exv10w2



 





Exhibit 10.2




GSI COMMERCE, INC.




2005 EQUITY INCENTIVE PLAN, AS AMENDED




Approved By Board on: March 8, 2005

Approved By Stockholders: June 30, 2005

Termination Date: March 8, 2015




1. GENERAL.




     (a) Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are
Employees, Directors and Consultants.



     (b) Available Stock Awards. The Plan provides for the grant of the following Stock Awards:
(i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Purchase Awards, (iv)
Stock Bonus Awards, (v) Stock Appreciation Rights, (vi) Stock Unit Awards, and (vii) Other Stock
Awards.



     (c) General Purpose. The Company, by means of the Plan, seeks to secure and retain the
services of the group of persons eligible to receive Stock Awards as set forth in Section 1(a), to
provide incentives for such persons to exert maximum efforts for the success of the Company and any
Affiliate and to provide a means by which such eligible recipients may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of Stock Awards.



2. DEFINITIONS.




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



     (a) “Affiliate” means (i) any corporation (other than the Company) in an unbroken ownership
chain of corporations ending with the Company, provided each corporation in the unbroken ownership
chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other corporations in such
ownership chain, and (ii) any corporation (other than the Company) in an unbroken ownership chain
of corporations beginning with the Company, provided each corporation (other than the last
corporation) in the unbroken ownership chain owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such ownership chain. The Board shall have the authority to
determine (x) the time or times at which the ownership tests are applied, and (y) whether
“Affiliate” includes entities other than corporations within the foregoing definition.



     (b) “Board” means the Board of Directors of the Company.



     (c) “Capitalization Adjustment” has the meaning ascribed to that term in Section 12(a).



     (d) “Cause” means with respect to a Participant, the occurrence of any of the following: (i)
such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral
turpitude under the laws of the United States or any state thereof; (ii) such Participant’s
attempted commission of, or participation in, a fraud or act of dishonesty against the Company;
(iii) such Participant’s intentional, material violation of any material contract or agreement
between the Participant and the Company or of the Company’s code of Business Conduct or any of the
Company’s policies or of any statutory duty owed to the Company; (iv) such Participant’s
unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v)
such Participant’s engaging in conduct which is inimical or injurious, in a material respect, to
the business or interests of the Company. The determination that a termination of the Participant’s
Continuous Service is either for Cause or without Cause shall be made by the Company in its sole
discretion. Any determination by the Company that the Continuous Service of a Participant was
terminated by reason of dismissal without Cause for the purposes of outstanding Stock Awards held
by such Participant shall have no effect upon any determination of the rights or obligations of the
Company or such Participant for any other purpose.



     (e) “Change in Control” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:




     (i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of
the Company representing more than fifty percent (50%) of the combined voting power of the
Company’s then outstanding securities other than by virtue of a merger, consolidation or
similar transaction, which is covered by Section 2(e)(ii). Notwithstanding the foregoing, a
Change in Control shall not be deemed to occur (A) on



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account of the acquisition of securities of the Company from the Company by an investor, any
affiliate (as such term is defined in Rule 405 of the Securities Act) thereof or any other
Exchange Act Person in a transaction or series of related transactions the primary purpose of
which is to obtain financing for the Company through the issuance of equity securities or (B)
solely because the level of Ownership held by any Exchange Act Person (the “Subject Person")
exceeds the designated percentage threshold of the outstanding voting securities as a result
of a repurchase or other acquisition of voting securities by the Company reducing the number
of shares outstanding, provided that if a Change in Control would occur (but for the operation
of this sentence) as a result of the acquisition of voting securities by the Company, and
after such share acquisition, the Subject Person becomes the Owner of any additional voting
securities that, assuming the repurchase or other acquisition had not occurred, increases the
percentage of the then outstanding voting securities Owned by the Subject Person over the
designated percentage threshold, then a Change in Control shall be deemed to occur;




     (ii) there is consummated a merger, consolidation or similar transaction involving
(directly or indirectly) the Company and, immediately after the consummation of such merger,
consolidation or similar transaction, the stockholders of the Company immediately prior
thereto do not Own, directly or indirectly, either (A) outstanding voting securities
representing more than fifty percent (50%) of the combined outstanding voting power of the
surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty
percent (50%) of the combined outstanding voting power of the parent of the surviving Entity
in such merger, consolidation or similar transaction, in each case in substantially the same
proportions as their Ownership of the outstanding voting securities of the Company immediately
prior to such transaction;




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




     (iv) there is consummated a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries, other than a
sale, lease, license or other disposition of all or substantially all of the consolidated
assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the
combined voting power of the voting securities of which are Owned by stockholders of the
Company in substantially the same proportions as their Ownership of the outstanding voting
securities of the Company immediately prior to such sale, lease, license or other disposition;
or




     (v) individuals who, on the date this Plan is adopted by the Board, are Directors (the
“Incumbent Board") cease for any reason to constitute at least a majority of the Directors;
provided, however, that if the appointment or election (or nomination for election) of any new
Director was approved or recommended by a majority vote of the Incumbent Board, such new
Director shall, for purposes of this Plan, be considered a member of the Incumbent Board.



     The term Change in Control shall not include a sale of assets, merger or other transaction
effected exclusively for the purpose of changing the domicile of the Company.



     Notwithstanding the foregoing or any other provision of this Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the Company or any
Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards
subject to such agreement where such agreement provides for acceleration of vesting of such Stock
Awards in the event of a Change in Control; provided, however, that if no definition of Change in
Control or any analogous term is set forth in such an individual written agreement, the foregoing
definition shall apply.



     (f) “Code” means the Internal Revenue Code of 1986, as amended.



     (g) “Committee” means a committee of one (1) or more Directors to whom authority has been
delegated by the Board in accordance with Section 3(c).



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



     (i) “Company” means GSI Commerce, Inc., a Delaware corporation.



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



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



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




     (i) a sale or other disposition of all or substantially all, as determined by the Board
in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;




     (ii) a sale or other disposition of at least ninety percent (90%) of the outstanding
securities of the Company;




     (iii) the consummation of a merger, consolidation or similar transaction following which
the Company is not the surviving corporation; or




     (iv) the consummation of a merger, consolidation or similar transaction following which
the Company is the surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger, consolidation or similar transaction are converted or
exchanged by virtue of the merger, consolidation or similar transaction into other property,
whether in the form of securities, cash or otherwise.



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



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



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



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



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



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



     (s) “Exchange Act” means the Securities Exchange Act of 1934, as amended.



     (t) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include
(i) the Company or any Affiliate, (ii) any employee benefit plan of the Company or any Affiliate or
any trustee or other fiduciary holding securities under an employee benefit plan of the Company or
any Affiliate, (iii) an underwriter temporarily holding securities pursuant to an offering of such
securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their Ownership of stock of the Company; or (v) any natural
person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that,
as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power of the Company’s then
outstanding securities.



     (u) “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 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 in



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question, as reported in The Wall Street Journal or such other source as the Board deems reliable. Unless otherwise
provided by the Board, if there is no closing sales price (or closing bid if no sales were
reported) for the Common Stock on the date in question, then the Fair Market Value shall be the closing
selling price (or closing bid if no sales were reported) on the last preceding date for which
such quotation exists.




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



     (v) “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.



     (w) “Non-Employee Director” means a Director who either (i) is not a current employee or
officer of the Company or an Affiliate, does not receive compensation, either directly or
indirectly, from the Company or an Affiliate for services rendered as a consultant or in any
capacity other than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
(“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure
would be required under Item 404(a) of Regulation S-K, and is not engaged in a business
relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or
(ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.



     (x) “Nonstatutory Stock Option” means any Option other than an Incentive Stock Option.



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



     (z) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares
of Common Stock granted pursuant to the Plan.



     (aa) “Option Agreement” means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to
the terms and conditions of the Plan.



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



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



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



     (ee) “Outside Director” means a Director who either (i) is not a current employee of the
Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated
corporation” who receives compensation for prior services (other than benefits under a
tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or
an “affiliated corporation,” and does not receive remuneration from the Company or an “affiliated
corporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is
otherwise considered an “outside director” for purposes of Section 162(m) of the Code.



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



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



     (hh) “Performance Criteria” means the one or more criteria that the Board shall select for
purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria
that shall be used to establish such Performance Goals may be based on any one of, or combination
of, the following: (i) earnings per share; (ii) earnings before interest and taxes; (iii) earnings
before interest, taxes and depreciation and/or amortization; (iv) total stockholder return; (v)
return on equity; (vi) return on assets, investment, or capital employed; (vii) operating margin;
(viii) gross margin; (ix) operating income; (x) net income (before or after taxes); (xi) net
operating income; (xii) net operating income after tax; (xiii) pre-tax profit; (xiv) operating cash
flow;



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(xv) sales or revenue targets; (xvi) increases in revenue or product revenue; (xvii) expenses
and cost reduction goals;
(xviii) improvement in or attainment of working capital levels; (xix) economic value added (or
an equivalent metric); (xx) market share; (xxi) cash flow; (xxii) cash flow per share; (xxiii)
share price performance; (xxiv) debt reduction; (xxv) implementation or completion of projects or
processes; (xxvi) customer satisfaction; (xxvii) stockholders’ equity; and (xxviii) other measures
of performance selected by the Board. Partial achievement of the specified criteria may result in
the payment or vesting corresponding to the degree of achievement as specified in the Stock Award
Agreement. The Board shall, in its sole discretion, define the manner of calculating the
Performance Criteria it selects to use for such Performance Period.




     (ii) “Performance Goals” means, for a Performance Period, the one or more goals established by
the Board for the Performance Period based upon the Performance Criteria. The Board is authorized
at any time in its sole discretion, to adjust or modify the calculation of a Performance Goal for
such Performance Period in order to prevent the dilution or enlargement of the rights of
Participants (i) in the event of, or in anticipation of, any unusual or extraordinary corporate
item, transaction, event or development; (ii) in recognition of, or in anticipation of, any other
unusual or nonrecurring events affecting the Company, or the financial statements of the Company,
or in response to, or in anticipation of, changes in applicable laws, regulations, accounting
principles, or business conditions; or (iii) in view of the Board’s assessment of the business
strategy of the Company, performance of comparable organizations, economic and business conditions,
and any other circumstances deemed relevant. Specifically, the Board is authorized to make
adjustment in the method of calculating attainment of Performance Goals and objectives for a
Performance Period as follows: (x) to exclude the dilutive effects of acquisitions or joint
ventures; (y) to assume that any business divested by the Company achieved performance objectives
at targeted levels during the balance of a Performance Period following such divestiture; and (z)
to exclude the effect of any change in the outstanding shares of Common Stock by reason of any
stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation,
spin-off, combination or exchange of shares or other similar corporate change, or any distributions
to common stockholders other than regular cash dividends. In addition, with respect to Performance
Goals established for Participants who are not Covered Employees, and who will not be Covered
Employees at the time the compensation will be paid, the Board is authorized to make adjustment in
the method of calculating attainment of Performance Goals and objectives for a Performance Period
as follows: (A) to exclude restructuring or other nonrecurring charges; (B) to exclude exchange
rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (C)
to exclude the effects of changes to generally accepted accounting standards required by the
Financial Accounting Standards Board; (D) to exclude the effects to any statutory adjustments to
corporate tax rates; (E) to exclude the impact of any “extraordinary items” as determined under
generally accepted accounting principles; and (F) to exclude any other unusual, non-recurring gain
or loss or other extraordinary item.



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



     (kk) “Plan” means this GSI Commerce, Inc. 2005 Equity Incentive Plan.



     (ll) “Prior Plan” means the Company’s 1996 Equity Incentive Plan in effect immediately prior
to the Effective Date.



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



     (nn) “Securities Act” means the Securities Act of 1933, as amended.



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



     (pp) “Stock Appreciation Right Agreement” means a written agreement between the Company and a
holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation
Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions
of the Plan.



     (qq) “Stock Award” means any right granted under the Plan, including an Incentive Stock
Option, a Nonstatutory Stock Option, a Stock Purchase Award, Stock Bonus Award, a Stock
Appreciation Right, a Stock Unit Award, or any Other Stock Award.



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



     (ss) “Stock Bonus Award” means an award of shares of Common Stock which is granted pursuant to
the terms and conditions of Section 7(b).



     (tt) “Stock Bonus Award Agreement” means a written agreement between the Company and a holder
of a Stock Bonus Award evidencing the terms and conditions of a Stock Bonus Award grant. Each Stock
Bonus Award Agreement shall be subject to the terms and conditions of the Plan.



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



     (vv) “Stock Purchase Award Agreement” means a written agreement between the Company and a
holder of a Stock Purchase Award evidencing the terms and conditions of a Stock Purchase Award
grant. Each Stock Purchase Award Agreement shall be subject to the terms and conditions of the
Plan.



     (ww) “Stock Unit Award” means a right to receive shares of Common Stock which is granted
pursuant to the terms and conditions of Section 7(c).



     (xx) “Stock Unit Award Agreement” means a written agreement between the Company and a holder
of a Stock Unit Award evidencing the terms and conditions of a Stock Unit Award grant. Each Stock
Unit Award Agreement shall be subject to the terms and conditions of the Plan.



     (yy) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether, at the time, stock
of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company,
and (ii) any partnership in which the Company has a direct or indirect interest (whether in the
form of voting or participation in profits or capital contribution) of more than fifty percent
(50%).



     (zz) “Ten Percent Stockholder” 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 any Affiliate.



3. ADMINISTRATION.




     (a) Administration by Board. The Board shall administer the Plan unless and until the Board
delegates administration of the Plan to a Committee or Committees, as provided in Section 3(c).



     (b) Powers of Board. The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:




     (i) To determine from time to time (A) which of the persons eligible under the Plan shall
be granted Stock Awards; (B) when and how each Stock Award shall be granted; (C) what type or
combination of types of Stock Award shall be granted; (D) the provisions of each Stock Award
granted (which need not be identical), including the time or times when a person shall be
permitted to receive Common Stock pursuant to a Stock Award; and (E) the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such person.




     (ii) To construe and interpret the Plan and Stock Awards granted under it, and to
establish, amend and revoke rules and regulations for its administration. The Board, 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 or Stock Award Agreement fully effective.




     (iii) To effect, at any time and from time to time, with the consent of any adversely
affected Optionholder, (A) the reduction of the exercise price of any outstanding Option under
the Plan; (B) the cancellation of any outstanding Option under the Plan and the grant in
substitution therefor of (I) a new Option under the Plan or another equity plan of the Company
covering the same or a different number of shares of Common Stock, (II) a Stock Purchase
Award, (III) a Stock Bonus Award, (IV) a Stock Appreciation Right, (V) a Stock Unit Award,
(VI) an Other Stock Award, (VII) cash, or (VIII) other valuable consideration (as determined
by the Board, in its sole discretion); or (C) any other action that is treated as a repricing
under generally accepted accounting principles.




     (iv) To settle all controversies regarding the Plan and Stock Awards granted under it.



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     (v) To amend the Plan or a Stock Award as provided in Section 13.




     (vi) To terminate or suspend the Plan as provided in Section 14.




     (vii) Generally, to exercise such powers and to perform such acts as the Board deems
necessary or expedient to promote the best interests of the Company and that are not in
conflict with the provisions of the Plan or Stock Awards.




     (viii) To adopt such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Employees, Directors and Consultants who are foreign nationals or
employed outside the United States.




     (c) Delegation to Committee.




     (i) General. The Board may delegate some or all of the administration of the Plan to a
Committee or Committees. If administration of the Plan is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board that have been delegated to the Committee, including the
power to delegate to a subcommittee of the Committee any of the administrative powers the
Committee is authorized to exercise (and references in this Plan to the Board shall thereafter
be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent
with the provisions of the Plan, as may be adopted from time to time by the Board. The Board
may retain the authority to concurrently administer the Plan with the Committee and may, at
any time, revest in the Board some or all of the powers previously delegated.




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




     (d) Effect of Board’s Decision. All determinations, interpretations and constructions made
by the Board in good faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.



     (e) Limitation of Board Member’s Liability. No member of the Board shall be liable for any
act or omission (whether or not negligent) taken or omitted in good faith, or for the good faith
exercise of any authority or discretion granted in the Plan to the Board, or for any act or
omission of any other member of the Board.



     (f) Company Obligations. All costs incurred in connection with the administration and
operation of the Plan shall be paid by the Company. Except for the express obligations of the
Company under the Plan and under Stock Awards granted in accordance with the provisions of the
Plan, the Company shall have no liability with respect to any Stock Award, or to any Participant or
any transferee of shares of Common Stock from any Participant, including, but not limited to, any
tax liabilities, capital losses, or other costs or losses incurred by any Participant or any such
transferee.



4. SHARES SUBJECT TO THE PLAN.




     (a) Share Reserve. Subject to the provisions of Section 12(a) relating to Capitalization
Adjustments, the number of shares of Common Stock that may be issued pursuant to Stock Awards shall
not exceed, in the aggregate, five million one thousand two hundred nineteen (5,001,219) shares of
Common Stock; provided, however, that such share reserve shall be increased from time to time by a
number of shares equal to the number of shares of Common Stock that (i) are issuable pursuant to
options or stock award agreements outstanding under the Prior Plan as of the Effective Date and
(ii) but for the termination of the Prior Plan as of the Effective Date, would otherwise have
reverted to the share reserve of the Prior Plan pursuant to subsection 2.3 thereof.



     (b) Reversion of Shares to the Share Reserve. If any Stock Award shall for any reason
expire or otherwise terminate, in whole or in part, without having been exercised in full, if any
shares of Common Stock issued to a Participant pursuant to a Stock Award are forfeited to or
repurchased by the Company, including, but not limited to, any repurchase or forfeiture caused by
the failure to meet a contingency or condition required for the vesting of such shares, or if any
shares of Common Stock are cancelled in accordance with the cancellation and regrant provisions of
Section 3(b)(iii), then the shares of Common Stock not issued under such Stock Award, or forfeited
to or repurchased by the Company, shall revert to and again become available for issuance under the
Plan. If any shares



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subject to a Stock Award are not delivered to a Participant because such shares
are withheld for the payment of taxes or the Stock Award is exercised through a reduction of shares
subject to the Stock Award (i.e., “net exercised”), the
number of shares that are not delivered to the Participant shall remain available for issuance
under the Plan. If the exercise price of any Stock Award is satisfied by tendering shares of Common
Stock held by the Participant (either by actual delivery or attestation), then the number of shares
so tendered shall remain available for issuance under the Plan.




     Notwithstanding anything to the contrary in this Section 4(b), subject to the provisions of
Section 12(a) relating to Capitalization Adjustments the aggregate maximum number of shares of
Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be four
million (4,000,000) shares of Common Stock.



     (c) Source of Shares. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the Company on the open
market.



5. ELIGIBILITY.




     (a) 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.



     (b) Ten Percent Stockholders. A Ten Percent Stockholder 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 on the date of grant and the Option is not exercisable
after the expiration of five (5) years from the date of grant.



     (c) Section 162(m) Limitation on Annual Grants. Subject to the provisions of Section 12(a)
relating to Capitalization Adjustments, at such time as the Company may be subject to the
applicable provisions of Section 162(m) of the Code, no Employee shall be eligible to be granted
Stock Awards whose value is determined by reference to an increase over an exercise or strike price
of at least one hundred percent (100%) of the Fair Market Value of the Common Stock on the date the
Stock Award is granted covering more than two million (2,000,000) shares of Common Stock during any
calendar year.



     (d) 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, because the
Consultant is not a natural person, or because of any other rule governing the use of Form S-8.



6. OPTION PROVISIONS.




     Each Option shall be in such form and shall contain such terms and conditions as the Board
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 shall be issued for shares of Common Stock purchased on exercise of
each type of Option. If an Option is not specifically designated as an Incentive Stock Option, then
the Option shall be a Nonstatutory Stock Option. The provisions of separate Options need not be
identical; provided, however, that each Option Agreement shall include (through incorporation of
provisions hereof by reference in the Option Agreement or otherwise) the substance of each of the
following provisions:



     (a) Term. The Board shall determine the term of an Option; provided, however, that subject
to the provisions of Section 5(b) regarding Ten Percent Stockholders, no Incentive Stock Option
shall be exercisable after the expiration of ten (10) years from the date of grant.



     (b) Exercise. To exercise any outstanding Option, the Participant must provide written
notice of exercise to the Company in compliance with the provisions of the Option Agreement
evidencing such Option.



     (c) Exercise Price of an Incentive Stock Option. Subject to the provisions of Section 5(b)
regarding Ten Percent Stockholders, 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. Notwithstanding the foregoing, an Incentive Stock 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
consistent with the provisions of Section 424(a) of the Code.



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     (d) Exercise Price of a Nonstatutory Stock Option. The exercise price of each Nonstatutory
Stock Option shall be determined by the Board at the time the Option is granted. However, if a
Nonstatutory Stock Option has an exercise price 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, the terms of such Option must provide that it is
exercisable only in a manner consistent with the requirements of Section 409A of the Code. For
example, such restrictions on exercisability may include, without limitation, a requirement that
the Option expire if it is not exercised on or before the date upon which the shares of Common
Stock vest, or that the Option may only be exercised upon a specified pre-determined date. To the
extent required by applicable law, the price to be paid by the Participant for each share of Common
Stock subject to a Nonstatutory Stock Option will not be less than the par value of a share of
Common Stock.



     (e) Consideration. The purchase price of Common Stock acquired pursuant to the exercise of
an Option shall be paid, to the extent permitted by applicable law and as determined by the Board
in its sole discretion, by any combination of the methods of payment set forth below. The Board
shall have the authority to grant Options that do not permit all of the following methods of
payment (or otherwise restrict the ability to use certain methods) and to grant Options that
require the consent of the Company to utilize a particular method of payment. The methods of
payment permitted by this Section 6(e) are:




     (i) by cash or check;




     (ii) bank draft or money order payable to the Company;




     (iii) pursuant to a program developed under Regulation T as promulgated by the Federal
Reserve Board that, prior to the issuance of Common Stock, 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;




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




     (v) by a “net exercise” arrangement pursuant to which the Company will reduce the number
of shares of Common Stock issued upon exercise by the largest whole number of shares with a
Fair Market Value that does not exceed the aggregate exercise price; provided, however, that
the Company shall accept a cash or other payment from the Participant to the extent of any
remaining balance of the aggregate exercise price not satisfied by such holding back of whole
            shares; provided, further, that shares of Common Stock will no longer be outstanding under an
Option and will not be exercisable thereafter to the extent that (A) shares are used to pay
the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant
as a result of such exercise, and (C) shares are withheld to satisfy tax withholding
obligations;




     (vi) according to a deferred payment or similar arrangement with the Optionholder;
provided, however, that interest shall compound at least annually and shall be charged at the
minimum rate of interest necessary to avoid (A) the imputation of interest income to the
Company and compensation income to the Optionholder under any applicable provisions of the
Code, and (B) adverse financial accounting treatment of the Option; or




     (vii) in any other form of legal consideration that may be acceptable to the Board.



     (f) Transferability of Options. The Board may, in its sole discretion, impose such
limitations on the transferability of Options as the Board shall determine. In the absence of such
a determination by the Board to the contrary, the following restrictions on the transferability of
Options shall apply:




     (i) Restrictions on Transfer. An 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.




     (ii) Domestic Relations Orders. Notwithstanding the foregoing, an Option may be
transferred pursuant to a domestic relations order.




     (iii) Beneficiary Designation. Notwithstanding the foregoing, the Optionholder may, by
delivering written notice to the Company, in a form provided by or otherwise satisfactory to
the Company, designate a third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.



     (g) Vesting Generally. The total number of shares of Common Stock subject to an Option may
vest and therefore become exercisable in periodic installments that may or may not be equal. The
Option may be subject to such other terms and conditions on the time or times when it may or may
not be exercised (which may be based on the satisfaction of Performance Goals or other criteria) as
the Board may deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this Section 6(g) are subject to any Option provisions governing the minimum number
of shares of Common Stock as to which an Option may be exercised.



9









 





     (h) Termination of Continuous Service. In the event that an Optionholder’s Continuous
Service terminates (other than for Cause or upon the Optionholder’s death or Disability), the
Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such Option as of the
date of termination of Continuous Service) but only within such period of time ending on the
earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous
Service (or such longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If, after termination of
Continuous Service, the Optionholder does not exercise his or her Option within the time specified
herein or in the Option Agreement (as applicable), the Option shall terminate.



     (i) Extension of Termination Date. An Optionholder’s Option Agreement may provide that if
the exercise of the Option following the termination of the Optionholder’s Continuous Service
(other than for Cause or upon the Optionholder’s death or Disability or upon a Change in Control)
would be prohibited at any time solely because the issuance of shares of Common Stock would violate
the registration requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) 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 (ii) the expiration of the term of the Option as set forth in
the Option Agreement.



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



     (k) Death of Optionholder. In the event that (i) an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period
(if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous
Service for a reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s
estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionholder’s death, but only within the period
ending on the earlier of (i) the date eighteen (18) months following the date of death (or such
longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of
such Option as set forth in the Option Agreement. If, after the Optionholder’s death, the Option is
not exercised within the time specified herein or in the Option Agreement (as applicable), the
Option shall terminate.



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



     (m) Early Exercise. The Option Agreement may, but need not, include a provision whereby the
Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to
exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior
to the full vesting of the Option. 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 Board determines to
be appropriate. The Company shall not be required to exercise its repurchase option until at least
six (6) months (or such longer or shorter period of time necessary to avoid a charge to earnings
for financial accounting purposes) have elapsed following exercise of the Option unless the Board
otherwise specifically provides in the Option Agreement.



7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.




     (a) Stock Purchase Awards. Each Stock Purchase Award Agreement shall be in such form and
shall contain such terms and conditions as the Board shall deem appropriate. At the Board’s
election, shares of Common Stock may be (i) held in book entry form subject to the Company’s
instructions until any restrictions relating to the Stock Purchase Award lapse; or (ii) evidenced
by a certificate, which certificate shall be held in such form and manner as determined by the
Board. The terms and conditions of Stock Purchase Award Agreements may change from time to time,
and the terms and conditions of separate Stock Purchase Award Agreements need not be identical,
provided, however, that each Stock Purchase Award Agreement shall include (through incorporation of
the provisions hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:



10









 






     (i) Purchase Price. At the time of the grant of a Stock Purchase Award, the Board will
determine the price to be paid by the Participant for each share subject to the Stock Purchase
Award. To the extent required
by applicable law, the price to be paid by the Participant for each share of the Stock
Purchase Award will not be less than the par value of a share of Common Stock.




     (ii) Consideration. At the time of the grant of a Stock Purchase Award, the Board will
determine the consideration permissible for the payment of the purchase price of the Stock
Purchase Award. The purchase price of Common Stock acquired pursuant to the Stock Purchase
Award shall be paid either: (A) in cash or by check at the time of purchase, (B) at the
discretion of the Board, according to a deferred payment or other similar arrangement with the
Participant, (C) by past services rendered to the Company, or (D) in any other form of legal
consideration that may be acceptable to the Board in its sole discretion and permissible under
applicable law.




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




     (iv) Termination of Participant’s Continuous Service. In the event that a
Participant’s Continuous Service terminates, the Company shall have the right, but not the
obligation, to repurchase or otherwise reacquire, any or all of the shares of Common Stock
held by the Participant that have not vested as of the date of termination under the terms of
the Stock Purchase Award Agreement. At the Board’s election, the price paid for all shares of
Common Stock so repurchased or reacquired by the Company may be at the lesser of: (A) the Fair
Market Value on the relevant date, or (B) the Participant’s original cost for such shares. The
Company shall not be required to exercise its repurchase or reacquisition option until at
least six (6) months (or such longer or shorter period of time necessary to avoid a charge to
earnings for financial accounting purposes) have elapsed following the Participant’s purchase
of the shares of Common Stock acquired pursuant to the Stock Purchase Award unless otherwise
determined by the Board or provided in the Stock Purchase Award Agreement.




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



     (b) Stock Bonus Awards. Each Stock Bonus Award Agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate. At the Board’s election,
shares of Common Stock may be (i) held in book entry form subject to the Company’s instructions
until any restrictions relating to the Stock Bonus Award lapse; or (ii) evidenced by a certificate,
which certificate shall be held in such form and manner as determined by the Board. The terms and
conditions of Stock Bonus Award Agreements may change from time to time, and the terms and
conditions of separate Stock Bonus Award Agreements need not be identical, provided, however, that
each Stock Bonus Award Agreement shall include (through incorporation of provisions hereof by
reference in the agreement or otherwise) the substance of each of the following provisions:




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




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




     (iii) Termination of Participant’s Continuous Service. In the event a Participant’s
Continuous Service terminates, the Company may receive via a forfeiture condition, any or all
of the shares of Common Stock held by the Participant which have not vested as of the date of
termination of Continuous Service under the terms of the Stock Bonus Award Agreement.




     (iv) Transferability. Rights to acquire shares of Common Stock under the Stock Bonus
Award Agreement shall be transferable by the Participant only upon such terms and conditions
as are set forth in the Stock Bonus Award Agreement, as the Board shall determine in its sole
discretion, so long as Common Stock awarded under the Stock Bonus Award Agreement remains
subject to the terms of the Stock Bonus Award Agreement.



     (c) Stock Unit Awards. Each Stock Unit Award Agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of
Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate
Stock Unit Award Agreements need not be identical, provided, however, that each Stock Unit Award
Agreement shall include (through



11









 




incorporation of the provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:





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




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




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




     (iv) Additional Restrictions. At the time of the grant of a Stock Unit Award, the
Board, as it deems appropriate, may impose such restrictions or conditions that delay the
delivery of the shares of Common Stock (or their cash equivalent) subject to a Stock Unit
Award after the vesting of such Stock Unit Award.




     (v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of
Common Stock covered by a Stock Unit Award, as determined by the Board and contained in the
Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may
be converted into additional shares of Common Stock covered by the Stock Unit Award in such
manner as determined by the Board. Any additional shares covered by the Stock Unit Award
credited by reason of such dividend equivalents will be subject to all the terms and
conditions of the underlying Stock Unit Award Agreement to which they relate.




     (vi) Termination of Participant’s Continuous Service. Except as otherwise provided in
the applicable Stock Unit Award Agreement, such portion of the Stock Unit Award that has not
vested will be forfeited upon the Participant’s termination of Continuous Service.




     (vii) Compliance with Section 409A of the Code. Notwithstanding anything to the
contrary set forth herein, any Stock Unit Award granted under the Plan that is not exempt from
the requirements of Section 409A of the Code shall contain such provisions so that such Stock
Unit Award will comply with the requirements of Section 409A of the Code. Such restrictions,
if any, shall be determined by the Board and contained in the Stock Unit Award Agreement
evidencing such Stock Unit Award. For example, such restrictions may include, without
limitation, a requirement that any Stock Unit Award that is to be issued after March 15 of the
year immediately following the year in which the shares of underlying Common Stock vest must
be issued in accordance with a permissible payment event under Section 409A of the Code.



     (d) Stock Appreciation Rights. Each Stock Appreciation Right Agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem appropriate. Stock
Appreciation Rights may be granted in tandem with, or independently of, Options granted under the
Plan. The terms and conditions of Stock Appreciation Right Agreements may change from time to time,
and the terms and conditions of separate Stock Appreciation Right Agreements need not be identical;
provided, however, that each Stock Appreciation Right Agreement shall include (through
incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:




     (i) Strike Price and Calculation of Appreciation. Each Stock Appreciation Right will
be denominated in shares of Common Stock equivalents. The appreciation distribution payable on
the exercise of a Stock Appreciation Right will be not greater than an amount equal to the
excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock
Appreciation Right) of a number of shares of Common Stock equal to the number of share of
Common Stock equivalents in which the Participant is vested under such Stock Appreciation
Right, and with respect to which the Participant is exercising the Stock Appreciation Right on
such date, over (B) an amount (the strike price) that will be determined by the Board at the
time of grant of the Stock Appreciation Right.




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




     (iii) Exercise. To exercise any outstanding Stock Appreciation Right, the Participant
must provide written notice of exercise to the Company in compliance with the provisions of
the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.




     (iv) Payment. The appreciation distribution in respect to a Stock Appreciation Right
may be paid in Common Stock, in cash, in any combination of the two or in any other form of
consideration, as determined



12









 






by the Board and contained in the Stock Appreciation Right
Agreement evidencing such Stock Appreciation Right.




     (v) Termination of Continuous Service. In the event that a Participant’s Continuous
Service terminates, the Participant may exercise his or her Stock Appreciation Right (to the
extent that the Participant was entitled to exercise such Stock Appreciation Right as of the
date of termination) but only within such period of time ending on the earlier of (A) the date
three (3) months following the termination of the Participant’s Continuous Service (or such
longer or shorter period specified in the Stock Appreciation Right Agreement), or (B) the
expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation
Right Agreement. If, after termination, the Participant does not exercise his or her Stock
Appreciation Right within the time specified herein or in the Stock Appreciation Right
Agreement (as applicable), the Stock Appreciation Right shall terminate.




     (vi) Compliance with Section 409A of the Code. Notwithstanding anything to the
contrary set forth herein, any Stock Appreciation Rights granted under the Plan that are not
exempt from the requirements of Section 409A of the Code shall contain such provisions so that
such Stock Appreciation Rights will comply with the requirements of Section 409A of the Code.
Such restrictions, if any, shall be determined by the Board and contained in the Stock
Appreciation Right Agreement evidencing such Stock Appreciation Right. For example, such
restrictions may include, without limitation, a requirement that a Stock Appreciation Right
that is to be paid wholly or partly in cash must be exercised and paid in accordance with a
fixed pre-determined schedule.



     (e) Other Stock Awards. Other forms of Stock Awards valued in whole or in part by reference
to, or otherwise based on, Common Stock may be granted either alone or in addition to Stock Awards
provided for under Section 6 and the preceding provisions of this Section 7. Subject to the
provisions of the Plan, the Board shall have sole and complete authority to determine the persons
to whom and the time or times at which such Other Stock Awards will be granted, the number of
shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock
Awards and all other terms and conditions of such Other Stock Awards.



8. COVENANTS OF THE COMPANY.




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



     (b) Securities Law Compliance. The Company shall seek 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 of the Stock Awards;
provided, however, that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority that 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 upon exercise of such Stock Awards unless and
until such authority is obtained.



9. USE OF PROCEEDS FROM SALES OF COMMON STOCK.




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



10. MISCELLANEOUS.




     (a) Severability. If any provision of the Plan is determined to be unenforceable for any
reason, then that provision shall be deemed to have been deleted or modified to the extent
necessary to make it enforceable, and the remaining provisions of the Plan shall be unaffected.



     (b) Deferred Payment of Stock Awards. Any payment under a Stock Award, may be paid at the
discretion of the Board, according to a deferred payment or other arrangement with the Participant;
provided, however, that any such deferred payment arrangement will be structured to comply with the
requirements of Section 409A of the Code.



     (c) Acceleration of Exercisability and Vesting. The Board 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.



13









 





     (d) Corporate Action Constituting Grant of Stock Awards. Corporate action constituting an
offer by the Company of Common Stock to any Participant under the terms of a Stock Award shall be
deemed completed as of the date of such corporate action, unless otherwise determined by the Board,
regardless of when the instrument, certificate, or letter evidencing the Stock Award is actually
received or accepted by the Participant.



     (e) 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 such Stock Award
unless and until such Participant has satisfied all requirements for exercise of the Stock Award
pursuant to its terms.



     (f) No Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement
or other instrument executed thereunder or any 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 or an Affiliate, and any applicable provisions of the corporate law of the state in which
the Company or the Affiliate is incorporated, as the case may be.



     (g) 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 any Affiliates) exceeds one hundred thousand dollars
($100,000), the Options or portions thereof that exceed such limit (according to the order in which
they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary
provision of the applicable Option Agreement(s).



     (h) Investment Assurances. The Company may require a Participant, as a condition of
exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances
satisfactory to the Company as to the Participant’s knowledge and experience in financial and
business matters 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 exercising
the Stock Award; and (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. The
foregoing requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or acquisition of Common Stock
under the Stock Award has been registered under a then currently effective registration statement
under the Securities Act, or (ii) 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. 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 securities laws, including, but not limited to, legends restricting the
transfer of the Common Stock.



     (i) Withholding Obligations. To the extent provided by the terms of a Stock Award
Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax
withholding obligation relating to 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) causing the Participant to tender a cash payment; (ii) withholding
shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the
Participant in connection with the Stock Award; (iii) by such other method as may be set forth in
the Stock Award Agreement; or (iv) pursuant to a loan or cash award described in Section 11 below.



     (j) Electronic Delivery. Any reference herein to a “written” agreement or document shall
include any agreement or document delivered electronically or posted on the Company’s intranet.



     (k) Performance Stock Awards. A Stock Award may be granted, may vest, or may be exercised
based upon service conditions, upon the attainment during a Performance Period of certain
Performance Goals, or both. The length of any Performance Period, the Performance Goals to be
achieved during the Performance Period, and the measure of whether and to what degree such
Performance Goals have been attained shall be conclusively determined by the Board in its sole
discretion. The maximum benefit to be received by any individual in any calendar year attributable
to Stock Awards described in this Section shall not exceed the value of two million
(2,000,000) shares of Common Stock. Any vesting or other benefit under a Stock Award
contingent upon the achievement of Performance Goals that have not been attained as of the date of
termination of Continuous Service, so that the Participant is not irrevocably entitled to the
benefit at the time of his or her termination of Continuous Service, shall be forfeited at the time
of termination unless otherwise determined by the Board.



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     (l) Dividend Benefits. The Board may, upon such terms and conditions as it deems
appropriate, provide that a Participant will receive a benefit in lieu of cash dividends that would
have been payable on any and all Common Stock subject to the Participant’s Stock Award, had the
Common Stock subject to such Stock Award been outstanding. Without limitation, the Board may
provide for payment to the Participant of amounts representing such dividends, either currently or
in the future, or for the investment of such amounts on behalf of the Participant.



11. TAX LOANS AND SUPPLEMENTAL CASH GRANTS.




     (a) Tax Loans. The Company may make a loan to a Participant (“Loan”) for the payment of any
Federal, state and local income tax with respect to income recognized as a result of Participant’s
receipt or exercise of the Stock Award, or the vesting of the Stock Award, as applicable; provided,
however, that no such loan shall violate applicable laws, including, but not limited to, Section
402 of the Sarbanes-Oxley Act of 2002. The Board shall have the authority, in its sole discretion,
to determine whether to make a Loan, and the amount, terms and conditions of the Loan; provided,
however, that interest shall compound at least annually and shall be charged at the minimum rate of
interest necessary to avoid (i) the imputation of interest income to the Company and compensation
income to the Participant under any applicable provisions of the Code, and (ii) adverse financial
accounting treatment of the Stock Award.



     (b) Supplemental Cash Grants. In connection with any Stock Award, the Board may grant a
cash award to the Participant not to exceed an amount equal to (i) the amount of any Federal, state
and local income tax on ordinary income for which the Participant may be liable with respect to the
Stock Award, determined by assuming taxation at the highest marginal rate, plus (ii) an additional
amount on a grossed-up basis intended to make the Participant whole on an after-tax basis after
discharging all the Participant’s income tax liabilities arising from all payments under this
Section 11. Any supplement cash grant awards granted under this Section 11(b) shall be paid at the
time the Participant incurs Federal income tax liability with respect to the Stock Award.



12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.




     (a) Capitalization Adjustments. If any change is made in, or other events occur with
respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective
Date without the receipt of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than
cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in
corporate structure or other transaction not involving the receipt of consideration by the Company
(each a “Capitalization Adjustment”)), the Board shall appropriately adjust: (i) the class(es) and
maximum number of securities subject to the Plan pursuant to Section 4(a), (ii) the class(es) and
number of securities subject to each outstanding stock award under the Prior Plan that are added
from time to time to the share reserve under the Plan pursuant to Section 4(a), (iii) the class(es)
and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock
Options pursuant to Section 4(b), (iv) the class(es) and maximum number of securities that may be
awarded to any person pursuant to Section 5(c), (v) the class(es) and maximum number of securities
that may be awarded to any person pursuant to Section 10(k) and (vi) the class(es) and number of
securities and price per share of stock subject to outstanding Stock Awards. The Board shall make
such adjustments, and its determination shall be final, binding and conclusive. (Notwithstanding
the foregoing, the conversion of any convertible securities of the Company shall not be treated as
a transaction “without receipt of consideration” by the Company.)



     (b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the
Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding
shares of Common Stock not subject to the Company’s right of repurchase) shall terminate
immediately prior to the completion of such dissolution or liquidation, and the shares of Common
Stock subject to the Company’s repurchase option may be repurchased by the Company notwithstanding
the fact that the holder of such Stock Award is providing Continuous Service, provided, however,
that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested,
exercisable or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have
not previously expired or terminated) before the dissolution or liquidation is completed but
contingent on its completion.



     (c) Corporate Transaction. The following provisions shall apply to Stock Awards in the
event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock
Award or any other written agreement between the Company or any Affiliate and the holder of the
Stock Award or unless otherwise expressly provided by the Board at the time of grant of a Stock
Award.




     (i) Stock Awards May Be Assumed. In the event of a Corporate Transaction, any
surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s
parent company) may assume or continue any or all Stock Awards outstanding under the Plan or
may substitute similar stock awards for Stock Awards outstanding under the Plan (including but
not limited to, awards to acquire the same consideration paid to the stockholders of the
Company pursuant to the Corporate Transaction), and any



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reacquisition or repurchase rights
held by the Company in respect of Common Stock issued pursuant to Stock Awards may be assigned
by the Company to the successor of the Company (or the successor’s parent company, if any), in
connection with such Corporate Transaction. A surviving corporation or acquiring corporation
(or its parent) may choose to assume or continue only a portion of a Stock Award or substitute
a similar stock award for only a portion of a Stock Award. The terms of any assumption,
continuation or substitution shall be set by the Board in accordance with the provisions of
Section 3.




     (ii) Stock Awards Held by Participants and Recent Participants. In the event of a
Corporate Transaction in which the surviving corporation or acquiring corporation (or its
parent company) does not assume or continue such outstanding Stock Awards or substitute
similar stock awards for such outstanding Stock Awards, then with respect to Stock Awards that
have not been assumed, continued or substituted and that are held by Participants whose
Continuous Service has not terminated prior to the effective time of the Corporate Transaction
or by Participants whose Continuous Service was terminated by the Company within three (3)
months prior to the effective time of the Corporate Transaction (referred to as the
“Participants and Recent Participants"), the vesting of such Stock Awards (and, if applicable,
the time at which such Stock Awards may be exercised) shall (contingent upon the effectiveness
of the Corporate Transaction) be accelerated in full to a date prior to the effective time of
such Corporate Transaction as the Board shall determine (or, if the Board shall not determine
such a date, to the date that is five (5) days prior to the effective time of the Corporate
Transaction), and such Stock Awards shall terminate if not exercised (if applicable) at or
prior to the effective time of the Corporate Transaction, and any reacquisition or repurchase
rights held by the Company with respect to such Stock Awards shall lapse (contingent upon the
effectiveness of the Corporate Transaction).




     (iii) Stock Awards Held by Persons Other than Participants and Recent Participants. In
the event of a Corporate Transaction in which the surviving corporation or acquiring
corporation (or its parent company) does not assume or continue such outstanding Stock Awards
or substitute similar stock awards for such outstanding Stock Awards, then with respect to
Stock Awards that have not been assumed, continued or substituted and that are held by persons
other than Participants and Recent Participants, the vesting of such Stock Awards (and, if
applicable, the time at which such Stock Award may be exercised) shall not be accelerated and
such Stock Awards (other than a Stock Award consisting of vested and outstanding shares of
Common Stock not subject to the Company’s right of repurchase) shall terminate if not
exercised (if applicable) prior to the effective time of the Corporate Transaction; provided,
however, that any reacquisition or repurchase rights held by the Company with respect to such
Stock Awards shall not terminate and may continue to be exercised notwithstanding the
Corporate Transaction.




     (iv) Payment for Stock Awards in Lieu of Exercise. Notwithstanding the foregoing, in
the event a Stock Award will terminate if not exercised prior to the effective time of a
Corporate Transaction, the Board may provide, in its sole discretion, that the holder of such
Stock Award may not exercise such Stock Award but will receive a payment, in such form as may
be determined by the Board, equal in value to the excess, if any, of (A) the value of the
property the holder of the Stock Award would have received upon the exercise of the Stock
Award, over (B) any exercise price payable by such holder in connection with such exercise.



     (d) Change in Control. A Stock Award may be subject to additional acceleration of vesting
and exercisability upon or after a Change in Control as may be provided in the Stock Award
Agreement for such Stock Award or as may be provided in any other written agreement between the
Company or any Affiliate and the Participant, but in the absence of such provision, no such
acceleration shall occur.



13. AMENDMENT OF THE PLAN AND STOCK AWARDS.




     (a) Amendment of Plan. Subject to the limitations, if any, of applicable law, the Board at
any time, and from time to time, may amend the Plan. However, except as provided in Section 12(a)
relating to Capitalization Adjustments, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary to satisfy applicable
law or applicable stock exchange listing requirements.



     (b) Stockholder Approval. The Board, in its sole discretion, may submit any other amendment
to the Plan for stockholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder
regarding the exclusion of performance-based compensation from the limit on corporate deductibility
of compensation paid to Covered Employees.



     (c) Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide eligible Employees with the
maximum benefits provided or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options or to bring the Plan or Incentive Stock
Options granted under it into compliance therewith.



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     (d) No Impairment of Rights. Rights under any Stock Award granted before amendment of the
Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent
of the affected Participant, and (ii) such Participant consents in writing.



     (e) Amendment of Stock Awards. The Board, at any time and from time to time, may amend the
terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms
more favorable than previously provided in the Stock Award Agreement, subject to any specified
limits in the Plan that are not subject to Board discretion; provided, however, that the rights
under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests
the consent of the affected Participant, and (ii) such Participant consents in writing.



14. TERMINATION OR SUSPENSION OF THE PLAN.




     (a) Plan Term. The Board 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 date the
Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier.
No Stock Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.



     (b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights
and obligations under any Stock Award granted while the Plan is in effect except with the written
consent of the affected Participant.



15. EFFECTIVE DATE OF PLAN.




     This Plan shall become effective on the Effective Date, but no Stock Award shall be exercised
(or, in the case of a Stock Purchase Award, Stock Bonus Award, Stock Unit Award, or Other Stock
Award shall be granted) under this Plan unless and until this Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months before or after the
date this Plan is adopted by the Board.



16. PLAN HISTORY




     The Plan was originally adopted by the Board on March 8, 2005, subject to the approval of the
Company’s stockholders. The 2005 Plan was originally approved by the Company’s stockholders at the
Company’s 2005 annual meeting of stockholders that was held on June 30, 2005.



     Since its original adoption, the 2005 Plan has been amended as follows:



	 	 	 	 	 
	 	 	Date Amended by	 	Date Approved by
	Nature of Amendment	 	Board of Directors	 	Stockholders
	Increase authorized shares under
Section 4(a) from 2,001,129 to
5,001,219 shares

	 	March 7, 2007
	 	June 15, 2007
	 
	Comply with Section 409A of the Code

	 	March 5, 2008
	 	N/A






17. 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.



     THE UNDERSIGNED CERTIFIES THAT THIS PLAN WAS DULY APPROVED AND ADOPTED BY THE BOARD OF
DIRECTORS OF GSI COMMERCE, INC. AT THE BOARD OF DIRECTORS MEETING HELD ON MARCH 8, 2005 AND DULY
AMENDED BY THE BOARD OF DIRECTORS AT THE BOARD OF DIRECTORS MEETING HELD ON MARCH 5, 2008.






	 	 	 	 	 
	 	 	 
	 	By:  	



/s/    Arthur H. Miller
 	 
	 	 	Arthur H. Miller 	 
	 	 	Executive Vice President

and General Counsel 	 
	 



 


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