**EXHIBIT 10.6****SYNTAX-BRILLIAN CORPORATION****2003 INCENTIVE COMPENSATION PLAN****As amended on March 1, 2007**
 

 
**TABLE OF CONTENTS**               **Page**          1. Purpose  1 2. Administration  1   (a) Authority of the Committee  1   (b) Manner of Exercise of Committee Authority  1   (c) Limitation of Liability  1 3. Stock Subject to Plan  2   (a) Limitation on Overall Number of Shares Subject to Awards  2   (b) Application of Limitations  2 4. Eligibility; Per-Person Award Limitations  2 5. Specific Terms of Awards  2   (a) General  2   (b) Options  2   (c) Stock Appreciation Rights  3   (d) Restricted Stock  4   (e) Bonus Stock and Awards in Lieu of Obligations  5   (f) Other Stock-Based Awards  5 6. Certain Provisions Applicable to Awards  5   (a) Stand-Alone, Additional, Tandem, and Substitute Awards  5   (b) Term of Awards  5   (c) Form and Timing of Payment Under Awards; Deferrals  5   (d) Exemptions from Section 16(b) Liability  6 7. Change in Control  6   (a) Effect of “Change in Control”  6   (b) Definition of “Change in Control  6   (c) Definition of “Change in Control Price”  7 8. Automatic Grant Program   7   (a) Amount and Date of Grant  7   (b) Exercise Price  8   (c) Vesting  8   (d) Term of Automatic Options  8   (e) Other Terms  8 9. General Provisions  9   (a) Compliance With Legal and Other Requirements  9   (b) Limits on Transferability; Beneficiaries  9   (c) Adjustments  9   (d) Taxes  10   (e) Changes to the Plan and Awards  10   (f) Limitation on Rights Conferred Under Plan  10   (g) Unfunded Status of Awards; Creation of Trusts  11   (h) Nonexclusivity of the Plan  11   (i) Payments in the Event of Forfeitures; Fractional Shares  11   (j) Governing Law  11   (k) Plan Effective Date and Stockholder Approval; Termination of Plan  11 10. Definitions  11   (a) “Automatic Options”  11   (b) “Award”  11   (c) “Beneficiary”  12   (d) “Beneficial Owner”, “Beneficially Owning” and “Beneficial Ownership”  12   (e) “Board”  12   (f) “Change in Control”  12   (g) “Change in Control Price”  12   (h) “Code”  12   (i) “Committee”  12   (j) “Consultant”  12   (k) “Continuous Service”  12   (l) “Corporate Transaction”  12   (m) “Director”  12   (n) “Effective Date”  12   (o) “Eligible Person”  12 
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**TABLE OF CONTENTS**               **Page**            (p) “Employee”  13   (q) “Exchange Act”  13   (r) “Executive Officer”  13   (s) “Fair Market Value”  13   (t) “Incentive Stock Option”  13   (u) “Incumbent Board”  13   (v) “Limited Stock Appreciation Right”  13   (w) “Option”  13   (x) “Optionee”  13   (y) “Other Stock-Based Awards”  13   (z) “Parent”  13   (aa) “Participant”  13   (bb) “Person”  13   (cc) “Related Entity”  13   (dd) “Restricted Stock”  13   (ee) “Rule 16b-3” and “Rule 16a-1(c)(3)”  14   (ff) “Stock”  14   (gg) “Stock Appreciation Right”  14   (hh) “Subsidiary”  14 
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**SYNTAX-BRILLIAN CORPORATION****2003 INCENTIVE COMPENSATION PLAN**     1. **Purpose**. The purpose of this 2003 Incentive Compensation Plan (the “Plan”) is to assistSyntax-Brillian Corporation, a Delaware corporation (the “Company”) and its Related Entities inattracting, motivating, retaining, and rewarding high-quality executives and other Employees,officers, Directors, and Consultants by enabling such persons to acquire or increase a proprietaryinterest in the Company in order to strengthen the mutuality of interests between such persons andthe Company’s stockholders, and providing such persons with annual and long-term performanceincentives to expend their maximum efforts in the creation of stockholder value. The Plan isintended to qualify certain compensation awarded under the Plan for tax deductibility under Section162(m) of the Code to the extent deemed appropriate by the applicable Committee (or any successorcommittee) of the Board of Directors of the Company.     2. **Administration.**          (a) **Authority of the Committee**. The Plan shall be administered by the Committee; provided,however, that except as otherwise expressly provided in this Plan or, during the period that theCompany is a Publicly Held Corporation, in order to comply with Code Section 162(m) or Rule 16b-3under the Exchange Act, the Board may exercise any power or authority granted to the Committeeunder this Plan. The Committee or the Board shall have full and final authority, in each casesubject to and consistent with the provisions of the Plan, to select Eligible Persons to becomeParticipants, grant Awards, determine the type, number and other terms and conditions of, and allother matters relating to, Awards, prescribe Award agreements (which need not be identical for eachParticipant) and rules and regulations for the administration of the Plan, construe and interpretthe Plan and Award agreements and correct defects, supply omissions or reconcile inconsistenciestherein, and to make all other decisions and determinations as the Committee or the Board may deemnecessary or advisable for the administration of the Plan. In exercising any discretion granted tothe Committee or the Board under the Plan or pursuant to any Award, the Committee or the Boardshall not be required to follow past practices, act in a manner consistent with past practices, ortreat any Eligible Person in a manner consistent with the treatment of other Eligible Persons.          (b) **Manner of Exercise of Committee Authority**. The Committee, and not the Board, shallexercise sole and exclusive discretion on any matter relating to a Participant then subject toSection 16 of the Exchange Act with respect to the Company to the extent necessary in order thattransactions by such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Anyaction of the Committee or the Board shall be final, conclusive, and binding on all persons,including the Company, its Related Entities, Participants, Beneficiaries, transferees under Section9(b) hereof, or other persons claiming rights from or through a Participant, and stockholders. Theexpress grant of any specific power to the Committee or the Board, and the taking of any action bythe Committee or the Board, shall not be construed as limiting any power or authority of theCommittee or the Board. The Committee or the Board may delegate to officers or managers of theCompany or any Related Entity, or committees thereof, the authority, subject to such terms as theCommittee or the Board shall determine, (i) to perform administrative functions, (ii) with respectto Participants not subject to Section 16 of the Exchange Act, to perform such other functions asthe Committee or the Board may determine, and (iii) with respect to Participants subject to Section16, to perform such other functions of the Committee or the Board as the Committee or the Board maydetermine to the extent performance of such functions will not result in the loss of an exemptionunder Rule 16b-3 otherwise available for transactions by such persons, in each case to the extentpermitted under applicable law. The Committee or the Board may appoint agents to assist it inadministering the Plan.          (c) **Limitation of Liability**. The Committee and the Board, and each member thereof, shall beentitled to, in good faith, rely or act upon any report or other information furnished to him orher by any Executive Officer, other officer or Employee, the Company’s independent auditors,Consultants or any other agents assisting in the administration of the Plan. Members of theCommittee and the Board, and any officer or Employeeacting at the direction or on behalf of the Committee or the Board, shall not be personallyliable for any action or determination taken or made in good faith with respect to the Plan, andshall, to the extent permitted by law, be fully indemnified and protected by the Company withrespect to any such action or determination.
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     3. **Stock Subject to Plan**          (a) **Limitation on Overall Number of Shares Subject to Awards**. Subject to adjustment asprovided in Section 9(c) hereof, the total number of shares of Stock reserved and available fordelivery in connection with Awards under the Plan shall be the sum of (i) 1,650,000 shares plus(ii) the number of shares of Stock with respect to which any Awards previously granted under thePlan terminated without being exercised, expire, are forfeited or canceled, do not vest, or aresurrendered in payment of any Awards or any tax withholding with regard thereto. The overallnumber of the shares of Stock shall be further increased on the first day of the Company’s fiscalyear by 4% of the total number of shares of Stock outstanding on that date, provided that themaximum number of shares of Stock available under the Plan shall not exceed 2,750,000 shares. Anyshares of Stock delivered under the Plan may consist, in whole or in part, of authorized andunissued shares or treasury shares. Subject to adjustment as provided in Section 9(c) hereof, thenumber of shares of Stock that may be issued pursuant to Incentive Stock Options shall not exceed1,650,000 shares.          (b) **Application of Limitations**. The limitation contained in Section 3(a) shall apply not onlyto Awards that are settleable by the delivery of shares of Stock but also to Awards relating toshares of Stock but settleable only in cash (such as cash-only Stock Appreciation Rights). TheCommittee or the Board may adopt reasonable counting procedures to ensure appropriate counting,avoid double counting (as, for example, in the case of tandem or substitute awards), and makeadjustments if the number of shares of Stock actually delivered differs from the number of sharespreviously counted in connection with an Award.     4. **Eligibility; Per-Person Award Limitations**. Awards may be granted under the Plan only toEligible Persons. In each fiscal year during any part of which the Plan is in effect, an EligiblePerson may not be granted Awards relating to more than 300,000 shares of Stock, subject toadjustment as provided in Section 9(c), under each of Sections 5(b), 5(c), 5(d), 5(e), and 5(f).Directors, who are not Employees, proposed directors, proposed employees, and independentcontractors shall be eligible to receive awards other than Incentive Stock Options.     5. **Specific Terms of Awards.**          (a) **General**. Awards may be granted on the terms and conditions set forth in this Section 5.In addition, the Committee or the Board may impose on any Award or the exercise thereof, at thedate of grant or thereafter (subject to Section 9(e)), such additional terms and conditions, notinconsistent with the provisions of the Plan, as the Committee or the Board shall determine,including terms requiring forfeiture of Awards in the event of termination of Continuous Service bythe Participant and terms permitting a Participant to make elections relating to his or her Award.The Committee or the Board shall retain full power and discretion to accelerate, waive, or modify,at any time, any term or condition of an Award that is not mandatory under the Plan.          (b) **Options**. The Committee and the Board each is authorized to grant Options to Participantson the following terms and conditions:     (i) **Exercise Price**. The exercise price per share of Stock purchasable under anOption shall be determined by the Committee or the Board, provided that suchexercise price shall not, in the case of Incentive Stock Options, be less than 100%of the Fair Market Value of the Stock on the date of grant of the Option and shallnot, in any event, be less than the par value of a share of Stock on the date ofgrant of such Option. If an employee owns or is deemed to own (by reason of theattribution rules applicable under Section 424(d) of the Code) more than 10% of thecombined voting power of all classes of stock of the Company or any ParentCorporation or Subsidiary and an Incentive Stock Option is granted to such employee,the option price of such Incentive Stock Option (to the extent required by the Codeat the time of grant) shall be no lessthan 110% of the Fair Market Value of the Stock on the date such Incentive StockOption is granted.     (ii) **Time and Method of Exercise**. The Committee or the Board shall determine thetime or times at which or the circumstances under which an Option may be exercisedin whole
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or in part (including based on achievement of performance goals and/orfuture service requirements), the time or times at which Options shall cease to beor become exercisable following termination of Continuous Service or upon otherconditions, the methods by which such exercise price may be paid or deemed to bepaid (including in the discretion of the Committee or the Board a cashless exerciseprocedure), the form of such payment, including, without limitation, cash, Stock,other Awards, or awards granted under other plans of the Company or a RelatedEntity, or other property (including notes or other contractual obligations ofParticipants to make payment on a deferred basis), and the methods by or forms inwhich Stock will be delivered or deemed to be delivered to Participants.     (iii) **Incentive Stock Options**. The terms of any Incentive Stock Option grantedunder the Plan shall comply in all respects with the provisions of Section 422 ofthe Code. Anything in the Plan to the contrary notwithstanding, no term of the Planrelating to Incentive Stock Options (including any Stock Appreciation Right intandem therewith) shall be interpreted, amended or altered, nor shall any discretionor authority granted under the Plan be exercised, so as to disqualify either thePlan or any Incentive Stock Option under Section 422 of the Code, unless theParticipant has first requested the change that will result in suchdisqualification. Thus, if and to the extent required to comply with Section 422 ofthe Code, Options granted as Incentive Stock Options shall be subject to thefollowing special terms and conditions:          (A) the Option shall not be exercisable more than ten years after the date suchIncentive Stock Option is granted; provided, however, that if a Participant owns oris deemed to own (by reason of the attribution rules of Section 424(d) of the Code)more than 10% of the combined voting power of all classes of stock of the Company orany Parent Corporation and the Incentive Stock Option is granted to suchParticipant, the term of the Incentive Stock Option shall be (to the extent requiredby the Code at the time of the grant) for no more than five years from the date ofgrant; and          (B) The aggregate Fair Market Value (determined as of the date the IncentiveStock Option is granted) of the shares of stock with respect to which IncentiveStock Options granted under the Plan and all other option plans of the Company orits Parent Corporation during any calendar year exercisable for the first time bythe Participant during any calendar year shall not (to the extent required by theCode at the time of the grant) exceed $100,000.     (iv) **Repurchase Rights**. The Committee and the Board shall have the discretion togrant Options that are exercisable for unvested shares of Stock. Should theOptionee’s Continuous Service cease while holding such unvested shares, the Companyshall have the right to repurchase, at the exercise price paid per share, any or allof those unvested shares. The terms upon which such repurchase right shall beexercisable (including the period and procedure for exercise and the appropriatevesting schedule for the purchased shares) shall be established by the Committee orthe Board and set forth in the document evidencing such repurchase right.          (c) **Stock Appreciation Rights**. The Committee and the Board each is authorized to grant StockAppreciation Right’s to Participants on the following terms and conditions:     (i) **Right to Payment**. A Stock Appreciation Right shall confer on the Participant towhom it is granted a right to receive, upon exercise thereof, the excess of (A) theFair Market Value of one share of stock on the date of exercise (or, in the case ofa “Limited Stock Appreciation Right” that may be exercised only in the event of aChange in Control, the Fair Market Value determined by reference to the Change in Control Price, as definedunder Section 7(c) hereof), over (B) the grant price of the Stock Appreciation Rightas determined by the Committee or the Board. The grant price of a StockAppreciation Right shall not be less than the Fair Market Value of a share of Stockon the date of grant except as provided under Section 6(a) hereof.
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     (ii) **Other Terms**. The Committee or the Board shall determine at the date of grantor thereafter, the time or times at which and the circumstances under which a StockAppreciation Right may be exercised in whole or in part (including based onachievement of performance goals and/or future service requirements), the time ortimes at which Stock Appreciation Rights shall cease to be or become exercisablefollowing termination of Continuous Service or upon other conditions, the method ofexercise, method of settlement, form of consideration payable in settlement, methodby or forms in which Stock will be delivered or deemed to be delivered toParticipants, whether or not a Stock Appreciation Right shall be in tandem or incombination with any other Award, and any other terms and conditions of any StockAppreciation Right. Limited Stock Appreciation Rights that may only be exercised inconnection with a Change in Control or other event as specified by the Committee orthe Board, may be granted on such terms, not inconsistent with this Section 5(c), asthe Committee or the Board may determine. Stock Appreciation Rights and LimitedStock Appreciation Rights may be either freestanding or in tandem with other Awards.          (d) **Restricted Stock**. The Committee and the Board each is authorized to grant RestrictedStock to Participants on the following terms and conditions:     (i) **Grant and Restrictions**. Restricted Stock shall be subject to such restrictionson transferability, risk of forfeiture, and other restrictions, if any, as theCommittee or the Board may impose, or as otherwise provided in this Plan. Therestrictions may lapse separately or in combination at such times, under suchcircumstances (including based on achievement of performance goals and/or futureservice requirements), in such installments, or otherwise, as the Committee or theBoard may determine at the date of grant or thereafter. Except to the extentrestricted under the terms of the Plan and any Award agreement relating to theRestricted Stock, a Participant granted Restricted Stock shall have all of therights of a stockholder, including the right to vote the Restricted Stock and theright to receive dividends thereon (subject to any mandatory reinvestment or otherrequirement imposed by the Committee or the Board). During the restricted periodapplicable to the Restricted Stock, subject to Section 9(b) below, the RestrictedStock may not be sold, transferred, pledged, hypothecated, margined, or otherwiseencumbered by the Participant.     (ii) **Forfeiture**. Except as otherwise determined by the Committee or the Board atthe time of the Award, upon termination of a Participant’s Continuous Service duringthe applicable restriction period, the Participant’s Restricted Stock that is atthat time subject to restrictions shall be forfeited and reacquired by the Company;provided that the Committee or the Board may provide, by rule or regulation or inany Award agreement, or may determine in any individual case, that restrictions orforfeiture conditions relating to Restricted Stock shall be waived in whole or inpart in the event of terminations resulting from specified causes, and the Committeeor the Board may in other cases waive in whole or in part the forfeiture ofRestricted Stock.     (iii) **Certificates for Stock**. Restricted Stock granted under the Plan may beevidenced in such manner as the Committee or the Board shall determine. Ifcertificates representing Restricted Stock are registered in the name of theParticipant, the Committee or the Board may require that such certificates bear anappropriate legend referring to the terms, conditions, and restrictions applicableto such Restricted Stock, that the Company retain physical possession of thecertificates, and that the Participant deliver a stock power to the Company,endorsed in blank, relating to the Restricted Stock.     (iv) **Dividends and Splits**. As a condition to the grant of an Award of RestrictedStock, the Committee or the Board may require that any cash dividends paid on ashare of Restricted Stock be automatically reinvested in additional shares ofRestricted Stock or applied to the purchase of additional Awards under the Plan.Unless otherwise determined by the Committee or the Board, Stock distributed inconnection with a Stock split or Stock dividend, and other
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property distributed as adividend, shall be subject to restrictions and a risk of forfeiture to the sameextent as the Restricted Stock with respect to which such Stock or other propertyhas been distributed.          (e) **Bonus Stock and Awards in Lieu of Obligations**. The Committee and the Board each isauthorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of Companyobligations to pay cash or deliver other property under the Plan or under other plans orcompensatory arrangements, provided that, in the case of Participants subject to Section 16 of theExchange Act, the amount of such grants remains within the discretion of the Committee to theextent necessary to ensure that acquisitions of Stock or other Awards are exempt from liabilityunder Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall be subject tosuch other terms as shall be determined by the Committee or the Board.          (f) **Other Stock-Based Awards**. The Committee and the Board each is authorized, subject tolimitations under applicable law, to grant to Participants such other Awards that may bedenominated or payable in, valued in whole or in part by reference to, or otherwise based on, orrelated to, Stock, as deemed by the Committee or the Board to be consistent with the purposes ofthe Plan, including, without limitation, convertible or exchangeable debt securities, other rightsconvertible or exchangeable into Stock, purchase rights for Stock, Awards with value and paymentcontingent upon performance of the Company or any other factors designated by the Committee or theBoard, and Awards valued by reference to the book value of Stock or the value of securities of orthe performance of specified Related Entities or business units. The Committee or the Board shalldetermine the terms and conditions of such Awards. Stock delivered pursuant to an Award in thenature of a purchase right granted under this Section 5(f) shall be purchased for suchconsideration (including without limitation loans from the Company or a Related Entity), paid forat such times, by such methods, and in such forms, including, without limitation, cash, Stock,other Awards, or other property, as the Committee or the Board shall determine. The Committee andthe Board shall have the discretion to grant such other Awards that are exercisable for unvestedshares of Stock. Should the Optionee’s Continuous Service cease while holding such unvestedshares, the Company shall have the right to repurchase, at the exercise price paid per share, anyor 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 thepurchased shares) shall be established by the Committee or the Board and set forth in the documentevidencing such repurchase right. Cash awards, as an element of or supplement to any other Awardunder the Plan, may also be granted pursuant to this Section 5(f).     6. **Certain Provisions Applicable to Awards.**          (a) **Stand-Alone, Additional, Tandem, and Substitute Awards**. Awards granted under the Planmay, in the discretion of the Committee or the Board, be granted either alone or in addition to, intandem with, or in substitution or exchange for, any other Award or any award granted under anotherplan of the Company, any Related Entity, or any business entity to be acquired by the Company or aRelated Entity, or any other right of a Participant to receive payment from the Company or anyRelated Entity. Such additional, tandem, and substitute or exchange Awards may be granted at anytime. If an Award is granted in substitution or exchange for another Award or award, the Committeeor the Board shall require the surrender of such other Award or award in consideration for thegrant of the new Award. In addition, Awards may be granted in lieu of cash compensation, includingin lieu of cash amounts payable under other plans of the Company or any Related Entity, in whichthe value of Stock subject to the Award is equivalent in value to the cash compensation (forexample, Restricted Stock), or in which the exercise price, grant price or purchase price of theAward in the nature of a right that may be exercised is equal to the Fair Market Value of theunderlying Stock minus the value of the cash compensation surrendered (for example, Options grantedwith an exercise price “discounted” by the amount of the cash compensation surrendered).          (b) **Term of Awards**. The term of each Award shall be for such period as may be determined bythe Committee or the Board; provided that in no event shall the term of any Option or StockAppreciation Right exceed a period of ten years (or such shorter term as may be required inrespect of an Incentive Stock Option under Section 422 of the Code).          (c) **Form and Timing of Payment Under Awards; Deferrals**. Subject to the terms of the Plan andany applicable Award agreement, payments to be made to the Company or a Related Entity upon the
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exercise of an Option or other Award or settlement of an Award may be made in such forms as theCommittee or the Board shall determine, including, without limitation, cash, other Awards or otherproperty, and may be made in a single payment or transfer, in installments, or on a deferred basis.The settlement of any Award may be accelerated, and cash paid in lieu of Stock in connection withsuch settlement, in the discretion of the Committee or the Board or upon occurrence of one or morespecified events (in addition to a Change in Control). Installment or deferred payments may berequired by the Committee or the Board (subject to Section 9(e) of the Plan) or permitted at theelection of the Participant on terms and conditions established by the Committee or the Board.Payments may include, without limitation, provisions for the payment or crediting of a reasonableinterest rate on installment or deferred payments or the grant or crediting of other amounts inrespect of installment or deferred payments denominated in Stock.          (d) **Exemptions from Section 16(b) Liability**. It is the intent of the Company that this Plancomply in all respects with applicable provisions of Rule 16b-3 or Rule 16a-1(c)(3) to the extentnecessary to ensure that neither the grant of any Awards to nor other transaction by a Participantwho is subject to Section 16 of the Exchange Act is subject to liability under Section 16(b)thereof (except for transactions acknowledged in writing to be non-exempt by such Participant).Accordingly, if any provision of this Plan or any Award agreement does not comply with therequirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any such transaction, suchprovision will be construed or deemed amended to the extent necessary to conform to the applicablerequirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall avoid liability underSection 16(b). In addition, the purchase price of any Award conferring a right to purchase Stockshall be not less than any specified percentage of the Fair Market Value of Stock at the date ofgrant of the Award then required in order to comply with Rule 16b-3.     7. **Change in Control.**          (a) **Effect of “Change in Control.”**If and to the extent provided in the Award, in the eventof a “Change in Control,” as defined in Section 7(b):     (i) The Committee may, within its discretion, accelerate the vesting andexercisability of any Award carrying a right to exercise that was not previouslyvested and exercisable as of the time of the Change in Control, subject toapplicable restrictions set forth in Section 8(a) hereof;     (ii) The Committee may, within its discretion, accelerate the exercisability ofany limited Stock Appreciation Rights (and other Stock Appreciation Rights if soprovided by their terms) and provide for the settlement of such Stock AppreciationRights for amounts, in cash, determined by reference to the Change in Control Price;and     (iii) The Committee may, within its discretion, lapse the restrictions,deferral of settlement, and forfeiture conditions applicable to any other Awardgranted under the Plan and such Awards may be deemed fully vested as of the time ofthe Change in Control, except to the extent of any waiver by the Participant andsubject to applicable restrictions set forth in Section 9(a) hereof.          (b) **Definition of “Change in Control**. A “Change in Control” shall be deemed to have occurredupon:     (i) Approval by the stockholders of the Company of a reorganization, merger,consolidation, or other form of corporate transaction or series of transactions, ineach case, with respect to which persons who were the stockholders of the Companyimmediately prior to such reorganization, merger, consolidation, or othertransaction do not, immediately thereafter, ownmore than 50% of the combined voting power entitled to vote generally in theelection of directors of the reorganized, merged, or consolidated company’s thenoutstanding voting securities, or a liquidation or dissolution of the Company or thesale of all or substantially all of the assets of the Company (unless suchreorganization, merger, consolidation or other corporate transaction,
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liquidation,dissolution or sale (any such event being referred to as a “Corporate Transaction”)is subsequently abandoned);     (ii) Individuals who, as of the date on which the Award is granted, constitutethe Board (the “Incumbent Board”) cease for any reason to constitute at least amajority of the Board, provided that any person becoming a director subsequent tothe date on which the Award was granted whose election, or nomination for electionby the Company’s shareholders, was approved by a vote of at least a majority of thedirectors then comprising the Incumbent Board (other than an election or nominationof an individual whose initial assumption of office is in connection with an actualor threatened election contest relating to the election of the Directors of theCompany) shall be, for purposes of this Agreement, considered as though such personwere a member of the Incumbent Board; or     (iii) the acquisition (other than from the Company) by any person, entity, or“group”, within the meaning of Section 13(d)(3) or 14(d)(2) of the SecuritiesExchange Act, of more than 50% of either the then outstanding shares of theCompany’s Stock or the combined voting power of the Company’s then outstandingvoting securities entitled to vote generally in the election of directors(hereinafter referred to as the ownership of a “Controlling Interest”) excluding,for this purpose, any acquisitions by (1) the Company or a Related Entity, (2) anyperson, entity, or “group” that as of the date on which the Award is granted ownsbeneficial ownership (within the meaning of Rule 13d-3 promulgated under theSecurities Exchange Act) of a Controlling Interest or (3) any employee benefit planof the Company a Related Entity.          (c) **Definition of “Change in Control Price.”**The “Change in Control Price” means an amount incash equal to the higher of (i) the amount of cash and fair market value of property that is thehighest price per share paid (including extraordinary dividends) in any Corporate Transactiontriggering the Change in Control under Section 7(b)(i) hereof or any liquidation of sharesfollowing a sale of substantially all of the assets of the Company, or (ii) the highest Fair MarketValue per share at any time during the 60-day period preceding and the 60-day period following theChange in Control.     8. **Automatic Grant Program**          (a) **Amount and Date of Grant.**During the term of the Plan, the Company shall make automaticgrants of Options (“Automatic Options”) to each Director (or proposed Director pursuant to Section8(a)(iii)) who is not employed by the Company, whether or not such person is a Non-EmployeeDirector as referred to in Section 2.2 as follows:     (i) **Annual Grants.**Each year on the Annual Grant Date, an Automatic Option toacquire 10,000 shares of Stock shall be granted to each Director for as long asshares of Stock are available under Section 3(a) hereof. The “Annual Grant Date”shall be the date of the Company’s annual stockholders meeting commencing as of thefirst annual meeting occurring after the Effective Date. Any Director that wasgranted an Automatic Option under Section 8(a)(ii) or (iii) within 90 days of anAnnual Grant Date shall be ineligible to receive an Automatic Option pursuant tothis Section 8(a)(i) on such Annual Grant Date.     (ii) **Initial New Director Grants.**On the Initial Grant Date, every new memberof the Board, who is an Director and has not previously received an Automatic Optionunder this Section 8(a)(ii) shall be granted an Automatic Option to acquire 15,000shares of Stock for as long as shares of Stock are available under Section 3(a)hereof. The “Initial Grant Date” shall be the date that a Director is firstappointed or elected to the Board. Any Director who previouslyreceived an Automatic Option pursuant to Section 8(a)(iii) shall be ineligibleto receive an Automatic Option pursuant to this Section 8(a)(ii).     (iii) **Initial Proposed Director Grants.**On the date that shares of Stock firstbecome registered under Section 12 of the 1934 Act, the Company shall grant anAutomatic
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Option to acquire 10,000 shares of Stock to each non-employee whoseelection to the Board is proposed as of such date .          (b) **Exercise Price.**The exercise price per share of Stock subject to each Automatic Optiongranted under Section 8(a)(i) or (ii) shall be equal to 100 percent of the Fair Market Value pershare of the Stock on the date such Automatic Option was granted. The exercise price per share ofStock subject to each Automatic Option granted under Section 8(a)(iii) shall be equal to theaverage price per share of Stock on the last day of “when issued trading” prior to thedistribution of the Stock.          (c) **Vesting.**Each Automatic Option granted pursuant to Section 8(a)(i) shall vest and becomeexercisable 12 months after the date of grant. Each Automatic Option granted pursuant to Section8(a)(ii) shall vest and become exercisable in a series of three equal and successive installmentswith the first installment vested on the date of grant and the next two installments 12 months and24 months after the date of grant. Each Automatic Option granted pursuant to Section 8(a)(iii)shall vest and become exercisable in a series of three equal and successive installments with thefirst installment vested on the date of the recipient’s election to the Board and the next twoinstallments 12 months and 24 months after the date of grant. Each Automatic Option shall vest andbecome exercisable only if the optionholder has not ceased serving as a Board member as of suchvesting date.          (d) **Term of Automatic Options.**Each Automatic Option shall expire on the tenth anniversary(the “Expiration Date”) of the date on which such Automatic Option was granted. Except asdetermined by the Plan Administrator, should a Director’s service as a Board member cease prior tothe Expiration Date for any reason while an Automatic Option remains outstanding and unexercised,the Automatic Option term shall immediately be modified and the Automatic Option shall terminateand cease to be outstanding in accordance with the following provisions:     (i) The Automatic Option shall immediately terminate and cease to beoutstanding with respect to any shares that were not vested at the time of theoptionholder’s cessation of Board service; provided, however, that a proposeddirector who receives a grant pursuant to Section 8(a)(iii) shall not be treated asceasing to serve as a Board member for purposes of this Section 7 prior to suchindividual’s election to the Board.     (ii) Should an optionholder cease, for any reason other than death, to serve asa member of the Board, then the optionholder shall have 90 days measured from thedate of such cessation of Board service in which to exercise his or her AutomaticOptions that vested prior to the time of such cessation of Board service. In noevent, however, may any Automatic Option be exercised after the Expiration Date ofsuch Automatic Option.     (iii) Should an optionholder die while serving as a Board member or within 90days after cessation of Board service, then the personal representative of theoptionholder’s estate (or the person or persons to whom the Automatic Option istransferred pursuant to the optionholder’s will or in accordance with the laws ofthe descent and distribution) shall have a 90-day period measured from the date ofthe optionholder’s cessation of Board service in which to exercise the AutomaticOptions that vested prior to the time of such cessation of Board service. In noevent, however, may any Automatic Option be exercised after the Expiration Date ofsuch Automatic Option.          (e) **Other Terms**. Except as expressly provided otherwise in this Section 8, anAutomatic Option shall be subject to all of the terms and conditions of the Plan. Directors shallbe entitled to receive other awards under the Plan or other plans of the Company in accordance withthe terms and conditions thereof.
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     9. **General Provisions.**          (a) **Compliance With Legal and Other Requirements**. The Company may, to the extent deemednecessary or advisable by the Committee or the Board, postpone the issuance or delivery of Stock orpayment of other benefits under any Award until completion of such registration or qualification ofsuch Stock or other required action under any federal or state law, rule, or regulation, listing,or other required action with respect to any stock exchange or automated quotation system uponwhich the Stock or other Company securities are listed or quoted, or compliance with any otherobligation of the Company, as the Committee or the Board, may consider appropriate, and may requireany Participant to make such representations, furnish such information and comply with or besubject to such other conditions as it may consider appropriate in connection with the issuance ordelivery of Stock or payment of other benefits in compliance with applicable laws, rules, andregulations, listing requirements, or other obligations.          (b) **Limits on Transferability; Beneficiaries**. No Award or other right or interest of aParticipant under the Plan, including any Award or right that constitutes a derivative security asgenerally defined in Rule 16a-1(c) under the Exchange Act, shall be pledged, hypothecated, orotherwise encumbered or subject to any lien, obligation, or liability of such Participant to anyparty (other than the Company or a Subsidiary), or assigned or transferred by such Participantotherwise than by will or the laws of descent and distribution or to a Beneficiary upon the deathof a Participant, and such Awards or rights that may be exercisable shall be exercised during thelifetime of the Participant only by the Participant or his or her guardian or legal representative,except that Awards and other rights (other than Incentive Stock Options and Stock AppreciationRights in tandem therewith) may be transferred to one or more Beneficiaries or other transfereesduring the lifetime of the Participant, and may be exercised by such transferees in accordance withthe terms of such Award, but only if and to the extent such transfers and exercises are permittedby the Committee or the Board pursuant to the express terms of an Award agreement (subject to anyterms and conditions which the Committee or the Board may impose thereon, and further subject toany prohibitions or restrictions on such transfers pursuant to Rule 16b-3). A Beneficiary,transferee, or other person claiming any rights under the Plan from or through any Participantshall be subject to all terms and conditions of the Plan and any Award agreement applicable to suchParticipant, except as otherwise determined by the Committee or the Board, and to any additionalterms and conditions deemed necessary or appropriate by the Committee or the Board.          (c) **Adjustments.**     (i) **Adjustments to Awards**. In the event that any dividend or other distribution(whether in the form of cash, Stock, or other property), recapitalization, forwardor reverse split, reorganization, merger, consolidation, spin-off, combination,repurchase, share exchange, liquidation, dissolution, or other similar corporatetransaction or event affects the Stock and/or such other securities of the Companyor any other issuer such that a substitution, exchange, or adjustment is determinedby the Committee or the Board to be appropriate, then the Committee or the Boardshall, in such manner as it may deem equitable, substitute, exchange, or adjust anyor all of (A) the number and kind of shares of Stock that may be delivered inconnection with Awards granted thereafter, (B) the number and kind of shares ofStock by which annual per-person Award limitations are measured under Section 4hereof, (C) the number and kind of shares of Stock subject to or deliverable inrespect of outstanding Awards, (D) the exercise price, grant price, or purchaseprice relating to any Award and/or make provision for payment of cash or otherproperty in respect of any outstanding Award, and (E) any other aspect of any Awardthat the Committee or Board determines to be appropriate.     (ii) **Adjustments in Case of Certain Corporate Transactions**. In the event of aproposed sale of all or substantially all of the Company’s assets or anyreorganization, merger, consolidation, or other form of corporate transaction inwhich the Company does not survive, or in which the shares of Stock are exchangedfor or converted into securities issued by another entity, then the successor oracquiring entity or an affiliate thereof may, with the consent of the Committee orthe Board, assume each outstanding Option or substitute an equivalent option orright. If the successor or acquiring entity or an affiliate thereof, does not causesuch an
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assumption or substitution, then each Option shall terminate upon the consummationof sale, merger, consolidation, or other corporate transaction. The Committee orthe Board shall give written notice of any proposed transaction referred to in thisSection 8(c)(ii) a reasonable period of time prior to the closing date for suchtransaction (which notice may be given either before or after the approval of suchtransaction), in order that Optionees may have a reasonable period of time prior tothe closing date of such transaction within which to exercise any Options that arethen exercisable (including any Options that may become exercisable upon the closingdate of such transaction). An Optionee may condition his exercise of any Optionupon the consummation of the transaction.     (iii) **Other Adjustments**. In addition, the Committee (and the Board if and only tothe extent such authority is not required to be exercised by the Committee to complywith Code Section 162(m)) is authorized to make adjustments in the terms andconditions of, and the criteria included in, Awards in recognition of unusual ornonrecurring events (including, without limitation, acquisitions and dispositions ofbusinesses and assets) affecting the Company, any Related Entity, or any businessunit, or the financial statements of the Company or any Related Entity, or inresponse to changes in applicable laws, regulations, accounting principles, taxrates and regulations, or business conditions or in view of the Committee’sassessment of the business strategy of the Company, any Related Entity or businessunit thereof, performance of comparable organizations, economic and businessconditions, personal performance of a Participant, and any other circumstancesdeemed relevant; provided that no such adjustment shall be authorized or made if andto the extent that such authority or the making of such adjustment would causeOptions, or Stock Appreciation Rights hereof to Participants designated by theCommittee as Covered Employees and intended to qualify as “performance-basedcompensation” under Code Section 162(m) and the regulations thereunder to otherwisefail to qualify as “performance-based compensation” under Code Section 162(m) andregulations thereunder.          (d) **Taxes**. The Company and any Related Entity are authorized to withhold from any Awardgranted, any payment relating to an Award under the Plan, including from a distribution of Stock,or any payroll or other payment to a Participant, amounts of withholding and other taxes due orpotentially payable in connection with any transaction involving an Award, and to take such otheraction as the Committee or the Board may deem advisable to enable the Company and Participants tosatisfy obligations for the payment of withholding taxes and other tax obligations relating to anyAward. This authority shall include authority to withhold or receive Stock or other property andto make cash payments in respect thereof in satisfaction of a Participant’s tax obligations, eitheron a mandatory or elective basis in the discretion of the Committee.          (e) **Changes to the Plan and Awards**. The Board may amend, alter, suspend, discontinue, orterminate the Plan, or the Committee’s authority to grant Awards under the Plan, without theconsent of stockholders or Participants, except that any amendment or alteration to the Plan shallbe subject to the approval of the Company’s stockholders not later than the annual meeting nextfollowing such Board action if such stockholder approval is required by any federal or state law orregulation (including, without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of anystock exchange or automated quotation system on which the Stock may then be listed or quoted, andthe Board may otherwise, in its discretion, determine to submit other such changes to the Plan tostockholders for approval; provided that, without the consent of an affected Participant, no suchBoard action may materially and adversely affect the rights of such Participant under anypreviously granted and outstanding Award. The Committee or the Board may waive any conditions orrights under, or amend, alter, suspend, discontinue, or terminate any Award theretofore granted andany Award agreement relating thereto, except as otherwise provided in the Plan; provided that,without the consent of an affected Participant, no such Committee or the Board action maymaterially and adversely affect the rights of such Participant under such Award.          (f) **Limitation on Rights Conferred Under Plan**. Neither the Plan nor any action takenhereunder shall be construed as (i) giving any Eligible Person or Participant the right to continueas an Eligible Person or Participant or in the employ of the Company or a Related Entity; (ii)interfering in any way with the right of the Company or a Related Entity to terminate any EligiblePerson’s or Participant’s Continuous Service at any time, (iii) giving an Eligible Person orParticipant any claim to be granted any Award under the Plan or to be treated
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uniformly with other Participants and Employees, or (iv) conferring on a Participant any ofthe rights of a stockholder of the Company unless and until the Participant is duly issued ortransferred shares of Stock in accordance with the terms of an Award.          (g) **Unfunded Status of Awards; Creation of Trusts**. The Plan is intended to constitute an“unfunded” plan for incentive and deferred compensation. With respect to any payments not yet madeto a Participant or obligation to deliver Stock pursuant to an Award, nothing contained in the Planor any Award shall give any such Participant any rights that are greater than those of a generalcreditor of the Company; provided that the Committee may authorize the creation of trusts anddeposit therein cash, Stock, other Awards, or other property, or make other arrangements to meetthe Company’s obligations under the Plan. Such trusts or other arrangements shall be consistentwith the “unfunded” status of the Plan unless the Committee otherwise determines with the consentof each affected Participant. The trustee of such trusts may be authorized to dispose of trustassets and reinvest the proceeds in alternative investments, subject to such terms and conditionsas the Committee or the Board may specify and in accordance with applicable law.          (h) **Nonexclusivity of the Plan**. Neither the adoption of the Plan by the Board nor itssubmission to the stockholders of the Company for approval shall be construed as creating anylimitations on the power of the Board or a committee thereof to adopt such other incentivearrangements as it may deem desirable including incentive arrangements and awards which do notqualify under Code Section 162(m).          (i) **Payments in the Event of Forfeitures; Fractional Shares**. Unless otherwise determined bythe Committee or the Board, in the event of a forfeiture of an Award with respect to which aParticipant paid cash or other consideration, the Participant shall be repaid the amount of suchcash or other consideration. No fractional shares of Stock shall be issued or delivered pursuantto the Plan or any Award. The Committee or the Board shall determine whether cash, other Awards orother property shall be issued or paid in lieu of such fractional shares or whether such fractionalshares or any rights thereto shall be forfeited or otherwise eliminated.          (j) **Governing Law**. The validity, construction and effect of the Plan, any rules andregulations under the Plan, and any Award agreement shall be determined in accordance with the lawsof the state of Delaware without giving effect to principles of conflicts of laws, and applicablefederal law.          (k) **Plan Effective Date and Stockholder Approval; Termination of Plan**. The Plan shall becomeeffective on the Effective Date, subject to subsequent approval within 12 months of its adoption bythe Board by stockholders of the Company eligible to vote in the election of directors, by a votesufficient to meet the requirements of Code Sections 162(m) (if applicable) and 422, Rule 16b-3under the Exchange Act (if applicable), applicable Nasdaq requirements, and other laws,regulations, and obligations of the Company applicable to the Plan. Awards may be granted subjectto stockholder approval, but may not be exercised or otherwise settled in the event stockholderapproval is not obtained except with respect to Awards granted by the Company prior to theCompany’s first shareholder meeting and that are otherwise in compliance with Treasury RegulationsSection 1.162-27(f)(4)(iii). The Plan shall terminate on the earlier of (i) ten (10) years fromthe later of (x) the date this Plan was originally approved by the Board or the shareholders of theCompany, whichever is earlier and (y) the date an increase in the number of shares reserved forissuance under the Plan is approved by the Board (so long as such increase is also approved by theshareholders) or (ii) at such time as no shares of Stock remain available for issuance under thePlan and the Company has no further rights or obligations with respect to outstanding Awards underthe Plan.     10. **Definitions**. For purposes of the Plan, the following terms shall be defined as set forthbelow, in addition to such terms defined in Section 1 hereof.          (a) “Automatic Options” means as defined in Section 8(a).          (b) “Award” means any Option, Stock Appreciation Right (including Limited Stock AppreciationRight), Restricted Stock, Stock granted as a bonus or in lieu of another award, or OtherStock-Based Award, together with any other right or interest, granted to a Participant under thePlan.
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          (c) “Beneficiary” means the person, persons, trust, or trusts that have been designated by aParticipant in his or her most recent written beneficiary designation filed with the Committee toreceive the benefits specified under the Plan upon such Participant’s death or to which Awards orother rights are transferred if and to the extent permitted under Section 10(b) hereof. If, upon aParticipant’s death, there is no designated Beneficiary or surviving designated Beneficiary, thenthe term Beneficiary means the person, persons, trust, or trusts entitled by will or the laws ofdescent and distribution to receive such benefits.          (d) “Beneficial Owner”, “Beneficially Owning” and “Beneficial Ownership” shall have themeanings ascribed to such terms in Rule 13d-3 under the Exchange Act and any successor to suchRule.          (e) “Board” means the Company’s Board of Directors.          (f) “Change in Control” means a Change in Control as defined with related terms in Section 8of the Plan.          (g) “Change in Control Price” means the amount calculated in accordance with Section 7(c) ofthe Plan.          (h) “Code” means the Internal Revenue Code of 1986, as amended from time to time, includingregulations thereunder and successor provisions and regulations thereto.          (i) “Committee” means a committee designated by the Board to administer the Plan. The Boardmay designate more than one committee to administer the Plan as to various categories of EligiblePersons. The Committee shall consist of at least two directors, and each member of which shall be(i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, unlessadministration of the Plan by “non-employee directors” is not then required in order for exemptionsunder Rule 16b-3 to apply to transactions under the Plan, and (ii) an “outside director” within themeaning of Section 162(m) of the Code, unless administration of the Plan by “outside directors” isnot then required in order to qualify for tax deductibility under Section 162(m) of the Code,provided, when appropriate, a Committee shall satisfy the then requirements of any stock exchangeor automated quotation system upon which the Stock or other Company securities are listed orquoted.          (j) “Consultant” means any person (other than an Employee or a Director, solely with respectto rendering services in such person’s capacity as a director) who is engaged by the Company or anyRelated Entity to render consulting or advisory services to the Company or such Related Entity.          (k) “Continuous Service” means uninterrupted provision of services to the Company in anycapacity of Employee, Director, or Consultant. Continuous Service shall not be considered to beinterrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, anyRelated Entities, or any successor entities, in any capacity of Employee Director, or Consultant,or (iii) any change in status as long as the individual remains in the service of the Company or aRelated Entity in any capacity of Employee, Director, or Consultant (except as otherwise providedin the Option Agreement). An approved leave of absence shall include sick leave, military leave,or any other authorized personal leave.          (l) “Corporate Transaction” means a Corporate Transaction as defined in Section 7(b)(i) of thePlan.          (m) “Director” means a member of the Board or the board of directors of any Related Entity.          (n) “Effective Date” means the effective date of the Plan, which shall be August 26, 2003.          (o) “Eligible Person” means each Executive Officer of the Company (as defined under theExchange Act) and other officers, Directors, and Employees of the Company or of any Related Entity,and Consultants with the Company or any Related Entity. The foregoing notwithstanding, onlyemployees of the Company, the Parent, or any Subsidiary shall be Eligible Persons for purposes ofreceiving any Incentive Stock
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Options. An Employee on leave of absence may be considered as still in the employ of theCompany or a Related Entity for purposes of eligibility for participation in the Plan.          (p) “Employee” means any person, including an officer or Director, who is an employee of theCompany or any Related Entity. The Payment of a director’s fee by the Company or a Related Entityshall not be sufficient to constitute “employment” by the Company.          (q) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time,including rules thereunder and successor provisions and rules thereto.          (r) “Executive Officer” means an executive officer of the Company as defined under theExchange Act.          (s) “Fair Market Value” means the fair market value of Stock, Awards, or other property asdetermined by the Committee or the Board, or under procedures established by the Committee or theBoard. Unless otherwise determined by the Committee or the Board, the Fair Market Value of Stockas of any given date after which the Company is a Publicly Held Corporation shall be the closingsale price per share reported on a consolidated basis for stock listed on the principal stockexchange or market on which Stock is traded on the date as of which such value is being determinedor, if there is no sale on that date, then on the last previous day on which a sale was reported.          (t) “Incentive Stock Option” means any Option intended to be designated as an incentive stockoption within the meaning of Section 422 of the Code or any successor provision thereto.          (u) “Incumbent Board” means the Incumbent Board as defined in Section 7(b)(ii) of the Plan.          (v) “Limited Stock Appreciation Right” means a right granted to a Participant under Section6(c) hereof.          (w) “Option” means a right granted to a Participant under Section 5(b) hereof, to purchaseStock or other Awards at a specified price during specified time periods.          (x) “Optionee” means a person to whom an Option or Incentive Stock Option is granted underthis Plan or any person who succeeds to the rights of such person under this Plan.          (y) “Other Stock-Based Awards” means Awards granted to a Participant under Section 5(f)hereof.          (z) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined inSection 424(e) of the Code.          (aa) “Participant” means a person who has been granted an Award under the Plan which remainsoutstanding, including a person who is no longer an Eligible Person.          (bb) “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the ExchangeAct and used in Sections 13(d) and 14(d) thereof, and shall include a “group” as defined in Section13(d) thereof.          (cc) “Related Entity” means any entity that is directly or indirectly controlled by theCompany or any entity in which the Company has a significant equity interest, as determined by theBoard or the Committee.          (dd) “Restricted Stock” means Stock granted to a Participant under Section 5(d) hereof, thatis subject to certain restrictions and to a risk of forfeiture.
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          (ee) “Rule 16b-3” and “Rule 16a-1(c)(3)” means Rule 16b-3 and Rule 16a-1(c)(3), as from timeto time in effect and applicable to the Plan and Participants, promulgated by the Securities andExchange Commission under Section 16 of the Exchange Act.          (ff) “Stock” means the Company’s Common Stock, and such other securities as may be substituted(or resubstituted) for Stock pursuant to Section 10(c) hereof.          (gg) “Stock Appreciation Right” means a right granted to a Participant under Section 6(c)hereof.          (hh) “Subsidiary” means a “subsidiary corporation” whether now or hereafter existing, asdefined in Section 424(f) of the Code.
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