The 2008 Plan will not limit the authority of the Board or the Compensation Committee (or theEquity Compensation Subcommittee) to grant awards or authorize any other compensation, with orwithout reference to the Common Stock, under any other plan or authority.*Transfer Restrictions.*Subject to certain exceptions contained in the 2008 Plan (whichgenerally include transfer to the Company, a participant’s designation of a beneficiary, theexercise of a participant’s award by the participant’s legal representative in the event of theparticipant’s disability, and transfers pursuant to certain court orders), awards under the 2008Plan are not transferable by the recipient other than by will or the laws of descent anddistribution and are generally exercisable, during the recipient’s lifetime, only by him or her.Any amounts payable or shares issuable pursuant to an award will be paid only to the recipient orthe recipient’s beneficiary or representative. The Administrator may, however, permit the transferof an award if the transferor presents satisfactory evidence that the transfer is for estate or taxplanning purposes.*Stock Options.*A stock option is the right to purchase shares of Common Stock at a futuredate at a specified price (the “exercise price” of the option). An option may either be an“incentive stock option” or a “nonqualified stock option.” Incentive stock option benefits aretaxed differently than nonqualified stock option benefits, as described under “Federal Income TaxConsequences” below. Incentive stock options are also subject to more restrictive terms and arelimited in amount by the Code and the 2008 Plan.The exercise price of options granted under the 2008 Plan will be determined by theAdministrator, but may be no less than the fair market value of a share on the date of grant;provided, however, that the exercise price may be no less than 110% of fair market value forincentive stock options granted to an employee who owns 10% or more of the outstanding CommonStock. Full payment for shares purchased on the exercise of any option must be made at the time ofsuch exercise in a manner approved by the Administrator (which may include cash, a check, apromissory note, notice and third party payment, or delivery of previously owned Common Stock,subject to certain limitations set forth in the 2008 Plan). Options granted under the 2008 Plan maybe exercised at the time or times determined by the Administrator, but in no event may options beexercised after ten years from the date of grant; provided, however, that incentive stock optionsgranted to an employee who owns 10% or more of the outstanding Common Stock may not be exercisedafter five years from the date of grant.*Stock Appreciation Rights.*An SAR is the right to receive a number of shares of Common Stockor an amount of cash, or a combination of shares and cash, the aggregate amount or value of whichis determined by reference to a change in the fair market value of the Common Stock. SARs may begranted in connection with other awards or independently. The Administrator may also grant limitedSARs exercisable only upon or in respect of a change in control or any other specified event; suchlimited SARs may relate to or operate in tandem with other SARs, options or other awards under the2008 Plan.*Restricted Stock Awards.*A restricted stock award is an award typically for a fixed number ofshares of Common Stock subject to restrictions. The Administrator specifies the price, if any, theparticipant must pay for such shares and the restrictions (which may include, for example,continued service only and/or performance standards) imposed on such shares.*Performance-Based Awards.*Performance share awards may be granted on the basis of suchfactors as the Administrator deems appropriate. Generally, these awards will be based upon specificagreements and will specify the number of shares of Common Stock subject to the award, theconsideration, if any, to be paid for such shares by the participant and the conditions upon whichthe issuance of the shares will be based. In addition to awards under the other provisions of the2008 Plan, the 2008 Plan provides that the Administrator may grant to eligible officersperformance-based awards designed to satisfy the requirements for deductibility of compensationunder Section 162(m) of the Code (“Section 162(m) Performance-Based Awards”). Options with anexercise price and SARs with a base price not less than fair market value on the date of grantwill, generally speaking, be considered Section 162(m) Performance-Based Awards. OtherSection 162(m) Performance-Based Awards must be based on performance relative to pre-establishedgoals over performance periods not shorter than one year nor longer than ten years. The businesscriteria on which performance goals may be established include one or more of the following asapplied to the consolidated operations, or one or more subsidiaries or business segments of theCompany: (1) net cash flow (including cash and cash equivalents) from operations or net cash flowfrom operations, financing and investing activities,
 
 

 
(2) earnings per share of Common Stock on afully diluted basis determined by dividing (a) net earnings less dividends on Preferred Stock, if any, of the Company and its subsidiaries by(b) the weighted average number of shares of Common Stock and Common Stock equivalents outstanding,(3) consolidated net income of the Company and its subsidiaries (less, if any, preferreddividends), divided by the average consolidated common stockholders’ equity, or (4) change in themarket price of the Company’s Common Stock plus dividends and other distributions paid, divided bythe beginning market price of the Common Stock, adjusted for any changes in equity structure.Section 162(m) Performance-Based Awards (other than options and SARs) are earned and payable onlyif performance meets the specific, pre-established performance goals approved by the Administratorin advance of applicable deadlines under the Code and while the performance relating to the goalsremains substantially uncertain. Performance goals may be adjusted to reflect certain changes,including reorganizations, liquidations and capitalization and accounting changes, to the extentpermitted by Section 162(m). Grants of Section 162(m) Performance-Based Awards in any calendar yearto any individual participant may not be made with reference to more than 350,000 shares.Section 162(m) Performance-Based Awards that do not relate to shares and are payable in cash andthat are granted in any calendar year to any individual participant can not provide for payment ofmore than $1,000,000. Before any of the Section 162(m) Performance-Based Awards (other than byexercise of qualifying options or SARs) are paid to a covered officer, the Administrator mustcertify that the performance goals have been satisfied. The Administrator will have discretion todetermine the performance goals and restrictions or other limitations of the individual awards andis expected to reserve “negative” discretion to reduce the number of shares delivered pursuant topayments of awards below maximum award limits.*Stock Bonuses.*The Administrator may grant a stock bonus to any eligible person to rewardexceptional or special services, contributions or achievements in the manner and on such terms andconditions (including any restrictions on such shares) as determined from time to time by theAdministrator. The number of shares so awarded is determined by the Administrator, and such anaward may be granted independently or in lieu of a cash bonus.*Acceleration of Awards; Possible Early Termination of Awards.*Unless prior to a Change inControl Event the Administrator determines that, upon its occurrence, benefits will not beaccelerated, then generally upon the Change in Control Event each option and SAR will becomeimmediately exercisable, restricted stock will vest, and cash and performance-based awards willbecome payable. A “Change in Control Event” under the 2008 Plan generally includes (subject tocertain exceptions) certain mergers or consolidations approved by the Company’s stockholders, orstockholder approval of a liquidation of the Company or sale of substantially all of the Company’sassets.*Effect of Termination of Employment.*Options which have not yet become exercisable willgenerally lapse upon the date a participant is no longer employed by the Company. Options whichhave become exercisable must be exercised within three months after such date if the termination ofemployment was for any reason other than retirement, total disability, death or discharge forcause. In the event a participant is discharged for cause, all options will lapse immediately uponsuch termination of employment. If the termination of employment is due to retirement, totaldisability or death, the options which are exercisable on the date of such termination mustgenerally be exercised within twelve months of the date of such termination. In no event may anoption be exercised after its stated term. SARs generally have the same termination provisions asthe options to which they relate. In respect of each other award granted under the 2008 Plan, aparticipant’s rights and benefits (if any) in the event of a termination of employment will bedetermined by the Administrator, which may make distinctions based upon the cause of terminationand the nature of the award. The Administrator may increase the portion of a participant’s awardavailable to the participant in connection with a participant’s termination of employment (otherthan termination by the Company for cause).*Amendments.*The Board may amend or terminate the 2008 Plan at any time. If any amendment tothe 2008 Plan would (1) materially increase the benefits accruing to participants, (2) materiallyincrease the aggregate number of shares which may be issued under the 2008 Plan or (3) materiallymodify the requirements of eligibility for participation in the 2008 Plan, then, to the extent thenrequired by applicable law or deemed advisable by the Board, such amendment will be subject tostockholder approval. Outstanding awards may be amended, subject, however, to the consent of theholder if the amendment materially and adversely affects the holder. If the 2008 Plan is approvedby the stockholders, the 2008 Plan will terminate on February 4, 2014, unless previously terminatedby the Board.
 
 

 
*Automatic Option Grants to Non-Employee Directors.*The 2008 Plan provides that each personwho first becomes a Non-Employee Director is granted automatically a nonqualified stock option topurchase 5,000 shares ofCommon Stock. In addition, in each calendar year, there will be granted automatically (withoutany action by the Administrator) immediately following the Annual Meeting of Stockholders in eachsuch year, a nonqualified stock option to purchase 5,000 shares of Common Stock to eachNon-Employee Director who is re-elected as a member of the Board or who continues as a member ofthe Board. A Non-Employee Director may not receive more than one nonqualified stock option underthe Non-Employee Director program in any calendar year, nor more than 75,000 shares on exercise ofall options awarded under such program. The purchase price per share of Common Stock covered byeach such option will be the fair market value of the Common Stock on the date the option isgranted. The 2008 Plan provides that Non-Employee Director Options expire on the tenth anniversaryof the award date and become exercisable at the rate of 33 1/3% on each of the first threeanniversaries of the date of grant. Immediately prior to the occurrence of a Change in Control,each option granted under the Non-Employee Director program will become exercisable in full.If a Non-Employee Director’s services as a member of the Board terminate by reason ofretirement, death or total disability, any option granted under the Non-Employee Director programheld by such Non-Employee Director will immediately become and will remain exercisable for twoyears after the date of such termination or until the expiration of the option’s term, whicheveroccurs first. If a Non-Employee Director’s services as a member of the Board terminate for anyother reason, any portion of an option granted under the Non-Employee Director program held by suchNon-Employee Director which is not then exercisable will terminate, and any portion of an optionwhich is then exercisable may be exercised for three months after the date of such termination oruntil the expiration of the option’s term, whichever occurs first.*Securities Underlying Awards.*The reported closing price of the Company’s Common Stock on theNasdaq Global Market on May 21, 2008 was $1.35 per share.*Federal Income Tax Consequences.*With respect to nonqualified stock options, upon exercise,the participant generally will be taxed as ordinary income (and the Company is generally entitledto deduct) an amount equal to the difference between the option exercise price and the fair marketvalue of the shares at the time of exercise. However, there will be no income tax to theparticipant (and there will be no deduction to the Company) upon the grant of a nonqualified stockoption. With respect to incentive stock options, the participant will not receive income tax (andthe Company is generally not entitled to a deduction) either upon grant of the option or at thetime the option is exercised. If incentive stock option shares are not held for specifiedqualifying periods, however, the difference between the fair market value of the shares at the dateof exercise (or, if lower, the sale price) and the cost of such shares is taxed as ordinary income(and the Company will receive a corresponding deduction) in the year the shares are sold.The current federal income tax consequences of other awards authorized under the 2008 Plangenerally follow certain basic patterns: SARs are taxed and deductible in substantially the samemanner as nonqualified stock options; nontransferable restricted stock subject to a substantialrisk of forfeiture results in income recognition only at the time the restrictions lapse (unlessthe recipient elects to accelerate recognition as of the date of grant); and performance shareawards generally are subject to tax at the time of payment. In each of the foregoing cases, theCompany will generally have a corresponding deduction at the time the participant recognizesincome. If an award is accelerated under the 2008 Plan in connection with a change in control (asthis term is used in the Internal Revenue Code), the Company may not be permitted to deduct theportion of the compensation attributable to the acceleration (“parachute payments”) if it exceedscertain threshold limits under the Internal Revenue Code (and certain excise taxes may betriggered). Further, if the compensation attributable to awards is not “performance based” withinthe meaning of Section 162(m) of the Internal Revenue Code, the Company may not be permitted todeduct the aggregate non performance-based compensation in excess of $1,000,000 per individual incertain circumstances.The above tax summary discusses general tax principles applicable to, and income tax consequencesof, the 2008 Plan under current federal law, which is subject to change. This summary is notintended to be exhaustive and, among other considerations, does not describe state, local, orinternational tax consequences.