exv10w1



 







Exhibit 10.1




ENDOLOGIX, INC.

2006 STOCK INCENTIVE PLAN




          The 2006 STOCK INCENTIVE PLAN (the “Plan”) is hereby established and adopted this 31st day of
March, 2006 (the “Effective Date”) by Endologix, Inc., a Delaware Corporation (the “Company”).




ARTICLE 1.




PURPOSES OF THE PLAN




          1.1 Purposes. The purposes of the Plan are (a) to enhance the Company’s ability to attract
and retain the services of qualified employees, officers, directors, consultants and other service
providers upon whose judgment, initiative and efforts the successful conduct and development of the
Company’s business largely depends, and (b) to provide additional incentives to such persons or
entities to devote their utmost effort and skill to the advancement and betterment of the Company,
by providing them an opportunity to participate in the ownership of the Company and thereby have an
interest in the success and increased value of the Company.




ARTICLE 2.




DEFINITIONS




          For purposes of this Plan, the following terms shall have the meanings indicated:




          2.1 Administrator. “Administrator” means the Board or, if the Board delegates responsibility
for any matter to the Committee, the term Administrator shall mean the Committee.




          2.2 Affiliated Company. “Affiliated Company” means:




                    (a) with respect to Incentive Options, any “parent corporation” or “subsidiary corporation” of
the Company, whether now existing or hereafter created or acquired, as those terms are defined in
Sections 424(e) and 424(f) of the Code, respectively; and



                    (b) with respect to Awards other than Incentive Options, any entity described in paragraph (a)
of this Section 2.2 above, plus any other corporation, limited liability company (“LLC”),
partnership or joint venture, whether now existing or hereafter created or acquired, with respect
to which the Company beneficially owns more than fifty percent (50%) of: (1) the total combined
voting power of all outstanding voting securities or (2) the capital or profits interests of an
LLC, partnership or joint venture.



          2.3 Award. “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right
award, a Dividend Equivalents award, a Stock Payment award or a Restricted Stock Unit award granted
to a Participant pursuant to the Plan.














 








          2.4 Award Agreement. “Award Agreement” means a written or electronic agreement entered into
between the Company and a Participant setting forth the terms and conditions of an Award granted to
a Participant.




          2.5 Board. “Board” means the Board of Directors of the Company.




          2.6 Change in Control. “Change in Control” shall mean:




                    (a) The acquisition, directly or indirectly, in one transaction or a series of related
transactions, by any person or group (within the meaning of Section 13(d)(3) of the Exchange Act)
of the beneficial ownership of securities of the Company possessing more than fifty percent (50%)
of the total combined voting power of all outstanding securities of the Company;



                    (b) A merger or consolidation in which the Company is not the surviving entity, except for a
transaction in which the holders of the outstanding voting securities of the Company immediately
prior to such merger or consolidation hold as a result of holding Company securities prior to such
transaction, in the aggregate, securities possessing more than fifty percent (50%) of the total
combined voting power of all outstanding voting securities of the surviving entity (or the parent
of the surviving entity) immediately after such merger or consolidation;



                    (c) A reverse merger in which the Company is the surviving entity but in which the holders of
the outstanding voting securities of the Company immediately prior to such merger hold, in the
aggregate, securities possessing less than fifty percent (50%) of the total combined voting power
of all outstanding voting securities of the Company or of the acquiring entity immediately after
such merger;



                    (d) The sale, transfer or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company, except for a transaction in
which the holders of the outstanding voting securities of the Company immediately prior to such
transaction(s) receive as a distribution with respect to securities of the Company, in the
aggregate, securities possessing more than fifty percent (50%) of the total combined voting power
of all outstanding voting securities of the acquiring entity immediately after such transaction(s);
or



                    (e) The approval by the stockholders of a plan or proposal for the liquidation or dissolution
of the Company.



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




          2.8 Committee. “Committee” means a committee of two or more members of the Board appointed to
administer the Plan, as set forth in Section 10.1 hereof.




          2.9 Common Stock. “Common Stock” means the Common Stock of the Company, subject to adjustment
pursuant to Section 4.2 hereof.




          2.10 Covered Employee. “Covered Employee” means the Chief Executive Officer of the Company
(or the individual acting in a similar capacity) and the four (4) other individuals that are the
highest compensated executive officers of the Company for the relevant taxable year for whom total
compensation is required to be reported to stockholders under the Exchange Act.




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          2.11 Disability. “Disability” means permanent and total disability as defined in Section
22(e)(3) of the Code. The Administrator’s determination of a Disability or the absence thereof
shall be conclusive and binding on all interested parties.




          2.12 Dividend Equivalent. “Dividend Equivalent” means a right to receive payments equivalent
to the amount of dividends paid by the Company to holders of shares of Common Stock with respect to
the number of Dividend Equivalents held by the Participant. The Dividend Equivalent may provide for
payment in Common Stock or in cash, or a fixed combination of Common Stock or cash, or the
Administrator may reserve the right to determine the manner of payment at the time the Dividend
Equivalent is payable. Dividend Equivalents may be granted only in connection with a grant of
Restricted Stock Units and shall be subject to the vesting conditions that govern Restricted Stock
Units as set forth in the applicable Restricted Stock Award Agreement.




          2.13 DRO. “DRO” means a domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the regulations thereunder.




          2.14 Effective Date. “Effective Date” means the date on which the Plan was originally adopted
by the Board, as set forth on the first page hereof.




          2.15 Exchange Act. “Exchange Act” means the Securities and Exchange Act of 1934, as amended.




          2.16 Exercise Price. “Exercise Price” means the purchase price per share of Common Stock
payable upon exercise of an Option.




          2.17 Fair Market Value. “Fair Market Value” on any given date means the value of one share of
Common Stock, determined as follows:




                    (a) If the Common Stock is then listed or admitted to trading on a Nasdaq market system or a
stock exchange which reports closing sale prices, the Fair Market Value shall be the closing sale
price on the date of valuation on such Nasdaq market system or principal stock exchange on which
the Common Stock is then listed or admitted to trading, or, if no closing sale price is quoted on
such day, then the Fair Market Value shall be the closing sale price of the Common Stock on such
Nasdaq market system or such exchange on the next preceding day on which a closing sale price is
reported.



                    (b) If the Common Stock is not then listed or admitted to trading on a Nasdaq market system or
a stock exchange which reports closing sale prices, the Fair Market Value shall be the average of
the closing bid and asked prices of the Common Stock in the over-the-counter market on the date of
valuation.



                    (c) If neither (a) nor (b) is applicable as of the date of valuation, then the Fair Market
Value shall be determined by the Administrator in good faith using any reasonable method of
evaluation, which determination shall be conclusive and binding on all interested parties.



          2.18 Incentive Option. “Incentive Option” means any Option designated and qualified as an
“incentive stock option” as defined in Section 422 of the Code.




          2.19 Incentive Option Agreement. “Incentive Option Agreement” means an Option Agreement with
respect to an Incentive Option.




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          2.20 NASD Dealer. “NASD Dealer” means a broker-dealer that is a member of the National
Association of Securities Dealers, Inc.




          2.21 Non-Employee Director. “Non-Employee Director” shall have the meaning given in Section
5.12 below.




          2.22 Nonqualified Option. “Nonqualified Option” means any Option that is not an Incentive
Option. To the extent that any Option designated as an Incentive Option fails in whole or in part
to qualify as an Incentive Option, including, without limitation, for failure to meet the
limitations applicable to a 10% Stockholder or because it exceeds the annual limit provided for in
Section 5.7 below, it shall to that extent constitute a Nonqualified Option.




          2.23 Nonqualified Option Agreement. “Nonqualified Option Agreement” means an Option Agreement
with respect to a Nonqualified Option.




          2.24 Option. “Option” means any option to purchase Common Stock granted pursuant to the Plan.




          2.25 Option Agreement. “Option Agreement” means the written agreement entered into between
the Company and the Optionee with respect to an Option granted under the Plan.




          2.26 Optionee. “Optionee” means any Participant who holds an Option.




          2.27 Participant. “Participant” means an individual or entity that holds an Option, Stock
Appreciation Right, shares of Stock, Restricted Stock, Restricted Stock Units, Stock Payment or
Dividend Equivalents under the Plan.




          2.28 Performance Criteria. “Performance Criteria” means one or more of the following as
established by the Administrator, which may be stated as a target percentage or dollar amount, a
percentage increase over a base period percentage or dollar amount or the occurrence of a specific
event or events:




                    (a) Sales;



                    (b) Operating income;



                    (c) Pre-tax income;



                    (d) Earnings before interest, taxes, depreciation and amortization;



                    (e) Earnings per share of Common Stock on a fully-diluted basis;



                    (f) Consolidated net income of the Company divided by the average consolidated common
stockholders equity;



                    (g) Cash and cash equivalents derived from either (i) net cash flow from operations, or (ii)
net cash flow from operations, financings and investing activities;



                    (h) Adjusted operating cash flow return on income;



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                    (i) Cost containment or reduction;



                    (j) The percentage increase in the market price of the Common Stock over a stated period;



                    (k) Return on assets;



                    (l) New Company product introductions;



                    (m) Obtaining regulatory approvals for new or existing products; and



                    (n) Individual business objectives.



          2.29 Purchase Price. “Purchase Price” means the purchase price payable to purchase a share of
Restricted Stock, or a Restricted Stock Unit, which, in the sole discretion of the Administrator,
may be zero (0), subject to limitations under applicable law.




          2.30 Repurchase Right. “Repurchase Right” means the right of the Company to repurchase either
unvested shares of Restricted Stock pursuant to Section 6.6 or to cancel unvested Restricted Stock
Units pursuant to Section 7.6.




          2.31 Restricted Stock. “Restricted Stock” means shares of Common Stock issued pursuant to
Article 6 hereof, subject to any restrictions and conditions as are established pursuant to such
Article 6.




          2.32 Restricted Stock Award. “Restricted Stock Award” means either the issuance of Restricted
Stock or the grant of Restricted Stock Units or Dividend Equivalents under the Plan.




          2.33 Restricted Stock Award Agreement. “Restricted Stock Award Agreement” means the written
agreement entered into between the Company and a Participant evidencing the issuance of Restricted
Stock or the grant of Restricted Stock Units or Dividend Equivalents under the Plan.




          2.34 Restricted Stock Unit. “Restricted Stock Unit” means the right to receive one share of
Common Stock issued pursuant to Article 7 hereof, subject to any restrictions and conditions as are
established pursuant to such Article 7.




          2.35 Service Provider. “Service Provider” means a consultant or other person or entity the
Administrator authorizes to become a Participant in the Plan and who provides services to (i) the
Company, (ii) an Affiliated Company, or (iii) any other business venture designated by the
Administrator in which the Company or an Affiliated Company has a significant ownership interest.




          2.36 Stock Appreciation Right. "Stock Appreciation Right” means a contractual right granted
to a Participant under Article 8 hereof entitling such Participant to receive a payment
representing the difference between the base price per share of the right and the Fair Market Value
of a share of Common Stock, payable either in cash or in shares of the Company’s Common Stock, at
such time, and subject to such conditions, as are set forth in this Plan and the applicable Stock
Appreciation Rights Award agreement.




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          2.37 Stock Appreciation Rights Holder. “Stock Appreciation Rights Holder” means any
Participant who holds a Stock Appreciation Right.




          2.38 Stock Payment. “Stock Payment” means a payment in the form of shares of Common Stock.




          2.39 10% Stockholder. “10% Stockholder” means a person who, as of a relevant date, owns or is
deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code)
stock possessing more than 10% of the total combined voting power of all classes of stock of the
Company or of an Affiliated Company.




ARTICLE 3.




ELIGIBILITY




          3.1 Incentive Options. Only employees of the Company or of an Affiliated Company (including
members of the Board if they are employees of the Company or of an Affiliated Company) are eligible
to receive Incentive Options under the Plan.




          3.2 Nonqualified Options, Stock Appreciation Rights, Stock Payments and Restricted Stock
Awards. Employees of the Company or of an Affiliated Company, members of the Board (whether or not
employed by the Company or an Affiliated Company), and Service Providers are eligible to receive
Nonqualified Options, Stock Appreciation Rights, Stock Payments or Restricted Stock Awards under
the Plan.




          3.3 Section 162(m) Limitation. In no event shall any Participant be granted Options or Stock
Appreciation Rights in any one calendar year pursuant to which the aggregate number of shares of
Common Stock that may be acquired thereunder exceeds 200,000 shares, subject to adjustment as to
the number and kind of shares pursuant to Section 4.2 hereof. Notwithstanding the foregoing, in
connection with his or her initial service to the Company, the aggregate number of shares of Common
Stock with respect to which Options or Stock Appreciation Rights may be granted to any Participant
shall not exceed 300,000 shares of Common Stock during the calendar year which includes such
individual’s initial service to the Company. The foregoing limitations shall be applied on an
aggregate basis taking into account Awards granted to a Participant under the Plan as well as
awards of the same type granted to a Participant under any other equity-based compensation plan of
the Company or any Affiliated Company.




ARTICLE 4.




PLAN SHARES




          4.1 Shares Subject to the Plan.




                    (a) The number of shares of Common Stock that may be issued pursuant to Awards under the Plan
shall be the sum of: (i) 2,000,000 shares; plus (ii) the number of shares of Common Stock remaining
available for issuance and not subject to awards granted under the Endologix, Inc. 1996 Stock
Option / Stock Issuance Plan (the “Existing Plan”) as of the Effective Date. The foregoing shall
be subject to adjustment as to the number and kind of shares pursuant to



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Section 4.2 hereof. In the event that (a) all or any portion of any Option granted under the
Plan can no longer under any circumstances be exercised, or (b) any shares of Common Stock subject
to an Award Agreement are reacquired by the Company, the shares of Common Stock allocable to the
unexercised portion of such Option or the shares so reacquired shall again be available for grant
or issuance under the Plan.



                    As of the Effective Date, there were 887,583 shares of Common Stock available for issuance
under the Existing Plan. Accordingly, the maximum number of shares of Common Stock that could be
issued pursuant to Awards under the Plan is 2,887,583 shares of Common Stock, subject to adjustment
as to the number and kind of shares pursuant to Section 4.2 hereof.



                    (b) The maximum number of shares of Common Stock that may be issued under the Plan as
Incentive Options shall be 2,887,583 shares, subject to adjustment as to the number and kind of
shares pursuant to Section 4.2 hereof.



                    (c) The maximum number of shares of Common Stock that may be issued as Restricted Stock, Stock
Payment awards, or subject to Restricted Stock Units shall be 500,000, subject to adjustment as to
the number and kind of shares pursuant to Section 4.2 hereof.



          4.2 Changes in Capital Structure. In the event that the outstanding shares of Common Stock
are hereafter increased or decreased or changed into or exchanged for a different number or kind of
shares or other securities of the Company by reason of a recapitalization, stock split, reverse
stock split, reclassification, stock dividend, or other change in the capital structure of the
Company, then appropriate adjustments shall be made by the Administrator to the aggregate number
and kind of shares subject to this Plan, the number and kind of shares and the price per share
subject to outstanding Award Agreements and the limit on the number of shares under Section 3.3,
all in order to preserve, as nearly as practical, but not to increase, the benefits to
Participants.




ARTICLE 5.




OPTIONS




          5.1 Grant of Stock Options. The Administrator shall have the right to grant, pursuant to this
Plan, Options subject to such terms, restrictions and conditions as the Administrator may determine
at the time of grant. Such conditions may include, but are not limited to, continued employment or
the achievement of specified performance goals or objectives established by the Administrator with
respect to one or more Performance Criteria.




          5.2 Option Agreements. Each Option granted pursuant to this Plan shall be evidenced by an
Option Agreement which shall specify the number of shares subject thereto, vesting provisions
relating to such Option, the Exercise Price per share, and whether the Option is an Incentive
Option or Nonqualified Option. As soon as is practical following the grant of an Option, an Option
Agreement shall be duly executed and delivered by or on behalf of the Company to the Optionee to
whom such Option was granted. Each Option Agreement shall be in such form and contain such
additional terms and conditions, not inconsistent with the provisions of this Plan, as the
Administrator shall, from time to time, deem desirable.




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          5.3 Exercise Price. The Exercise Price per share of Common Stock covered by each Option shall
be determined by the Administrator, subject to the following: (a) the Exercise Price of an
Incentive Option shall not be less than 100% of Fair Market Value on the date the Incentive Option
is granted, (b) the Exercise Price of a Nonqualified Option shall not be less than 100% of Fair
Market Value on the date the Nonqualified Option is granted, and (c) if the person to whom an
Incentive Option is granted is a 10% Stockholder on the date of grant, the Exercise Price shall not
be less than 110% of Fair Market Value on the date the Incentive Option is granted. However, an
Option may be granted with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424 of the Code.




          5.4 Payment of Exercise Price. Payment of the Exercise Price shall be made upon exercise of
an Option and may be made, in the discretion of the Administrator, subject to any legal
restrictions, by: (a) cash; (b) check; (c) the surrender of shares of Common Stock owned by the
Optionee (provided that shares acquired pursuant to the exercise of options granted by the Company
must have been held by the Optionee for the requisite period necessary to avoid a charge to the
Company’s earnings for financial reporting purposes), which surrendered shares shall be valued at
Fair Market Value as of the date of such exercise; (d) the cancellation of indebtedness of the
Company to the Optionee; (e) the waiver of compensation due or accrued to the Optionee for services
rendered; (f) provided that a public market for the Common Stock exists, a “same day sale”
commitment from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to exercise
the Option and to sell a portion of the shares so purchased to pay for the Exercise Price and
whereby the NASD Dealer irrevocably commits upon receipt of such shares to forward the Exercise
Price directly to the Company; (g) provided that a public market for the Common Stock exists, a
“margin” commitment from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to
exercise the Option and to pledge the shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such shares to forward the Exercise Price directly to
the Company; or (h) any combination of the foregoing methods of payment or any other consideration
or method of payment as shall be permitted by applicable law.




          5.5 Term and Termination of Options. The term and provisions for termination of each Option
shall be as fixed by the Administrator, but no Option may be exercisable more than ten (10) years
after the date it is granted.




          5.6 Vesting and Exercise of Options. Each Option shall vest and become exercisable in one or
more installments, at such time or times and subject to such conditions, including without
limitation the achievement of specified performance goals or objectives established with respect to
one or more Performance Criteria, as shall be determined by the Administrator.




          5.7 Annual Limit on Incentive Options. To the extent required for “incentive stock option”
treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time
of grant) of the Common Stock with respect to which Incentive Options granted under this Plan and
any other plan of the Company or any Affiliated Company become exercisable for the first time by an
Optionee during any calendar year shall not exceed $100,000.




          5.8 Nontransferability of Options. Except as otherwise provided in this Section 5.8, Options
shall not be assignable or transferable except by will, the laws of descent and distribution or
pursuant to a DRO entered by a court in settlement of marital property rights, and during the life
of



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the Optionee, Options shall be exercisable only by the Optionee. At the discretion of the
Administrator and in accordance with rules it establishes from time to time, Optionees may be
permitted to transfer some or all of their Nonqualified Options to one or more “family members,”
which is not a “prohibited transfer for value,” provided that (i) the Optionee (or such Optionee’s
estate or representative) shall remain obligated to satisfy all income or other tax withholding
obligations associated with the exercise of such Nonqualified Option; (ii) the Optionee shall
notify the Company in writing that such transfer has occurred and disclose to the Company the name
and address of the “family member” or “family members” and their relationship to the Optionee, and
(iii) such transfer shall be effected pursuant to transfer documents in a form approved by the
Administrator. For purposes of the foregoing, the terms “family members” and “prohibited transfer
for value” have the meaning ascribed to them in the General Instructions to Form S-8 (or any
successor form) promulgated under the Securities Act of 1933, as amended.



          5.9 Repricing Prohibited. Subject to Section 4.2 hereof, without the prior approval of the
Company’s stockholders, evidenced by a majority of votes cast, the Administrator shall not cause
the cancellation, substitution or amendment of an Option Agreement that would have the effect of
reducing the exercise price of such an Option previously granted under the Plan, or otherwise
approve any modification to such an Option that would be treated as a “repricing” under the then
applicable rules, regulations or listing requirements adopted by the Nasdaq Stock Market.




          5.10 Rights as a Stockholder. An Optionee or permitted transferee of an Option shall have no
rights or privileges as a stockholder with respect to any shares covered by an Option until such
Option has been duly exercised and certificates representing shares purchased upon such exercise
have been issued to such person.




          5.11 Unvested Shares. The Administrator shall have the discretion to grant Options which are
exercisable for unvested shares of Common Stock. Should the Optionee cease being an employee,
officer or director of the Company while owning such unvested shares, the Company shall have the
right to repurchase, at the exercise price paid per share, any or all of those unvested shares.
The terms upon which such repurchase right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the purchased shares) shall be established by
the Administrator and set forth in the document evidencing such repurchase right.




          5.12 Option Grants to Non-Employee Directors.




                    (a) Automatic Grants. Each director of the Company who is not an employee or executive
officer of the Company (a “Non-Employee Director”) shall automatically be granted (i) a
Nonqualified Option to purchase 30,000 shares of the Common Stock upon commencement of service as a
director of the Company, and (ii) a Nonqualified Option to purchase 20,000 shares of Common Stock
at each annual meeting of the Company’s stockholders (provided such individual has served as a
Non-Employee Director for at least six (6) months prior to such meeting); provided, however, that
the Chairman of the Board shall automatically be granted a Nonqualified Option to purchase a
maximum of 50,000 shares of Common Stock at each annual meeting of the Company’s stockholders, with
the exact amount determined by the Administrator. All such Non-Qualified Options shall be subject
to the terms and conditions of this Plan, including Section 5.11 above.




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                    (b) Vesting
of Options Granted to Non-Employee Directors. Each initial Nonqualified Option granted to a newly-elected or appointed Non-Employee Director shall vest,
in a series of four (4) successive equal annual installments over the Non-Employee Director’s
period of continued service as a director, with the first such installment to vest upon the
Non-Employee Director’s completion of one (1) year of service as a Non-Employee Director measured
from the Nonqualified Option grant date. Each annual Nonqualified Option granted to continuing
Non-Employee Directors shall vest, upon the Non-Employee Director’s completion of one (1) year of
service as a Non-Employee Director measured from the Nonqualified Option grant date.



ARTICLE 6.




RESTRICTED STOCK




          6.1 Issuance of Restricted Stock. The Administrator shall have the right to issue pursuant to
this Plan and at a Purchase Price determined by the Administrator, shares of Common Stock subject
to such terms, restrictions and conditions as the Administrator may determine at the time of grant.
Such conditions may include, but are not limited to, continued employment or the achievement of
specified performance goals or objectives established by the Administrator with respect to one or
more Performance Criteria, which require the Administrator to certify in writing whether and the
extent to which such performance goals were achieved before such restrictions are considered to
have lapsed.




          6.2 Restricted Stock Award Agreements. A Participant shall have no rights with respect to the
shares of Restricted Stock covered by a Restricted Stock Award Agreement until the Participant has
paid the full Purchase Price, if any, to the Company in the manner set forth in Section 6.3(b)
hereof and has executed and delivered to the Company the applicable Restricted Stock Award
Agreement. Each Restricted Stock Award Agreement shall be in such form, and shall set forth the
Purchase Price, if any, and such other terms, conditions and restrictions of the Restricted Stock
Award Agreement, not inconsistent with the provisions of this Plan, as the Administrator shall,
from time to time, deem desirable. Each such Restricted Stock Award Agreement may be different
from each other Restricted Stock Award Agreement.




          6.3 Purchase Price.




                    (a) Amount. Restricted Stock may be issued to Participants for such consideration as is
determined by the Administrator in its sole discretion, including no consideration or such minimum
consideration as may be required by applicable law.



                    (b) Payment. Payment of the Purchase Price, if any, may be made, in the discretion of the
Administrator, subject to any legal restrictions, by: (a) cash; (b) check; (c) the surrender of
shares of Common Stock owned by the Participant (provided that shares acquired pursuant to the
exercise of options granted by the Company shall have been held by the Participant for the
requisite period necessary to avoid a charge to the Company’s earnings for financial reporting
purposes), which surrendered shares shall be valued at Fair Market Value as of the date of such
acceptance; (d) the cancellation of indebtedness of the Company to the Participant; (e) the waiver
of compensation due or accrued to the Participant for services rendered; or (f) any combination of
the foregoing methods of payment or any other consideration or method of payment as shall be
permitted by applicable law. If payment for shares of Restricted Stock is made by promissory note,
any cash



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dividends paid with respect to the Restricted Stock may be applied, in the discretion of the
Administrator, to repayment of such note.



          6.4 Vesting of Restricted Stock. The Restricted Stock Award Agreement shall specify the date
or dates, the performance goals, if any, established by the Administrator with respect to one or
more Performance Criteria that must be achieved, and any other conditions on which the Restricted
Stock may vest.




          6.5 Rights as a Stockholder. Upon complying with the provisions of Sections 6.2 and 6.3
hereof, a Participant shall have the rights of a stockholder with respect to the Restricted Stock
acquired pursuant to a Restricted Stock Award Agreement, including voting and dividend rights,
subject to the terms, restrictions and conditions as are set forth in such Restricted Stock Award
Agreement. Unless the Administrator shall determine otherwise, certificates evidencing shares of
Restricted Stock shall remain in the possession of the Company until such shares have vested in
accordance with the terms of the Restricted Stock Award Agreement.




          6.6 Restrictions. Shares of Restricted Stock may not be sold, pledged or otherwise encumbered
or disposed of and shall not be assignable or transferable except by will, the laws of descent and
distribution or pursuant to a DRO entered by a court in settlement of marital property rights,
except as specifically provided in the Restricted Stock Award Agreement or as authorized by the
Administrator. In the event of termination of a Participant’s employment, service as a director of
the Company or Service Provider status for any reason whatsoever (including death or disability),
the Restricted Stock Award Agreement may provide, in the discretion of the Administrator, that the
Company may, at the discretion of the Administrator, exercise a Repurchase Right to repurchase at
the original Purchase Price the shares of Restricted Stock that have not vested as of the date of
termination.




ARTICLE 7.




RESTRICTED STOCK UNITS




          7.1 Grants of Restricted Stock Units and Dividend Equivalents. The Administrator shall have
the right to grant, pursuant to this Plan, Restricted Stock Units and Dividend Equivalents, subject
to such terms, restrictions and conditions as the Administrator may determine at the time of grant.
Such conditions may include, but are not limited to, continued employment or the achievement of
specified performance goals or objectives established by the Administrator with respect to one or
more Performance Criteria, which require the Administrator to certify in writing whether and the
extent to which such performance goals were achieved before such restrictions are considered to
have lapsed.




          7.2 Restricted Stock Unit Agreements. A Participant shall have no rights with respect to the
Restricted Stock Units or Dividend Equivalents covered by a Restricted Stock Award Agreement until
the Participant has executed and delivered to the Company the applicable Restricted Stock Award
Agreement. Each Restricted Stock Award Agreement shall be in such form, and shall set forth the
Purchase Price, if any, and such other terms, conditions and restrictions of the Restricted Stock
Award Agreement, not inconsistent with the provisions of this Plan, as the Administrator shall,
from time to time, deem desirable. Each such Restricted Stock Award Agreement may be different
from each other Restricted Stock Award Agreement.




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          7.3 Purchase Price.




                    (a) Amount. Restricted Stock Units may be issued to Participants for such consideration as is
determined by the Administrator in its sole discretion, including no consideration or such minimum
consideration as may be required by applicable law.



                    (b) Payment. Payment of the Purchase Price, if any, may be made, in the discretion of the
Administrator, subject to any legal restrictions, by: (a) cash; (b) check; (c) the surrender of
shares of Common Stock owned by the Participant (provided that shares acquired pursuant to the
exercise of options granted by the Company shall have been held by the Participant for the
requisite period necessary to avoid a charge to the Company’s earnings for financial reporting
purposes), which surrendered shares shall be valued at Fair Market Value as of the date of such
acceptance; (d) the cancellation of indebtedness of the Company to the Participant; (e) the waiver
of compensation due or accrued to the Participant for services rendered; or (f) any combination of
the foregoing methods of payment or any other consideration or method of payment as shall be
permitted by applicable law.



          7.4 Vesting of Restricted Stock Units and Dividend Equivalents. The Restricted Stock Award
Agreement shall specify the date or dates, the performance goals, if any, established by the
Administrator with respect to one or more Performance Criteria that must be achieved, and any other
conditions on which the Restricted Stock Units and Dividend Equivalents may vest.




          7.5 Rights as a Stockholder. Holders of Restricted Stock Units shall not be entitled to vote
or to receive dividends unless or until they become owners of the shares of Common Stock pursuant
to their Restricted Stock Award Agreement and the terms and conditions of the Plan.




          7.6 Restrictions. Restricted Stock Units and Dividend Equivalents may not be sold, pledged or
otherwise encumbered or disposed of and shall not be assignable or transferable except by will, the
laws of descent and distribution or pursuant to a DRO entered by a court in settlement of marital
property rights, except as specifically provided in the Restricted Stock Award Agreement or as
authorized by the Administrator. In the event of termination of a Participant’s employment,
service as a director of the Company or Service Provider status for any reason whatsoever
(including death or disability), the Restricted Stock Award Agreement may provide that all
Restricted Stock Units and Dividend Equivalents that have not vested as of such date shall be
automatically forfeited by the Participant. However, if, with respect to such unvested Restricted
Stock Units the Participant paid a Purchase Price, the Administrator shall have the right,
exercisable at the discretion of the Administrator, to exercise a Repurchase Right to cancel such
unvested Restricted Stock Units upon payment to the Participant of the original Purchase Price.
The Participant shall forfeit such unvested Restricted Stock Units upon the Administrator’s
exercise of such right.




ARTICLE 8.




STOCK APPRECIATION RIGHTS




          8.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be granted to any
Participant selected by the Administrator. Stock Appreciation Rights may be granted on a basis
that allows for the exercise of the right by the Participant or that provides for the automatic
payment of the right upon a specified date or event. Stock Appreciation Rights shall be
exercisable



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or payable at such time or times and upon conditions as may be approved by the Administrator,
provided that the Administrator may accelerate the exercisability or payment of a Stock
Appreciation Right at any time.



          8.2 Vesting of Stock Appreciation Rights. Each Stock Appreciation Right shall vest and become
exercisable in one or more installments at such time or times and subject to such conditions,
including without limitation the achievement of specified performance goals or objectives
established with respect to one or more Performance Criteria, as shall be determined by the
Administrator. A Stock Appreciation Right will be exercisable or payable at such time or times as
determined by the Administrator, provided that the maximum term of a Stock Appreciation Right shall
be ten (10) years from the date of grant. The base price of a Stock Appreciation Right shall be
determined by the Administrator in its sole discretion; provided, however, that the base price per
share of any Stock Appreciation Right shall not be less than one hundred percent (100%) of the Fair
Market Value of the shares of Common Stock on the date of grant.




          8.3 Payment of Stock Appreciation Rights. A Stock Appreciation Right will entitle the holder,
upon exercise or other payment of the Stock Appreciation Right, as applicable, to receive an amount
determined by multiplying: (i) the excess of the Fair Market Value of a share of Common Stock on
the date of exercise or payment of the Stock Appreciation Right over the base price of such Stock
Appreciation Right, by (ii) the number of shares as to which such Stock Appreciation Right is
exercised or paid. Payment of the amount determined under the foregoing shall be made either in
cash or in shares of Common Stock, as determined by the Administrator in its discretion. If
payment is made in shares of Common Stock, such shares shall be valued at their Fair Market Value
on the date of exercise or payment, subject to applicable tax withholding requirements and to such
conditions, as are set forth in this Plan and the applicable Stock Appreciation Rights Award
Agreement.




          8.4 Nontransferability of Stock Appreciation Rights. Except as otherwise provided in this
Section 8.4, Stock Appreciation Rights shall not be assignable or transferable except by will, the
laws of descent and distribution or pursuant to a DRO entered by a court in settlement of marital
property rights, and during the life of the Stock Appreciation Rights Holder, Stock Appreciation
Rights shall be exercisable only by the Stock Appreciation Rights Holder. At the discretion of the
Administrator and in accordance with rules it establishes from time to time, Stock Appreciation
Rights Holders may be permitted to transfer some or all of their Stock Appreciation Rights to one
or more “family members,” which is not a “prohibited transfer for value,” provided that (i) the
Stock Appreciation Rights Holder (or such holder’s estate or representative) shall remain obligated
to satisfy all income or other tax withholding obligations associated with the exercise of such
Stock Appreciation Right; (ii) the Stock Appreciation Rights Holder shall notify the Company in
writing that such transfer has occurred and disclose to the Company the name and address of the
“family member” or “family members” and their relationship to the holder, and (iii) such transfer
shall be effected pursuant to transfer documents in a form approved by the Administrator. For
purposes of the foregoing, the terms “family members” and “prohibited transfer for value” have the
meaning ascribed to them in the General Instructions to Form S-8 (or any successor form)
promulgated under the Securities Act of 1933, as amended.







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ARTICLE 9.




STOCK PAYMENT AWARDS




          9.1 Grant of Stock Payment Awards. A Stock Payment award may be granted to any Participant
selected by the Administrator. A Stock Payment award may be granted for past services, in lieu of
bonus or other cash compensation, as directors’ compensation or for any other valid purpose as
determined by the Administrator. A Stock Payment award granted to a Participant represents shares
of Common Stock that are issued without restrictions on transfer and other incidents of ownership
and free of forfeiture conditions, except as otherwise provided in the Plan and the Award
Agreement. The Administrator may, in connection with any Stock Payment award, provide that no
payment is required, or require the payment by the Participant of a specified purchase price.




          9.2 Rights as Stockholder. Subject to the foregoing provisions of this Article 9 and the
applicable Award Agreement, upon the issuance of the Common Stock under a Stock Payment award the
Participant shall have all rights of a stockholder with respect to the shares of Common Stock,
including the right to vote the shares and receive all dividends and other distributions paid or
made with respect thereto.




ARTICLE 10.




ADMINISTRATION OF THE PLAN




          10.1 Administrator. Authority to control and manage the operation and administration of the
Plan shall be vested in the Board, which may delegate such responsibilities in whole or in part to
a Committee. Members of the Committee may be appointed from time to time by, and shall serve at
the pleasure of, the Board. The Board may limit the composition of the Committee to those persons
necessary to comply with the requirements of Section 162(m) of the Code and Section 16 of the
Exchange Act.




          10.2 Powers of the Administrator. In addition to any other powers or authority conferred upon
the Administrator elsewhere in the Plan or by law, the Administrator shall have full power and
authority: (a) to determine the persons to whom, and the time or times at which, Awards shall be
granted, the number of shares to be represented by each Award, and the consideration to be received
by the Company upon the exercise and/or vesting of such Awards; (b) to interpret the Plan; (c) to
create, amend or rescind rules and regulations relating to the Plan; (d) to determine the terms,
conditions and restrictions contained in, and the form of, Award Agreements; (e) to determine the
identity or capacity of any persons who may be entitled to exercise a Participant’s rights under
any Award Agreement under the Plan; (f) to correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any Award Agreement; (g) to accelerate the vesting of any Award
or release or waive any repurchase rights of the Company with respect to Restricted Stock Awards;
(h) to extend the expiration date of any Option; (i) to amend outstanding Award Agreements to
provide for, among other things, any change or modification which the Administrator could have
included in the original Agreement or in furtherance of the powers provided for herein; and (j) to
make all other determinations necessary or advisable for the administration of the Plan, but only
to the extent not contrary to the express provisions of the Plan. Any action, decision,
interpretation or determination made in good faith by the Administrator in the exercise of its
authority conferred upon it under the Plan shall be final and binding on the Company and all
Participants. To the extent permitted by applicable law, the Administrator may from time to time
delegate to one or more members of the Board or one or more officers of the Company the authority



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to grant or amend Awards to Participants other than (a) senior executives of the Company who
are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers of the
Company (or members of the Board) to whom authority to grant or amend Awards has been delegated
hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the
Administrator specifies at the time of such delegation, and the Administrator may at any time
rescind the authority so delegated or appoint a new delegatee.



          10.3 Limitation on Liability. No employee of the Company or member of the Board or
Administrator shall be subject to any liability with respect to duties under the Plan unless the
person acts fraudulently or in bad faith. To the extent permitted by law, the Company shall
indemnify each member of the Board or Administrator, and any employee of the Company with duties
under the Plan, who was or is a party, or is threatened to be made a party, to any threatened,
pending or completed proceeding, whether civil, criminal, administrative or investigative, by
reason of such person’s conduct in the performance of duties under the Plan.




ARTICLE 11.




CHANGE IN CONTROL




          11.1 Impact of Change in Control on Awards Under Plan. In order to preserve a Participant’s
rights in the event of a Change in Control of the Company:




                    (a) The Administrator shall have the discretion to provide in each Award Agreement the terms
and conditions that relate to (i) vesting of such Award in the event of a Change in Control, and
(ii) assumption of such Awards or issuance of comparable securities under an incentive program in
the event of a Change in Control. The aforementioned terms and conditions may vary in each Award
Agreement.



                    (b) If the terms of an outstanding Option provide for accelerated vesting in the event of a
Change in Control, or to the extent that a Option is vested and not yet exercised, the
Administrator in its discretion may provide, in connection with the Change in Control transaction,
for the purchase or exchange of each Option for an amount of cash or other property having a value
equal to the difference (or “spread”) between: (x) the value of the cash or other property that the
Participant would have received pursuant to the Change in Control transaction in exchange for the
shares issuable upon exercise of the Option had the Option been exercised immediately prior to the
Change in Control, and (y) the Exercise Price of the Option.



                    (c) If the terms of an outstanding Stock Appreciation Right provide for accelerated vesting in
the event of a Change in Control, or to the extent that a Stock Appreciation Right is vested and
not yet exercised, the Administrator in its discretion may provide, in connection with the Change
in Control transaction, for the purchase or exchange of each Stock Appreciation Right for an amount
of cash or other property having a value equal to the value of the cash or other property that the
Participant would have received pursuant to the Change in Control transaction in exchange for the
shares issuable upon exercise of the Stock Appreciation Right had the Stock Appreciation Right been
exercised immediately prior to the Change in Control.



                    (d) Outstanding Options and Stock Appreciation Rights shall terminate and cease to be
exercisable upon consummation of a Change in Control except to the extent that the Options or



15









 







Stock Appreciation Rights are assumed by the successor entity (or parent thereof) pursuant to
the terms of the Change in Control transaction.



                    (e) The Administrator shall cause written notice of a proposed Change in Control transaction
to be given to Participants not less than fifteen (15) days prior to the anticipated effective date
of the proposed transaction.



ARTICLE 12.




AMENDMENT AND TERMINATION OF THE PLAN




          12.1 Amendments. The Board may from time to time alter, amend, suspend or terminate the Plan
in such respects as the Board may deem advisable. No such alteration, amendment, suspension or
termination shall be made which shall substantially affect or impair the rights of any Participant
under an outstanding Award Agreement without such Participant’s consent. The Board may alter or
amend the Plan to comply with requirements under the Code relating to Incentive Options or other
types of options which give Optionees more favorable tax treatment than that applicable to Options
granted under this Plan as of the date of its adoption. Upon any such alteration or amendment, any
outstanding Option granted hereunder may, if the Administrator so determines and if permitted by
applicable law, be subject to the more favorable tax treatment afforded to an Optionee pursuant to
such terms and conditions.




          12.2 Plan Termination. Unless the Plan shall theretofore have been terminated, the Plan shall
terminate on the tenth (10th) anniversary of the Effective Date and no Awards may be granted under
the Plan thereafter, but Awards and Award Agreements then outstanding shall continue in effect in
accordance with their respective terms.




ARTICLE 13.




TAX WITHHOLDING




          13.1 Tax Withholding. The Participant shall be responsible for payment of any taxes or
similar charges required by law to be withheld from an Award or an amount paid in satisfaction of
an Award, which shall be paid by the Participant on or prior to the payment or other event that
results in taxable income in respect of an Award. The Award Agreement may specify the manner in
which the withholding obligation shall be satisfied with respect to the particular type of Award.




ARTICLE 14.




MISCELLANEOUS




          14.1 Benefits Not Alienable. Other than as provided above, benefits under the Plan may not be
assigned or alienated, whether voluntarily or involuntarily. Any unauthorized attempt at
assignment, transfer, pledge or other disposition shall be without effect.




          14.2 Awards subject to Code Section 409A. Any Award that constitutes, or provides for, a
deferral of compensation subject to Section 409A of the Code (a “Section 409A Award”) shall satisfy
the requirements of Section 409A of the Code, to the extent applicable as determined by the



16









 







Administrator. The Award Agreement with respect to a Section 409A Award shall incorporate the
terms and conditions required by Section 409A of the Code. If any deferral of compensation is to
be permitted in connection with a 409A Award, the Administrator shall establish rules and
procedures relating to such deferral in a manner intended to comply with the requirements of
Section 409A of the Code, including, without limitation, the time when an election to defer may be
made, the time period of the deferral and the events that would result in payment of the deferred
amount, the interest or other earnings attributable to the deferral and the method of funding, if
any, attributable to the deferred amount.



          14.3 No Enlargement of Employee Rights. This Plan is strictly a voluntary undertaking on the
part of the Company and shall not be deemed to constitute a contract between the Company and any
Participant to be consideration for, or an inducement to, or a condition of, the employment of any
Participant. Nothing contained in the Plan shall be deemed to give the right to any Participant to
be retained as an employee of the Company or any Affiliated Company or to interfere with the right
of the Company or any Affiliated Company to discharge any Participant at any time.




          14.4 Application of Funds. The proceeds received by the Company from the sale of Common Stock
pursuant to Option Agreements and Restricted Stock Award Agreements, except as otherwise provided
herein, will be used for general corporate purposes.




          14.5 Unfunded Plan. The adoption of the Plan and any reservation of shares of Common Stock or
cash amounts by the Company to discharge its obligations hereunder shall not be deemed to create a
trust or other funded arrangement. Except upon the issuance of Common Stock pursuant to an Award,
any rights of a Participant under the Plan shall be those of a general unsecured creditor of the
Company, and neither a Participant nor the Participant’s permitted transferees or estate shall have
any other interest in any assets of the Company by virtue of the Plan.




          14.6 Annual Reports. During the term of this Plan, the Company will furnish to each
Participant who does not otherwise receive such materials, copies of all reports, proxy statements
and other communications that the Company distributes generally to its stockholders.





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