Ex-10.1 2004 Stock Incentive Plan, as amended



 






Exhibit 10.1




COLOR KINETICS INCORPORATED




2004 STOCK INCENTIVE PLAN



As adopted on April 7, 2004 and as amended through July 27, 2005



SECTION 1. General Purpose of the Plan; Definitions




     The name of the plan is the Color Kinetics Incorporated 2004 Stock Incentive Plan (the
“Plan”). The purpose of the Plan is to encourage and enable officers and employees of, and other
persons providing services to, Color Kinetics Incorporated (the “Company”) and its Affiliates to
acquire a proprietary interest in the Company. It is anticipated that providing such persons with
a direct stake in the Company’s welfare will assure a closer identification of their interests with
those of the Company and its shareholders, thereby stimulating their efforts on the Company’s
behalf and strengthening their desire to remain with the Company.



     The following terms shall be defined as set forth below:



     “Affiliate” means a parent corporation, if any, and each subsidiary corporation of the
Company, as those terms are defined in Section 424 of the Code.



     “Award” or “Awards”, except where referring to a particular category of grant under the Plan,
shall include Incentive Stock Options, Non-Statutory Stock Options, Restricted Stock Awards,
Unrestricted Stock Awards, Performance Share Awards and Stock Appreciation Rights. Awards shall be
evidenced by a written agreement (which may be in electronic form and may be electronically
acknowledged and accepted by the recipient) containing such terms and conditions not inconsistent
with the provisions of this Plan as the Committee shall determine.



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



     “Cause” shall mean, with respect to any Award holder, a determination by the Company
(including the Board) or any Affiliate that the Holder’s employment or other relationship with the
Company or any such Affiliate should be terminated as a result of (i) a material breach by the
Award holder of any agreement to which the Award holder and the Company (or any such Affiliate) are
parties, (ii) any act (other than retirement) or omission to act by the Award holder that may have
a material and adverse effect on the business of the Company, such Affiliate or any other Affiliate
or on the Award holder’s ability to perform services for the Company or any such Affiliate,
including, without limitation, the proven or admitted commission of any crime (other than an
ordinary traffic violation), or (iii) any material misconduct or material neglect of duties by the
Award holder in connection with the business or affairs of the Company or any such Affiliate.



 









 





     “Change of Control” shall have the meaning set forth in Section 15.



     “Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and
related rules, regulations and interpretations.



     “Committee” shall have the meaning set forth in Section 2.



     “Disability” means disability as set forth in Section 22(e)(3) of the Code.



     “Effective Date” means the date on which the Plan is approved by the Board of Directors as set
forth in Section 17.



     “Eligible Person” shall have the meaning set forth in Section 4.



     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.



     “Fair Market Value” on any given date means the closing price per share of the Stock on such
date as reported by such registered national securities exchange on which the Stock is listed, or,
if the Stock is not listed on such an exchange, as quoted on NASDAQ; provided, that, if there is no
trading on such date, Fair Market Value shall be deemed to be the closing price per share on the
last preceding date on which the Stock was traded. If the Stock is not listed on any registered
national securities exchange or quoted on NASDAQ, the Fair Market Value of the Stock shall be
determined in good faith by the Committee.



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



     “Independent Director” means any director who meets the independence requirement of NASDAQ
Marketplace Rule 4200(a)(15).



     “Non-Employee Director” means any director who: (i) is not currently an officer of the Company
or an Affiliate, or otherwise currently employed by the Company or an Affiliate, (ii) 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 that
does not exceed the dollar amount for which disclosure would be required pursuant to Rule 404(a) of
Regulation S-K promulgated by the SEC, (iii) does not possess an interest in any other transaction
for which disclosure would be required pursuant to Rule 404(a) of Regulation S-K, and (iv) is not
engaged in a business relationship for which disclosure would be required pursuant to Rule 404(b)
of Regulation S-K.



     “Non-Statutory Stock Option” means any Stock Option that is not an Incentive Stock Option.



     “Normal Retirement” means retirement in good standing from active employment with the Company
and its Affiliates in accordance with the retirement policies of the Company and its Affiliates
then in effect.



- 1 -









 





     “Option” or “Stock Option” means any option to purchase shares of Stock granted pursuant to
Section 5.



     “Outside Director” means any director who (i) is not an employee of the Company or of any
“affiliated group,” as such term is defined in Section 1504(a) of the Code, which includes the
Company (an “Affiliated Group Member”), (ii) is not a former employee of the Company or any
Affiliated Group Member who is receiving compensation for prior services (other than benefits under
a tax-qualified retirement plan) during the Company’s or any Affiliated Group Member’s taxable
year, (iii) has not been an officer of the Company or any Affiliated Group Member and (iv) does not
receive remuneration from the Company or any Affiliated Group Member, either directly or
indirectly, in any capacity other than as a director. “Outside Director” shall be determined in
accordance with Section 162(m) of the Code and the Treasury regulations issued thereunder.



     “Performance Share Award” means an Award pursuant to Section 8.



     “Restricted Stock Award” means an Award granted pursuant to Section 6.



     “SEC” means the Securities and Exchange Commission or any successor authority.



     “Stock” means the common stock, $.001 par value per share, of the Company, subject to
adjustments pursuant to Section 3.



     “Stock Appreciation Right” means an Award granted pursuant to Section 9.



     “Unrestricted Stock Award” means Awards granted pursuant to Section 7.



SECTION 2. Administration of Plan; Committee Authority to Select Participants and Determine Awards.




     (a) Committee. The Plan shall be administered by a committee of the Board (the “Committee”)
consisting of not less than two (2) persons each of whom qualifies as an Independent Director, an
Outside Director and a Non-Employee Director, but the authority and validity of any act taken or
not taken by the Committee shall not be affected if any person administering the Plan is not an
Independent Director, an Outside Director or a Non-Employee Director. Except as specifically
reserved to the Board under the terms of the Plan, the Committee shall have full and final
authority to operate, manage and administer the Plan on behalf of the Company.



     (b) Powers of Committee. The Committee shall have the power and authority to grant and modify
Awards consistent with the terms of the Plan, including the power and authority:



          (i) to select the persons to whom Awards may from time to time be granted;




          (ii) to determine the time or times of grant, and the extent, if any, of Incentive Stock
Options, Non-Statutory Stock Options, Restricted Stock, Unrestricted Stock, Performance






- 2 -









 







Shares and Stock Appreciation Rights, or any combination of the foregoing, granted to any one
or more participants;




          (iii) to determine the number of shares to be covered by any Award;




          (iv) to determine and modify the terms and conditions, including restrictions, not
inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among
individual Awards and participants, and to approve the form of written instruments evidencing the
Awards; provided, however, that no such action shall adversely affect rights under any outstanding
Award without the participant’s consent;




          (v) to accelerate the exercisability or vesting of all or any portion of any Award;




          (vi) to extend the period in which any outstanding Stock Option or Stock Appreciation Right
may be exercised; and




          (vii) to adopt, alter and repeal such rules, guidelines and practices for administration of
the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms
and provisions of the Plan and any Award (including related written instruments); to make all
determinations it deems advisable for the administration of the Plan; to decide all disputes
arising in connection with the Plan; and to otherwise supervise the administration of the Plan.




     All decisions and interpretations of the Committee shall be binding on all persons, including
the Company and Plan participants. No member or former member of the Committee or the Board shall
be liable for any action or determination made in good faith with respect to this Plan.



SECTION 3. Shares Issuable under the Plan; Mergers; Substitution.




     (a) Shares Issuable. The maximum number of shares of Stock which may be issued in respect of
Awards (including Stock Appreciation Rights) granted under the Plan, subject to adjustment upon
changes in capitalization of the Company as provided in this Section 3, shall be 1,500,000 shares
which number shall increase on each of the first five (5) anniversaries of the effective date of
this Plan by an amount, if any, equal to the lesser of: (i) 150,000 of shares of Stock or (ii) an
amount determined by the Board. Notwithstanding the foregoing, the maximum cumulative number of
shares of Stock with respect to which Awards may be granted under the Plan is 2,250,000 shares
subject to adjustment upon changes in capitalization of the Company as provided in this Section 3.
For purposes of this limitation, the shares of Stock underlying any Awards which are forfeited,
cancelled, reacquired by the Company or otherwise terminated (other than by exercise), shares that
are tendered in payment of the exercise price of any Award and shares that are tendered or withheld
for tax withholding obligations shall be added back to the shares of Stock with respect to which
Awards may be granted under the Plan. Shares issued under the Plan may be authorized but unissued
shares or shares reacquired by the Company.



     (b) Limitation on Awards. In no event may any Plan participant be granted Awards (including
Stock Appreciation Rights) with respect to more than 500,000 shares of Stock in any



- 3 -









 




calendar year. The number of shares of Stock relating to an Award granted to a Plan
participant in a calendar year that is subsequently forfeited, cancelled or otherwise terminated
shall continue to count toward the foregoing limitation in such calendar year. In addition, if the
exercise price of an Award is subsequently reduced, the transaction shall be deemed a cancellation
of the original Award and the grant of a new one so that both transactions shall count toward the
maximum shares issuable in the calendar year of each respective transaction.




     (c) Stock Dividends, Mergers, etc. In the event that after approval of the Plan by the
stockholders of the Company in accordance with Section 17, the Company effects a stock dividend,
stock split or similar change in capitalization affecting the Stock, the Committee shall make
appropriate adjustments in (i) the number and kind of shares of stock or securities with respect to
which Awards may thereafter be granted (including without limitation the limitations set forth in
Sections 3(a) and (b) above), (ii) the number and kind of shares remaining subject to outstanding
Awards, and (iii) the option or purchase price in respect of such shares. In the event of any
merger, consolidation, dissolution or liquidation of the Company, the Committee in its sole
discretion may, as to any outstanding Awards, make such substitution or adjustment in the aggregate
number of shares reserved for issuance under the Plan and in the number and purchase price (if any)
of shares subject to such Awards as it may determine and as may be permitted by the terms of such
transaction, or accelerate, amend or terminate such Awards upon such terms and conditions as it
shall provide (which, in the case of the termination of the vested portion of any Award, shall
require payment or other consideration which the Committee deems equitable in the circumstances),
subject, however, to the provisions of Section 15.



     (d) Substitute Awards. The Committee may grant Awards under the Plan in substitution for
stock and stock based awards held by employees of another corporation who concurrently become
employees of the Company or an Affiliate as the result of a merger or consolidation of the
employing corporation with the Company or an Affiliate or the acquisition by the Company or an
Affiliate of property or stock of the employing corporation. The Committee may direct that the
substitute awards be granted on such terms and conditions as the Committee considers appropriate in
the circumstances.



SECTION 4. Eligibility.




     Awards may be granted to officers, directors and employees of, and consultants and advisers
to, the Company or its Affiliates (“Eligible Persons”).



SECTION 5. Stock Options.




     The Committee may grant to Eligible Persons options to purchase stock.



     Any Stock Option granted under the Plan shall be in such form as the Committee may from time
to time approve.



     Stock Options granted under the Plan may be either Incentive Stock Options (subject to
compliance with applicable law) or Non-Statutory Stock Options. Unless otherwise so designated, an
Option shall be a Non-Statutory Stock Option. To the extent that any option does not qualify as an
Incentive Stock Option, it shall constitute a Non-Statutory Stock Option.



- 4 -









 





     No Incentive Stock Option shall be granted under the Plan after the tenth anniversary of the
date of adoption of the Plan by the Board.



     Non-Statutory Stock Options shall automatically be granted to all Non-Employee Directors as
follows:




(1) Each Non-Employee Director joining the Board after May 25, 2004 shall be
granted, on the later to occur of such Non-Employee Director’s date of election
to the Board or the effective date of the registration statement for the
Company’s initial public offering of the Stock (the “IPO Effective Date”), an
Option to purchase 25,000 shares of Stock at an exercise price per share equal
to no less than the Fair Market Value of the Stock on the date of grant, such
Option to vest over three years at the rate of 8.33% per quarter until fully
vested.





(2) Following the IPO Effective Date, each Non-Employee Director shall be
granted on the date of the Company’s annual meeting of stockholders, an Option
to purchase 7,500 shares of Stock at an exercise price per share equal to no
less than the Fair Market Value of the Stock on the date of grant, such options
to vest over three years at the rate of 8.33% per quarter until fully vested.



     The Committee may also grant additional Non-Statutory Stock Options to purchase a number of
shares to be determined by the Committee in recognition of services provided by a Non-Employee
Director in his or her capacity as a director, provided that such grants are in compliance with the
requirements of Rule 16b-3, as promulgated under the Securities Exchange Act of 1934, as amended
from time to time (“Rule 16b-3”).



     The Committee in its discretion may determine the effective date of Stock Options, provided,
however, that grants of Incentive Stock Options shall be made only to persons who are, on the
effective date of the grant, employees of the Company or an Affiliate. Stock Options granted
pursuant to this Section 5 shall contain such additional terms and conditions, not inconsistent
with the terms of the Plan, as the Committee shall deem desirable.



     (a) Exercise Price. The exercise price per share for the Stock covered by a Stock Option
granted pursuant to this Section 5 shall be determined by the Committee at the time of grant but
shall be not less than one hundred percent (100%) of Fair Market Value on the date of grant. If an
employee owns or is deemed to own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of
stock of the Company or any subsidiary or parent corporation and an Incentive Stock Option is
granted to such employee, the option price shall be not less than one hundred ten percent (110%) of
Fair Market Value on the date of grant.



     (b) Option Term. The term of each Stock Option shall be fixed by the Committee, but no
Incentive Stock Option shall be exercisable more than ten (10) years after the date the option is
granted. If an employee owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than ten percent (10%) of the combined voting power of all



- 5 -









 




classes of stock of the Company or any subsidiary or parent corporation and an Incentive Stock
Option is granted to such employee, the term of such option shall be no more than five (5) years
from the date of grant.




     (c) Exercisability; Rights of a Shareholder. Stock Options shall become vested and
exercisable at such time or times, whether or not in installments, as shall be determined by the
Committee. The Committee, in its discretion, may accelerate the exercisability of all or any
portion of any Stock Option only in circumstances involving (i) a Change of Control of the Company,
(ii) undue hardship, including, but not limited to, death or disability of the option holder, and
(iii) a severance arrangement with a departing option holder. An optionee shall have the rights of
a shareholder only as to shares acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.



     (d) Method of Exercise. Stock Options may be exercised in whole or in part, by delivering
written notice of exercise to the Company, specifying the number of shares to be purchased.
Payment of the purchase price may be made by delivery of cash or bank check or other instrument
acceptable to the Committee in an amount equal to the exercise price of such Options, or, to the
extent provided in the applicable Option Agreement, by one or more of the following methods:



          (i) by delivery to the Company of shares of Common Stock of the Company that either have been
purchased by the optionee on the open market, or have been beneficially owned by the optionee for a
period of at least six months and are not then subject to restriction under any Company plan
(“mature shares”); such surrendered shares shall have a fair market value equal in amount to the
exercise price of the Options being exercised; or




          (ii) a personal recourse note issued by the optionee to the Company in a principal amount
equal to such aggregate exercise price and with such other terms, including interest rate and
maturity, as the Company may determine in its discretion; provided, however, that the interest rate
borne by such note shall not be less than the lowest applicable federal rate, as defined in Section
1274(d) of the Code; or




          (iii) if the class of Common Stock is registered under the Securities Exchange Act of 1934 at
such time, by delivery to the Company of a properly executed exercise notice along with irrevocable
instructions to a broker to deliver promptly to the Company cash or a check payable and acceptable
to the Company for the purchase price; provided that in the event that the optionee chooses to pay
the purchase price as so provided, the optionee and the broker shall comply with such procedures
and enter into such agreements of indemnity and other agreements as the Committee shall prescribe
as a condition of such payment procedure (including, in the case of an optionee who is an executive
officer of the Company, such procedures and agreements as the Committee deems appropriate in order
to avoid any extension of credit in the form of a personal loan to such officer). The Company need
not act upon such exercise notice until the Company receives full payment of the exercise price; or




          (iv) by reducing the number of Option shares otherwise issuable to the optionee upon exercise
of the Option by a number of shares of Common Stock having a fair





- 6 -









 








market value equal to such aggregate exercise price; provided, however, that the optionee
otherwise holds an equal number of mature shares; or



          (v) by any combination of such methods of payment.




     The delivery of certificates representing shares of Stock to be purchased pursuant to the
exercise of a Stock Option will be contingent upon receipt from the Optionee (or a purchaser acting
in his stead in accordance with the provisions of the Stock Option) by the Company of the full
purchase price for such shares and the fulfillment of any other requirements contained in the Stock
Option or imposed by applicable law.



     (e) Non-transferability of Options. Except as the Committee may provide with respect to a
Non-Statutory Stock Option, no Stock Option shall be transferable other than by will or by the laws
of descent and distribution and all Stock Options shall be exercisable, during the optionee’s
lifetime, only by the optionee.



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



     (g) Lockup Agreement. Each Option shall provide that the optionee shall agree for a period
of time (not to exceed 180 days) from the effective date of any registration of securities of the
Company (upon request of the Company or the underwriters managing any underwritten offering of the
Company’s securities) not to sell, make any short sale of, loan, grant any option for the purchase
of, or otherwise dispose of, any shares issued pursuant to the exercise of such Option, without the
prior written consent of the Company or such underwriters, as the case may be.



SECTION 6. Restricted Stock Awards.




     (a) Nature of Restricted Stock Award. The Committee in its discretion may grant Restricted
Stock Awards to any Eligible Person, entitling the recipient to acquire, for such purchase price,
if any, as may be determined by the Committee, shares of Stock subject to such restrictions and
conditions as the Committee may determine at the time of grant (“Restricted Stock”), including
continued employment and/or achievement of pre-established performance goals and objectives.



     (b) Acceptance of Award. A participant who is granted a Restricted Stock Award shall have no
rights with respect to such Award unless the participant shall have accepted the Award within sixty
(60) days (or such shorter date as the Committee may specify) following the award date by making
payment to the Company of the specified purchase price, if any, of the shares covered by the Award
and by executing and delivering to the Company a written instrument that sets forth the terms and
conditions applicable to the Restricted Stock in such form as the Committee shall determine.



- 7 -









 





     (c) Rights as a Shareholder. Upon complying with Section 6(b) above, a participant shall have
all the rights of a shareholder with respect to the Restricted Stock, including voting and dividend
rights, subject to non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 6 and subject to such other conditions contained in the written
instrument evidencing the Restricted Award. Unless the Committee shall otherwise determine,
certificates evidencing shares of Restricted Stock shall remain in the possession of the Company
until such shares are vested as provided in Section 6(e) below.



     (d) Restrictions. Shares of Restricted Stock may not be sold, assigned, transferred, pledged
or otherwise encumbered or disposed of except as specifically provided herein. In the event of
termination of employment by the Company and its Affiliates for any reason (including death,
Disability, Normal Retirement and for Cause), the Company shall have the right, at the discretion
of the Committee, to repurchase shares of Restricted Stock which have not then vested at their
purchase price, or to require forfeiture of such shares to the Company if acquired at no cost, from
the participant or the participant’s legal representative. The Company must exercise such right of
repurchase or forfeiture within ninety (90) days following such termination of employment (unless
otherwise specified in the written instrument evidencing the Restricted Stock Award).



     (e) Vesting of Restricted Stock. The Committee at the time of grant shall specify the date or
dates and/or the attainment of pre-established performance goals, objectives and other conditions
on which the non-transferability of the Restricted Stock and the Company’s right of repurchase or
forfeiture shall lapse. Subsequent to such date or dates and/or the attainment of such
pre-established performance goals, objectives and other conditions, the shares on which all
restrictions have lapsed shall no longer be Restricted Stock and shall be deemed “vested.” Subject
to Section 13, the Committee, in its discretion, may accelerate the exercisability of all or any
portion of any Restricted Stock Award only in circumstances involving (i) a Change of Control of
the Company, (ii) undue hardship, including, but not limited to, death or disability of the
Restricted Stock Award holder, and (iii) a severance arrangement with a departing Restricted Stock
Award holder.



     (f) Waiver, Deferral and Reinvestment of Dividends. The written instrument evidencing the
Restricted Stock Award may require or permit the immediate payment, waiver, deferral or investment
of dividends paid on the Restricted Stock.



SECTION 7. Unrestricted Stock Awards.




     (a) Grant or Sale of Unrestricted Stock. The Committee in its discretion may grant or sell to
any Eligible Person shares of Stock free of any restrictions under the Plan (“Unrestricted Stock”)
at a purchase price determined by the Committee. Shares of Unrestricted Stock may be granted or
sold as described in the preceding sentence in respect of past services or other valid
consideration.



     (b) Restrictions on Transfers. The right to receive unrestricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent
and distribution.



- 8 -









 





SECTION 8. Performance Share Awards.




     A Performance Share Award is an award entitling the recipient to acquire shares of Stock upon
the attainment of specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the Plan. Performance
Share Awards may be granted under the Plan to any Eligible Person. The Committee in its discretion
shall determine whether and to whom Performance Share Awards shall be made, the performance goals
applicable under each such Award (which may include, without limitation, continued employment by
the recipient or a specified achievement by the recipient, the Company or any business unit of the
Company), the periods during which performance is to be measured, and all other limitations and
conditions applicable to the Award or the Stock issuable thereunder.



SECTION 9. Stock Appreciation Rights.




     The Committee in its discretion may grant Stock Appreciation Rights to any Eligible Person (i)
alone, or (ii) simultaneously with the grant of a Stock Option and in conjunction therewith or in
the alternative thereto. A Stock Appreciation Right shall entitle the participant upon exercise
thereof to receive from the Company, upon written request to the Company at its principal offices
(the “Request”), a number of shares of Stock (with or without restrictions as to substantial risk
of forfeiture and transferability, as determined by the Committee in its sole discretion), an
amount of cash, or any combination of Stock and cash, as specified in the Request (but subject to
the approval of the Committee in its sole discretion, at any time up to and including the time of
payment, as to the making of any cash payment), having an aggregate Fair Market Value equal to the
product of (a) the excess of Fair Market Value, on the date of such Request, over the exercise
price per share of Stock specified in such Stock Appreciation Right or its related Option (which
exercise price shall be not less than one hundred percent (100%) of Fair Market Value on the date
of grant), multiplied by (b) the number of shares of Stock for which such Stock Appreciation Right
shall be exercised. Notwithstanding the foregoing, the Committee may specify at the time of grant
of any Stock Appreciation Right that such Stock Appreciation Right may be exercisable solely for
cash and not for Stock.



SECTION 10. Termination of Stock Options and Stock Appreciation Rights..




     (a) Incentive Stock Options:



          (i) Termination by Death. If any participant’s employment by the Company and its Affiliates
terminates by reason of death, any Incentive Stock Option owned by such participant may thereafter
be exercised to the extent exercisable at the date of death, by the legal representative or legatee
of the participant, for a period of one hundred eighty (180) days (or such longer period as the
Committee shall specify at any time) from the date of death, or until the expiration of the stated
term of the Incentive Stock Option, if earlier.




          (ii) Termination by Reason of Disability or Normal Retirement.




          (A) Any Incentive Stock Option held by a participant whose employment by the Company and its
Affiliates has terminated by reason of Disability may thereafter be





- 9 -









 







exercised, to the extent it was exercisable at the time of such termination, for a period of
ninety (90) days (or such longer period as the Committee shall specify at any time) from the date
of such termination of employment, or until the expiration of the stated term of the Option, if
earlier.




          (B) Any Incentive Stock Option held by a participant whose employment by the Company and its
Affiliates has terminated by reason of Normal Retirement may thereafter be exercised, to the extent
it was exercisable at the time of such termination, for a period of ninety (90) days (or such
longer period as the Committee shall specify at any time) from the date of such termination of
employment, or until the expiration of the stated term of the Option, if earlier.




          (C) The Committee shall have sole authority and discretion to determine whether a
participant’s employment has been terminated by reason of Disability or Normal Retirement.




          (iii) Termination for Cause. If any participant’s employment by the Company and its
Affiliates has been terminated for Cause, any Incentive Stock Option held by such participant shall
immediately terminate and be of no further force and effect; provided, however, that the Committee
may, in its sole discretion, provide that such Option can be exercised for a period of up to thirty
(30) days from the date of termination of employment or until the expiration of the stated term of
the Option, if earlier.




          (iv) Other Termination. Unless otherwise determined by the Committee, if a participant’s
employment by the Company and its Affiliates terminates for any reason other than death,
Disability, Normal Retirement or for Cause, any Incentive Stock Option held by such participant may
thereafter be exercised, to the extent it was exercisable on the date of termination of employment,
for thirty (30) days (or such other period as the Committee shall specify) from the date of
termination of employment or until the expiration of the stated term of the Option, if earlier.




     (b) Non-Statutory Stock Options and Stock Appreciation Rights. Any Non-Statutory Stock Option
or Stock Appreciation Right granted under the Plan shall contain such terms and conditions with
respect to its termination as the Committee, in its discretion, may from time to time determine.



SECTION 11. Tax Withholding.




     (a) Payment by Participant. Each participant shall, no later than the date as of which the
value of an Award or of any Stock or other amounts received thereunder first becomes includable in
the gross income of the participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Committee regarding payment of any Federal, state, local and/or
payroll taxes of any kind required by law to be withheld with respect to such income. The Company
and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant.



- 10 -









 





     (b) Payment in Shares. A Participant may elect, with the consent of the Committee, to have
such tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to
withhold from shares of Stock to be issued pursuant to an Award a number of shares with an
aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the
minimum withholding amount due with respect to such Award, or (ii) delivering to the Company a
number of mature shares of Stock with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the minimum withholding amount due.



     (c) Notice of Disqualifying Disposition. Each holder of an Incentive Option shall agree to
notify the Company in writing immediately after making a disqualifying disposition (as defined in
Section 421(b) of the Code) of any Stock purchased upon exercise of an Incentive Stock Option.



SECTION 12. Transfer and Leave of Absence.




     For purposes of the Plan, the following events shall not be deemed a termination of
employment:



     (a) a transfer to the employment of the Company from an Affiliate or from the Company to an
Affiliate, or from one Affiliate to another;



     (b) an approved leave of absence for military service or sickness, or for any other purpose
approved by the Company, if the employee’s right to re-employment is guaranteed either by a statute
or by contract or under the policy pursuant to which the leave of absence was granted or if the
Committee otherwise so provides in writing.



SECTION 13. Amendments and Termination.




     The Board may at any time amend or discontinue the Plan and the Committee may at any time
amend or cancel any outstanding Award (or provide substitute Awards at the same or reduced exercise
or purchase price or with no exercise or purchase price, but such price, if any, must satisfy the
requirements which would apply to the substitute or amended Award if it were then initially granted
under this Plan) for the purpose of satisfying changes in law or for any other lawful purpose, but
no such action shall adversely affect rights under any outstanding Award without the holder’s
consent.



     This Plan shall terminate as of the tenth anniversary of its effective date. The Board may
terminate this Plan at any earlier time for any reason. No Award may be granted after the Plan has
been terminated. No Award granted while this Plan is in effect shall be altered or impaired by
termination of this Plan, except upon the consent of the holder of such Award. The power of the
Committee to construe and interpret this Plan and the Awards granted prior to the termination of
this Plan shall continue after such termination.



SECTION 14. Status of Plan.




     With respect to the portion of any Award which has not been exercised and any payments in
cash, Stock or other consideration not received by a participant, a participant shall have no
rights greater than those of a general creditor of the Company unless the Committee shall



- 11 -









 




otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet the Company’s
obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the
existence of such trusts or other arrangements is consistent with the provision of the foregoing
sentence.




SECTION 15. Change of Control Provisions.




     (a) Upon the occurrence of a Change of Control as defined in this Section 15:



          (i) subject to the provisions of clause (iii) below, after the effective date of such Change
of Control, each holder of an outstanding Stock Option, Restricted Stock Award, Performance Share
Award or Stock Appreciation Right shall be entitled, upon exercise of such Award, to receive, in
lieu of shares of Stock (or consideration based upon the Fair Market Value of Stock), shares of
such stock or other securities, cash or property (or consideration based upon shares of such stock
or other securities, cash or property) as the holders of shares of Stock received in connection
with the Change of Control;




          (ii) the Committee may accelerate, fully or in part, the time for exercise of, and waive any
or all conditions and restrictions on, each unexercised and unexpired Stock Option, Restricted
Stock Award, Performance Share Award and Stock Appreciation Right, effective upon a date prior or
subsequent to the effective date of such Change of Control, as specified by the Committee; or




          (iii) each outstanding Stock Option, Restricted Stock Award, Performance Share Award and Stock
Appreciation Right may be cancelled by the Committee as of the effective date of any such Change of
Control provided that (x) prior written notice of such cancellation shall be given to each holder
of such an Award and (y) each holder of such an Award shall have the right to exercise such Award
to the extent that the same is then exercisable or, in full, if the Committee shall have
accelerated the time for exercise of all such unexercised and unexpired Awards, during the thirty
(30) day period preceding the effective date of such Change of Control.




     (b) “Change of Control” shall mean the occurrence of any one of the following events:



          (i) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes, after the Effective Date of this Plan, a “beneficial owner” (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, or any corporation
owned, directly or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the combined voting power of the Company’s
then outstanding securities; or




          (ii) the stockholders of the Company approve a merger or consolidation of the Company with any
other corporation or other entity, other than a merger or consolidation which






- 12 -









 







would result in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding immediately after such
merger or consolidation; or




          (iii) the stockholders of the Company approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all or substantially all of the
Company’s assets.




SECTION 16. General Provisions.




     (a) No Distribution; Compliance with Legal Requirements. The Committee may require each
person acquiring shares pursuant to an Award to represent to and agree with the Company in writing
that such person is acquiring the shares without a view to distribution thereof.



     No shares of Stock shall be issued pursuant to an Award until all applicable securities laws
and other legal and stock exchange requirements have been satisfied. The Committee may require the
placing of such stop orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.



     (b) Delivery of Stock Certificates. Delivery of stock certificates to participants under this
Plan shall be deemed effected for all purposes when the Company or a stock transfer agent of the
Company shall have delivered such certificates in the United States mail, addressed to the
participant, at the participant’s last known address on file with the Company.



     (c) Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan
shall prevent the Board from adopting other or additional compensation arrangements, including
trusts, subject to stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption of the Plan or any
Award under the Plan does not confer upon any employee any right to continued employment with the
Company or any Affiliate.



SECTION 17. Effective Date of Plan.




     This Plan shall become effective upon its adoption by the Company’s Board of Directors. If the
Plan shall not be approved by the shareholders of the Company within twelve months following its
adoption, this Plan shall terminate and be of no further force or effect.



SECTION 18. Governing Law.




     This Plan shall be governed by, and construed and enforced in accordance with, the substantive
laws of The Commonwealth of Massachusetts without regard to its principles of conflicts of laws.



* * *






- 13 -