Exhibit 10.4


 


MUELLER
WATER PRODUCTS, INC.


 


2006
STOCK INCENTIVE PLAN


 


Approved by the Board of
Directors on May 24, 2006


 


Approved by Stockholders on May 25,
2006


 


Effective Date: May 25,
2006


 


Termination Date: May 23,
2016


 


I. PURPOSE.


 


1.1.                                                 The
purpose of this Plan is to aid the Company and its Affiliates in recruiting and
retaining key Employees (including officers), Directors, and Consultants of
outstanding ability and to motivate such persons to exert their best efforts on
behalf of the Company and its Affiliates by providing incentives through the
granting of Stock Awards. The Company expects that it will benefit from the
added interest which such key Employees, Directors and Consultants will have in
the welfare of the Company as a result of their proprietary interest in the
Company’s success.


 


II. DEFINITIONS.


 


2.1.                                                 “Affiliate”
means, with respect to the Company, any entity directly or indirectly
controlling, controlled by, or under common control with, the Company or any
other entity designated by the Board in which the Company or any Affiliate has
an interest.


 


2.2.                                                 “Applicable
Law” means the legal requirements relating to the administration of an equity
compensation plan under applicable U.S. federal and state corporate and
securities laws, the Code, any stock exchange rules or regulations, and
the applicable laws of any other country or jurisdiction, as such laws, rules,
regulations and requirements shall be in place from time to time.


 


2.3.                                                 “Beneficial
Owner” means the definition given in Rule 13d-3 promulgated under the
Exchange Act.


 


2.4.                                                 “Board”
means the board of directors of the Company.


 


2.5.                                                 “Cause”
means any of the following: (1) the Participant’s theft, dishonesty, or
falsification of any documents or records related to the Company or any of its
Affiliates; (2) the Participant’s improper use or disclosure of the
Company’s or any of its Affiliate’s confidential or proprietary information; (3) any
action by the Participant which has a material detrimental effect on the
reputation or business of the Company or any of its Affiliates; (4) the
Participant’s failure or inability to perform any reasonable assigned
duties, if such failure or inability is reasonably capable of cure, after being
provided with a reasonable opportunity to cure, such failure or inability; (5) any
material breach by the Participant of any employment or service agreement
between the Participant and the 


 

















 


Company or any of its Affiliates or applicable policy of the Company or
any of its Affiliates, which breach is not cured pursuant to the terms of such
agreement; or (6) the Participant’s indictment or plea of guilty or nolo contendere with respect to any
criminal act which impairs the Participant’s ability to perform his or her
duties with the Company or any of its Affiliates. Notwithstanding the
foregoing, the definition of “Cause” in an individual written agreement between
the Company or any of its Affiliates and the Participant shall supersede the
foregoing definition with respect to Stock Awards subject to such individual
agreement to the extent expressly provided for in such individual written
agreement (it being understood, however, that if no definition of the term “Cause”
is set forth in such an individual written agreement, the foregoing definition
shall apply).


 


2.6.                                                 “Change
of Control” means the occurrence of any of the following events:


 


(i)                                     The sale,
exchange, lease or other disposition, in one or a series of related
transactions, of all or substantially all of the assets of the Company to a
person or group of related persons, as such terms are defined or described in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act;


 


(ii)                                  A merger or
consolidation or similar transaction involving the Company if the stockholders
of the Common Stock of the Company immediately prior to such transaction do not
own a majority of the outstanding common stock of the surviving company or its
parent immediately after the transaction in substantially the same proportions
relative to each other as immediately prior to such transaction;


 


(iii)                               Any
person or group becomes the Beneficial Owner, directly or indirectly, of more
than 50% of the total voting power of the voting stock of the Company,
including by way of merger, consolidation or otherwise (for the purposes of
this clause (iii), a member of a group will not be considered to be the
Beneficial Owner of the securities owned by other members of the group other
than in response to a contested proxy or other control battle); or


 


(iv)                              During any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board
(together with any new Directors whose election by such Board or whose
nomination for election by the stockholders of the Company was approved by a
vote of a majority of the Directors of the Company then still in office, who
were either Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board then in office.


 


2.7.                                                 “Code”
means the Internal Revenue Code of 1986, as amended from time to time.


 


2.8.                                                 “Committee”
means the Board, or a committee of one or more members of the Board (or other
individuals who are not members of the Board to the extent allowed by law) duly
appointed by the Board in accordance with the Plan and Applicable Law. At any
time that no such committee has been appointed, the Board shall constitute the “Committee”
hereunder.


 


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2.9.                                                 “Common
Stock” means the Series A common stock of the Company, par value $0.01 per
Share.


 


2.10.                                           “Company”
means Mueller Water Products, Inc., a Delaware corporation.


 


2.11.                                           “Consultant”
means any person (i) engaged by the Company or an Affiliate to render
consulting or advisory services and who is compensated for such services or (ii) who
is a member of the board of directors of an Affiliate. For purposes of
determining eligibility to participate in the Plan, the term Consultant shall
be clarified pursuant to the provisions of Section 5.4.


 


2.12.                                           “Continuous
Service” means that the Participant’s service with the Company or an Affiliate,
whether as an Employee, Director, or Consultant, as applicable, is not
interrupted or terminated. Unless otherwise expressly provided in the Stock
Award, the Participant’s Continuous Service shall be deemed to have terminated
in the event of a termination of all positions a Participant holds with the
Company and its Affiliates, except in the case of a transition from status as a
Consultant to status as an Employee if and only if there is no interruption or
termination of the Participant’s service in connection with such transition. For
example, unless otherwise expressly provided in the Stock Award, a termination
in a Participant’s status as an Employee and the immediate commencement of
service as a Consultant of the Company will constitute a termination of
Continuous Service. Notwithstanding anything herein to the contrary, the
Committee, in its sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave of absence
approved by the Company or an Affiliate, including sick leave, military leave
or any other personal leave.


 


2.13.                                           “Covered
Employee” means a “covered employee” as determined for purposes of Section 162(m)
of the Code.


 


2.14.                                           “Director”
means a member of the Board of Directors of the Company.


 


2.15.                                           “Disability”
(a) means with respect to all Incentive Stock Options, the permanent and
total disability of a person within the meaning of Section 22(e)(3) of
the Code, (b) for all other purposes, has the meaning under Section 409A(a)(2)(C)(i) of
the Code, that is, the Participant (a) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months or (b) is,
by reason of any medically determinable physical or mental impairment which can
be expected to result in death, or can be expected to last for a continuous
period of not less than 12 months, receiving income replacement benefits for a
period of not less than three (3) months under an accident and health plan
covering employees of the Participant’s employer.


 


2.16.                                           “Employee”
means any person employed by the Company or an Affiliate. Compensation by the
Company or an Affiliate solely for services as a Director or as a Consultant
shall not be sufficient to constitute “employment” by the Company or an
Affiliate.


 


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2.17.                                           “Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to time.


 


2.18.                                           “Fair Market
Value” means, as of any date, the value of the Common Stock determined as
follows:


 


(i)                                     If the Common
Stock is listed on any established stock exchange or traded on the Nasdaq
National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share
of Common Stock shall be the closing sales price for such stock (or the closing
bid, if no such sales were reported) as quoted on such exchange or market (or
the exchange or market with the greatest volume of trading in the Common Stock)
on the date of determination, as reported in The
Wall Street Journal or such other source as the Board deems
reliable;


 


(ii)                                  If the Common Stock
is regularly quoted by a recognized securities dealer but selling prices are
not reported, the Fair Market Value of a share of Common Stock shall be the
mean between the high bid and low asked prices for the Common Stock on the day
of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable; or


 


(iii)                               In the absence of such
markets for the Common Stock, the Fair Market Value shall be determined in good
faith by the Board.


 


(iv)                              Notwithstanding the
foregoing, to the extent required to comply with Section 409A of the Code
in order to avoid the imposition of penalties or interest in respect thereof,
the value of the Common Stock shall be determined in a manner consistent with Section 409A
(and the regulations and guidance promulgated thereunder).


 


2.19.                                           “Full-Value
Stock Award” shall mean any of a Restricted Stock Bonus, Restricted Stock
Units, Phantom Stock Units, Performance Share Bonus, or Performance Share
Units.


 


2.20.                                           “Incentive
Stock Option” means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.


 


2.21.                                           “Nonstatutory
Stock Option” means an Option not intended to qualify as an Incentive Stock
Option.


 


2.22.                                           “Option”
means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant
to the Plan.


 


2.23.                                           “Optionholder”
means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.


 


2.24.                                           “Participant”
means an Employee, Director or Consultant to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.


 


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2.25.                                           “Performance
Share Bonus” means a grant of shares of the Company’s Common Stock not
requiring a Participant to pay any amount of monetary consideration (other than
par value to the extent required by Applicable Law), and subject to the
provisions of Section 8.2 of the Plan.


 


2.26.                                           “Performance
Share Unit” means the right to receive the value of one (1) share of the
Company’s Common Stock at the time the Performance Share Unit vests, with the
further right to elect to defer receipt of that value otherwise deliverable
upon the vesting of an award of Performance Share Units to the extent permitted
in the Participant’s agreement. These Performance Share Units are subject to
the provisions of Section 8.2 of the Plan.


 


2.27.                                           “Phantom
Stock Unit” means the right to receive the value of one (1) share of the
Company’s Common Stock, subject to the provisions of Section 8.2 of the
Plan.


 


2.28.                                           “Plan” means
this Mueller Water Products, Inc. 2006 Stock Incentive Plan, as amended
and in effect from time to time.


 


2.29.                                           “Retirement”
means the voluntary termination of a Participant’s Continuous Service in all
capacities with the Company and all of its Affiliates at such time that the
Participant’s age and years of service equal or exceed 70.


 


2.30.                                           “Restricted
Stock Bonus” means a grant of shares of the Company’s Common Stock not
requiring a Participant to pay any amount of monetary consideration (other than
par value to the extent required by Applicable Law), and subject to the
provisions of Section 8.2 of the Plan.


 


2.31.                                           “Restricted
Stock Purchase Right” means the right to acquire shares of the Company’s Common
Stock upon the payment of the agreed-upon monetary consideration, subject to
the provisions of Section 8.2 of the Plan.


 


2.32.                                           “Restricted
Stock Unit” means the right to receive the value of one (1) share of the
Company’s Common Stock at the time the Restricted Stock Unit vests, with the
further right to elect to defer receipt of that value otherwise deliverable
upon the vesting of an award of restricted stock to the extent permitted in the
Participant’s agreement. These Restricted Stock Units are subject to the
provisions of Section 8.2 of the Plan.


 


2.33.                                           “Rule 16b-3”
means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule l6b-3,
as in effect from time to time.


 


2.34.                                           “Securities
Act” means the Securities Act of 1933, as amended from time to time.


 


2.35.                                           “Stock
Appreciation Right” means the right to receive an amount equal to the Fair
Market Value of one (1) share of the Company’s Common Stock on the day the
Stock Appreciation Right is redeemed, reduced by the deemed exercise price or
base price of such right, subject to the provisions of Section 8.1 of the
Plan.


 


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2.36.                                           “Stock Award”
means any award of an Option, Restricted Stock Bonus, Restricted Stock Purchase
Right, Stock Appreciation Right, Phantom Stock Unit, Restricted Stock Unit,
Performance Share Bonus, Performance Share Unit, or other stock-based award.


 


2.37.                                           “Stock Award
Agreement” means a written agreement between the Company and a holder of a
Stock Award setting forth the terms and conditions of an individual Stock Award
grant. Each Stock Award Agreement shall be subject to the terms and conditions
of the Plan.


 


2.38.                                           “Subsidiary”
means a subsidiary corporation, as defined in Section 424(f) of the
Code.


 


2.39.                                           “Ten Percent
Shareholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of
the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of its parent or
subsidiary corporation.


 


III. ADMINISTRATION.


 


3.1.                                                 Administration.
The Committee shall administer the Plan and shall have the power, subject to,
and within the limitations of, the express provisions of the Plan:


 


(i)                                     To determine from
time to time which of the persons eligible under the Plan shall be granted
Stock Awards; when and how each Stock Award shall be granted; what type or
combination of types of Stock Awards shall be granted; the terms and conditions
of each Stock Award granted (which need not be identical), including the time
or times when a person shall be permitted to receive cash and/or Common Stock
pursuant to a Stock Award; the number of shares of Common Stock with respect to
which a Stock Award shall be granted to each such person; and whether a Stock
Award will be adjusted to account for dividends paid with respect to the
Company’s Common Stock.


 


(ii)                                  To construe and
interpret the Plan and Stock Awards granted under it, and to establish, amend
and revoke rules and regulations for the administration of the Plan. The
Committee, in the exercise of this power, may correct any defect, omission
or inconsistency in the Plan or in any Stock Award Agreement, in a manner and
to the extent it shall deem necessary or expedient to make the Plan and the
terms of the Stock Award fully effective.


 


(iii)                               To amend the Plan or a
Stock Award as provided in the Plan.


 


(iv)                              Generally, to exercise
such powers and to perform such acts as the Committee deems necessary,
desirable, convenient or expedient to promote the best interests of the Company
consistent with the provisions of the Plan.


 


(v)                                 To adopt sub-plans
and/or special provisions applicable to Stock Awards regulated by the laws of a
jurisdiction other than and outside of the United States. Except with respect
to Section 4 of the Plan and such other sections as required by Applicable
Law, the sub-plans and/or special provisions may take precedence over
other provisions 


 


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of the Plan to the extent expressly set forth
in the terms of such sub-plans and/or special provisions.


 


(vi)                              To authorize any person
to execute on behalf of the Company any instrument required to effectuate the
grant of a Stock Award previously granted by the Committee.


 


(vii)                           To
impose such restrictions, conditions or limitations as it determines
appropriate as to the timing and manner of any resales by a Participant or
other subsequent transfers by the Participant of any shares of Common Stock
issued as a result of or under a Stock Award, including, without limitation, (A) restrictions
under an insider trading policy and (B) restrictions as to the use of a
specified brokerage firm for such resales or other transfers.


 


(viii)                        To
provide, either at the time a Stock Award is granted or by subsequent action,
that a Stock Award shall contain as a term thereof, a right, either in tandem
with the other rights under the Stock Award or as an alternative thereto, of
the Participant to receive, without payment to the Company, a number of shares
of Common Stock, cash or a combination thereof, the amount of which is
determined by reference to the value of the Stock Award.


 


(ix)                                To
assume, or provide for the issuance of substitute Stock Awards that will
substantially preserve the otherwise applicable terms of, stock options and
other stock-based awards previously granted by an Affiliate to an award holder
who is or becomes eligible to participate in the Plan, as determined by the
Committee in its sole discretion; provided, however, that any such assumption
or substitution shall comply with Applicable Law, including but not limited to
Sections 409A and 424 of the Code, and any such substitute Stock Awards may be
granted at a price below Fair Market Value only to the extent that such grants
would otherwise comply with the terms of this Plan, including but not limited
to Section 10.10 hereof.


 


3.2.                                                 Delegation
by the Committee. In no way limiting any other provision of the Plan, the
Committee may delegate its duties and powers hereunder in whole or in part to
any subcommittee thereof consisting solely of at least two individuals who are
intended to qualify as “Non-Employee Directors” within the meaning of Rule 16b-3
under the Exchange Act and “outside directors” within the meaning of Section 162(m)
of the Code.


 


3.3.                                                 Effect
of the Committee’s Decision. All determinations, interpretations and
constructions made by the Committee or its duly authorized sub-committee(s) in
good faith shall not be subject to review by any person and shall be final,
binding and conclusive on all persons.


 


IV. SHARES SUBJECT TO THE PLAN.


 


4.1.                                                 Share
Reserve. Subject to the provisions of Section 11 of the Plan relating
to adjustments upon changes in Common Stock, the maximum aggregate number of
shares of Common Stock that may be issued pursuant to Stock Awards shall
not exceed 8,000,000 


 


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shares of Common Stock (“Share Reserve”), provided that each share of
Common Stock issued pursuant to an Option or Restricted Stock Purchase Right
shall reduce the Share Reserve by one (1) share and each share of Common
Stock subject to the redeemed portion of a Stock Appreciation Right (whether
the distribution upon redemption is made in cash, stock or a combination of the
two) shall reduce the Share Reserve by one (1) share. Each share of Common
Stock issued pursuant to a Full-Value Stock Award shall reduce the Share
Reserve by one (1) share. To the extent that a distribution pursuant to a
Stock Award is made in cash, the Share Reserve shall be reduced by the number
of shares of Common Stock subject to the redeemed or exercised portion of the
Stock Award. Notwithstanding any other provision of the Plan to the contrary,
the maximum aggregate number of shares of Common Stock that may be issued
under the Plan pursuant to Incentive Stock Options is 1,250,000 shares of
Common Stock (“ISO Limit”), subject to the adjustments provided for in Section 11
of the Plan.


 


4.2.                                                 Reversion
of Shares to the Share Reserve. If any Stock Award granted under this Plan
shall for any reason (i) expire, be cancelled or otherwise terminate, in
whole or in part, without having been exercised or redeemed in full, (ii) be
reacquired by the Company prior to vesting, or (iii) be repurchased at
cost by the Company prior to vesting, the shares of Common Stock not acquired
under such Stock Award shall revert or be added to the Share Reserve and become
available for issuance under the Plan; provided, however, that such shares of
Common Stock shall not be available for issuance pursuant to the exercise of
Incentive Stock Options.


 


4.3.                                                 Source
of Shares. The shares of Common Stock subject to the Plan may be
unissued shares or reacquired shares (whether purchased on the market or otherwise
reacquired).


 


V. ELIGIBILITY.


 


5.1.                                                 Eligibility
for Specific Stock Awards. Incentive Stock Options may be granted only
to Employees. Stock Awards other than Incentive Stock Options may be
granted to Employees, Directors, and Consultants.


 


5.2.                                                 Ten
Percent Shareholders. A Ten Percent Shareholder shall not be granted an
Incentive Stock Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant, except as provided in Section 3.1(ix) above.


 


5.3.                                                 Annual
Section 162(m) Limitation. Subject to the provisions of Section 11
of the Plan relating to adjustments upon changes in the shares of Common Stock,
and to the extent required for compliance with Section 162(m) of the Code,
no Employee shall be eligible to be granted Options and other Stock Awards
covering more than 1,000,000 shares of Common Stock (with respect to Stock
Awards payable in shares) or with a value in excess of $5,000,000 (with respect
to Stock Awards payable in cash) during any fiscal year; provided that in
connection with his or her initial service, an Employee may be granted
Options and other Stock Awards covering not more than an additional 300,000
shares of 


 


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Common Stock (with respect to Stock Awards payable in shares) or with a
value in excess of $5,000,000 (with respect to Stock Awards payable in cash),
which shall not count against the limit set forth in the preceding sentence.


 


5.4.                                                 Consultants.
A Consultant shall not be eligible for the grant of a Stock Award if, at the
time of grant, a Form S-8 Registration Statement under the Securities Act
(“Form S-8”) is not available to register either the offer or the sale of
the Company’s securities to such Consultant because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules governing
the use of Form S-8, unless the Company determines both (1) that such
grant (A) shall be registered in another manner under the Securities Act
(e.g., on a Form S-3 Registration Statement) or (B) does not require
registration under the Securities Act in order to comply with the requirements
of the Securities Act, if applicable, and (2) that such grant complies
with the securities laws of all other relevant jurisdictions.


 


VI. OPTION PROVISIONS.


 


6.1                                                    Form of
Options. Each Option shall be in such form and shall contain such
terms and conditions as the Committee shall deem appropriate. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and, if certificates are issued, a separate certificate
or certificates will be issued for shares of Common Stock purchased upon
exercise of each type of Option. The provisions of separate Options need not be
identical, but each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:


 


6.2                                                    Term.
In the absence of a provision to the contrary in the individual Optionholder’s
Stock Award Agreement, and subject to the provisions of Section 5.2 of the
Plan regarding grants of Incentive Stock Options to Ten Percent Shareholders,
the term of the Option shall be ten (10) years from the date it was
granted.


 


6.3                                                    Incentive
Stock Option $100,000 Limitation. To the extent that the aggregate Fair
Market Value (determined at the time of grant) of Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by any
Optionholder during any calendar year (under all plans of the Company and its
Affiliates) exceeds one hundred thousand dollars ($100,000), or such other
limit as may be set by Applicable Law, the Options or portions thereof
which exceed such limit (according to the order in which they were granted)
shall be treated as Nonstatutory Stock Options.


 


6.4                                                    Exercise
Price of an Incentive Stock Option. The exercise price of each Incentive
Stock Option shall be not less than one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Option on the date the Option
is granted (or less than one hundred and ten percent (110%) in the case of a
Ten Percent Shareholder), except as provided in Section 3.1(ix) above.


 


6.5                                                    Exercise
Price of a Nonstatutory Stock Option. The exercise price of each
Nonstatutory Stock Option shall be not less than one hundred percent (100%) of
the Fair 


 


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Market Value of the Common Stock subject to the Option on the date the
Option is granted, except as provided in Section 3.1(ix) above.


 


6.6                                                    Consideration.


 


(i)                                     The purchase price
of Common Stock acquired pursuant to an Option shall be paid, to the extent
permitted by applicable statutes and regulations, either (a) in cash or by
check at the time the Option is exercised or (b) at the discretion of the
Committee (in the case of Incentive Stock Options, at the time of the grant of
the Option): (1) by delivery to the Company of other shares of Common
Stock (subject to such requirements as may be imposed by the Committee), (2) if
there is a public market for the Common Stock at such time, and to the extent
permitted by Applicable Law, pursuant to a “same day sale” program that results
in either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company
from the sales proceeds, (3) reduction of the Company’s liability to the
Optionholder, (4) by any other form of consideration permitted by
law, but in no event shall a promissory note or other form of deferred
payment constitute a permissible form of consideration for an Option
granted under the Plan, or (5) by some combination of the foregoing.


 


(ii)                                  Unless otherwise
specifically provided in the Stock Award Agreement, the purchase price of
Common Stock acquired pursuant to a Stock Award that is paid by delivery to the
Company of other Common Stock, which Common Stock was acquired, directly or
indirectly from the Company, shall be paid only by shares of the Common Stock
that have been held for more than six (6) months (or such longer or
shorter period of time required to avoid a supplemental charge to earnings for
financial accounting purposes).


 


(iii)                               Whenever a Participant
is permitted to pay the exercise price of a Stock Award and/or taxes relating
to the exercise of a Stock Award by delivering Common Stock, the Participant
may, subject to procedures satisfactory to the Committee, satisfy such delivery
requirements by presenting proof of beneficial ownership of such Common Stock,
in which case the Company shall treat the Stock Award as exercised or redeemed
without further payment and shall withhold such number of shares of Common
Stock from the Common Stock acquired under the Stock Award. When necessary to
avoid a supplemental charge to earnings for financial accounting purposes, any
such withholding for tax purposes shall be made at the statutory minimum rate
of withholding.


 


6.7                                                    Transferability
of an Incentive Stock Option. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Optionholder only by the
Optionholder.


 


6.8                                                    Transferability
of a Nonstatutory Stock Option. Except as otherwise provided in the Stock
Award Agreement, a Nonstatutory Stock Option shall not be transferable except
by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder.


 


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6.9                                                    Vesting
Generally. Options granted under the Plan shall be exercisable at such
times and upon such terms and conditions as may be determined by the
Committee. The vesting provisions of individual Options may vary. The
provisions of this Section 6.9 are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may be
exercised.


 


6.10                                              Termination
of Unvested Options. Any Option or portion thereof that is not vested at
the time of termination of Continuous Service shall lapse and terminate, and
shall not be exercisable by the Optionee or any other person, unless otherwise
provided for in the Stock Award Agreement.


 


6.11                                              Termination
of Continuous Service. In the event an Optionholder’s Continuous Service
terminates (other than upon the Optionholder’s death, Disability or Retirement
or termination for Cause), the Option shall remain exercisable for three (3) months
following the date of termination (to the extent that the Option was
exercisable at that time), or such other period specified in the Stock Award
Agreement. In no event may the Option be exercised after the expiration of
the term of the Option as set forth in the Stock Award Agreement. If the
Optionholder does not exercise his or her Option within the specified time, the
Option shall terminate.


 


6.12                                              Extension
of Termination Date. An Optionholder’s Stock Award Agreement may also
provide that if the exercise of the Option following the termination of the
Optionholder’s Continuous Service (other than upon the Optionholder’s death or
termination for Cause) would be prohibited at any time solely because the
issuance of shares of Common Stock would violate the registration requirements
under the Securities Act or other applicable securities law, then the Option
shall terminate on the earlier of (i) the expiration of the term of the
Option set forth in the Stock Award Agreement or (ii) the expiration of a
period of three (3) months after the termination of the Optionholder’s
Continuous Service during which the exercise of the Option would not be in
violation of such registration requirements or other applicable securities law.
The provisions of this Section 6.12 notwithstanding, in the event that a
sale of the shares of Common Stock received upon exercise of his or her Option
would subject the Optionholder to liability under Section 16(b) of
the Exchange Act, then the Option will terminate on the earlier of (1) the
fifteenth (15th) day after the last date upon which such sale would
result in liability, or (2) two hundred ten (210) days following the date
of termination of the Optionholder’s employment or other service to the Company
(and in no event later than the expiration of the term of the Option).


 


6.13                                              Disability
or Retirement of Optionholder. In the event an Optionholder’s Continuous
Service terminates upon the Optionholder’s Disability or Retirement, the Option
shall remain exercisable for two (2) years following the date of
termination (to the extent that the Option was exercisable at that time), or
such other period specified in the Stock Award Agreement. In no event may the
Option be exercised after than the expiration of the term of the Option as set
forth in the Stock Award Agreement. If the Optionholder does not exercise his
or her Option within the specified time, the Option shall terminate.


 


11

















 


6.14                                              Death
of Optionholder. In the event (i) an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s death or (ii) the
Optionholder dies after the termination of his or her Continuous Service but within
the post-termination exercise period applicable to the Option, then, except as
otherwise provided in the Stock Award Agreement, the Option shall remain
exercisable for two (2) years following the date of death (to the extent
that the Option was exercisable at that time). In no event may the Option
be exercised after the expiration of the term of the Option as set forth in the
Stock Award Agreement. If the Option is not exercised by the person entitled to
do so within the specified time, the Option shall terminate.


 


6.15                                              Termination
for Cause. Unless otherwise provided in the applicable Stock Award
Agreement, the Option shall cease to be exercisable as to all unexercised
shares of Common Stock (including any vested shares) immediately upon the
termination of the Optionholder’s Continuous Service for Cause.


 


6.16                                              Early
Exercise Generally Not Permitted. The Company may grant Options which
permit the Optionholder to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the vesting of the
Option. If a Stock Award Agreement does permit such early exercise, any
unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the
Committee determines to be appropriate.


 


VII. NON-DISCRETIONARY STOCK AWARDS FOR
ELIGIBLE DIRECTORS.


 


7.1                                                    Stock
Awards for Eligible Directors. In addition to any other Stock Awards that
Directors may be granted on a discretionary basis under the Plan, each
Director of the Company who is not an Employee of the Company or any Affiliate
(each, an “Eligible Director”) shall be automatically granted, without the
necessity of action by the Committee, the following Stock Awards:


 


(i)                                     Initial Grant.
On the first day following the date that a Director commences service on the
Board and satisfies the definition of an Eligible Director, an initial grant of
a Stock Award (the “Initial Grant”) shall automatically be made to that
Eligible Director. The type of Stock Award, the number of shares subject to
this Initial Grant and other terms governing this Initial Grant shall be as
determined by the Committee in its sole discretion. If the Committee does not
establish the terms and conditions of the Initial Grant for a given
newly-elected Eligible Director prior to the date of grant, then the Stock
Award shall be of the same type, and for the same number of shares, as the
Initial Grant made to the immediately preceding newly-elected Eligible Director.
If at the time a Director first commences service on the Board, the Director
does not satisfy the definition of an Eligible Director, such Director shall
not be entitled to an Initial Grant at any time, even if such Director
subsequently becomes an Eligible Director.


 


(ii)                                  Annual Grant. An
annual Stock Award grant (the “Annual Award”) shall automatically be made to
each Director who (1) is re-elected to the Board, (2) is an Eligible
Director on the relevant grant date, and (3) has served as a Director for
a period 


 


12

















 


of at least six (6) months on the
relevant grant date. The type of Stock Award, the number of shares subject to
the Annual Grant and other terms governing the Annual Grant shall be as
determined by the Committee in its sole discretion. If the Committee does not
establish the terms and conditions of the Annual Grant prior to the date of
grant, then the Annual Grant shall be of the same type, and for the same number
of shares of Common Stock, as the Annual Grants made for the immediately
preceding year. The date of grant of an Annual Grant is the date on which the
Director is re-elected to serve on the Board.


 


(iii)                               Vesting on Retirement.
All Initial Grants and Annual Grants held by an Eligible Director shall become
fully vested and exercisable upon the termination of the Eligible Director’s
Continuous Service by reason of Retirement, unless otherwise expressly set
forth in the applicable Stock Award Agreement(s).


 


VIII. PROVISIONS OF STOCK AWARDS OTHER THAN
OPTIONS.


 


8.1.                                                 Stock
Appreciation Rights. Each award of Stock Appreciation Rights (“SARs”)
granted under the Plan shall be subject to such terms and conditions as the
Committee shall deem appropriate. The terms and conditions of SAR agreements
need not be identical, but each SAR agreement shall include the substance of
each of the applicable provisions of this Section 8.1. The two types of
SARs that are authorized for issuance under this Plan are:


 


(i)                                     Stand-Alone
SARs. The following terms and conditions shall govern the grant and redeemability
of stand-alone SARs:


 


(A)                              The stand-alone SAR shall
cover a specified number of underlying shares of Common Stock and shall be
redeemable upon such terms and conditions as the Committee may establish. Upon
redemption of the stand-alone SAR, the holder shall be entitled to receive a
distribution from the Company in an amount equal to the excess of (i) the
aggregate Fair Market Value (on the redemption date) of the shares of Common
Stock underlying the redeemed right over (ii) the aggregate base price in
effect for those shares.


 


(B)                                The number of shares of
Common Stock underlying each stand-alone SAR and the base price in effect for
those shares shall be determined by the Committee in its sole discretion at the
time the stand-alone SAR is granted. In no event, however, may the base
price per share be less than one hundred percent (100%) of the Fair Market
Value per underlying share of Common Stock on the grant date.


 


(C)                                The distribution with
respect to any redeemed stand-alone SAR may be made in shares of Common
Stock valued at Fair Market Value on the redemption date, in cash, or partly in
shares and partly in cash, as the Committee shall in its sole discretion deem
appropriate.


 


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(ii)                                  Stapled SARs. The
following terms and conditions shall govern the grant and redemption of stapled
SARs:


 


(A)                              Stapled SARs may only
be granted concurrently with an Option to acquire the same number of shares of
Common Stock as the number of such shares underlying the stapled SARs.


 


(B)                                Stapled SARs shall be
redeemable upon such terms and conditions as the Committee may establish
and shall grant a holder the right to elect among (i) the exercise of the
concurrently granted Option for shares of Common Stock, whereupon the number of
shares of Common Stock subject to the stapled SARs shall be reduced by an
equivalent number, (ii) the redemption of such stapled SARs in exchange
for a distribution from the Company in an amount equal to the excess of the
Fair Market Value (on the redemption date) of the number of vested shares which
the holder redeems over the aggregate base price for such vested shares,
whereupon the number of shares of Common Stock subject to the concurrently
granted Option shall be reduced by any equivalent number, or (iii) a
combination of (i) and (ii).


 


(C)                                The distribution to
which the holder of stapled SARs shall become entitled upon the redemption of
stapled SARs may be made in shares of Common Stock valued at Fair Market
Value on the redemption date, in cash, or partly in shares and partly in cash,
as the Committee shall in its sole discretion deem appropriate.


 


(iii)                               Limitations.
The total number of shares of Common Stock subject to a SAR may, but need not,
vest in period installments that may, but need not, be equal. The Committee
shall determine the criteria under which shares of Common Stock under the SAR may vest.
If the Stock Award Agreement does not provide for transferability, then the
shares subject to the SAR shall not be transferable except by will or by the
laws of descent and distribution.


 


8.2.                                                 Other
Stock-Based Awards. The Committee, in its sole discretion, may grant
or sell an award of a Restricted Stock Bonus, Restricted Stock Purchase Right,
Phantom Stock Unit, Restricted Stock Unit, Performance Share Bonus, Performance
Share Unit, or other stock-based award that is valued in whole or in part by
reference to, or is otherwise based on, the Fair Market Value of the Company’s
Common Stock (each, an “Other Stock-Based Award”). Each Other Stock-Based Award
shall be subject to a Stock Award Agreement which shall contain such terms and
conditions as the Committee shall deem appropriate, including any provisions
for the deferral of the receipt of any shares of Common Stock, cash or property
otherwise distributable to the Participant in respect of the Stock Award. The
terms and conditions of Other Stock-Based Awards may change from time to
time, and the terms and conditions of separate Other Stock-Based Awards need
not be identical, but each Other Stock-Based Award shall be subject to the
following provisions (either through incorporation of provisions hereof by
reference in the applicable Stock Award Agreement or otherwise):


 


14

















 


(i)                                     Purchase Price.
Other Stock-Based Awards may be granted in consideration for past services
actually rendered to the Company or an Affiliate. The purchase price (if any)
under each Other Stock-Based Award shall be such amount as the Committee shall
determine and designate in the applicable Stock Award Agreement. To the extent
required by Applicable Law, the purchase price shall not be less than one
hundred percent (100%) of the Fair Market Value of the Common Stock subject to
the Other Stock-Based Award on the date such award is made or at the time the
purchase is consummated, as applicable.


 


(ii)                                  Consideration.


 


(A)                              The purchase price (if
any) of Common Stock acquired pursuant to Other Stock-Based Awards shall be
paid either: (1) in cash or by check, or (2) as determined by the Committee
(and to the extent required by Applicable Law, at the time of the grant): (v) by
delivery to the Company of other shares of Common Stock (subject to such
requirements as may be imposed by the Committee), (w) if there is a public
market for the Common Stock at such time, and to the extent permitted by
Applicable Law, pursuant to a “same day sale” program that results in either
the receipt of cash (or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company from the sales
proceeds, (x) reduction of the Company’s liability to the Participant, (y) by
any other form of consideration permitted by law, but in no event shall a
promissory note or other form of deferred payment constitute a permissible
form of consideration, or (z) by some combination of the foregoing.


 


(B)                                Unless
otherwise specifically provided in the Stock Award Agreement, the purchase
price of Common Stock acquired pursuant to any Other Stock-Based Award that is
paid by delivery to the Company of other Common Stock, which Common Stock was
acquired, directly or indirectly from the Company, shall be paid only by shares
of the Common Stock that have been held for more than six (6) months (or
such longer or shorter period of time required to avoid a supplemental charge
to earnings for financial accounting purposes). To the extent required by
Applicable Law, the Participant shall pay the Common Stock’s “par value” solely
in cash or by check.


 


(C)                                Whenever
a Participant is permitted to pay the exercise price of any Other Stock-Based
Award and/or taxes relating to the exercise thereof by delivering Common Stock,
the Participant may, subject to procedures satisfactory to the Committee,
satisfy such delivery requirements by presenting proof of beneficial ownership
of such Common Stock, in which case the Company shall treat the Other
Stock-Based Award as exercised or redeemed without further payment and shall
withhold such number of shares of Common Stock from the Common Stock acquired
under the Other Stock-Based Award. When necessary to avoid a supplemental
charge to earnings for financial accounting purposes, any such withholding for
tax purposes shall be made at the statutory minimum rate of withholding.


 


15

















 


(iii)                               Vesting. The
total number of shares of Common Stock subject to each Other Stock-Based Award
may, but need not, vest and/or become redeemable in periodic installments that
may, but need not, be equal. The Committee shall determine the criteria under
which shares of Common Stock under the each Other Stock-Based Award may vest.
The criteria may or may not include performance criteria or
Continuous Service. Shares of Common Stock acquired under each Other
Stock-Based Award may, but need not, be subject to a share repurchase right or
similar forfeiture feature in favor of the Company in accordance with a vesting
schedule to be determined by the Committee.


 


(iv)                              Distributions. The
distribution with respect to any Other Stock-Based Award may be made in
shares of Common Stock valued at Fair Market Value on the redemption or
exercise date, in cash, or partly in shares and partly in cash, as the
Committee shall in its sole discretion deem appropriate.


 


(v)                                 Termination of
Participant’s Continuous Service. In the event a Participant’s Continuous
Service terminates, the Company may repurchase or reacquire, and/or the
Participant shall forfeit (as applicable), any or all of the shares of Common
Stock held by the Participant that have not vested as of the date of
termination on such terms and conditions as set forth in the Stock Award
Agreement.


 


(vi)                              Transferability. Rights
to acquire shares of Common Stock under Other Stock-Based Award shall be
transferable by the Participant only upon such terms and conditions as are set
forth in the applicable Stock Award Agreement, as the Committee shall determine
in its discretion. If the Stock Award Agreement does not provide for
transferability, then the shares subject to Other Stock-Based Award shall not
be transferable except by will or by the laws of descent and distribution.


 


IX. ISSUANCE OF SHARES.


 


9.1.                                                 Availability
of Shares. During the terms of the outstanding Stock Awards, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such Stock Awards.


 


9.2.                                                 Securities
Law Compliance. The grant of Stock Awards and the issuance of Common Stock
pursuant to Stock Awards shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to securities. The
Company shall use commercially reasonable efforts to obtain from each
regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell
shares of Common Stock upon exercise, redemption or satisfaction of the Stock
Awards; provided, however, that this undertaking shall not require the Company
to register under the Securities Act or under any foreign law of similar effect
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to
any such Stock Award. If, after commercially reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock related to such Stock
Awards unless and until such authority is obtained.


 


16

















 


9.3.                                                 Proceeds.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.


 


X. MISCELLANEOUS.


 


10.1.                                           Vesting
Generally. Unless otherwise provided in the Stock Award Agreement or the
terms of the Plan, if the vesting of a Stock Award is based solely on the
Participant’s Continuous Service, the Stock Award will not fully vest in less
than three (3) years and if the vesting of a Stock Award is based on the
Participant’s achievement of performance criteria, the Stock Award will not
fully vest in less than one (1) year.


 


10.2.                                           Acceleration
of Exercisability and Vesting. The Committee shall have the power to
accelerate exercisability and/or vesting when it deems fit, such as upon a
Change of Control. The Committee shall have the power to accelerate the time at
which a Stock Award may first be exercised or the time during which a
Stock Award or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Stock Award stating the time at which it may first
be exercised or the time during which it will vest.


 


10.3.                                           Clawback.
The Company may provide in any Stock Award Agreement that, upon the
Committee’s discovery of facts that would be grounds for a termination for
Cause of a Participant’s Continuous Service, and regardless of whether such
discovery is made prior to or following a termination of Continuous Service for
any reason, the Committee may (in its sole discretion, but acting in good
faith) direct that the Company recover all or a portion of the Stock Award,
including any shares of Common Stock then held by the Participant as well as
any gain recognized by the Participant upon any sale of the shares of Common
Stock issued pursuant to the Stock Award. In no event shall the amount to be
recovered by the Company be less than any amount required to be repaid or
recovered as a matter of law. The Committee shall determine whether the Company
shall effect any such recovery or repayment (i) by seeking recovery or
repayment from the Participant, (ii) by reducing (subject to Applicable
Law and the terms and conditions of the applicable plan, program or
arrangement) the amount that would otherwise be payable to the Participant
under any compensatory plan, program, agreement or arrangement maintained by
the Company or any of its Affiliates, (iii) by withholding payment of
future compensation (including the payment of any discretionary bonus amount)
or grants of compensatory awards that would otherwise have been made in
accordance with the otherwise applicable compensation practices of the Company
or any Affiliate, or (iv) by any combination of the foregoing.


 


10.4.                                           Compliance
of Performance Awards. Notwithstanding anything to the contrary herein, any
Stock Award granted under this Plan may, but need not, be granted in a manner
which may be deductible by the Company under Section 162(m) of the
Code and, as applicable, compliant with the requirements of Section 409A
of the Code (such awards, “Performance-Based Awards”). A Participant’s
Performance-Based Award shall be determined based on the attainment of written
performance goals approved by the Committee for a performance period
established by the Committee, which goals are approved (i) while the
outcome for that performance period is substantially uncertain and (ii) during
such period of time as permitted by Applicable Law. The performance goals,
which must be objective, 


 


17

















 


shall be based upon one or more of the following criteria: (i) consolidated
earnings before or after taxes (including earnings before one or more of the
following: interest, taxes, depreciation and amortization); (ii) net
income; (iii) operating income; (iv) earnings per share; (v) book
value per share; (vi) return on stockholders’ equity; (vii) expense
management; (viii) return on investment; (ix) improvements in capital
structure; (x) profitability of an identifiable business unit or product; (xi)
maintenance or improvement of profit margins; (xii) stock price; (xiii) market
share; (xiv) revenues or sales; (xv) costs and/or cost reductions or savings;
(xvi) cash flow; (xvii) working capital; (xviii) return on invested capital or
assets; (xix) consummations of acquisitions or sales of certain Company assets,
subsidiaries or other businesses; (xx) funds from operations and (xxi) pre-tax
income. The foregoing criteria may relate to the Company, one or more of
its Affiliates or one or more of its divisions or units, or any combination of
the foregoing, and may be applied on an absolute basis and/or be relative
to one or more peer group companies or indices, or any combination thereof, all
as the Committee shall determine. In addition, to the degree consistent with Section 162(m)
of the Code (or any successor section thereto) and/or Section 409A of
the Code, the performance goals may be calculated without regard to
extraordinary items. The Committee shall determine whether, with respect to a
performance period, the applicable performance goals have been met with respect
to a given Participant and, if they have, to so certify and ascertain the
amount of the applicable Performance-Based Award. No Performance-Based Awards
will be paid for such performance period until such certification is made by
the Committee. The amount of the Performance-Based Award actually paid to a
given Participant may be less than the amount determined by the applicable
performance goal formula, at the discretion of the Committee. The amount of the
Performance-Based Award determined by the Committee for a performance period
shall be paid to the Participant at such time as determined by the Committee in
its sole discretion after the end of such performance period; provided,
however, that a Participant may, if and to the extent permitted by the
Committee and consistent with the provisions of Section 162(m) and/or Section 409A
of the Code, elect to defer payment of a Performance-Based Award.


 


10.5.                                           Stockholder
Rights. No Participant shall be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares of Common Stock subject
to a Stock Award except to the extent that the Company has issued the shares of
Common Stock relating to such Stock Award or except as expressly provided in a
Stock Award Agreement.


 


10.6.                                           No
Employment or Other Service Rights. Nothing in the Plan or any instrument
executed or Stock Award granted pursuant thereto shall confer upon any
Participant any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Stock Award was granted or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the
service of a Consultant pursuant to the terms of such Consultant’s agreement with
the Company or an Affiliate or (iii) the service of a Director pursuant to
the Bylaws of the Company, and any applicable provisions of the corporate law
of the state or other jurisdiction in which the Company is domiciled, as the
case may be.


 


10.7.                                           Investment
Assurances. The Company may require a Participant, as a condition of
exercising or redeeming a Stock Award or acquiring Common Stock under any Stock
Award, (i) to give written assurances satisfactory to the Company as to
the 


 


18

















 


Participant’s knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business matters
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of acquiring the Common Stock; (ii) to
give written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Stock Award for the
Participant’s own account and not with any present intention of selling or
otherwise distributing the Common Stock; and (iii) to give such other
written assurances as the Company may determine are reasonable in order to
comply with Applicable Law. The foregoing requirements, and any assurances
given pursuant to such requirements, shall be inoperative if (1) the
issuance of the shares of Common Stock under the Stock Award has been
registered under a then currently effective registration statement under the
Securities Act or (2) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws, and in either case
otherwise complies with Applicable Law. The Company may, upon advice of counsel
to the Company, place legends on stock certificates issued under the Plan as
such counsel deems necessary or appropriate in order to comply with Applicable
Laws, including, but not limited to, legends restricting the transfer of the
Common Stock.


 


10.8.                                           Designation
of a Beneficiary. The Committee may establish rules pertaining to
the designation by the Participant of a beneficiary who is to receive any
shares of Common Stock and/or any cash, or have the right to exercise or redeem
that Participant’s Stock Award, in the event of such Participant’s death.


 


10.9.                                           Withholding
Obligations. To the extent provided by the terms of a Stock Award
Agreement, the Participant may satisfy any federal, state, local, or
foreign tax withholding obligation relating to the grant, exercise, acquisition
or redemption of a Stock Award or the acquisition, vesting, distribution or
transfer of Common Stock under a Stock Award by any of the following means (in
addition to the Company’s right to withhold from any compensation paid to the
Participant by the Company) or by a combination of such means: (i) tendering
a cash payment; (ii) authorizing the Company to withhold shares of Common
Stock from the shares of Common Stock otherwise issuable to the Participant,
provided, however, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law (where
withholding in excess of the minimum amount will result in a supplemental
charge to earnings for financial accounting purposes); or (iii) delivering
to the Company owned and unencumbered shares of Common Stock; provided,
however, that in the case of the tender of shares, that any such shares have
been held by the Participant for not less than six (6) months (or such
other period as established from time to time by the Committee in order to
avoid a supplemental charge to earnings for financial accounting purposes).


 


10.10.                                     Section 409A.
Notwithstanding anything in the Plan to the contrary, it is the intent of the
Company that the administration of the Plan, and the granting of all Stock
Awards under this Plan, shall be done in accordance with Section 409A of
the Code and the Department of Treasury regulations and other interpretive
guidance issued thereunder, including any guidance or regulations that may be
issued after the effective date of this Plan, and shall not cause the
acceleration of, or the imposition of the additional, taxes provided for 


 


19

















 


in Section 409A of the Code. Any Stock Award shall be granted,
deferred, paid out or modified under this Plan in a manner that shall be
intended to avoid resulting in the acceleration of taxation, or the imposition
of penalty taxation, under Section 409A upon a Participant. In the event
that it is reasonably determined by the Committee that any amounts payable in
respect of any Stock Award under the Plan will be taxable to a Participant
under Section 409A of the Code prior to the payment and/or delivery to
such Participant of such amounts or will be subject to the acceleration of
taxation or the imposition of penalty taxation under Section 409A of the
Code, the Company may either (i) adopt such amendments to the Plan
and related Stock Award, and appropriate policies and procedures, including
amendments and policies with retroactive effect, that the Committee determines
necessary or appropriate to preserve the intended tax treatment of the benefits
provided by the Plan and Stock Awards hereunder, and/or (ii) take such
other actions as the Committee determines necessary or appropriate to comply
with the requirements of Section 409A of the Code.


 


10.11.                                     Market Standoff
Provision. If required by the Company (or a representative of the
underwriter(s)) in connection with the first underwritten registration of the
offering of any equity securities of the Company under the Securities Act, for
a specified period of time, the Participant shall not sell, dispose of,
transfer, make any short sale of, grant any option for the purchase of, or
enter into any hedging or similar transaction with the same economic effect as
a sale, any shares of the Common Stock acquired by the Participant pursuant to
a Stock Award, and shall execute and deliver such other agreements as may be
reasonably requested by the Company and/or the underwriter(s) that are
consistent with the foregoing or that are necessary to give further effect
thereto. In order to enforce the foregoing covenant, the Company may impose
stop transfer instructions with respect to such shares until the end of such
period.


 


XI. ADJUSTMENTS UPON CHANGES IN STOCK.


 


11.1.                                           Capitalization
Adjustments. In the event of any change in the Common Stock subject to the
Plan or subject to or underlying any Stock Award, by reason of any stock
dividend, stock split, reverse stock split, reorganization, recapitalization,
merger, consolidation, spin-off, combination, exchange of shares of Common
Stock or other corporate exchange, or any distribution or dividend to
stockholders of Common Stock (whether paid in cash or otherwise) or any
transaction similar to the foregoing, the Committee in its sole discretion and
without liability to any person may make such substitution or adjustment,
if any, as it deems to be equitable to (i) the type, class(es) and maximum
number of securities or other property subject to the Plan pursuant to the
Share Reserve, the ISO Limit, and Section 5.3, (ii) the type,
class(es) and number of securities subject to option grants to Eligible
Directors under Section 7 of the Plan, (iii) the type, class(es) and
number of securities or other property subject to, as well as the exercise
price, base price, redemption price or purchase price applicable to,
outstanding Stock Awards or (iv) any other affected terms of any
outstanding Stock Awards. Any determination, substitution or adjustment made by
the Committee under this Section 11.1, shall be final, binding and
conclusive on all persons. The conversion of any convertible securities of the
Company shall not be treated as a transaction that shall cause the Committee to
make any determination, substitution or adjustment under this Section 11.1.


 


20

















 


11.2.                                           Adjustments
Upon a Change of Control. In the event of a Change of Control, then the
Committee or the board of directors of any surviving entity or acquiring entity
may provide or require that the surviving or acquiring entity shall: (1) assume
or continue all or any part of the Stock Awards outstanding under the Plan
or (2) substitute substantially equivalent stock awards (including an
award to acquire substantially the same consideration paid to the stockholders
in the transaction by which the Change of Control occurs) for those Stock
Awards outstanding under the Plan. In the event any surviving entity or
acquiring entity refuses to assume or continue outstanding Stock Awards or to
substitute similar stock awards for those outstanding under the Plan, then with
respect to Stock Awards held by Participants whose Continuous Service has not
terminated, the Committee in its sole discretion and without liability to any
person may: (1) provide for the payment of a cash amount in exchange for
the cancellation of a Stock Award equal to the product of (x) the excess, if
any, of the Fair Market Value per share of Common Stock at such time over the
exercise or redemption price, if any, and (y) the total number of shares then
subject to such Stock Award; (2) continue the Stock Awards upon such terms
as the Committee determines in its sole discretion; (3) provide for the
issuance of substitute awards that will substantially preserve the otherwise
applicable terms of any affected Stock Awards (including any unrealized value
immediately prior to the Change of Control) previously granted hereunder, as
determined by the Committee in its sole discretion; or (4) notify
Participants holding Stock Awards that they must exercise or redeem any portion
of such Stock Award (including, at the discretion of the Committee, any
unvested portion of such Stock Award) at or prior to the closing of the
transaction by which the Change of Control occurs and that the Stock Awards
shall terminate if not so exercised or redeemed at or prior to the closing of
the transaction by which the Change of Control occurs. With respect to any
other Stock Awards outstanding under the Plan, such Stock Awards shall
terminate if not exercised or redeemed with respect to the vested portion of
the Stock Award (and, at the discretion of the Committee, any unvested portion
of such Stock Award) at or prior to the closing of the transaction by which the
Change of Control occurs. In the event of the dissolution or liquidation of the
Company, unless the Board determined otherwise, all outstanding Stock Awards
will terminate immediately prior to the dissolution or liquidation of the
Company. In all cases, the Committee shall not be obligated to treat all Stock
Awards, even those that are of the same type, in the same manner.


 


XII. AMENDMENT OR TERMINATION OF THE PLAN OR
STOCK AWARDS.


 


12.1.                                           Term and
Termination of the Plan. The Committee may suspend or terminate the
Plan at any time. Unless sooner terminated, the Plan shall terminate on the day
before the tenth (10th) anniversary of the earlier of the date that
the Plan is approved by the stockholders of the Company or the date the Plan is
adopted by the Board. No Stock Awards may be granted under the Plan while
the Plan is suspended or after it is terminated.


 


12.2.                                           Amendment
of the Plan and Stock Awards. The Committee at any time, and from time to
time, may amend the Plan, subject to the approval of the Company’s
stockholders to the extent such approval is necessary under Applicable Law. The
Committee at any time, and from time to time, may amend the terms of one
or more Stock Awards. It is expressly contemplated that the Committee may amend
the Plan and Stock Awards in any respect the Committee deems necessary or
advisable (i) to provide eligible Participants with 


 


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the maximum benefits provided or to be provided under the provisions of
the Code and the regulations promulgated thereunder relating to Incentive Stock
Options and deferred compensation and/or (ii) to bring the Plan and/or
Stock Awards granted under the Plan into compliance with Applicable Law.


 


12.3.                                           No
Material Impairment of Rights. Notwithstanding anything to the contrary in
the Plan, the amendment, suspension or termination of the Plan and the
amendment of outstanding Stock Awards, shall not materially impair rights and
obligations under any Stock Award granted while the Plan is in effect except
with the written consent of the Participant unless such amendment is necessary
pursuant to Section 10.10 hereof, in which case the Participant will be
deemed to have consented to the amendment by virtue of accepting the grant of
the Stock Award.


 


XIII. EFFECTIVE DATE OF PLAN.


 


13.1                                              Effective
Date. The Plan shall become effective as of the date the Board approves the
Plan, or such later date as is designated by the Board (such date, as set forth
on the first page of this Plan, the “Effective Date”), subject to the
approval of the Plan by the stockholders of the Company within twelve (12)
months before or after the date the Plan is adopted by the Board.


 


XIV. CHOICE OF LAW.


 


14.1                                              Choice
of Law. The law of the State of Delaware shall govern all questions
concerning the construction, validity and interpretation of this Plan, without
regard to such state’s conflict of laws rules.


 


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