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EXHIBIT 10.3




LUMINENT MORTGAGE CAPITAL, INC.

2003 STOCK INCENTIVE PLAN, AS AMENDED




1. PURPOSE OF PLAN





The purpose of the Luminent Mortgage Capital, Inc. 2003 Stock Incentive Plan (this “Plan”) is to
promote the success of the Corporation and to increase stockholder value by providing an
additional means through the grant of awards to attract, motivate, retain and reward selected
employees and other eligible persons of the Company and to attract, motivate and retain
experienced and knowledgeable independent directors. As used herein, “Corporation” means Luminent
Mortgage Capital, Inc., a Maryland corporation; “Subsidiary” means any corporation or other
entity a majority of whose outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Corporation; and “Company” means the Corporation and its
Subsidiaries, collectively.



2. ELIGIBILITY





	 	2.1	 	Eligible Persons. The Administrator (as such term is defined in Section 3.1) may grant
awards under this Plan only to those persons that the Administrator determines to be
Eligible Persons. An “Eligible Person” is any person who is either: (a) an officer (whether
or not a director) or employee of the Company; (b) a director of the Company; or (c) an
individual consultant or advisor who renders or has rendered bona fide services (other than
services in connection with the offering or sale of securities of the Company in a
capital-raising transaction or as a market maker or promoter of the Company’s securities) to
the Company and who is selected to participate in this Plan by the Administrator; provided,
however, that a person who is otherwise an Eligible Person under clause (c) above may
participate in this Plan only if such participation would not adversely affect either the
Corporation’s eligibility to use Form S-8 to register under the Securities Act of 1933, as
amended (the “Securities Act”), the offering of shares issuable under this Plan by the
Company or the Corporation’s compliance with any other applicable laws. An Eligible Person
who has been granted an award (a “participant”) may, if otherwise eligible, be granted
additional awards if the Administrator shall so determine.
	 
	 	2.2	 	Ownership Limit. Notwithstanding anything else contained herein or in any award
hereunder to the contrary, no Person may receive Common Stock upon the grant, exercise or
payment of an award to the extent that it will cause such Person to Beneficially Own or
Constructively Own Capital Stock in excess of the Ownership Limit. If a Person would be
entitled to receive or acquire shares of Common Stock but for the limitation of the
preceding sentence, the Corporation shall have the right to deliver to the Person, in lieu
of Common Stock, a check or cash in the amount equal to the value of the Common Stock
otherwise deliverable, subject to any applicable tax withholding or other authorized
deductions. For purposes of this limitation, the terms “Person,” “Beneficially Own,”
“Constructively Own,” “Capital Stock,” and “Ownership Limit” are used as defined in the
Corporation’s Articles of Incorporation.





3. PLAN ADMINISTRATION





	 	3.1	 	The Administrator. This Plan shall be administered by and all awards under this Plan
shall be authorized by the Administrator. The “Administrator” means the Board of Directors
of the Corporation (the “Board”) or one or more committees appointed by the Board or another
committee (within its delegated authority) to administer all or certain aspects of this
Plan. Any such committee shall be comprised solely of one or more directors or such number
of directors as may be required under applicable law. A committee may delegate some or all
of its authority to another committee so constituted. The Board or a committee comprised
solely of directors may also delegate, to the extent permitted by the Maryland General
Corporation Law and any other applicable law, to one or more officers of the Corporation,
its powers under this Plan (a) to designate the officers and employees of the Company who
will receive grants of rights or options to purchase shares of Common Stock (as defined in
Section 4.1), and (b) to determine the number of rights or options to be received by them,
pursuant to a resolution that specifies the total number of rights or options that may be
granted under the delegation, provided that no officer may be delegated the power to
designate himself or herself as a recipient of such options or rights. The Board may
delegate different levels of authority to different committees with administrative and grant
authority under this Plan. Notwithstanding the foregoing, only the Board (and not any
delegate of the Board) may approve an award grant to a member of the Board who is not
employed by the Corporation or one of its Subsidiaries. Unless otherwise provided in the
Bylaws of the Corporation or the applicable charter of any Administrator: (a) a majority of
the members of the acting Administrator shall constitute a quorum, and (b) the vote of a
majority of the members present assuming the presence of a quorum or the unanimous written
consent of the members of the Administrator shall constitute action by the acting
Administrator.




 









 






	 	3.2	 	Powers of the Administrator. Subject to the express provisions of this Plan and
compliance with Section 2-203 of the Maryland General Corporation Law, the Administrator is
authorized and empowered to do all things necessary or desirable in connection with the
authorization of awards and the administration of this Plan (in the case of a committee or
delegation to one or more officers, within the authority delegated to that committee or
person(s)), including, without limitation, the authority to:






	 	(a)	 	determine eligibility and, from among those persons determined to be eligible, the
particular Eligible Persons who will receive an award under this Plan;
	 
	 	(b)	 	grant awards to Eligible Persons, determine the price at which securities will be
offered or awarded and the number of securities to be offered or awarded to any of such
persons, determine the other specific terms and conditions of such awards consistent with
the express limits of this Plan, establish the installments (if any) in which such awards
shall become exercisable or shall vest (which may include, without limitation,
performance and/or time-based schedules), or determine that no delayed exercisability or
vesting is required, establish any applicable performance targets, and establish the
events of termination or reversion of such awards;
	 
	 	(c)	 	approve the forms of award agreements (which need not be identical either as to
type of award or among participants);
	 
	 	(d)	 	construe and interpret this Plan and any agreements defining the rights and
obligations of the Company and participants under this Plan, further define the terms
used in this Plan, and prescribe, amend and rescind rules and regulations relating to the
administration of this Plan or the awards granted under this Plan;
	 
	 	(e)	 	cancel, modify, or waive the Corporation’s rights with respect to, or modify,
discontinue, suspend, or terminate any or all outstanding awards, subject to any required
consent under Section 8.6.5;
	 
	 	(f)	 	accelerate or extend the vesting or exercisability or extend the term of any or all
such outstanding awards (in the case of options or stock appreciation rights, within the
maximum ten-year term of such awards) in such circumstances as the Administrator may deem
appropriate (including, without limitation, in connection with a termination of
employment or services or other events of a personal nature) subject to any required
consent under Section 8.6.5;
	 
	 	(g)	 	adjust the number of shares of Common Stock subject to any award, adjust the price
of any or all outstanding awards, reprice any or all outstanding awards (by amendment,
exchange, or other means) or otherwise change previously imposed terms and conditions, in
such circumstances as the Administrator may deem appropriate, in each case subject to
Sections 4 and 8.6;
	 
	 	(h)	 	determine the date of grant of an award, which may be a designated date after but
not before the date of the Administrator’s action (unless otherwise designated by the
Administrator, the date of grant of an award shall be the date upon which the
Administrator took the action granting an award);
	 
	 	(i)	 	determine whether, and the extent to which, adjustments are required pursuant to
Section 7 hereof and authorize the termination, conversion, substitution or succession of
awards upon the occurrence of an event of the type described in Section 7;
	 
	 	(j)	 	acquire or settle (subject to Sections 7 and 8.6) rights under awards in cash,
stock of equivalent value, or other consideration; and
	 
	 	(k)	 	determine the fair market value of the Common Stock or awards under this Plan from
time to time and/or the manner in which such value will be determined.






	 	3.3	 	Binding Determinations. Any action taken by, or inaction of, the Corporation, any
Subsidiary, or the Administrator relating or pursuant to this Plan and within its authority
hereunder or under applicable law shall be within the absolute discretion of that entity or
body and shall be conclusive and binding upon all persons. Neither the Board nor any Board
committee, nor any member thereof or person acting at the direction thereof, shall be liable
for any act, omission, interpretation, construction or determination made in good faith in
connection with this Plan (or any award made under this Plan), and all such persons shall be
entitled to indemnification and reimbursement by the Company in respect of any claim, loss,
damage or expense (including,




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without limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent
permitted by law and/or under any directors and officers liability insurance coverage that may
be in effect from time to time.




	 	3.4	 	Reliance on Experts. In making any determination or in taking or not taking any action
under this Plan, the Board or a committee, as the case may be, may obtain and may rely upon
the advice of experts, including employees and professional advisors to the Corporation. No
director, officer or agent of the Company shall be liable for any such action or
determination taken or made or omitted in good faith.
	 
	 	3.5	 	Delegation. The Administrator may delegate ministerial, non-discretionary functions to
individuals who are officers or employees of the Company or to third parties.





4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN; SHARE LIMITS





	 	4.1	 	Shares Available. Subject to the provisions of Section 7.1, the capital stock that may
be delivered under this Plan shall be shares of the Corporation’s authorized but unissued
Common Stock and any shares of its Common Stock held as treasury shares. For purposes of
this Plan, “Common Stock” shall mean the common stock of the Corporation and such other
securities or property as may become the subject of awards under this Plan, or may become
subject to such awards, pursuant to an adjustment made under Section 7.1.
	 
	 	4.2	 	Share Limits. The maximum number of shares of Common Stock that may be delivered
pursuant to awards granted to Eligible Persons under this Plan (the “Share Limit”) is
1,850,000 shares. The maximum number of shares of Common Stock that may be delivered
pursuant to options qualified as incentive stock options granted under this Plan is
1,850,000 shares. Each of the foregoing numerical limits is subject to adjustment as
contemplated by Section 4.3, Section 7.1 and Section 8.10.
	 
	 	4.3	 	Awards Settled in Cash, Reissue of Awards and Shares. To the extent that an award is
settled in cash or a form other than shares of Common Stock, the shares that would have been
delivered had there been no such cash or other settlement shall not be counted against the
shares available for issuance under this Plan. In the event that shares are delivered in
respect of a dividend equivalent, stock appreciation right, or other award, only the actual
number of shares delivered with respect to the award shall be counted against the share
limits of this Plan. Shares that are subject to or underlie awards which expire or for any
reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are
not paid or delivered under this Plan shall again be available for subsequent awards under
this Plan. Shares that are exchanged by a participant or withheld by the Corporation as full
or partial payment in connection with any award under this Plan, as well as any shares
exchanged by a participant or withheld by the Company to satisfy the tax withholding
obligations related to any award under this Plan, shall be available for subsequent awards
under this Plan. Refer to Section 8.10 for application of the foregoing share limits with
respect to assumed awards.
	 
	 	4.4	 	Reservation of Shares; No Fractional Shares; Minimum Issue. The Corporation shall at all
times reserve a number of shares of Common Stock sufficient to cover the Corporation’s
obligations and contingent obligations to deliver shares with respect to awards then
outstanding under this Plan (exclusive of any dividend equivalent obligations to the extent
the Corporation has the right to settle such rights in cash). No fractional shares shall be
delivered under this Plan. The Administrator may pay cash in lieu of any fractional shares
in settlements of awards under this Plan. No fewer than one hundred (100) shares may be
purchased on exercise of any award (or, in the case of stock appreciation or purchase
rights, no fewer than one hundred (100) rights may be exercised at any one time) unless the
total number purchased or exercised is the total number at the time available for purchase
or exercise under the award.





5. AWARDS





	 	5.1	 	Type and Form of Awards. The Administrator shall determine the type or types of award(s)
to be made to each selected Eligible Person. Awards may be granted singly, in combination or
in tandem. Awards also may be made in combination or in tandem with, in replacement of, as
alternatives to, or as the payment form for grants or rights under any other employee or
compensation plan of the Company. The types of awards that may be granted under this Plan
are:






5.1.1 Stock Options. A stock option is the grant of a right to purchase a specified number
of shares of Common Stock during a specified period as determined by the Administrator. An
option may be intended as an incentive stock option (an “ISO”) within the meaning of Section
422 of the Code or a nonqualified stock option (an option not intended to be an ISO). The
award agreement for an option will indicate if the option is intended as an ISO, otherwise it
will be deemed to be a nonqualified stock



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option. The maximum term of each option (ISO or nonqualified) shall be ten (10) years. The per
share exercise price for each option shall be determined by the Administrator and set forth in
the applicable award agreement and, in the case of an ISO, shall not be less than 100% of the
fair market value of a share of Common Stock on the date of grant of the option. When an
option is exercised, the exercise price for the shares to be purchased shall be paid in full
in cash or such other method permitted by the Administrator consistent with Section 5.4.




5.1.2 Additional Rules Applicable to ISOs. To the extent that the aggregate fair market
value (determined at the time of grant of the applicable option) of stock with respect to
which ISOs first become exercisable by a participant in any calendar year exceeds $100,000,
taking into account both Common Stock subject to ISOs under this Plan and stock subject to
ISOs under all other plans of the Company (or any parent or predecessor corporation to the
extent required by and within the meaning of Section 422 of the Code and the regulations
promulgated thereunder), such options shall be treated as nonqualified stock options. In
reducing the number of options treated as ISOs to meet the $100,000 limit, the most recently
granted options shall be reduced first. To the extent a reduction of simultaneously granted
options is necessary to meet the $100,000 limit, the Administrator may, in the manner and to
the extent permitted by law, designate which shares of Common Stock are to be treated as
shares acquired pursuant to the exercise of an ISO. ISOs may only be granted to employees of
the Corporation or one of its subsidiaries (for this purpose, the term “subsidiary” is used as
defined in Section 424(f) of the Code, which generally requires an unbroken chain of ownership
of at least 50% of the total combined voting power of all classes of stock of each subsidiary
in the chain beginning with the Corporation and ending with the subsidiary in question). There
shall be imposed in any award agreement relating to ISOs such other terms and conditions as
from time to time are required in order that the option be an “incentive stock option” as that
term is defined in Section 422 of the Code. No ISO may be granted to any person who, at the
time the option is granted, owns (or is deemed to own under Section 424(d) of the Code) shares
of outstanding Common Stock possessing more than 10% of the total combined voting power of all
classes of stock of the Corporation, unless the exercise price of such option is at least 110%
of the fair market value of the stock subject to the option and such option by its terms is
not exercisable after the expiration of five years from the date such option is granted.




5.1.3 Stock Appreciation Rights. A stock appreciation right or “SAR” is a right to receive a
payment, in cash and/or Common Stock, equal to the excess of the fair market value of a
specified number of shares of Common Stock on the date the SAR is exercised over a per share
amount (the “base price”) determined by the Administrator and set forth in the applicable
award agreement. The maximum term of an SAR shall be ten (10) years. The Administrator may
grant limited SARs which are exercisable only upon a change in control or other specified
event and may be payable based on the spread between the base price of the SAR and the fair
market value of a share of Common Stock during a specified period or at a specified time
within a specified period before, after or including the date of such event.




5.1.4 Other Awards. The other types of awards that may be granted under this Plan include:
(a) stock bonuses, restricted stock, performance stock, stock units, phantom stock, dividend
equivalents, or similar rights to purchase or acquire shares, whether at a fixed or variable
price or ratio related to the Common Stock, upon the passage of time, the occurrence of one or
more events, or the satisfaction of performance criteria or other conditions, or any
combination thereof; or (b) any similar securities with a value derived from the value of or
related to the Common Stock and/or returns thereon.




	 	5.2	 	Award Agreements. Each award shall be evidenced by a written award agreement in the form
approved by the Administrator and executed on behalf of the Corporation and, if required by
the Administrator, executed by the recipient of the award. The Administrator may authorize
any officer of the Corporation (other than the particular award recipient) to execute any or
all award agreements on behalf of the Corporation. The award agreement shall set forth the
material terms and conditions of the award as established by the Administrator consistent
with the express limitations of this Plan.
	 
	 	5.3	 	Deferrals and Settlements. Payment of awards may be in the form of cash, Common Stock,
other awards or combinations thereof as the Administrator shall determine, and with such
restrictions as it may impose. The Administrator may also require or permit participants to
elect to defer the issuance of shares or the settlement of awards in cash under such rules
and procedures as it may establish under this Plan. The Administrator may also provide that
deferred settlements include the payment or crediting of interest or other earnings on the
deferral amounts, or the payment or crediting of dividend equivalents where the deferred
amounts are denominated in shares.
	 
	 	5.4	 	Consideration for Common Stock or Awards. The purchase price for any award granted under
this Plan or the Common Stock to be delivered pursuant to an award, as applicable, may be
paid by means of any lawful consideration as determined by the Administrator, including,
without limitation, one or a combination of the following methods:




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	 	•	 	services rendered by the recipient of such award;
	 
	 	•	 	cash, check payable to the order of the Corporation, or electronic funds transfer;
	 
	 	•	 	notice and third party payment in such manner as may be authorized by the Administrator;
	 
	 	•	 	the delivery of previously owned shares of Common Stock;
	 
	 	•	 	by a reduction in the number of shares otherwise deliverable pursuant to the award;
	 
	 	•	 	by delivery of one or more promissory notes from the Eligible Person, provided that
any such note shall be subject to terms and conditions established by the Administrator
and the requirements of applicable law; or
	 
	 	•	 	subject to such procedures as the Administrator may adopt, pursuant to a “cashless
exercise” with a third party who provides financing for the purposes of (or who otherwise
facilitates) the purchase or exercise of awards.






In no event shall any shares newly-issued by the Corporation be issued for less than the
minimum lawful consideration for such shares or for consideration other than consideration
permitted by applicable state law. In the event that the Administrator allows a participant to
exercise an award by delivering shares of Common Stock previously owned by such participant
and unless otherwise expressly provided by the Administrator, any shares delivered which were
initially acquired by the participant from the Corporation (upon exercise of a stock option or
otherwise) must have been owned by the participant at least six months as of the date of
delivery. Shares of Common Stock used to satisfy the exercise price of an option shall be
valued at their fair market value on the date of exercise. The Corporation will not be
obligated to deliver any shares unless and until it receives full payment of the exercise or
purchase price therefor and any related withholding obligations under Section 8.5 and any
other conditions to exercise or purchase have been satisfied. Unless otherwise expressly
provided in the applicable award agreement, the Administrator may at any time eliminate or
limit a participant’s ability to pay the purchase or exercise price of any award or shares by
any method other than cash payment to the Corporation.




	 	5.5	 	Definition of Fair Market Value. For purposes of this Plan, “fair market value” shall
mean, unless otherwise determined or provided by the Administrator in the circumstances: (a)
the closing price of a share of Common Stock as reported on the composite tape of the
principal national securities exchange on which the Common Stock is listed or admitted to
trade (the “Exchange”) for the date in question or, if no sales of Common Stock were made on
the Exchange on that date (or if the market has not closed at the applicable time), the
closing price of a share of Common Stock as reported on the composite tape of the Exchange
for the next preceding day on which sales of Common Stock were made on the Exchange; or (b)
if the stock is not listed or admitted to trade on a national securities exchange, then the
last trading price for a share of Common Stock for the date in question (or as of the most
recent trading date if there were no sales of Common Stock on the date in question or if the
market has not closed at the applicable time) as furnished by the National Association of
Securities Dealers, Inc. (“NASD”). The Administrator may, however, provide with respect to
one or more awards that the fair market value shall equal the last closing or trading price
of a share of Common Stock as reported on the composite tape of the Exchange or by the NASD
available on the date in question or the average of the high and low prices, or the average
of the bid and asked prices, of a share of Common Stock as reported on the composite tape of
the Exchange or by the NASD (or by a similar organization if the NASD is no longer reporting
such information) for the date in question or the most recent trading day. If the Common
Stock is not listed or admitted to trade on a national securities exchange and if prices for
the Common Stock are not furnished by the NASD, or if the Common Stock is not actively
traded as of the applicable date, the fair market value of the Common Stock shall be the
value as reasonably determined by the Administrator for purposes of the award in the
circumstances. The Administrator also may adopt a different methodology for determining fair
market value with respect to one or more awards if a different methodology is necessary or
advisable to secure any intended favorable tax, legal or other treatment for the particular
award(s) (for example, and without limitation, the Administrator may provide that fair
market value for purposes of one or more awards will be based on an average of closing
prices (or the average of high and low daily trading prices) for a specified period
preceding the relevant date).
	 
	 	5.6	 	Transfer Restrictions.






5.6.1 Limitations on Exercise and Transfer. Unless otherwise expressly provided in (or
pursuant to) this Section 5.6, by applicable law and by the award agreement, as the same may
be amended, (a) all awards are non-transferable and shall not be subject in any manner to
sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; (b)
awards shall be



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exercised only by the participant; and (c) amounts payable or shares issuable pursuant to any
award shall be delivered only to (or for the account of) the participant.




5.6.2 Further Exceptions to Limits on Transfer. The exercise and transfer restrictions in
Section 5.6.1 shall not apply to:




	 	(a)	 	transfers to the Corporation,
	 
	 	(b)	 	the designation of a beneficiary to receive benefits in the event of the
participant’s death or, if the participant has died, transfers to or exercise by the
participant’s beneficiary, or, in the absence of a validly designated beneficiary,
transfers by will or the laws of descent and distribution,
	 
	 	(c)	 	transfers by gift to “immediate family” as that term is defined in Rule 16a-1(e)
promulgated under the Securities Exchange Act of 1934, as amended,
	 
	 	(d)	 	if the participant has suffered a disability, permitted transfers or exercises on
behalf of the participant by his or her legal representative, or
	 
	 	(e)	 	the authorization by the Administrator of “cashless exercise” procedures with third
parties who provide financing for the purpose of (or who otherwise facilitate) the
exercise of awards consistent with applicable laws and the express authorization of the
Administrator.






Notwithstanding the foregoing or anything in Section 5.6.1, ISOs and restricted stock awards
shall be subject to any and all additional transfer restrictions under the Code to the extent
necessary to maintain the intended tax consequences of such awards. Notwithstanding clause (c)
above but subject to compliance with all applicable laws, any contemplated transfer by gift to
“immediate family” as referenced in clause (c) above is subject to the condition precedent
that the transfer be approved by the Administrator in order for it to be effective.




	 	5.7	 	International Awards. One or more awards may be granted to Eligible Persons who provide
services to the Company outside of the United States. Any awards granted to such persons may
be granted pursuant to the terms and conditions of any applicable sub-plans, if any,
appended to this Plan and approved by the Administrator.
	 
	 	5.8	 	Certain Minimum Requirements That May Apply Under California Securities Laws. The
following limitations shall apply with respect to awards under this Plan or, as the case may
be, the Administrator’s authority with respect thereto; provided that the following
limitations shall apply only to the extent required in order to satisfy applicable
securities laws:






	 	(a)	 	Subject to any applicable termination of employment rules, each option and
restricted stock award granted under this Plan shall vest and become exercisable at a
rate of less than 20% per year over five years after the date the option is granted,
except that an option or restricted stock award granted to an officer, director, or
consultant of the Company shall not be subject to this minimum vesting requirement.
	 
	 	(b)	 	Subject to any greater amount that may be required pursuant to the terms hereof, in
no case will the per share exercise price of an option or the purchase price of a share
of restricted stock granted under this Plan be less than 85% of fair market value of the
Common Stock on the date of grant of the award.
	 
	 	(c)	 	Subject to any greater amount that may be required pursuant to the terms hereof, in
no case will the per share exercise price of an option or the purchase price of a share
of restricted stock granted under this Plan to a 10% stockholder described in Section
5.1.2 be less than 110% of fair market value of the Common Stock on the date of grant in
the case of an option or, in the case of a restricted stock grant, 100% of the fair
market value of the Common Stock on the date of grant.
	 
	 	(d)	 	The Corporation shall provide the recipients of awards under this Plan with
financial statements of the Corporation at least annually.
	 
	 	(e)	 	Subject to such longer period as the Administrator may provide in the
circumstances, each option granted under this Plan, to the extent exercisable on the date
the option holder’s employment by or service to the Company terminates, shall continue to
be exercisable for at least six months after such date of termination if the termination
is the result of the option holder’s death or disability, or shall continue to be
exercisable for at least thirty (30) days after such date of termination if




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the termination is caused by any other reason (other than a termination for cause as
defined in the applicable award agreement). In no case, however, may an option be exercised
after the expiration of its stated maximum term and in all cases awards remain subject to
earlier termination pursuant to Section 7.



6. EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE ON AWARDS





	 	6.1	 	General. The Administrator shall establish the effect of a termination of employment or
service on the rights and benefits under each award under this Plan and in so doing may make
distinctions based upon, inter alia, the cause of termination and type of award. If the
participant is not an employee or director of the Company and provides other services to the
Company, the Administrator shall be the sole judge for purposes of this Plan (unless a
contract or the award otherwise provides) of whether the participant continues to render
services to the Company and the date, if any, upon which such services shall be deemed to
have terminated.
	 
	 	6.2	 	Events Not Deemed Terminations of Employment. Unless Company policy or the
Administrator otherwise provides, the employment relationship shall not be considered
terminated in the case of (a) sick leave, (b) military leave, or (c) any other leave of
absence authorized by the Company or the Administrator; provided that unless reemployment
upon the expiration of such leave is guaranteed by contract or law, such leave is for a
period of not more than ninety (90) days. In the case of any employee of the Company on an
approved leave of absence, continued vesting of the award while on leave from the employ of
the Company may be suspended until the employee returns to service, unless the Administrator
otherwise provides or applicable law otherwise requires. In no event shall an award be
exercised after the expiration of the term set forth in the award agreement.
	 
	 	6.3	 	Effect of Change of Subsidiary Status. For purposes of this Plan and any award, if an
entity ceases to be a Subsidiary of the Corporation a termination of employment or service
shall be deemed to have occurred with respect to each Eligible Person in respect of such
Subsidiary who does not continue as an Eligible Person in respect of another entity within
the Company after giving effect to the Subsidiary’s change in status.





7. ADJUSTMENTS; ACCELERATION





	 	7.1	 	Adjustments. Upon or in contemplation of: any reclassification, recapitalization, stock
split (including a stock split in the form of a stock dividend) or reverse stock split
(“stock split”); any merger, combination, consolidation, or other reorganization; any
spin-off, split-up, or similar extraordinary dividend distribution in respect of the Common
Stock (whether in the form of securities or property); any exchange of Common Stock or other
securities of the Corporation, or any similar, unusual or extraordinary corporate
transaction in respect of the Common Stock; or a sale of all or substantially all the
business or assets of the Corporation as an entirety; then the Administrator shall, in such
manner, to such extent (if any) and at such time as it deems appropriate and equitable in
the circumstances:






	 	(a)	 	proportionately adjust any or all of (1) the number and type of shares of Common
Stock (or other securities) that thereafter may be made the subject of awards (including
the specific share limits, maximums and numbers of shares set forth elsewhere in this
Plan), (2) the number, amount and type of shares of Common Stock (or other securities or
property) subject to any or all outstanding awards, (3) the grant, purchase, or exercise
price (which term includes the base price of any SAR or similar right) of any or all
outstanding awards, (4) the securities, cash or other property deliverable upon exercise
or payment of any outstanding awards, or (5) (subject to Section 7.7) the performance
standards applicable to any outstanding awards, or
	 
	 	(b)	 	make provision for a cash payment or for the assumption, substitution or exchange
of any or all outstanding share-based awards or the cash, securities or property
deliverable to the holder of any or all outstanding share-based awards, based upon the
distribution or consideration payable to holders of the Common Stock upon or in respect
of such event.






The Administrator may adopt such valuation methodologies for outstanding awards as it deems
reasonable in the event of a cash or property settlement and, in the case of options, SARs or
similar rights, but without limitation on other methodologies, may base such settlement solely
upon the excess if any of the per share amount payable upon or in respect of such event over
the exercise or base price of the award. With respect to any award of an ISO, the
Administrator may make such an adjustment that causes the option to cease to qualify as an ISO
without the consent of the affected participant.



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In any of such events, the Administrator may take such action prior to such event to the
extent that the Administrator deems the action necessary to permit the participant to realize
the benefits intended to be conveyed with respect to the underlying shares in the same manner
as is or will be available to stockholders generally. In the case of any stock split or
reverse stock split, if no action is taken by the Administrator, the proportionate adjustments
contemplated by clause (a) above shall nevertheless be made.




	 	7.2	 	Automatic Acceleration of Awards. Upon a dissolution of the Corporation or other event
described in Section 7.1 that the Corporation does not survive (or does not survive as a
public company in respect of its Common Stock), then each then outstanding option and SAR
shall become fully vested, all shares of restricted stock then outstanding shall fully vest
free of restrictions, and each other award granted under this Plan that is then outstanding
shall become payable to the holder of such award; provided that such acceleration provision
shall not apply, unless otherwise expressly provided by the Administrator, with respect to
any award to the extent that the Administrator has made a provision for the substitution,
assumption, exchange or other continuation or settlement of the award, or the award would
otherwise continue in accordance with its terms, in the circumstances.
	 
	 	7.3	 	Possible Acceleration of Awards. Without limiting Section 7.2, in the event of a Change
in Control Event (as defined below), the Administrator may, in its discretion, provide that
any outstanding option or SAR shall become fully vested, that any share of restricted stock
then outstanding shall fully vest free of restrictions, and that any other award granted
under this Plan that is then outstanding shall be payable to the holder of such award. The
Administrator may take such action with respect to all awards then outstanding or only with
respect to certain specific awards identified by the Administrator in the circumstances. For
purposes of this Plan, “Change in Control Event” means any of the following:






	 	(a)	 	The acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (a “Person”)) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) of 20% or more of either (1) the then-outstanding
shares of common stock of the Corporation (the “Outstanding Company Common Stock”) or (2)
the combined voting power of the then-outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that, for purposes of this definition, the following
acquisitions shall not constitute a Change in Control Event; (A) any acquisition directly
from the Corporation, (B) any acquisition by the Corporation, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Corporation or
any affiliate of the Corporation or a successor, or (D) any acquisition by any entity
pursuant to a transaction that complies with Sections (c)(1), (2) and (3) below;
	 
	 	(b)	 	Individuals who, as of the Effective Date, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the Effective Date whose
election, or nomination for election by the Corporation’s stockholders, was approved by a
vote of at least two-thirds of the directors then comprising the Incumbent Board
(including for these purposes, the new members whose election or nomination was so
approved, without counting the member and his predecessor twice) shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board;
	 
	 	(c)	 	Consummation of a reorganization, merger, statutory share exchange or consolidation
or similar corporate transaction involving the Corporation or any of its Subsidiaries, a
sale or other disposition of all or substantially all of the assets of the Corporation,
or the acquisition of assets or stock of another entity by the Corporation or any of its
Subsidiaries (each, a “Business Combination”), in each case unless, following such
Business Combination, (1) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of the then-outstanding shares of common stock
and the combined voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the entity resulting from
such Business Combination (including, without limitation, an entity that, as a result of
such transaction, owns the Corporation or all or substantially all of the Corporation’s
assets directly or through one or more subsidiaries (a “Parent”)) in substantially the
same proportions as their ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the
case may be, (2) no Person (excluding any entity resulting from such Business Combination
or a Parent or any employee benefit plan (or related trust) of the Corporation or such
entity resulting from such Business Combination or Parent) beneficially owns, directly or
indirectly, 20% or more of,




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respectively, the then-outstanding shares of common stock of the entity resulting from such
Business Combination or the combined voting power of the then-outstanding voting securities
of such entity, except to the extent that the ownership in excess of 20% existed prior to
the Business Combination, and (3) at least a majority of the members of the board of
directors or trustees of the entity resulting from such Business Combination or a Parent
were members of the Incumbent Board at the time of the execution of the initial agreement
or of the action of the Board providing for such Business Combination; or




	 	(d)	 	Approval by the stockholders of the Corporation of a complete liquidation or
dissolution of the Corporation other than in the context of a transaction that does not
constitute a Change in Control Event under clause (c) above.






	 	7.4	 	Early Termination of Awards. Any award that has been accelerated as required or
contemplated by Section 7.2 or 7.3 (or would have been so accelerated but for Section 7.5,
7.6 or 7.7) shall terminate upon the related event referred to in Section 7.2 or 7.3, as
applicable, subject to any provision that has been expressly made by the Administrator,
through a plan of reorganization or otherwise, for the survival, substitution, assumption,
exchange or other continuation or settlement of such award and provided that, in the case of
options and SARs that will not survive, be substituted for, assumed, exchanged, or otherwise
continued or settled in the transaction, the holder of such award shall be given reasonable
advance notice of the impending termination and a reasonable opportunity to exercise his or
her outstanding options and SARs in accordance with their terms before the termination of
such awards (except that in no case shall more than ten days’ notice of accelerated vesting
and the impending termination be required and any acceleration may be made contingent upon
the actual occurrence of the event).
	 
	 	7.5	 	Other Acceleration Rules. Any acceleration of awards pursuant to this Section 7 shall
comply with applicable legal requirements and, if necessary to accomplish the purposes of
the acceleration or if the circumstances require, may be deemed by the Administrator to
occur a limited period of time not greater than thirty (30) days before the event. Without
limiting the generality of the foregoing, the Administrator may deem an acceleration to
occur immediately prior to the applicable event and/or reinstate the original terms of an
award if an event giving rise to an acceleration does not occur. The Administrator may
override the provisions of Section 7.2, 7.3, 7.4 and/or 7.6 by express provision in the
award agreement and may accord any Eligible Person a right to refuse any acceleration,
whether pursuant to the award agreement or otherwise, in such circumstances as the
Administrator may approve. The portion of any ISO accelerated in connection with a Change in
Control Event or any other action permitted hereunder shall remain exercisable as an ISO
only to the extent the applicable $100,000 limitation on ISOs is not exceeded. To the extent
exceeded, the accelerated portion of the option shall be exercisable as a nonqualified stock
option under the Code.
	 
	 	7.6	 	Possible Rescission of Acceleration. If the vesting of an award has been accelerated
expressly in anticipation of an event or upon stockholder approval of an event and the
Administrator later determines that the event will not occur, the Administrator may rescind
the effect of the acceleration as to any then outstanding and unexercised or otherwise
unvested awards.
	 
	 	7.7	 	Golden Parachute Limitation. Notwithstanding anything else contained in this Section 7
to the contrary, in no event shall an award be accelerated under this Plan to an extent or
in a manner which would not be fully deductible by the Company for federal income tax
purposes because of Section 280G of the Code, nor shall any payment hereunder be accelerated
to the extent any portion of such accelerated payment would not be deductible by the Company
because of Section 280G of the Code. If a participant would be entitled to benefits or
payments hereunder and under any other plan or program that would constitute “parachute
payments” as defined in Section 280G of the Code, then the participant may by written notice
to the Company designate the order in which such parachute payments will be reduced or
modified so that the Company is not denied federal income tax deductions for any “parachute
payments” because of Section 280G of the Code. Notwithstanding the foregoing, an employment
or other agreement with the participant may expressly provide for benefits in excess of
amounts determined by applying the foregoing Section 280G limitations.





8. OTHER PROVISIONS





	 	8.1	 	Compliance with Laws. This Plan, the granting and vesting of awards under this Plan,
the offer, issuance and delivery of shares of Common Stock, the acceptance of promissory
notes and/or the payment of money under this Plan or under awards are subject to compliance
with all applicable federal and state laws, rules and regulations (including but not limited
to state and federal securities law, federal margin requirements) and to such approvals by
any listing, regulatory or governmental authority as may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith. The person acquiring any
securities under this Plan will, if requested by the Company, provide such assurances and
representations to the Company




9









 












as the Administrator may deem necessary or desirable to assure compliance with all applicable
legal and accounting requirements.




	 	8.2	 	Employment Status. No person shall have any claim or rights to be granted an award (or
additional awards, as the case may be) under this Plan, subject to any express contractual
rights (set forth in a document other than this Plan) to the contrary.
	 
	 	8.3	 	No Employment/Service Contract. Nothing contained in this Plan (or in any other
documents under this Plan or in any award) shall confer upon any Eligible Person or other
participant any right to continue in the employ or other service of the Company, constitute
any contract or agreement of employment or other service or affect an employee’s status as
an employee at will, nor shall interfere in any way with the right of the Company to change
a person’s compensation or other benefits, or to terminate his or her employment or other
service, with or without cause. Nothing in this Section 8.3, however, is intended to
adversely affect any express independent right of such person under a separate employment or
service contract other than an award agreement.
	 
	 	8.4	 	Plan Not Funded. Awards payable under this Plan shall be payable in shares or from the
general assets of the Corporation, and no special or separate reserve, fund or deposit shall
be made to assure payment of such awards. No participant, beneficiary or other person shall
have any right, title or interest in any fund or in any specific asset (including shares of
Common Stock, except as expressly otherwise provided) of the Company by reason of any award
hereunder. Neither the provisions of this Plan (or of any related documents), nor the
creation or adoption of this Plan, nor any action taken pursuant to the provisions of this
Plan shall create, or be construed to create, a trust of any kind or a fiduciary
relationship between the Company and any participant, beneficiary or other person. To the
extent that a participant, beneficiary or other person acquires a right to receive payment
pursuant to any award hereunder, such right shall be no greater than the right of any
unsecured general creditor of the Company.
	 
	 	8.5	 	Tax Withholding. Upon any exercise, vesting, or payment of any award or upon the
disposition of shares of Common Stock acquired pursuant to the exercise of an ISO prior to
satisfaction of the holding period requirements of Section 422 of the Code, the Company
shall have the right at its option to:






	 	(a)	 	require the participant (or the participant’s personal representative or
beneficiary, as the case may be) to pay or provide for payment of at least the minimum
amount of any taxes which the Company may be required to withhold with respect to such
award event or payment; or
	 
	 	(b)	 	deduct from any amount otherwise payable in cash to the participant (or the
participant’s personal representative or beneficiary, as the case may be) the minimum
amount of any taxes which the Company may be required to withhold with respect to such
cash payment.






In any case where a tax is required to be withheld in connection with the delivery of shares
of Common Stock under this Plan, the Administrator may in its sole discretion (subject to
Section 8.1) grant (either at the time of the award or thereafter) to the participant the
right to elect, pursuant to such rules and subject to such conditions as the Administrator may
establish, to have the Corporation reduce the number of shares to be delivered by (or
otherwise reacquire) the appropriate number of shares, valued in a consistent manner at their
fair market value or at the sales price in accordance with authorized procedures for cashless
exercises, necessary to satisfy the minimum applicable withholding obligation on exercise,
vesting or payment. In no event shall the shares withheld exceed the minimum whole number of
shares required for tax withholding under applicable law. The Corporation may, with the
Administrator’s approval, accept one or more promissory notes from any Eligible Person in
connection with taxes required to be withheld upon the exercise, vesting or payment of any
award under this Plan; provided that any such note shall be subject to terms and conditions
established by the Administrator and the requirements of applicable law.



8.6 Effective Date, Termination and Suspension, Amendments.





8.6.1 Effective Date. This Plan is effective as of June 4, 2003, the date of its approval by
the Board (the “Effective Date”). This Plan shall be submitted for and subject to stockholder
approval no later than twelve months after the Effective Date. Unless earlier terminated by
the Board, this Plan shall terminate at the close of business on the day before the tenth
anniversary of the Effective Date. After the termination of this Plan either upon such stated
expiration date or its earlier termination by the Board, no additional awards may be granted
under this Plan, but previously granted awards (and the authority of the



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Administrator with respect thereto, including the authority to amend such awards) shall remain
outstanding in accordance with their applicable terms and conditions and the terms and
conditions of this Plan.




8.6.2 Board Authorization. The Board may, at any time, terminate or, from time to time,
amend, modify or suspend this Plan, in whole or in part. No awards may be granted during any
period that the Board suspends this Plan.




8.6.3 Stockholder Approval. To the extent then required by applicable law or any applicable
listing agency or required under Sections 422 or 424 of the Code to preserve the intended tax
consequences of this Plan, or deemed necessary or advisable by the Board, any amendment to
this Plan shall be subject to stockholder approval.




8.6.4 Amendments to Awards. Without limiting any other express authority of the
Administrator under (but subject to) the express limits of this Plan, the Administrator by
agreement or resolution may waive conditions of or limitations on awards to participants that
the Administrator in the prior exercise of its discretion has imposed, without the consent of
a participant, and (subject to the requirements of Sections 3.2 and 8.6.5) may make other
changes to the terms and conditions of awards. Any amendment or other action that would
constitute a repricing of an award is subject to the limitations set forth in Section 3.2(g).




8.6.5 Limitations on Amendments to Plan and Awards. No amendment, suspension or termination
of this Plan or change of or affecting any outstanding award shall, without written consent of
the participant, affect in any manner materially adverse to the participant any rights or
benefits of the participant or obligations of the Company under any award granted under this
Plan prior to the effective date of such change. Changes, settlements and other actions
contemplated by Section 7 shall not be deemed to constitute changes or amendments for purposes
of this Section 8.6.




	 	8.7	 	Privileges of Stock Ownership. Except as otherwise expressly authorized by the
Administrator or this Plan, a participant shall not be entitled to any privilege of stock
ownership as to any shares of Common Stock not actually delivered to and held of record by
the participant. No adjustment will be made for dividends or other rights as a stockholder
for which a record date is prior to such date of delivery.
	 
	 	8.8	 	Governing Law; Severability.






8.8.1 Choice of Law. This Plan, the awards, all documents evidencing awards and all other
related documents shall be governed by, and construed in accordance with the laws of the State
of Maryland.




8.8.2 Severability. If a court of competent jurisdiction holds any provision invalid and
unenforceable, the remaining provisions of this Plan shall continue in effect.




	 	8.9	 	Captions. Captions and headings are given to the sections and subsections of this Plan
solely as a convenience to facilitate reference. Such headings shall not be deemed in any
way material or relevant to the construction or interpretation of this Plan or any provision
thereof.
	 
	 	8.10	 	Stock-Based Awards in Substitution for Stock Options or Awards Granted by Other Corporation.
Awards may be granted to Eligible Persons under this Plan in substitution for or in
connection with an assumption of employee stock options, SARs, restricted stock or other
stock-based awards granted by other entities to persons who are or who will become Eligible
Persons in respect of the Company, in connection with a distribution, merger or other
reorganization by or with the granting entity or an affiliated entity, or the acquisition by
the Company, directly or indirectly, of all or a substantial part of the stock or assets of
the employing entity. The awards so granted need not comply with other specific terms of this
Plan, provided the awards reflect only adjustments giving effect to the assumption or
substitution consistent with the conversion applicable to the Common Stock in the transaction
and any change in the issuer of the security. Any shares that are delivered and any awards
that are granted by, or become obligations of, the Corporation, as a result of the assumption
by the Corporation of, or in substitution for, outstanding awards previously granted by an
acquired company (or previously granted by a predecessor employer (or direct or indirect
parent thereof) in the case of persons that become employed by the Company in connection with
a business or asset acquisition or similar transaction) shall not be counted against the Share
Limit or other limits on the number of shares available for issuance under this Plan.
	 
	 	8.11	 	Non-Exclusivity of Plan. Nothing in this Plan shall limit or be deemed to limit the
authority of the Board or the Administrator to grant awards or authorize any other
compensation, with or without reference to the Common Stock, under any other plan or
authority.




11









 












	 	8.12	 	No Corporate Action Restriction. The existence of this Plan, the award agreements and the
awards granted hereunder shall not limit, affect or restrict in any way the right or power of
the Board or the stockholders of the Corporation to make or authorize: (a) any adjustment,
recapitalization, reorganization or other change in the capital structure or business of the
Corporation or any subsidiary, (b) any merger, amalgamation, consolidation or change in the
ownership of the Corporation or any subsidiary, (c) any issue of bonds, debentures, capital,
preferred or prior preference stock ahead of or affecting the capital stock (or the rights
thereof) of the Corporation or any subsidiary, (d) any dissolution or liquidation of the
Corporation or any subsidiary, (e) any sale or transfer of all or any part of the assets or
business of the Corporation or any subsidiary, or (f) any other corporate act or proceeding by
the Corporation or any subsidiary. No participant, beneficiary or any other person shall have
any claim under any award or award agreement against any member of the Board or the
Administrator, or the Corporation or any employees, officers or agents of the Corporation or
any subsidiary, as a result of any such action.
	 
	 	8.13	 	Other Company Benefit and Compensation Programs. Payments and other benefits received by a
participant under an award made pursuant to this Plan shall not be deemed a part of a
participant’s compensation for purposes of the determination of benefits under any other
employee welfare or benefit plans or arrangements, if any, provided by the Corporation or any
subsidiary, except where the Administrator expressly otherwise provides or authorizes in
writing. Awards under this Plan may be made in addition to, in combination with, as
alternatives to or in payment of grants, awards or commitments under any other plans or
arrangements of the Company or its subsidiaries.






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