2010
INCENTIVE PLAN

    OF

    POINT.360

     

    
      	
              1.

            	
              PURPOSES OF THE
      PLAN

            


    

     

    The
purposes of the 2010 Incentive Plan (the “Plan”) of Point.360, a California
corporation (the “Company”), are to:

     

    1.1           Encourage
selected employees, directors, consultants and advisers to improve operations
and increase the profitability of the Company;

     

    1.2           Encourage
selected employees, directors, consultants and advisers to accept or continue
employment or association with the Company or its Affiliates; and

     

    1.3           Increase
the interest of selected employees, directors, consultants and advisers in the
Company’s welfare through participation in the growth in value of the common
stock of the Company (the “Common Stock”).  All references herein to stock
or shares, unless otherwise specified, shall mean Common Stock.

     

    
      	
              2.

            	
              TYPES OF AWARDS;
      ELIGIBLE PERSONS

            


    

     

    2.1           The
Administrator (as defined below) may, from time to time, take the following
action, separately or in combination, under the Plan: (i) grant “incentive stock
options” (“ISOs”) intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
“Code”); (ii) grant “non-qualified options” (“NQOs,” and together with ISOs,
“Options”); (iii) grant or sell Common Stock subject to restrictions
(“restricted stock”) or without restrictions and (iv) grant stock appreciation
rights (any such right would permit the holder to receive the excess of the fair
market value of Common Stock on the exercise date over its fair market value (or
a greater base value) on the grant date (“SARs”)), either in tandem with Options
or as separate and independent grants; and performance compensation awards in
either Common Stock or cash or in combinations of Common Stock and cash.. 
Any such awards may be made to employees, including employees who are officers
or directors, and to individuals described in Section 1 of the Plan who the
Administrator believes have made or will make a contribution to the Company or
any Affiliate (as defined below); provided, however, that only a
person who is an employee of the Company or any Affiliate at the date of the
grant of an Option is eligible to receive ISOs under the Plan or performance
compensation awards.  The term “Affiliate” as used in the Plan means a
parent or subsidiary corporation as defined in the applicable provisions
(currently Sections 424(e) and (f), respectively) of the Code.  The term
“employee” includes an officer or director who is an employee of the
Company.  The term “consultant” includes persons employed by, or otherwise
affiliated with, a consultant.  The term “adviser” includes persons
employed by, or otherwise affiliated with, an adviser.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    2.2           Except
as otherwise expressly set forth in the Plan, no right or benefit under the Plan
shall be subject in any manner to anticipation, alienation, hypothecation, or
charge, and any such attempted action shall be void.  No right or benefit
under the Plan shall in any manner be liable for or subject to debts, contracts,
liabilities, or torts of any option holder or any other person except as
otherwise may be expressly required by applicable law.

     

    
      	
              3.

            	
              STOCK SUBJECT TO THE
      PLAN; MAXIMUM NUMBER OF
GRANTS

            


    

     

    Subject
to the provisions of Sections 6.1.1 and 8.2 of the Plan, the total number of
shares of Common Stock under the Plan which may be offered, or issued as
restricted stock or unrestricted stock on the exercise of Options or SARs or
otherwise under the Plan shall not exceed four million (4,000,000) shares of
Common Stock.  The shares subject to an Option or SAR granted under the
Plan that expire, terminate or are cancelled unexercised shall become available
again for grants under the Plan.  If shares of restricted stock awarded
under the Plan are forfeited to the Company or repurchased by the Company, the
number of shares forfeited or repurchased shall again be available under the
Plan.  Where the exercise price of an Option is paid by means of the
optionee’s surrender of previously owned shares of Common Stock or the Company’s
withholding of shares otherwise issuable upon exercise of the Option as may be
permitted herein, only the net number of shares issued and which remain
outstanding in connection with such exercise shall be deemed “issued” and no
longer available for issuance under the Plan.  No eligible person shall be
granted Options or other awards during any twelve-month period covering more
than one million (1,000,000) shares.

     

    
      	
              4.

            	
              ADMINISTRATION

            


    

     

    4.1           The
Plan shall be administered by the Board of Directors of the Company (the
“Board”) or by a committee (the “Adminstrator”) selected by the Board to
administer the Plan, or of part thereof (in either case, the
“Administrator”).  The Board shall appoint and remove members of the
Adminstrator in its discretion in accordance with applicable laws.  At the
Board’s discretion, the Adminstrator may be comprised solely of “non-employee
directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), or  “outside directors” within
the meaning of Section 162(m) of the Code.  The Administrator may delegate
non-discretionary administrative duties to such employees of the Company as the
Administrator deems proper and the Board, in its absolute discretion, may at any
time and from time to time exercise any and all rights and duties of the
Administrator under the Plan.


    
      
         


      

      
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    4.2           Subject
to the other provisions of the Plan, the Administrator shall have the authority,
in its discretion: (i) to grant Options and SARs and grant or sell restricted
stock or unrestricted stock; (ii) to determine the fair market value of the
Common Stock subject to Options or other awards; (iii) to determine the exercise
price of Options granted, which shall be no less than the fair market value of
the Common Stock on the date of grant, the economic terms of SARs granted, which
shall provide for a benefit of the appreciation on Common Stock over not less
than the value of the Common Stock on the date of grant, or the offering price
of restricted stock; (iv) to determine the persons to whom, and the time or
times at which, Options or SARs shall be granted or restricted stock or
unrestricted stock granted or sold, and the number of shares subject to each
Option or SAR or the number of shares of restricted stock granted or sold; (v)
to grant performance compensation awards under the criteria set forth in the
Plan; and (vi) to construe and interpret the terms and provisions of the Plan,
of any applicable agreement and all Options and SARs granted under the Plan, and
of any restricted  or unrestricted stock award under the Plan; (vi) to
prescribe, amend, and rescind rules and regulations relating to the Plan; (vii)
to determine the terms and provisions of each Option and SAR granted and award
of restricted stock or unrestricted stock (which need not be identical),
including but not limited to, the time or times at which Options and SARs shall
be exercisable or the time at which the restrictions on restricted stock shall
lapse; (viii) with the consent of the grantee, to rescind any award or exercise
of an Option or SAR and to modify or amend the terms of any Option, SAR or
restricted stock; (ix) to reduce the purchase price of restricted stock or
unrestricted stock; (x) to accelerate or defer (with the consent of the grantee)
the exercise date of any Option or SAR or the date on which the restrictions on
restricted stock lapse; (xi) to issue shares of restricted stock to an optionee
in connection with the accelerated exercise of an Option by such optionee; (xii)
to authorize any person to execute on behalf of the Company any instrument
evidencing the grant of an Option. SAR or award of restricted stock or
unrestricted stock and a performance compensation award; (xiii) to determine the
duration and purposes of leaves of absence which may be granted to participants
without constituting a termination of their employment for the purposes of the
Plan; and (xiv) to make all other determinations deemed necessary or advisable
for the administration of the Plan, any applicable agreement, Option, SAR or
award of restricted stock or unrestricted stock.

     

    4.3           All
questions of interpretation, implementation, and application of the Plan or any
agreement or Option, SAR or award of restricted stock shall be determined by the
Administrator, which determination shall be final and binding on all
persons.

     

    
      	
              5.

            	
              GRANTING OF OPTIONS
      AND SARS; AGREEMENTS

            


    

     

    5.1           No
Options or SARs shall be granted under the Plan after ten (10) years from the
date of adoption of the Plan by the Board.

     

    5.2           Each
Option and SAR shall be evidenced by a written agreement, in form satisfactory
to the Administrator, executed by the Company and the person to whom such grant
is made.  In the event of a conflict between the terms or conditions of an
agreement and the terms and conditions of the Plan, the terms and conditions of
the Plan shall govern.

     

    5.3           Each
agreement shall specify whether the Option it evidences is an NQO or an ISO,
provided, however, all Options
granted under the Plan to non-employee directors, consultants and advisers of
the Company are intended to be NQOs.

     

    5.4           Subject
to Section 6.3.3 with respect to ISOs, the Administrator may approve the grant
of Options or SARs under the Plan to persons who are expected to become
employees, directors, consultants or advisers of the Company, but are not
employees, directors, consultants or advisers at the date of
approval.

     

    
      	
              6.

            	
              TERMS AND CONDITIONS
      OF OPTIONS AND SARS

            


    

     

    Each
Option and SAR granted under the Plan shall be subject to the terms and
conditions set forth in Section 6.1.  NQOs and SARs shall also be subject
to the terms and conditions set forth in Section 6.2, but not those set forth in
Section 6.3.  ISOs shall also be subject to the terms and conditions set
forth in Section 6.3, but not those set forth in Section 6.2.  SARs shall
be subject to the terms and conditions of Section 6.4.


    
      
         


      

      
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    6.1         Terms and Conditions to
Which All Options and SARs Are Subject.  All Options and SARs
granted under the Plan shall be subject to the following terms and
conditions:

     

    6.1.1        Changes in Capital
Structure.  Subject to Section 6.1.2, if the Common Stock of the
Company is changed by reason of a stock split, reverse stock split, stock
dividend, recapitalization, combination or reclassification, or if the Company
effects a spin-off of the Company’s subsidiary, appropriate adjustments shall be
made by the Administrator, in its sole discretion, in (a) the number and class
of shares of stock subject to the Plan and each Option and SAR outstanding under
the Plan, and (b) the exercise price of each outstanding Option; provided, that the
Company shall not be required to issue fractional shares as a result of any such
adjustments.  Any adjustment, however, in an outstanding Option shall be
made without change in the total price applicable to the unexercised portion of
the Option but with a corresponding adjustment in the price for each share
covered by the unexercised portion of the Option.  Adjustments under this
Section 6.1.1 shall be made by the Administrator, whose determination as to the
nature of the adjustments that shall be made, and the extent thereof, shall be
final, binding, and conclusive.  If an adjustment under this Section 6.1.1
would result in a fractional share interest under an option or any installment,
the Administrator’s decision as to inclusion or exclusion of that fractional
share interest shall be final, but no fractional shares of stock shall be issued
under the Plan on account of any such adjustment.

     

    6.1.2        Corporate
Transactions.  Except as otherwise provided in the applicable
agreement, in the event of a Corporate Transaction (as defined below), the
Administrator shall notify each holder of an Option or SAR at least thirty (30)
days prior thereto or as soon as may be practicable.  To the extent not
then exercised all Options and SARs shall terminate immediately prior to the
consummation of such Corporate Transaction unless the Administrator determines
otherwise in its sole discretion; provided. however, that the
Administrator, in its sole discretion, may (i) permit exercise of any Options or
SARs prior to their termination, even if such Options or SARs would not
otherwise have been exercisable, and/or (ii) provide that all or certain of the
outstanding Options and SARs shall be assumed or an equivalent Option or SAR
substituted by an applicable successor corporation or entity or any Affiliate of
the successor corporation or entity.  A “Corporate Transaction” means (i) a
liquidation or dissolution of the Company; (ii) a merger or consolidation of the
Company with or into another corporation or entity (other than a merger with a
wholly-owned subsidiary); (iii) a sale of all or substantially all of the assets
of the Company; or (iv) a purchase or other acquisition of more than 50% of the
outstanding stock of the Company by one person, other than Haig Bagerdjian, or
by more than one person acting in concert with persons other than Haig
Bagerdjian.

     

    6.1.3        Time of Option or SAR
Exercise.  Subject to Section 5 and Section 6.3.4, an Option or SAR
granted under the Plan shall be exercisable (a) immediately as of the effective
date of the of the applicable agreement or (b) in accordance with a schedule or
performance criteria as may be set by the Administrator and specified in the
applicable agreement.  However, in no case may an Option or SAR be
exercisable until a written agreement in form and substance satisfactory to the
Company is executed by the Company and the grantee.


    
      
         


      

      
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    6.1.4      Grant Date.  The
date of grant of an Option or SAR under the Plan shall be the date approved or
specified by the Administrator and reflected as  the effective date of
the applicable agreement.

     

    6.1.5      Non-Transferability of
Rights.  Except with the express written approval of the
Administrator, which approval the Administrator is authorized to give only with
respect to NQOs and SARs, no Option or SAR granted under the Plan shall be
assignable or otherwise transferable by the grantee except by will or by the
laws of descent and distribution.  During the life of the grantee, an
Option or SAR shall be exercisable only by the grantee or permitted
transferee.

     

    6.1.6      Payment.  Except
as provided below, payment in full, in cash, shall be made for all Common Stock
purchased at the time written notice of exercise of an Option is given to the
Company and the proceeds of any payment shall be considered general funds of the
Company.  The Administrator, in the exercise of its absolute discretion
after considering any tax, accounting and financial consequences, may authorize
any one or more of the following additional methods of payment:

     

    (a)           Subject
to the Sarbanes-Oxley Act of 2002, acceptance of the optionee’s full recourse
promissory note for all or part of the Option price, payable on such terms and
bearing such interest rate as determined by the Administrator (but in no event
less than the minimum interest rate specified under the Code at which no
additional interest or original issue discount would be imputed), which
promissory note may be either secured or unsecured in such manner as the
Administrator shall approve (including, without limitation, by a security
interest in the shares of the Company);

     

    (b)           Subject
to the discretion of the Administrator and the terms of the stock option
agreement granting the Option, delivery by the optionee of shares of Common
Stock already owned by the optionee for all or part of the Option price,
provided the fair market value (determined as set forth in Section 6.1.9) of
such shares of Common Stock is equal on the date of exercise to the Option
price, or such portion thereof as the optionee is authorized to pay by delivery
of such stock;

     

    (c)           Subject
to the discretion of the Administrator, through the surrender of shares of
Common Stock then issuable upon exercise of the Option, provided the fair market
value (determined as set forth in Section 6.1.9) of such shares of Common Stock
is equal on the date of exercise to the Option price, or such portion thereof as
the optionee is authorized to pay by surrender of such stock; and

     

    (d)           By
means of so-called cashless exercises as permitted under applicable rules and
regulations of the Securities and Exchange Commission and the Federal Reserve
Board.


    
      
         


      

      
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    6.1.7      Withholding and Employment
Taxes.  At the time of exercise and as a condition thereto, or at
such other time as the amount of such obligation becomes determinable, the
grantee of an Option or SAR shall remit to the Company in cash all applicable
federal and state withholding and employment taxes.  Such obligation to
remit may be satisfied, if authorized by the Administrator in its sole
discretion, after considering any tax, accounting and financial consequences, by
the holder’s (i) delivery of a promissory note in the required amount on such
terms as the Administrator deems appropriate, (ii) tendering to the Company
previously owned shares of Common Stock or other securities of the Company with
a fair market value equal to the required amount, or (iii) agreeing to have
shares of Common Stock (with a fair market value equal to the required amount),
which are acquired upon exercise of the Option or SAR, withheld by the
Company.

     

    6.1.8      Other
Provisions.  Each Option and SAR granted under the Plan may contain
such other terms, provisions, and conditions not inconsistent with the Plan as
may be determined by the Administrator, and each ISO granted under the Plan
shall include such provisions and conditions as are necessary to qualify the
Option as an “incentive stock option” within the meaning of Section 422 of the
Code.

     

    6.1.9      Determination of
Value.  For purposes of the Plan, the fair market value of Common
Stock or other securities of the Company shall be determined as
follows:

     

    (a)           If
the stock of the Company is listed on a securities exchange or is regularly
quoted by a recognized securities dealer, and selling prices are reported, its
fair market value shall be the closing price of such stock on the date the value
is to be determined, but if selling prices are not reported, its fair market
value shall be the mean between the high bid and low asked prices for such stock
on the date the value is to be determined (or if there are no quoted prices for
the date of grant, then for the last preceding business day on which there were
quoted prices).

     

    (b)          In
the absence of an established market for the stock, the fair market value
thereof shall be determined in good faith by the Administrator, with reference
to the Company’s net worth, prospective earning power, dividend-paying capacity,
and other relevant factors, including the goodwill of the Company, the economic
outlook in the Company’s industry, the Company’s position in the industry, the
Company’s management, and the values of stock of other corporations in the same
or a similar line of business.

     

    6.1.10    Option and SAR
Term.  No Option or SAR shall be exercisable more than 10 years
after the date of grant, or such lesser period of time as is set forth in the
applicable agreement (the end of the maximum exercise period stated in the
agreement is referred to in the Plan as the “Expiration Date”).

     

    6.2         Terms and Conditions to
Which Only NQOs and SARs Are Subject.  Options granted under the
Plan which are designated as NQOs and SARs shall be subject to the following
terms and conditions:

     

    6.2.1      Exercise Price. 
The exercise price of an NQO and the base value of an SAR shall be the amount
determined by the Administrator as specified in the option or SAR agreement, but
shall not be less than the fair market value of the Common Stock on the date of
grant (determined under Section 6.1.9).


    
      
         


      

      
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    6.2.2        Termination of
Employment.  Except as otherwise provided in the applicable
agreement, if for any reason a grantee ceases to be employed by the Company or
any of its Affiliates, Options that are NQOs and SARs held at the date of
termination (to the extent then exercisable) may be exercised in whole or in
part at any time within ninety (90) days of the date of such termination (but in
no event after the Expiration Date).  For purposes of this Section 6.2.2,
“employment” includes service as a director, consultant or adviser.  For
purposes of this Section 6.2.2, a grantee’s employment shall not be deemed to
terminate by reason of the grantee’s transfer from the Company to an Affiliate,
or vice versa, or sick leave, military leave or other leave of absence approved
by the Administrator, if the period of any such leave does not exceed ninety
(90) days or, if longer, if the grantee’s right to reemployment by the Company
or any Affiliate is guaranteed either contractually or by statute.

     

    6.3         Terms and Conditions to
Which Only ISOs Are Subject.  Options granted under the Plan which
are designated as ISOs shall be subject to the following terms and
conditions:

     

    6.3.1        Exercise Price. 
The exercise price of an ISO shall not be less than the fair market value
(determined in accordance with Section 6.1.9) of the stock covered by the Option
at the time the Option is granted.  The exercise price of an ISO granted to
any person who owns, directly or by attribution under the Code (currently
Section 424(d)), stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Affiliate
(a “Ten Percent Stockholder”) shall in no event be less than one hundred ten
percent (110%) of the fair market value (determined in accordance with Section
6.1.9) of the stock covered by the Option at the time the Option is
granted.

     

    6.3.2        Disqualifying
Dispositions.  If stock acquired by exercise of an ISO granted
pursuant to the Plan is disposed of in a “disqualifying disposition” within the
meaning of Section 422 of the Code (a disposition within two (2) years from the
date of grant of the Option or within one year after the issuance of such stock
on exercise of the Option), the holder of the stock immediately before the
disposition shall promptly notify the Company in writing of the date and terms
of the disposition and shall provide such other information regarding the Option
as the Company may reasonably require.

     

    6.3.3        Grant Date.  If
an ISO is granted in anticipation of employment as provided in Section 5.4, the
Option shall be deemed granted, without further approval, on the date the
grantee assumes the employment relationship forming the basis for such grant,
and, in addition, satisfies all requirements of the Plan for Options granted on
that date.

     

    6.3.4        Term. 
Notwithstanding Section 6.1.10, no ISO granted to any Ten Percent Stockholder
shall be exercisable more than five (5) years after the date of
grant.


    
      
         


      

      
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    6.3.5        Termination of
Employment.  Except as otherwise provided in the stock option
agreement, if for any reason an optionee ceases to be employed by the Company or
any of its Affiliates, Options that are ISOs held at the date of termination (to
the extent then exercisable) may be exercised in whole or in part at any time
within 90 days of the date of termination (but in no event after the Expiration
Date).  For purposes of this Section 6.3.5, an optionee’s employment shall
not be deemed to terminate by reason of the optionee’s transfer from the Company
to an Affiliate, or vice versa, or sick leave, military leave or other leave of
absence approved by the Administrator, if the period of any such leave does not
exceed ninety (90) days or, if longer, if the optionee’s right to reemployment
by the Company or any Affiliate is guaranteed either contractually or by
statute.

     

    6.4         Terms and Conditions
Applicable Solely to SARs.  In addition to the other terms and
conditions applicable to SARs in this Section 6, the holder shall be entitled to
receive on exercise of an SAR only Common Stock at a fair market value equal to
the benefit to be received by the exercise.

     

    
      	
              7.

            	
              MANNER OF
      EXERCISE

            


    

     

    7.1         An
optionee wishing to exercise an Option or SAR shall give written notice to the
Company at its principal executive office, to the attention of the officer of
the Company designated by the Administrator, accompanied by payment of the
exercise price and/or withholding taxes as provided in Sections 6.1.6 and
6.1.7.  The date the Company receives written notice of an exercise
hereunder accompanied by the applicable payment will be considered as the date
such Option or SAR was exercised.

     

    7.2         Promptly
after receipt of written notice of exercise and the applicable payments called
for by Section 7.1, the Company shall, without stock issue or transfer taxes to
the holder or other person entitled to exercise the Option or SAR, deliver to
the holder or such other person a certificate or certificates for the requisite
number of shares of Common Stock.  A holder or permitted transferee of an
Option or SAR shall not have any privileges as a stockholder with respect to any
shares of Common Stock to be issued until the date of issuance (as evidenced by
the appropriate entry on the books of the Company or a duly authorized transfer
agent) of such shares.

     

    
      	
              8.

            	
              STOCK

            


    

     

    8.1         Grant or Sale of
Stock.

     

    8.1.1        No
awards of Common Stock shall be granted under the Plan after ten (10) years from
the date of adoption of the Plan by the Board.


    
      
         


      

      
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    8.1.2        The
Administrator may issue Common Stock under the Plan as a grant or for such
consideration (including services, and, subject to the Sarbanes-Oxley Act of
2002, promissory notes) as determined by the Administrator.  Common Stock
issued under the Plan shall be subject to the terms, conditions and restrictions
determined by the Administrator.  The restrictions, if any, may include
restrictions concerning transferability, repurchase by the Company and
forfeiture of the shares issued, together with such other restrictions as may be
determined by the Administrator.  If shares are subject to forfeiture or
repurchase by the Company, all dividends or other distributions paid by the
Company with respect to the shares may be retained by the Company until the
shares are no longer subject to forfeiture or repurchase, at which time all
accumulated amounts shall be paid to the recipient.  All Common Stock
issued pursuant to this Section 8 shall be subject to a written purchase
agreement, grant agreement, or performance compensation award which shall be
executed by the Company and the prospective recipient of the Common Stock prior
to the delivery of certificates representing such stock to the recipient. 
The purchase agreement, grant agreement or performance compensation award, may
contain any terms, conditions, restrictions, representations and warranties
required by the Administrator.  The certificates representing the shares
shall bear any legends required by the Administrator.  The Administrator
may require any purchaser or grantee of Common Stock to pay to the Company in
cash upon demand amounts necessary to satisfy any applicable federal, state or
local tax withholding requirements.  If the purchaser or grantee fails to
pay the amount demanded, the Administrator may withhold that amount from other
amounts payable by the Company to the purchaser or grantee, including salary,
subject to applicable law.  With the consent of the Administrator in its
sole discretion, a purchaser or grantee may deliver Common Stock to the Company
to satisfy this withholding obligation.  Upon the issuance of Common Stock,
the number of shares reserved for issuance under the Plan shall be reduced by
the number of shares issued.

     

    8.2         Changes in Capital
Structure.  In the event of a change in the Company’s capital
structure, as described in Section 6.1.1, appropriate adjustments shall be made
by the Administrator, in its sole discretion, in the number and class of
restricted stock subject to the Plan and the restricted stock outstanding under
the Plan; provided, however, that the
Company shall not be required to issue fractional shares as a result of any such
adjustments.

     

    8.3         Corporate
Transactions.  In the event of a Corporate Transaction, as defined
in Section 6.1.2 hereof, to the extent not previously forfeited, subject to the
terms of the purchase agreement, the grant agreement or the performance
compensation award, all restricted stock shall be forfeited immediately prior to
the consummation of such Corporate Transaction unless the Administrator
determines otherwise in its sole discretion; provided, however, that the
Administrator, in its sole discretion, may remove any restrictions as to any
restricted stock.  The Administrator may, in its sole discretion, provide
that all outstanding restricted stock participate in the Corporate Transaction
with an equivalent stock substituted by an applicable successor corporation
subject to the restriction.

     

    
      	
              9.

            	
              PERFORMANCE
      COMPENSATION AWARDS

            


    

     

    9.1         General.  The
Administrator shall have the authority to designate an award as a performance
compensation award in order to qualify such award as “performance-based
compensation” under Section 162(m) of the Code.

     

    9.2         Eligibility. 
The Administrator will, in its sole discretion, designate within the first
ninety (90) days of a Performance Period (or within the maximum period allowed
under Section 162(m) of the Code) which participants will be eligible to receive
performance compensation awards in respect of such Performance Period (defined
at the end of this Section 9.2).  Designation of a participant eligible to
receive an award for a Performance Period shall not in any manner entitle the
participant to receive payment in respect of any award for such Performance
Period.  The determination as to whether or not such participant becomes
entitled to payment in respect of any performance compensation award shall be
decided solely in accordance with the provisions of this Section 9. 
Moreover, designation of a participant eligible to receive an award hereunder
for a particular Performance Period shall not require designation of such
participant eligible to receive an award hereunder in any subsequent Performance
Period and designation of one person as a participant eligible to receive an
award hereunder shall not require designation of any other person as a
participant eligible to receive an award hereunder in such period or in any
other period.  “Performance Period” shall mean one or more periods of time
of at least one (1) year in duration, as the Administrator may select, over
which the attainment of one or more performance goals will be measured for the
purpose of determining the participant’s right to, and the payment of, a
performance compensation award.  All performance compensation awards under
the Plan shall be evidenced by a written agreement.


    
      
         


      

      
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    9.3           Discretion of Administrator
with Respect to performance compensation awards.  With regard to a
particular Performance Period, the Administrator shall have full discretion to
select the length of such Performance Period, the type of performance
compensation awards to be issued, the performance criteria that will be used to
establish the performance goals, the kinds and levels of the performance goals
that are to apply to the Company and the Performance Formula or Formulas. 
A “Performance Formula” is an objective formula to be applied against the
relevant performance goals to determine, with regard to the performance
compensation award of a participant, whether all, some portion but less than
all, or none of the performance compensation award has been earned for the
Performance Period.  Within the first ninety (90) days of a Performance
Period (or within the maximum period allowed under Section 162(m) of the Code),
the Administrator shall, with regard to the performance compensation awards to
be issued for such Performance Period, exercise its discretion with respect to
each of the matters enumerated in the immediately preceding sentence of this
Section 9.3 and record the same in writing.

     

    9.4           Performance Criteria.
The criterion or criteria that the Administrator shall select for purposes of
establishing the performance goal or goals for a Performance Period with respect
to any performance compensation award under the Plan shall be based on the
attainment of specific levels of performance of the Company (or an Affiliate,
division or operational unit of the Company) and shall be limited to the
following: return on net assets, return on stockholders’ equity, return on
assets, return on capital, revenue, average revenue per subscriber, stockholder
returns, profit margin, earnings per share of Common Stock, net earnings,
operating earnings, free cash flow, earnings before interest, taxes,
depreciation and amortization, number of subscribers, growth of subscribers,
operating expenses, capital expenses, subscriber acquisition costs, Common Stock
price, enterprise value, equity market capitalization or sales or market
share.  To the extent required under Section 162(m) of the Code, the
Administrator shall, within the first ninety (90) days of a Performance Period
(or within the maximum period allowed under Section 162(m) of the Code), define
in an objective fashion the manner of calculating the performance criteria it
selects to use for such Performance Period.

     

    9.5           Performance
Goals.  The Adminstrator is authorized at any time during the first
ninety (90) days of a Performance Period, or at any time thereafter (but only to
the extent the exercise of such authority after the first ninety (90) days of a
Performance Period would not cause the performance compensation awards granted
to any participant for the Performance Period to fail to qualify as
“performance-based compensation” under Section 162(m) of the Code), in its sole
discretion, to adjust or modify the calculation of a Performance Goal for such
Performance Period to the extent permitted under Section 162(m) of the Code in
order to prevent the dilution or enlargement of the rights of participants, (a)
in the event of, or in anticipation of, any unusual or extraordinary corporate
item, transaction, event or development affecting the Company; or (b) in
recognition of, or in anticipation of, any other unusual or nonrecurring events
affecting the Company, or the financial statements of the Company, or in
response to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions.


    
      
         


      

      
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    9.6         Grant.  The
Adminstrator shall have sole authority to determine the employees
(“participants”) who shall receive performance compensation awards, which shall
consist of a right which is (i) denominated in cash or Common Stock or a
combination thereof, (ii) the Common Stock valued, as determined by the
Administrator, in accordance with the achievement of such performance goal or
goals during the Performance Period as the Adminstrator shall establish, and
(iii) payable at such time and in such form as the Adminstrator shall
determine.

     

    9.7         Terms and
Conditions.

     

    9.7.1        Employment at End of
Performance Period.  Unless otherwise provided in the applicable
written performance compensation award, a Participant must be employed by the
Company on the last day of a Performance Period to be eligible for payment in
respect of a performance compensation award for such Performance
Period.

     

    9.7.2        Certification and Negative
Discretion. Following the completion of a Performance Period, the
Administrator shall meet to review and certify in writing whether, and to what
extent, the performance goals for the Performance Period have been achieved and,
if so, to calculate and certify in writing the amount of the performance
compensation awards earned for the period based upon the Performance Formula or
Formulas.  The Adminstrator shall then determine the actual size of each
Participant’s performance compensation award payment for the Performance Period
and, in so doing, may apply Negative Discretion, if and when it deems
appropriate.  Negative Discretion is the power of the Administrator to
reduce or eliminate the amount of the performance compensation award earned
under the Performance Formula in the Performance Period if, in its sole
judgment, such reduction or elimination is appropriate.

     

    9.7.3        Right to
Payment.  The participant shall be entitled to receive the
performance compensation earned as certified by the Administrator. 
Performance compensation payments may be paid in a lump sum or in installments
following the close of the Performance Period as set forth in the written
performance compensation award on the date of grant.

     

    9.7.4        Timing of Award
Payments.  The amounts payable for a Performance Period shall be
paid to participants as soon as administratively possible following completion
of the certifications required by this Section 9.7.2; provided that in no event
shall any such payment be made later than the fifteenth day of the third month
following the end of such Performance Period.


    
      
         


      

      
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    9.7.5        Maximum Award
Payable.  Notwithstanding any provision contained in the Plan to the
contrary, the maximum performance compensation award payable to any one
participant under the Plan for a Performance Period is ______ shares of Common
Stock or, in the event the performance compensation award is paid in cash, the
equivalent cash value thereof on the last day of the Performance Period to which
such award relates, or if the award is payable in cash and Common Stock, the
cash paid shall be the excess of the award over the value of the Common Stock,
as so determined. Furthermore, any payment that has been deferred and is payable
in cash shall not, between the date as of which it is deferred and the payment
date, increase by a measuring factor for each fiscal year greater than a
reasonable rate of interest set by the Administrator; any such deferred payment
made with respect to Common Stock, shall not increase by an amount greater than
the appreciation of a share of Common Stock from the end of the Performance
Period to the payment date.

     

    
      	
              10.

            	
              EMPLOYMENT OR
      CONSULTING RELATIONSHIP

            


    

     

    Nothing
in the Plan or any Option, SAR or performance compensation award, or award of
Common Stock under the Plan shall interfere with or limit in any way the right
of the Company or of any of its Affiliates to terminate the employment,
consulting or advising of any recipient thereof or restricted stock holder at
any time, nor confer upon any of any recipient, optionee or restricted stock
holder any right to continue in the employ of, or consult with, or advise, the
Company or any of its Affiliates.

     

    
      	
              11.

            	
              CONDITIONS UPON
      ISSUANCE OF SHARES

            


    

     

    11.1         Securities Act. 
Shares of Common Stock shall not be issued pursuant to the exercise of an
Option, SAR or other award under the Plan unless the exercise of such Option or
SAR or payment under other awards, the receipt of Common Stock and the issuance
and delivery of such shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended (the “Securities Act”).

     

    11.2         Non-Compete
Agreement.  As a further condition to the receipt of Common Stock
pursuant to the exercise of an Option, SAR or any other award under the Plan,
the optionee or recipient may be required not to render services for any
organization, or engage directly or indirectly in any business, competitive with
the Company at any time during which  an Option or SAR is outstanding
to such Optionee and for six (6) months after any exercise of an Option or SAR
or the receipt of Common Stock pursuant to the exercise of an Option or SAR or
other award and, as to restricted stock, for six (6) months after the
restrictions on such restricted stock lapse.  Failure to comply with this
condition shall cause such Option, SAR  and the exercise or issuance
of shares thereunder and/or any other award under the Plan to be rescinded and
the benefit of such exercise, issuance or award to be repaid to the
Company.

     

    
      	
              12.

            	
              NON-EXCLUSIVITY OF THE
      PLAN

            


    

     

    The
adoption of the Plan shall not be construed as creating any limitations on the
power of the Company to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options other
than under the Plan.

     

    
      	
              13.

            	
              MARKET
      STAND-OFF

            


    

     

    Each
optionee, holder of an SAR or recipient of Common Stock under the Plan, if so
requested by the Company or any representative of the underwriters in connection
with any registration of the offering of any securities of the Company under the
Securities Act, shall not sell or otherwise transfer any shares of Common Stock
so acquired during the 180-day period following the effective date of a
registration statement of the Company filed under the Securities Act; provided, however, that such
restriction shall apply only to a registration statement of the Company which
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act and the restriction period
shall not exceed 90 days after the registration statement becomes
effective.


    
      
         


      

      
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              14.

            	
              AMENDMENTS TO
      PLAN

            


    

     

    The Board
may at any time amend, alter, suspend or discontinue the Plan.  Without the
consent of an optionee, holder of an SAR or holder of restricted stock, or
performance compensation award, no amendment, alteration, suspension or
discontinuance may adversely affect such person’s outstanding Option(s), SAR(s)
or the terms applicable to restricted stock or performance compensation award
except to conform the Plan and ISOs granted under the Plan to the requirements
of federal or other tax laws relating to ISOs.  No amendment, alteration,
suspension or discontinuance shall require stockholder approval unless (a)
stockholder approval is required to preserve incentive stock option treatment
for federal income tax purposes or (b) the Board otherwise concludes that
stockholder approval is advisable.

     

    
      	
              15.

            	
              EFFECTIVE DATE OF
      PLAN; TERMINATION

            


    

     

    The Plan
shall become effective upon adoption by the Board; provided, however, that no
Option or SAR, or other award under the Plan shall be exercisable unless and
until written consent of the stockholders of the Company, or approval of
stockholders of the Company voting at a validly called stockholders’ meeting, is
obtained within twelve (12) months after adoption by the Board.  If any
Options, SARs or other awards are so granted and stockholder approval shall not
have been obtained within twelve (12) months of the date of adoption of the Plan
by the Board, such Options, SARs or other awards shall terminate retroactively
as of the date they were granted.  In addition,  awards may
be made under the Plan and exercise of Options and SARs shall occur only after
there has been compliance with all applicable federal and state securities laws
and other applicable laws, rules and regulations.   The Plan (but
not Options and SARs previously granted under the Plan) shall terminate ten (10)
years from the date of its adoption by the Board.  Termination shall
not affect any outstanding Options or SARs or the terms applicable to other
previously made awards under the Plan.


    
      
         


      

      
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