certify any such document as having been approved and adoptedin the same manner as this Plan.

##  

## (g)           Compliancewith Section 409A of the Code. Except as provided in individual Awardagreements initially or by amendment, if and to the extent any portion of anypayment, compensation or other benefit provided to a Participant in connectionwith his or her employment termination is determined to constitute “nonqualifieddeferred compensation” within the meaning of Section 409A of the Code andthe Participant is a specified employee as defined in Section 409A(a)(2)(B)(i) ofthe Code, as determined by the Company in accordance with its procedures, bywhich determination the Participant (through accepting the Award) agrees that****he or she is bound, such portion of thepayment, compensation or other benefit shall not be paid before the day that issix months plus one day after the date of “separation from service” (asdetermined under Code Section 409A) (the “***NewPayment Date***”), except as Code Section 409A may thenpermit.  The aggregate of any paymentsthat otherwise would have been paid to the Participant during the periodbetween the date of separation from service and the New Payment Date shall bepaid to the Participant in a lump sum on such New Payment Date, and anyremaining payments will be paid on their original schedule.

##  

### The Company makes no representations orwarranty and shall have no liability to the Participant or any other person ifany provisions of or payments, compensation or other benefits under the Planare determined to constitute nonqualified deferred compensation subject to CodeSection 409A but do not to satisfy the conditions of that section.

###  

## (h)           Limitationson Liability.** **Notwithstanding any otherprovisions of the Plan, no individual****actingas a director, officer, other employee, or agent of the Company will be liableto any Participant, former Participant, spouse, beneficiary, or any otherperson for any claim, loss, liability, or expense incurred in connection withthe Plan, nor will such individual be personally 

 

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liable with respect to the Planbecause of any contract or other instrument he or she executes in his or hercapacity as a director, officer, other employee,  or agent of the Company.  The Company will indemnify and hold harmlesseach director, officer, other employee, or agent of the Company to whom anyduty or power relating to the administration or interpretation of the Plan hasbeen or will be delegated, against any cost or expense (including attorneys’fees) or liability (including any sum paid in settlement of a claim with theBoard’s approval) arising out of any act or omission to act concerning thisPlan unless arising out of such person’s own fraud or bad faith.

 

## (i)            GoverningLaw.  The provisions of the Plan andall Awards made hereunder shall be governed by and interpreted in accordancewith the laws of the State of Delaware, excluding choice-of-law principles ofthe law of such state that would require the application of the laws of ajurisdiction other than such state.

###  

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