Exhibit 10.2


 


INVESTORS FINANCIAL SERVICES CORP.


 


2005 EQUITY INCENTIVE PLAN


 


1.             Purpose


 


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


 


2.             Definitions


 


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


 


2.1.  Accelerate, Accelerated,
and Acceleration, means:
(a) when used with respect to an Option or Stock Appreciation Right, that
as of the time of reference the Option or Stock Appreciation Right will become
exercisable with respect to some or all of the shares of Stock for which it was
not then otherwise exercisable by its terms; (b) when used with respect to
Restricted Stock or Restricted Stock Units, that the Risk of Forfeiture
otherwise applicable to the Stock or Units shall expire with respect to some or
all of the shares of Restricted Stock or Units then still otherwise subject to
the Risk of Forfeiture; and (c) when used with respect to Performance
Units, that the applicable Performance Goals shall be deemed to have been met
as to some or all of the Units.


 


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


 


2.3.  Affiliate means any corporation, partnership, limited
liability company, business trust, or other entity controlling, controlled by
or under common control with the Company.


 


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


 


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


 


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


 


2.7.  Change in Control means the
occurrence of any of the following after the date of the approval of the Plan
by the Board:


 


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


 


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


 


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


 


(c)       over
a period of 36 consecutive months or less, there is a change in the composition
of the Board such that a majority of the Board members (rounded up to the next
whole number, if a fraction) ceases, by reason of one or more proxy contests
for the election of Board members, to be composed of individuals who either
(i) have been Board members continuously since the beginning of that
period, or (ii) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described in the
preceding clause (i) who were still in office at the time that election or
nomination was approved by the Board; or


 


(d)       a
majority of the Board votes in favor of a decision that a Change in Control has
occurred.


 


2.8.  Code means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute thereto, and any regulations issued
from time to time thereunder.


 


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


 


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


 


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


 


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


 


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


 


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


 


2.15.  Non-Employee Director means a director that is not an
employee of the Company.


 


2.16.  Nonstatutory Option means any Option that is not an
Incentive Option.


 


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


 


2.18.  Optionee means a Participant to whom an Option shall have
been granted under the Plan.


 


2.19.  Participant means any holder of an outstanding Award under
the Plan.


 


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


 


2.21.  Performance Goals means, for a Performance Period, the
written goals established by the Committee for the Performance Period based
upon the Performance Criteria. Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance or the performance of a division, business
unit, subsidiary, or an individual.


 


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


 


2.23.  Performance Unit means a right granted to a Participant
under Section 7.5, to receive cash, Stock or other Awards, the payment of
which is contingent on achieving Performance Goals established by the
Committee.


 


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


 


2.25.  Qualified Performance-Based Awards means Awards intended to
qualify as “performance-based compensation” under Section 162(m) of the
Code.


 


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


 


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


 


2.28.  Risk of Forfeiture means a limitation on the right of the
Participant to retain Restricted Stock or Restricted Stock Units, including a
right in the Company to reacquire shares of Restricted Stock at less than their
then Market Value, arising because of the occurrence or non-occurrence of
specified events or conditions.


 


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


 


2.30.  Stock means common stock, par value $.01 per share, of the
Company, and such other securities as may be substituted for Stock pursuant to
Section 8.


 


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


 


2.32.  Stock Grant means the grant of shares of Stock not subject
to restrictions or other forfeiture conditions.


 


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


 


3.             Term of the Plan


 


Unless the Plan shall have been earlier terminated by the Board, Awards
may be granted under this Plan at any time in the period commencing on the date
of approval of the Plan by the Board and ending immediately prior to the tenth
anniversary of the earlier of the adoption of the Plan by the Board or approval
of the Plan by the Company’s stockholders. Awards granted pursuant to the Plan
within that period shall not expire solely by reason of the termination of the
Plan. Awards of Incentive Options granted prior to stockholder approval of the
Plan are expressly conditioned upon such approval, but in the event of the
failure of the stockholders to approve the Plan shall thereafter and for all
purposes be deemed to constitute Nonstatutory Options.


 


4.             Stock Subject to the Plan


 


At no time shall the number of shares of Stock issued pursuant to or
subject to outstanding Awards granted under the Plan exceed the excess of
(i) 18,080,000 shares of stock over (ii) the number of shares of
Stock issued pursuant to or subject to outstanding awards granted under the
Company’s Amended and Restated 1995 Stock Plan and 1995 Non-Employee Director
Stock Option Plan; subject, however,
to the provisions of Section 8 of the Plan. At no time shall the number of
shares of Stock issued pursuant to or subject to the outstanding Incentive
Options granted under the Plan exceed 5,489,245 shares of Stock; subject, however, to the provisions of
Section 8 of the Plan. For purposes of applying the foregoing limitation,
(a) if any Option or Stock Appreciation Right expires, terminates, or is
cancelled for any reason without having been exercised in full, or if any other
Award is forfeited by the recipient, the shares not purchased by the Optionee
or which are forfeited by the recipient shall again be available for Awards to
be granted under the Plan and (b) if any Option is exercised by delivering
previously owned shares in payment of the exercise price therefore, only the
net number of shares, that is, the number of shares issued minus the number
received by the Company in payment of the exercise price, shall be considered
to have been issued pursuant to an Award granted under the Plan. In addition,
settlement of any Award shall not count against the foregoing limitations
except to the extent settled in the form of Stock. Shares of Stock issued
pursuant to the Plan may be either authorized but unissued shares or shares
held by the Company in its treasury.


 


5.             Administration


 


The Plan shall be administered by the Committee; provided, however, that at any time and on
any one or more occasions the Board may itself exercise any of the powers and
responsibilities assigned the Committee under the Plan and when so acting shall
have the benefit of all of the provisions of the Plan pertaining to the
Committee’s exercise of its authorities hereunder. Subject to the provisions of
the Plan, the Committee shall have complete authority, in its discretion, to
make or to select the manner of making all determinations with respect to each
Award to be granted by the Company under the Plan including the employee,
consultant or director to receive the Award and the form of Award. In making
such determinations, the Committee may take into account the nature of the
services rendered by the respective employees, consultants, and directors,
their present and potential contributions to the success of the Company and its
Affiliates, and such other factors as the Committee in its discretion shall
deem relevant. Subject to the provisions of the Plan, the Committee shall also
have complete authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the 


 


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terms and provisions of the respective Award Agreements (which need not
be identical), and to make all other determinations necessary or advisable for
the administration of the Plan. The Committee’s determinations made in good
faith on matters referred to in the Plan shall be final, binding and conclusive
on all persons having or claiming any interest under the Plan or an Award made
pursuant hereto.


 


6.             Authorization of Grants


 


6.1.  Eligibility. The Committee may grant from time to time and
at any time prior to the termination of the Plan one or more Awards, either
alone or in combination with any other Awards, to any employee of or consultant
to one or more of the Company and its Affiliates or to non-employee members of
the Board or of any board of directors (or similar governing authority) of any
Affiliate. However, only employees of the Company, and of any parent or
subsidiary corporations of the Company, as defined in Sections 424(e) and (f),
respectively, of the Code, shall be eligible for the grant of an Incentive
Option. Further, in no event shall the number of shares of Stock covered by
Options or other Awards granted to any one person in any one calendar year
exceed 25% of the aggregate number of shares of Stock subject to the Plan.


 


6.2.  General Terms of Awards. Each grant of an Award shall be
subject to all applicable terms and conditions of the Plan (including but not
limited to any specific terms and conditions applicable to that type of Award
set out in the following Section), and such other terms and conditions, not
inconsistent with the terms of the Plan, as the Committee may prescribe. No
prospective Participant shall have any rights with respect to an Award, unless
and until such Participant has executed an agreement evidencing the Award,
delivered a fully executed copy thereof to the Company, and otherwise complied
with the applicable terms and conditions of such Award.


 


6.3.  Effect of Termination of Employment, Etc. Unless the
Committee shall provide otherwise with respect to any Award, if the Participant’s
employment or other association with the Company and its Affiliates ends for
any reason, including because of the Participant’s employer ceasing to be an
Affiliate, (a) any outstanding Option or SAR of the Participant shall
cease to be exercisable in any respect not later than 90 days following
that event and, for the period it remains exercisable following that event,
shall be exercisable only to the extent exercisable at the date of that event,
and (b) any other outstanding Award of the Participant shall be forfeited
or otherwise subject to return to or repurchase by the Company on the terms
specified in the applicable Award Agreement. Military or sick leave or other
bona fide leave shall not be deemed a termination of employment or other
association, provided that it
does not exceed the longer of ninety (90) days or the period during which
the absent Participant’s reemployment rights, if any, are guaranteed by statute
or by contract.


 


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


 


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


 


7.             Specific Terms of Awards


 


7.1.  Options.


 


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


 


(b)       Exercise
Price. The price at which shares of Stock may be acquired under each
Incentive Option shall be not less than 100% of the Market Value of Stock on
the Grant Date, or not less than 110% of the Market Value of Stock on the Grant
Date if the Optionee is a Ten Percent Owner. The price at which shares may be
acquired under each Nonstatutory Option shall not be so limited solely by
reason of this Section.


 


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


 


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


 


(e)       Method
of Exercise. An Option may be exercised by the Optionee giving written
notice, in the manner provided in Section 16, specifying the number of
shares with respect to which the Option is then being exercised. Payment of the
purchase price may be made by one or more of the following methods to the
extent provided in the Award Agreement:


 


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


 


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


 


3.       By the Optionee delivering
to the Company a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company cash or a check
payable and acceptable to the Company for the purchase price; provided that in
the event the Optionee chooses to pay the purchase price as so provided, the
Optionee and the broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Committee shall prescribe
as a condition of such payment procedure.


 


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


 


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


 


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


 


(g)       Notification
of Disposition. Each person exercising any Incentive Option granted under
the Plan shall be deemed to have covenanted with the Company to report to the
Company any disposition of such shares prior to the expiration of the holding
periods specified by Section 422(a)(1) of the Code and, if and to the
extent that the realization of income in such a disposition imposes upon the
Company federal, state, local or other withholding tax requirements, or any
such withholding is required to secure for the Company an otherwise available
tax deduction, to remit to the Company an amount in cash sufficient to satisfy
those requirements.


 


7.2.  Stock Appreciation Rights.


 


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


 


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


 


(c)       Other
Terms. Except as the Committee may deem inappropriate or inapplicable in
the circumstances, Stock Appreciation Rights shall be subject to terms and
conditions substantially similar to those applicable to a Nonstatutory Option.
In addition, an SAR related to an Option which can only be exercised during
limited periods following a Change in Control may entitle the Participant to receive
an amount based upon the highest price paid or offered for Stock in any
transaction relating to the Change in Control or paid during the thirty
(30) day period immediately preceding the occurrence of the change in
control in any transaction reported in the stock market in which the Stock is
normally traded.


 


7.3.  Restricted Stock.


 


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


 


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


 


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


 


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


 


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


 


(d)       Restrictions
and Restriction Period. During the Restriction Period applicable to shares
of Restricted Stock, such shares shall be subject to limitations on
transferability and a Risk of Forfeiture arising on the basis of such
conditions related to the performance of services, Company or Affiliate
performance or otherwise as the Committee may determine and provide for in the
applicable Award Agreement. Any such Risk of Forfeiture may be waived or
terminated, or the Restriction Period shortened, at any time by the Committee
on such basis as it deems appropriate.


 


(e)       Rights
Pending Lapse of Risk of Forfeiture or Forfeiture of Award. Except as
otherwise provided in the Plan or the applicable Award Agreement, at all times
prior to lapse of any Risk of Forfeiture applicable to, or forfeiture of, an
Award of Restricted Stock, the Participant shall have all of the rights of a
stockholder of the Company, including the right to vote, and the right to
receive any dividends with respect to, the shares of Restricted Stock. The
Committee, as determined at the time of Award, may permit or require the
payment of cash dividends to be deferred and, if the Committee so determines,
reinvested in additional Restricted Stock to the extent shares are available
under Section 4.


 


(f)        Lapse
of Restrictions. If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock, the certificates for such shares shall be
delivered to the Participant promptly if not theretofore so delivered.


 


7.4.  Restricted Stock Units.


 


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


 


(b)       Form
and Timing of Payment. Payment of earned Restricted Stock Units shall be
made in a single lump sum following the close of the applicable Restriction
Period. At the discretion of the Committee, Participants may be entitled to
receive payments equivalent to any dividends declared with respect to Stock
referenced in grants of Restricted Stock Units but only following the close of
the applicable Restriction Period and then only if the underlying Stock shall
have been earned. Unless the Committee shall provide otherwise, any such
dividend equivalents shall be paid, if at all, without interest or other
earnings.


 


7.5.  Performance Units.


 


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


 


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(b)       Earning
of Performance Units. The Committee shall set Performance Goals in its
discretion which, depending on the extent to which they are met within the
applicable Performance Period, will determine the number and value of
Performance Units that will be paid out to the Participant. After the
applicable Performance Period has ended, the holder of Performance Units shall
be entitled to receive payout on the number and value of Performance Units
earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding Performance Goals have been
achieved.


 


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


 


7.6.  Stock Grants. Stock Grants shall be awarded solely in
recognition of significant contributions to the success of the Company or its
Affiliates, in lieu of compensation otherwise already due and in such other
limited circumstances as the Committee deems appropriate. Stock Grants shall be
made without forfeiture conditions of any kind.


 


7.7.  Qualified Performance-Based Awards.


 


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


 


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


 


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


 


(c)       Discretion
of Committee with Respect to Qualified Performance-Based Awards. Options
may be granted as Qualified Performance-Based Awards in accordance with
Section 7.1, except that the exercise price of any Option intended to
qualify as a Qualified Performance-Based Award shall in no event be less that
the Market Value of the Stock on the date of grant. With regard to other Awards
intended to qualify as Qualified Performance-Based Awards, such as Restricted
Stock, 


 


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


 


(d)       Payment
of Qualified Performance-Based Awards. A Participant will be eligible to
receive payment under a Qualified Performance-Based Award which is subject to
achievement of a Performance Goal or Goals only if the applicable Performance
Goal or Goals period are achieved within the applicable Performance Period, as
determined by the Committee. In determining the actual size of an individual
Qualified Performance-Based Award, the Committee may reduce or eliminate the
amount of the Qualified Performance-Based Award earned for the Performance
Period, if in its sole and absolute discretion, such reduction or elimination
is appropriate.


 


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


 


(f)        Limitation
on Adjustments for Certain Events. No adjustment of any Qualified
Performance-Based Award pursuant to Section 8 shall be made except on such
basis, if any, as will not cause such Award to provide other than “performance-based
compensation” within the meaning of Section 162(m) of the Code.


 


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


 


8.             Adjustment Provisions


 


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


 


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


 


8.2.  Change in Control. The Committee may, in the Award
Agreement, provide for the effect of a Change in Control on an Award. Such
provisions may include but are not limited to any one or more of the following
with respect to any or all Awards: (i) the specific consequences of a
Change in Control on the Awards; (ii) the acceleration or extension of
time periods for purposes of exercising, vesting in, or realizing gain from,
the Awards; (iii) a reservation of the Committee’s right to determine in
its discretion at any time that there shall be full acceleration or no
acceleration of benefits under the Awards; (iv) that only certain or
limited benefits under the Awards shall be accelerated; (v) that the
Awards shall be accelerated for a limited time only; or (vi) that
acceleration of the Awards shall be subject to additional conditions precedent
(such as a termination of employment following a Change in Control).


 


In addition to any action required or authorized by the terms of an
Award, the Committee may take any other action it deems appropriate to ensure
the equitable treatment of Participants in the event of or in anticipation of a
Change in Control, including but not limited to any one or more of the
following with respect to any or all Awards: (i) the waiver of conditions
on the Awards that were imposed for the benefit of the Corporation;
(ii) provision for the cash settlement of the Awards for their equivalent
cash value, as determined by the Committee, as of the date of the Change in
Control; (iii) provision for Awards to be assumed or replaced by
comparable Awards referencing shares of the capital stock of the successor or
acquiring entity or parent thereof; or (iv) such other modification or
adjustment to the Awards as the Committee deems appropriate to maintain and
protect the rights and interests of Participants upon or following the Change
in Control. The Committee also may accord any Participant a right to refuse any
acceleration of exercisability, vesting or benefits, whether pursuant to the
Award Agreement or otherwise, in such circumstances as the Committee may
approve.


 


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


 


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


 


8.4.  Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. In the event of any corporate action not
specifically covered by the preceding Sections, including but not limited to an
extraordinary cash distribution on Stock, a corporate separation or other
reorganization or liquidation, the Committee may make such adjustment of
outstanding Awards and their terms, if any, as it, in its sole discretion, may
deem equitable and appropriate in the circumstances. The Committee may make
adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in this Section) affecting the Company or the
financial statements of the Company or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such


 


11





















 


adjustments are appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan.


 


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


 


9.             Settlement of Awards


 


9.1.  In General. Options and Restricted Stock shall be settled in
accordance with their terms. All other Awards may be settled in cash, Stock, or
other Awards, or a combination thereof, as determined by the Committee at or
after grant and subject to any contrary Award Agreement. The Committee may not
require settlement of any Award in Stock pursuant to the immediately preceding
sentence to the extent issuance of such Stock would be prohibited or
unreasonably delayed by reason of any other provision of the Plan.


 


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


 


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


 


(b)       the
Company shall have determined, on such basis as it deems appropriate (including
an opinion of counsel in form and substance satisfactory to the Company) that
the sale, transfer, assignment, pledge, encumbrance or other disposition of
such shares or such beneficial interest, as the case may be, does not require
registration under the Securities Act of 1933, as amended or any applicable
State securities laws.


 


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


 


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


 


9.4.  Registration. If the Company shall deem it necessary or
desirable to register under the Securities Act of 1933, as amended or other
applicable statutes any shares of Stock issued or to be issued pursuant to
Awards granted under the Plan, or to qualify any such shares of Stock for
exemption from the Securities Act of 1933, as amended or other applicable
statutes, then the Company shall take such action at its own expense. The
Company may require from each recipient of an Award, or each


 


12





















 


holder of shares of Stock acquired pursuant to the Plan, such
information in writing for use in any registration statement, prospectus,
preliminary prospectus or offering circular as is reasonably necessary for that
purpose and may require reasonable indemnity to the Company and its officers
and directors from that holder against all losses, claims, damage and
liabilities arising from use of the information so furnished and caused by any
untrue statement of any material fact therein or caused by the omission to
state a material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made. In addition, the Company may require of any such person that he or she
agree that, without the prior written consent of the Company or the managing
underwriter in any public offering of shares of Stock, he or she will not sell,
make any short sale of, loan, grant any option for the purchase of, pledge or
otherwise encumber, or otherwise dispose of, any shares of Stock during the
180 day period commencing on the effective date of the registration
statement relating to the underwritten public offering of securities. Without
limiting the generality of the foregoing provisions of this Section 10.4,
if in connection with any underwritten public offering of securities of the
Company the managing underwriter of such offering requires that the Company’s
directors and officers enter into a lock-up agreement containing provisions
that are more restrictive than the provisions set forth in the preceding
sentence, then (a) each holder of shares of Stock acquired pursuant to the
Plan (regardless of whether such person has complied or complies with the
provisions of clause (b) below) shall be bound by, and shall be deemed to
have agreed to, the same lock-up terms as those to which the Company’s
directors and officers are required to adhere; and (b) at the request of
the Company or such managing underwriter, each such person shall execute and
deliver a lock-up agreement in form and substance equivalent to that which is
required to be executed by the Company’s directors and officers.


 


9.5.  Placement of Legends; Stop Orders; etc. Each share of Stock
to be issued pursuant to Awards granted under the Plan may bear any applicable
restriction under the Plan, the terms of the Award or applicable law. All
certificates for shares of Stock or other securities delivered under the Plan
shall be subject to such stock transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of any stock exchange upon which the Stock is then listed, and any
applicable federal or state securities law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.


 


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


 


10.    Reservation of Stock


 


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


 


13





















 


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


 


11.           Limitation of Rights in Stock; No Special Service
Rights


 


A Participant shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the shares of Stock subject to an Award,
unless and until a certificate shall have been issued therefore and delivered
to the Participant or his agent. Any Stock to be issued pursuant to Awards
granted under the Plan shall be subject to all restrictions upon the transfer
thereof which may be now or hereafter imposed by the Certificate of
Incorporation and the By-laws of the Company. Nothing contained in the Plan or
in any Award Agreement shall confer upon any recipient of an Award any right
with respect to the continuation of his or her employment or other association
with the Company (or any Affiliate), or interfere in any way with the right of
the Company (or any Affiliate), subject to the terms of any separate employment
or consulting agreement or provision of law or corporate articles or by-laws to
the contrary, at any time to terminate such employment or consulting agreement
or to increase or decrease, or otherwise adjust, the other terms and conditions
of the recipient’s employment or other association with the Company and its
Affiliates.


 


12.           Unfunded Status of Plan


 


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


 


13.           Nonexclusivity of the Plan


 


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


 


14.           Termination and Amendment of the Plan


 


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


 


14





















 


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


 


15.           Notices and Other Communications


 


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


 


16.           Governing Law


 


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


 


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