exv10w4






EXHIBIT 10.4




CORVEL CORPORATION

RESTATED OMNIBUS INCENTIVE PLAN

(FORMERLY THE RESTATED 1988 EXECUTIVE STOCK OPTION PLAN)

AS AMENDED AND RESTATED THROUGH AUGUST 14, 2008




ARTICLE I

GENERAL




I. GENERAL PROVISIONS



A. The Plan is intended to promote the interests of the Company and its stockholders by providing a
method whereby (i) key employees (including officers and directors) of the Company (or any Parent
or Subsidiary) responsible for the management, growth and financial success of the Company (or any
Parent or Subsidiary), (ii) the non-employee members of the Board or the board of directors of any
Parent or Subsidiary, and (iii) consultants and advisors who provide valuable services to the
Company (or any Parent or Subsidiary) may be offered various types of equity incentives and
rewards intended to encourage such individuals to put forth maximum efforts for the success of the
Company’s business and to acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Company, thereby aligning the interests of such persons with the Company’s
stockholders.



B. For purposes of the Plan, the following definitions shall be in effect:




     AFFILIATE: Any entity (i) that, directly or indirectly through one or more
intermediaries, is controlled by the Company or (ii) in which the Company has a significant equity
interest, in each case as determined by the Committee.



     AWARD: Any Option, Tandem Right, Limited Right, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent, or Other Stock-Based Award
granted under the Plan.



     AWARD AGREEMENT: Any written agreement, contract or other instrument or document
evidencing any Award granted under the Plan. Each Award Agreement shall be subject to the
applicable terms and conditions of the Plan and any other terms and conditions (not inconsistent
with the Plan) determined by the Committee.



     BOARD: The Board of Directors of the Company.



     CHANGE IN CONTROL: A Change in Control shall be deemed to occur in the event that:



     (i) any person or related group of persons (other than the Company or a person that directly
or indirectly controls, is controlled by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined voting power of the
Company’s outstanding securities pursuant to a tender or exchange offer which the Board does not
recommend the Company’s stockholders to accept; or



     (ii) there is a change in the composition of the Board over a period of twenty-four (24)
consecutive months or less for purposes of the terms set forth in Article III, or over a period of
twelve (12) consecutive months for all other purposes under the Plan, such that a majority of the
Board members (rounded up to the next whole number) cease, by reason of one or more proxy contests
for the election of Board members, to be comprised of individuals who either (a) have been Board
members continuously since the beginning of such period or (b) have been elected or nominated for
election as Board members during such period by at least two-thirds of the Board members described
in clause (a) who were still in office at the time such election or nomination was approved by the
Board.



     CODE: The Internal Revenue Code of 1986, as amended.



     COMMON STOCK: The Common Stock issuable under the Plan shall be shares of the
Company’s common stock, $0.0001 par value.



     COMMITTEE: The Committee shall be a committee designated by the Board to administer
the Plan, which initially shall be the compensation committee of the Board. The Committee shall be
comprised of at least two Directors but not less than such number of Directors as shall be required
to permit Awards granted under the Plan to qualify under Rule 16b-3 and Section 162(m) of the Code,
and each member of the Committee shall be a “Non-Employee Director” and an “Outside Director.”



 









 





     COMPANY: The Company shall mean CorVel Corporation, a Delaware corporation1, or any
corporate successor which shall assume the Plan.



     CORPORATE TRANSACTION: A Corporate Transaction shall include any of the following
transactions for which the approval of the Company’s stockholders is obtained:



     (i) a merger or acquisition in which the Company is not the surviving entity, except for a
transaction the principal purpose of which is to change the state of the Company’s incorporation,



     (ii) the sale, transfer or other disposition of all or substantially all of the assets of the
Company to any entity other than a parent or subsidiary of the Company, or



     (iii) any reverse merger in which the Company is the surviving entity but in which fifty
percent (50%) or more of the Company’s outstanding voting stock is transferred to holders different
from those who held such fifty percent (50%) or greater interest immediately prior to such merger.



     DIRECTOR: A member of the Board, including any Non-Employee Director.



     DIVIDEND EQUIVALENT: Any right granted under Section IV of Article IV of the Plan.



     ELIGIBLE DIRECTOR: An Eligible Director is defined in Section I.A. of Article III.



     ELIGIBLE PERSON: (i) Any Employee, officer, consultant, or advisor providing services
to the Company (or any Parent or Subsidiary), and (ii) any Director or director of any Parent or
Subsidiary who is not an employee of the Company or any Parent or Subsidiary.



     EMPLOYEE: An individual shall be considered to be an Employee for so long as the
Company or one or more of its Parent or Subsidiaries reports his or her earnings on a Form W-2.



     EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.



     FAIR MARKET VALUE: The Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:



     (i) If the Common Stock is at the time listed on the Nasdaq National Market or the Nasdaq
Capital Market, then the Fair Market Value shall be the closing selling price per share of Common
Stock on the date in question, as such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or the Nasdaq Capital Market and published in The Wall Street
Journal.



     (ii) If the Common Stock is at the time listed on any stock exchange, then the Fair Market
Value shall be the closing selling price per share of Common Stock on the date in question on the
stock exchange determined by the Committee to be the primary market for the Common Stock, as such
price is officially quoted in the composite tape of transactions on such exchange and published in
The Wall Street Journal.



     (iii) If the Common Stock is not listed on the Nasdaq National Market, Nasdaq Capital Market
or a national securities exchange, the Fair Market Value shall be the average of the closing bid
and ask prices of the Common Stock on that day as reported by the Nasdaq bulletin board or any
comparable system on that day.



     (iv) If the Common Stock is not traded included in the Nasdaq bulletin board or any comparable
system, the Fair Market Value shall be the average of the closing bid and ask prices on that day as
furnished by any member of the National Association of Securities Dealers, Inc. selected from time
to time by the Company for that purpose.



     (v) If the date in question is not a trading day, then the Fair Market Value shall be
determined based on prices for the





 




			
	1	 	The Company was previously known as FORTIS Corporation and assumed
all of the rights and responsibilities of FORTIS Corporation, a Minnesota
corporation (“FORTIS Minnesota”), with respect to the Plan pursuant to the
Agreement and Plan of Merger by and between the Company and FORTIS Minnesota,
effective May 16, 1991, under which FORTIS Minnesota changed its state of
incorporation from Minnesota to Delaware by merging with and into the Company
which was a wholly owned subsidiary of FORTIS Minnesota.




 









 









trading day prior to the date in question.




     HOSTILE TAKE-OVER: A Hostile Take-Over shall be the acquisition, directly or
indirectly, by any person or related group of persons (other than the Company or a person that
directly or indirectly controls, is controlled by, or is under common control with, the Company) of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than fifty percent (50%) of the total combined voting power of the Company’s
outstanding securities pursuant to a tender or exchange offer made directly to the Company’s
stockholders which the Board does not recommend such stockholders to accept.



     NON-EMPLOYEE DIRECTOR. Any Director who is not also an employee of the Company or a
Parent or Subsidiary within the meaning of Rule 16b-3 and is an “outside director” within the
meaning of Section 162(m) of the Code.



     NON-STATUTORY OPTION: A Non-Statutory Option shall mean an option not intended to
satisfy the requirements of Code Section 422.



     OPTION: A Non-Statutory Option.



     OTHER STOCK-BASED AWARD: Any right granted under Section V of Article IV of the Plan.



     OPTIONEE: Any person to whom an option is granted under the Discretionary Option
Grant Program of Article II, the Automatic Option Grant Program of Article III, or the Other Equity
Based Awards Program of Article IV of this Plan.



     PARENT: A corporation shall be deemed to be a Parent of the Company if it is a
corporation (other than the Company) in an unbroken chain of corporations ending with the Company,
provided each such corporation in the unbroken chain (other than the Company) owns, at the time of
the determination, stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.



     PARTICIPANT: An Eligible Person granted an Award under the Plan.



     PERFORMANCE AWARD: Any right granted under Section III of Article IV of the Plan.



     PERFORMANCE GOAL: Performance Goal shall have the meaning set forth in Section
III.A.(i) of Article IV of the Plan.



     PERMANENT DISABILITY: A permanent disability shall have the meaning assigned to it in
Code Section 22(e)(3).



     PERSON: Any individual or entity, including a corporation, partnership, limited
liability company, association, joint venture or trust.



     PLAN: The CorVel Corporation Restated Omnibus Incentive Plan, which was formerly
named the Restated 1988 Executive Stock Option Plan, as amended and restated.



     QUALIFIED PERFORMANCE BASED AWARD: A Qualified Performance Based Award shall have the
meaning set forth in Section III.A. of Article IV of the Plan.



     RESTRICTED STOCK: Any Share granted under Section II of Article IV of the Plan.



     RESTRICTED STOCK UNIT: Any unit granted under Section II of Article IV of the Plan.



     RULE 16b-3: Rule 16b-3 promulgated by the SEC under the Exchange Act or any successor
rule or regulation.



     SECURITIES ACT: Securities Act of 1933, as amended.



     SEC: The SEC shall mean the Securities and Exchange Commission.



     SECTION 16(b) INSIDER: An individual shall be considered to be a Section 16(b)
Insider on any relevant date under the Plan if such individual is at the time subject to the
short-swing profit restrictions of Section 16(b) of the Exchange Act by reason of his or her
affiliation with the Company.



     SERVICE PROVIDER: An individual shall be deemed to be a Service Provider for so long
as such individual renders



 









 







service on a periodic basis to the Company, its Parent and/or any of its Subsidiaries as an
Employee, a non-Employee member of the board of directors or a consultant or independent advisor.



     SHARE OR SHARES: A Share or Shares of Common Stock or such other securities or
property as may become subject to Awards pursuant to an adjustment made pursuant to Section V.C. of
Article I of the Plan.



     STOCK APPRECIATION RIGHT: Any right granted under Section I of Article IV of the
Plan.



     SUBSIDIARY: A corporation shall be deemed to be a Subsidiary of the Company if it is
one of the corporations (other than the Company) in an unbroken chain of corporations beginning
with the Company, provided each such corporation (other than the last corporation in the unbroken
chain) owns, at the time of determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other corporations in such chain.
For purposes of all Non-Statutory Option grants, all other Awards granted under Article IV of the
Plan, and all Corporate Transaction provisions of the Plan, the term “Subsidiary” shall also
include any partnership, joint venture or other business entity of which the Company owns, directly
or indirectly through another entity, more than a fifty percent (50%) interest in voting power,
capital or profits.



     TANDEM RIGHT: Any tandem stock appreciation right granted under Section II of Article
II of the Plan.



     10% STOCKHOLDER: A 10% Stockholder is the owner of stock possessing 10% or more of
the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary.




	 	(i)	 	The individual is treated as owning any stock owned, directly or indirectly, by:






	 	(a)	 	His or her brothers and sisters (whether by whole or half-blood);
	 
	 	(b)	 	His or her spouse; and
	 
	 	(c)	 	His or her lineal descendants and/or ancestors.






	 	(ii)	 	Stock owned, directly or indirectly, by a corporation, partnership, estate, or trust is
treated as owned proportionately by or for its stockholders, partners, or beneficiaries.




C. Stock option grants made to any Participant under the Discretionary Option Grant Program of
Article II and Awards made to any Participant under the Other Equity Based Awards Program of
Article IV shall not in any way affect, limit or restrict such individual’s eligibility to
participate in any other stock plan or other compensation or benefit plan, arrangement or practice
now or hereafter maintained by the Company or any Parent or Subsidiary.



D. Stock option grants or other Awards outstanding under the Plan shall in no way affect the right
of the Company to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.




II. STRUCTURE OF THE PLAN



A. Stock Programs. The Plan shall be divided into three separate components: the
Discretionary Option Grant Program specified in Article II, the Automatic Option Grant Program
specified in Article III, and the Other Equity Based Awards Program specified in Article IV. Under
the Discretionary Option Grant Program, Eligible Persons (except as otherwise limited by Section
I.B.of Article III) may, at the discretion of the Committee, be granted options to purchase shares
of Common Stock in accordance with the provisions of Article II. Under the Automatic Option Grant
Program, Eligible Directors will receive at periodic intervals special option grants to purchase
shares of Common Stock in accordance with the provisions of Article III. Under the Other Equity
Based Awards Program, Eligible Persons (except as otherwise limited by Section I.B.of Article III)
may be granted, at the discretion of the Committee, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Performance Awards, Dividend Equivalents or Other Stock-Based Awards in
accordance with the provisions of Article IV.



B. General Provisions. Unless the context clearly indicates otherwise, the provisions of
Articles I and V shall apply to the Discretionary Option Grant Program, the Automatic Option Grant
Program and the Other Equity Based Awards Program, and shall accordingly govern the interests of
all individuals under the Plan.




III. ADMINISTRATION OF THE PLAN



A. The Plan shall be administered by the Committee. The Committee may delegate its
responsibilities to others under such conditions and limitations as it may determine, except that
the Committee may not delegate its authority with regard to the making of grants to Section 16(b)
Insiders. However, if the grant to a Section 16(b) Insider would not be exempt under SEC Rule
16b-3 if made by the Committee, such grant may be made by the Board. On the other hand, if the
grant of an option is intended to be exempt from Code Section 162(m), it must be made by a
committee composed exclusively of outside directors, as that term is defined in Code Section
162(m).




 









 







B. Subject to the express provisions of the Plan and applicable law, the Committee shall have the
sole and exclusive authority with respect to the Discretionary Option Grant Program and the Other
Equity Based Awards Program:




     (i) to designate Participants and make grants of Awards to any and all Eligible Persons;



     (ii) to determine the type or types of Awards to be granted to each Participant;



     (iii) to determine the number of Shares to be covered by, or the method by which payment or
other rights are to be determined in connection with, each Award;



     (iv) to determine the terms and conditions of any Award or Award Agreement, consistent with
the terms of the Plan;



     (v) to determine whether, to what extent, and under what circumstances Awards may be exercised
in cash, Shares, promissory notes (provided, however, that the par value of any Shares to be issued
pursuant to such exercise shall be paid in the form of cash, services rendered, personal property,
real property or a combination thereof, and the acceptance of such promissory notes does not
conflict with Section 402 of the Sarbanes-Oxley Act of 2002), other securities, other awards or
other property, or cancelled, forfeited or suspended;



     (vi) to interpret the Plan and any Award Agreement, to prescribe, amend and rescind rules and
regulations relating to it, and to make all other determinations deemed necessary or advisable in
administering the Discretionary Option Grant Program and the Other Equity Based Awards Program;



     (vii) to change the terms and conditions or accelerate the vesting of any outstanding Award or
Award Agreement granted pursuant to Article II, and any outstanding Award or Award Agreement
granted pursuant to Article IV (except for any Qualified Performance Based Award as defined in
Article IV of the Plan to the extent such authority would violate Code Section 162(m)), provided
such action does not, without the consent of the holder, adversely affect the rights and
obligations such individual may have under the outstanding grant; and



     (viii) to make any other determination or take any other action that the Committee deems
necessary or desirable for the administration of the Plan.


C. Administration of the Automatic Option Grant Program shall be self-executing in accordance with
the express terms and conditions of Article III, and neither the Committee nor the Board shall
exercise discretionary functions with respect to option grants made pursuant to that program.



D. Except as otherwise provided in Section III.C. of this Article I, designations, determinations,
interpretations and other decisions of the Committee on all matters relating to the Plan and any
option grants, stock issuances or any other Awards made hereunder shall be within the sole
discretion of the Committee, may be made at any time, and shall be final, conclusive and binding on
all Persons having any interest in the Plan or any options or Awards granted or shares issued under
the Plan.



E. To the maximum extent permitted by law, the Company shall indemnify each member of the Committee
and any secondary committee formed pursuant to Section III.A. of this Article I and every other
member of the Board, as well as any other employee with duties under the Plan, against all
liabilities and expenses (including any amount paid in settlement or in satisfaction of a judgment)
reasonably incurred by the individual in connection with any claims against the individual by
reason of the performance of the individual’s duties under the Plan. This indemnity shall not
apply, however, if: (i) it is determined in the action, lawsuit, or proceeding that the individual
is guilty of gross negligence or intentional misconduct in the performance of those duties; or (ii)
the individual fails to assist the Company in defending against any such claim. The Company shall
have the right to select counsel and to control the prosecution or defense of the suit. The
Company shall not be obligated to indemnify any individual for any amount incurred through any
settlement or compromise of any action unless the Company consents in writing to the settlement or
compromise.



F. Notwithstanding anything to the contrary contained herein (except as provided in Section III.A.
of this Article I), the Board may, at any time and from time to time, without any further action of
the Committee, exercise the powers and duties of the Committee under the Plan.




IV. ELIGIBILITY



A. The persons eligible to receive option grants under the Discretionary Option Grant Program of
Article II and Awards under the Other Equity Based Awards Program of Article IV are Eligible
Persons selected by the Committee to receive such options and Awards, except as otherwise limited
by Section I.B.of Article III of the Plan.



B. The persons entitled to receive option grants under the Automatic Option Grant Program of
Article III are the Eligible Directors, as defined in Section I.A. of Article III of the Plan.




 









 








V. STOCK SUBJECT TO THE PLAN



A. The Common Stock issuable under the Plan shall be made available either from authorized but
unissued shares of Common Stock or from shares of Common Stock reacquired by the Company on the
open market. The aggregate number of shares of Common Stock issuable over the term of this Plan
shall not exceed 9,682,500 shares. Such share reserve is subject to adjustment from time to time
in accordance with Section V.C. of this Article I.



B. Should an option or other Award granted under this Plan expire or terminate for any reason prior
to exercise or surrender in full, the shares subject to the portion of the option or other Award
not so exercised or surrendered shall be available for subsequent option or other Award grants
under this Plan. In addition, unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Company, at the original option or Award exercise price paid per share, pursuant
to the Company’s repurchase rights under the Plan shall be added back to the number of shares of
Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance
through one or more subsequent option or other Award grants under the Plan. However, shares
subject to Tandem Rights exercised in accordance with the provisions of Section II of Article II
shall reduce on a share-for-share basis the number of shares of Common Stock available for
subsequent option or other Award grants under this Plan. Should the exercise price of an
outstanding option or other Award under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the Company in satisfaction
of the withholding taxes incurred in connection with the exercise of an outstanding option or other
Award or the vesting of a stock issuance or other Award under the Plan, then the number of shares
of Common Stock available for issuance under the Plan shall be reduced by the gross number of
shares for which the option or other Award is exercised or which vest under the stock issuance or
other Award, and not by the net number of shares of Common Stock actually issued to the
Participant.



C. In the event any change is made to the Common Stock issuable under the Plan by reason of any
stock dividend, recapitalization, stock split, reverse stock split, combination of shares, exchange
of shares, reorganization, merger, consolidation, split-up, spin-off, or other change affecting the
outstanding Common Stock as a class without the Company’s receipt of consideration, then
appropriate adjustments shall be made by the Committee to (i) the aggregate number and/or class of
securities (or other property) issuable under the Plan, (ii) the maximum number and/or class of
securities (or other property) for which any one Participant may be granted stock options, stock
appreciation rights or other Awards over the term of the Plan, (iii) the number and/or class of
securities for which automatic option grants are to be subsequently made to Eligible Directors
under the Automatic Option Grant Program, (iv) the number and/or class of securities (or other
property) subject to, and the purchase and/or exercise price per share in effect under, each
option, stock appreciation right or other Award outstanding under the Plan, and (v) the limitations
contained in Section V.E. of this Article I, in order to preclude the dilution or enlargement of
benefits thereunder. All adjustments made by the Committee pursuant to this Section V.C. shall be
final and binding.



D. In the event that (i) the Company is the surviving entity in any Corporate Transaction which
does not result in the termination of outstanding options pursuant to the Corporate Transaction
provisions of the Plan or (ii) the outstanding options under the Plan are to be assumed in
connection with such Corporate Transaction, then each such continuing or assumed option shall,
immediately after such Corporate Transaction, be appropriately adjusted to apply and pertain to the
number and class of securities which would have been issuable, in consummation of such Corporate
Transaction, to an actual holder of the same number of shares of Common Stock as are subject to
such option immediately prior to such Corporate Transaction. Appropriate adjustments shall also be
made to the exercise price payable per share, provided the aggregate option price shall remain the
same. In addition, the number and class of securities which remain issuable under this Plan
following the consummation of the Corporate Transaction shall be appropriately adjusted.
Adjustments under this section will be made in accordance with Code Section 424 and treasury
regulations promulgated thereunder to the extent required, and for purposes of compliance with the
provisions of Code Section 409A relating to modification of stock rights, adjustments will be made
in accordance with the requirements Code Section 424 and treasury regulations promulgated
thereunder as modified by applicable guidance under Code Section 409A.



E. 162(m) Limitation on Awards. From and after January 1, 1994 until June 30, 2006, in no event
may any one individual participating in the Plan be granted stock options and/or separately
exercisable stock appreciation rights, exceeding 1,600,000 shares of Common Stock in the aggregate
over such period, subject to adjustment from time to time in accordance with the provisions of
Section V.C. of this Article. From and after approval of the stockholders at the 2006 Annual
Meeting of Stockholders, notwithstanding any other provision of the Plan other than Section V.C. of
this Article I, no Participant shall be granted: (i) Options or SARs, the value of which are
derived solely from the appreciation in the value of Shares after the date of grant, with respect
to more than 500,000 Shares in the aggregate within any fiscal year of the Company; or (ii) other
Qualified Performance Based Awards under Article IV that do not meet the definition contained in
clause (i) above and that could result in such Participant receiving more than $1,500,000 in cash
or the equivalent Fair Market Value of Shares determined at the date of grant for each full or
partial fiscal year of the Company contained in the performance period of a particular Qualified
Performance Based Award, provided, however, that, if any other Qualified Performance Based Awards
are outstanding for such Participant for a given fiscal year, such dollar limitation shall be
reduced for each such given fiscal year by the amount that could be received by the Participant
under all such Qualified Performance Based Awards, divided, for each such Qualified Performance
Based Award, by the number of full or partial fiscal years of the Company contained in the
performance period of each such outstanding Qualified Performance Based Award; provided, however,
that the limitations set forth in this Section V.E. shall be subject to adjustment under Section
V.C. of Article I only to the extent that such adjustment does not affect the status of any Award
intended under Article IV to qualify as “performance based compensation” under Section 162(m) of
the Code.




 









 








ARTICLE II.

DISCRETIONARY OPTION GRANT PROGRAM




I. TERMS AND CONDITIONS OF OPTIONS



A. The Committee shall have sole and exclusive authority (subject to the express provisions of the
Plan) to determine which Eligible Persons are to be granted options under the Discretionary Option
Grant Program, the number of shares to be covered by each such option, the status of the granted
option as a Non-Statutory Option, the time or times at which such option is to become exercisable
and the maximum term for which the option is to remain outstanding.



B. The granted options shall be evidenced by Award Agreements in such form as the Committee shall
from time to time approve. Unless otherwise provided in a particular Award Agreement, the granted
options shall comply with the terms and conditions specified below.




     1. Option Price.




     a. The option price per share shall be fixed by the Committee, but in no event shall the
option price per share be less than the Fair Market Value per share of Common Stock on the
date of the option grant.



          b. The option price shall become immediately due upon exercise of the option and shall,
subject to the loan provisions of Section I of Article V, be payable in one or more of the
alternative forms specified below:




               i. full payment in cash or check payable to the Company’s order; or



               ii. full payment in shares of Common Stock held by the Optionee for the requisite period
necessary to avoid a charge to the Company’s reported earnings and valued at Fair Market Value on
the Exercise Date (as such term is defined below); or



               iii. to the extent the option is exercised for vested shares, full payment through a special
sale and remittance procedure pursuant to which the Optionee is to provide irrevocable written
instructions (i) to a brokerage firm to effect the immediate sale of the purchased shares and remit
to the Company, out of the sale proceeds available on the settlement date, an amount sufficient to
cover the aggregate option price payable for the purchased shares plus all applicable Federal and
state income and employment taxes required to be withheld by the Company by reason of such purchase
and (ii) to the Company to deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction; or



          c. If payment of the exercise price is made by means of the surrender of shares of Common
Stock which are subject to certain restrictions, the number of shares of Common Stock issued upon
the exercise of the option equal to the number of shares of restricted stock surrendered shall be
subject to the same restrictions as the restricted stock that was surrendered.




          d. The Exercise Date shall be the date on which written or electronic notice of the option
exercise is delivered to the Company. Except to the extent the sale and remittance procedure
specified in clause (iii) of subparagraph b. above is utilized in connection with the option
exercise, payment of the option price for the purchased shares must accompany such notice.




     2. Term and Exercise of Options.



          a. Each option granted under the Discretionary Option Grant Program shall be exercisable in
one or more installments as shall be determined by the Committee and set forth in the Award
Agreement evidencing such option; provided, however, no such option shall have a maximum term in
excess of ten (10) years from the date it was granted to the Optionee.




          b. During the lifetime of the Optionee, Non-Statutory Options shall be exercisable only by the
Optionee and shall not be assignable or transferable other than by will, by the laws of descent and
distribution following the Optionee’s death, or to any “Family Member” (as such term is defined in
the General Instructions to Form S-8 (or any successor to such Instructions or such Form) under the
Securities Act), provided that the Participant may not receive any consideration for such transfer,
the Family Member may not make any subsequent transfers other than by will or by the laws of
descent and distribution and the Company receives written notice of such transfer. This assigned
portion may only be exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Committee may deem appropriate. Notwithstanding the
foregoing, the Optionee may also designate one or more persons as the beneficiary or beneficiaries
of his or her outstanding Non-Statutory Options under the Plan, and those options shall, in
accordance with such designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee’s death while holding those options. Such beneficiary or beneficiaries shall take
the transferred options subject to all the terms and



 









 






conditions of the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be exercised following the
Optionee’s death.




     3. Termination of Service.



          a. Should an Optionee cease to be a Service Provider for any reason (including death or
Permanent Disability) other than due to a termination for the reasons set forth in subparagraph (c)
below, then such options shall not be exercisable at any time after the EARLIER of (i) the
specified expiration date of the option term or (ii) the expiration of the limited period of time
specified by the Committee in the option agreement. Each such option shall, during such period
following cessation of Service Provider status, be exercisable only to the extent of the number of
shares (if any) in which the Optionee is vested on the date of such cessation of Service Provider
status.




          b. Any option held by an Optionee under this Article II at the time of his or her death and
exercisable in whole or in part at that time may be subsequently exercised, but only to the extent
of the number of shares (if any) in which the Optionee is vested on the date the Optionee ceases to
be a Service Provider (less any of those shares subsequently purchased by the Optionee prior to
death), by the personal representative of the Optionee’s estate, by the person or persons to whom
the option is transferred pursuant to the Optionee’s will or the laws of inheritance or by the
Optionee’s designated beneficiary or beneficiaries of that option. Any such exercise must occur
prior to the EARLIER of (i) the expiration date of the option term or (ii) the first anniversary of
the date of the Optionee’s death.




          c. If an Optionee’s Service Provider status is terminated for any of the following reasons,
then all outstanding options granted the Optionee under this Article II shall immediately terminate
and cease to be exercisable immediately upon such termination:




               i. the Optionee’s intentional misconduct or continuing gross neglect of duties which
materially and adversely affects the business and operations of the Company or any Parent or
Subsidiary employing the Optionee;



               ii. the Optionee’s unauthorized use or disclosure (or attempt thereat) of confidential
information or trade secrets of the Company or any Parent or Subsidiary; or



               iii. the Optionee’s commission of an act involving embezzlement, theft, fraud, falsification
of records, destruction of property or commission of a crime or other offense involving money or
other property of the Company or any Parent or Subsidiary employing the Optionee.



     The reasons for termination of an Optionee as a Service Provider set forth in this
subparagraph (c) are not intended to be an exclusive list of all acts or omissions which the
Company may deem to constitute misconduct or other grounds for terminating the Optionee (or any
other individual).



          d. The Committee shall have complete discretion, exercisable either at the time the option is
granted or at any time while the option remains outstanding, to permit one or more options held by
the Optionee under this Article II to be exercised, during the limited period of exercisability
following cessation of Service Provider status, not only with respect to the number of shares in
which the Optionee is vested at the time of such cessation of Service Provider status but also with
respect to one or more subsequent installments of purchasable shares in which the Optionee would
otherwise have vested had the Optionee continued as a Service Provider.




          e. If the option is granted to an individual who is not an Employee of the Company, then the
option agreement evidencing the granted option shall include provisions comparable to those set
forth in subparagraphs (a), (b) and (c) above, and may include provisions comparable to
subparagraph (d) above, with respect to the Optionee’s termination of service with the Company or
any Parent or Subsidiary.




     4. Stockholder Rights. An option holder shall have none of the rights of a
stockholder with respect to any shares covered by the option until such individual shall have
exercised the option, paid the option price and satisfied all other conditions precedent to the
issuance of certificates for the purchased shares.



     5. Repurchase Rights. The shares of Common Stock acquired upon the exercise of any
Article II option grant may be subject to one or more repurchase rights of the Company in
accordance with the following provisions:



          a. The Committee shall have the discretion to authorize the issuance of unvested shares of
Common Stock under this Article II. Should the Optionee cease Service Provider status while
holding such unvested shares, the Company shall have the right to repurchase any or all of those
unvested shares at the option price paid per share. The terms and conditions upon which such
repurchase right shall be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by the Committee and
set forth in the instrument evidencing such repurchase right.




 









 








          b. All of the Company’s outstanding repurchase rights shall automatically terminate, and all
shares subject to such terminated rights shall immediately vest in full, upon the occurrence of any
Corporate Transaction, except to the extent: (i) any such repurchase right is expressly assigned to
the successor corporation (or parent thereof) in connection with the Corporate Transaction or (ii)
such termination is precluded by other limitations imposed by the Committee at the time the
repurchase right is issued.




          c. The Committee shall have the discretionary authority, exercisable either before or after
the Optionee’s cessation of Service Provider status, to cancel the Company’s outstanding repurchase
rights with respect to one or more shares purchased or purchasable by the Optionee under this
Article II and thereby accelerate the vesting of such shares in whole or in part at any time.




II. TANDEM RIGHTS AND LIMITED RIGHTS



A. The Committee shall have full power and authority, exercisable in its sole discretion, to grant
selected Optionees tandem stock appreciation rights (“Tandem Rights”) pertaining to all or part of
the shares of Common Stock subject to one or more of their option grants under this Article II.



B. Tandem Rights may be granted at the same time the underlying option is granted or any time
thereafter while the option remains outstanding. The Optionee may exercise such Tandem Right by
surrendering the underlying option in whole or in part to the Company, to the extent such option is
at the time exercisable for vested shares of Common Stock. In exchange for the surrendered option,
the Optionee shall receive a distribution from the Company in an amount equal to the excess of (i)
the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee
is at the time vested under the surrendered option (or surrendered portion) over (ii) the aggregate
option price payable for such vested shares. However, the exercise of the Tandem Right shall be
effective only if approved by the Committee. If so approved, the distribution to which the
Optionee shall accordingly become entitled with respect to the surrendered option shall be made in
shares of Common Stock valued at Fair Market Value on the option surrender date.



C. If the surrender of an option is rejected by the Committee, then the Optionee shall retain
whatever rights the Optionee had under the surrendered option (or surrendered portion) on the
option surrender date and may exercise such rights at any time prior to the last day on which the
option is otherwise exercisable in accordance with the terms of the instrument evidencing such
option, but in no event may such rights be exercised more than ten (10) years after the date of the
option grant.



D. Prior to July 1, 2006, one or more Section 16(b) Insiders may, in the Committee’s sole
discretion, be granted limited stock appreciation rights
(“Limited
Rights”)2 in conjunction with
their outstanding options under this Article II. Such Limited Rights shall provide that upon the
occurrence of a Hostile Take-Over, each outstanding option with such a Limited Right shall
automatically be cancelled, to the extent such option is at the time exercisable for fully-vested
shares of Common Stock. The Optionee shall in return be entitled to a cash distribution from the
Company in an amount equal to the excess of (i) the Take-Over Price of the vested shares of Common
Stock at the time subject to the cancelled option (or cancelled portion of such option) over (ii)
the aggregate exercise price payable for such shares. The cash distribution payable upon such
cancellation shall be made within five (5) days following the consummation of the Hostile
Take-Over. The Committee shall pre-approve, at the time the limited right is granted, the
subsequent exercise of that right in accordance with the terms of this Section II.D. Accordingly,
no further approval of the Committee or the Board shall be required at the time of the actual
option cancellation and cash distribution. The balance of the option (if any) shall continue to
remain outstanding and exercisable in accordance with the terms and conditions of the instrument
evidencing such option.




III. CORPORATE TRANSACTION



A. Upon the occurrence of a Corporate Transaction, the exercisability of each option outstanding
under this Article II shall be automatically accelerated so that each such option shall,
immediately prior to the specified effective date for the Corporate Transaction, become fully
exercisable with respect to the total number of shares of Common Stock at the time subject to such
option, whether or not vested, and may be exercised for all or any portion of such shares. However,
an outstanding option under this Article II shall NOT be so accelerated if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either to be assumed by the successor
corporation or parent thereof or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation or parent thereof, or (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the spread existing at
the time of the Corporate Transaction on any shares for which the option is not otherwise at that
time exercisable and provides for subsequent payout in accordance with the same






 




			
	2	 	Options granted to Section 16(b) Insiders prior to the effective
date of the June 15, 1992 Restatement contain a different form of Limited
Right. Such right will provide each Section 16(b) Insider with a thirty
(30)-day election period, following the successful completion of a hostile
tender offer for fifty percent (50%) or more of the Company’s outstanding
voting securities, to surrender the underlying option for a cash distribution
from the Company in an amount per share of Common Stock in which the Section
16(b) Insider is at the time vested under the surrendered option equal to the
excess of the highest price per share paid in effecting such tender offer over
the exercise price payable per share under the surrendered option.




 









 









exercise/vesting schedule applicable to those option shares, or (iii) the acceleration of such
option is subject to other applicable limitations imposed by the Committee at the time of grant.
The determination of comparability under clause (i) above shall be made by the Committee, and its
determination shall be final and binding.



B. The Committee shall have the discretion, exercisable at any time, to provide (upon such terms
and conditions as it may deem appropriate) for either the automatic acceleration of one or more
assumed or replaced options which do not accelerate in connection with the Corporate Transaction or
for the automatic vesting of any cash incentive programs implemented in replacement of such
options, in the event the Optionee’s employment should subsequently terminate within a designated
period following the effective date of such Corporate Transaction.



C. Upon the consummation of the Corporate Transaction, all outstanding options under this Article
II shall, to the extent not previously exercised or assumed by the successor corporation or its
parent company, terminate and cease to be outstanding.




ARTICLE III.

AUTOMATIC OPTION GRANT PROGRAM




I. ELIGIBILITY



A. Eligible Directors. The individuals eligible to receive automatic option grants pursuant
to the provisions of this Article III program shall be limited to those individuals who first
become non-Employee Board members on or after August 5, 1993, whether through appointment by the
Board or election by the Company’s stockholders. Any non-Employee Board member eligible to
participate in the Automatic Option Grant Program pursuant to the foregoing criteria shall be
designated an “Eligible Director” for purposes of this Plan.



B. Limitation. Except for the option grants to be made pursuant to the provisions of this
Automatic Option Grant Program, an Eligible Director serving on the Committee or any secondary
committee established pursuant to Section III.A. of Article I shall NOT be eligible during such
period of service to receive any additional option grants or stock issuances under this Plan or any
other stock plan of the Company (or any Parent or Subsidiary).




II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS



A. Grant Dates. Option grants shall be made under this Article III on the dates specified
below:




     (i) Each Eligible Director who has not at any time been in the prior employ of the Company
(or any Parent or Subsidiary) shall automatically be granted, at the time of such initial election
or appointment, a Non-Statutory Option to purchase 7,500 shares of Common Stock upon the terms and
conditions of this Article III.



     (ii) On the date of each Annual Stockholders Meeting, commencing with the 1993 Annual
Stockholders Meeting, each individual who is at the time serving as an Eligible Director shall
automatically be granted, whether or not such individual is standing for re-election as a Board
member at that particular meeting and whether or not such individual has at any time been in the
prior employ of the Company (or any Parent or Subsidiary), a Non-Statutory Option to purchase 3,000
shares of Common Stock upon the terms and conditions of this Article III, provided he or she has
served as a non-Employee Board member for at least six (6) months prior to the date of such
meeting. There shall be no limit on the number of 3,000-share option grants any Eligible Director
may receive over his or her period of Board service.



     The number of shares for which the automatic grants are to be made to each newly elected or
continuing Eligible Director shall be subject to periodic adjustment pursuant to the applicable
provisions of Section V.C. of Article I.


B. Exercise Price. The exercise price per share of Common Stock subject to each automatic
option grant made under this Article III shall be equal to one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the automatic grant date.



C. Payment.




     (i) The exercise price shall be payable in one or more of the alternative forms specified
below:



          a. full payment in cash or check payable to the Company’s order; or




          b. full payment in shares of Common Stock held for the requisite period necessary to avoid a
charge to the Company’s reported earnings and valued at Fair Market Value on the Exercise Date (as
such term is defined below); or




          c. full payment through a sale and remittance procedure pursuant to which the non-Employee
Board member is to provide irrevocable written instructions (1) to a brokerage firm to effect the
immediate sale of the purchased shares



 









 






and remit to the Company, out of the sale proceeds available on the settlement date, an amount
sufficient to cover the aggregate option price payable for the purchased shares and (2) to the
Company to deliver the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale transaction; or




     (ii) If payment is made by means of the surrender of shares of Common Stock which are subject
to certain restrictions, the number of shares of Common Stock issued upon the exercise of the
option equal to the number of shares of restricted stock surrendered shall be subject to the same
restrictions as the restricted stock that was surrendered.



     (iii) The Exercise Date shall be the date on which written notice of the option exercise is
delivered to the Company. Except to the extent the sale and remittance or loan procedure specified
in clause (i)(c) above is utilized in connection with the option exercise, payment of the option
price for the purchased shares must accompany such notice.


D. Option Term. Each automatic grant under this Article III shall have a maximum term of
ten (10) years measured from the automatic grant date.



E. Exercisability. Each automatic grant shall become exercisable in a series of four (4)
equal and successive annual installments over the Optionee’s period of service on the Board, with
the first such installment to become exercisable twelve (12) months after the automatic grant date.
The exercisability of each automatic grant shall be subject to acceleration in accordance with the
provisions of Section II.G and Section III of this Article III.



F. Limited Transferability. During the lifetime of the Optionee, each automatic option
grant shall be exercisable only by the Optionee and shall not be assignable or transferable by
Optionee other than by will or the laws of descent and distribution following the Optionee’s death,
or to any “Family Member” (as such term is defined in the General Instructions to Form S-8 (or any
successor to such Instructions or such Form) under the Securities Act), provided that the Optionee
may not receive any consideration for such transfer, the Family Member may not make any subsequent
transfers other than by will or by the laws of descent and distribution and the Company receives
written notice of such transfer. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such documents issued to the assignee as the
Committee may deem appropriate. Notwithstanding the foregoing, the Optionee may also designate one
or more persons as the beneficiary or beneficiaries of his or her outstanding options under the
Plan, and those options shall, in accordance with such designation, automatically be transferred to
such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Such
beneficiary or beneficiaries shall take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such transferred option, including (without
limitation) the limited time period during which the option may be exercised following the
Optionee’s death.



G. Termination of Board Service.




     1. Should the Optionee’s service as a Board member cease for any reason (other than death or
Permanent Disability) while holding one or more automatic option grants under this Article III,
then such individual shall have a six (6)-month period following the date of such cessation of
Board service in which to exercise each such option for any or all of the shares of Common Stock
for which the option is exercisable at the time of such cessation of Board service. However, each
such option shall immediately terminate and cease to be outstanding, at the time of such cessation
of Board service, with respect to any shares for which the option is not otherwise at that time
exercisable.



     2. Should the Optionee die within six (6) months after cessation of Board service, then each
outstanding automatic option grant held by the Optionee at the time of death may subsequently be
exercised, for any or all of the shares of Common Stock for which such option is exercisable at the
time of the Optionee’s cessation of Board service (less any option shares subsequently purchased by
the Optionee prior to death), by the personal representative of the Optionee’s estate, by the
person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of
inheritance or by the Optionee’s designated beneficiary or beneficiaries of that option. Any such
exercise must occur with twelve (12) months after the date of the Optionee’s death.



     3. Should the Optionee die or become Permanently Disabled while serving as a Board member,
then each automatic option grant held at that time by such Optionee under this Article III shall
accelerate in full, and the Optionee (or the personal representative of the Optionee’s estate, or
the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws
of inheritance or the Optionee’s designated beneficiary or beneficiaries of that option) shall have
a twelve (12) month period following the date of the Optionee’s cessation of Board service in which
to exercise each such option for any or all of the shares of Common Stock subject to that option at
the time of such cessation of Board service.



     4. In no event shall any automatic grant under this Article III remain exercisable after the
specified expiration date of the ten (10)-year option term. Upon the expiration of the applicable
post-service exercise period under subparagraph 1, 2 or 3 above or (if earlier) upon the expiration
of the ten (10)-year option term, the automatic grant shall terminate and cease to be outstanding
for any unexercised shares for which the option was otherwise exercisable at the time of the
Optionee’s cessation of Board service.



 









 




H. Remaining Terms. The remaining terms and conditions of each automatic option grant shall
be substantially the same as the terms in effect for option grants made under the Discretionary
Option Grant Program and shall be set forth in an Award Agreement.




III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER



A. In the event of any Corporate Transaction effected during the Optionee’s period of Board
service, each automatic option grant at the time held by such Optionee under this Article III shall
automatically accelerate so that each such option shall, immediately prior to the specified
effective date for the Corporate Transaction, become exercisable for all of the shares of Common
Stock at the time subject to such option and may be exercised for all or any portion of such
shares. Upon the consummation of the Corporate Transaction, all automatic option grants under this
Article III shall terminate and cease to be outstanding.



B. In the event of any Change in Control effected during the Optionee’s period of Board service,
each automatic option grant at the time held by such Optionee under this Article III shall
automatically accelerate so that each such option shall, immediately prior to the specified
effective date for the Change in Control, become exercisable for all of the shares of Common Stock
at the time subject to such option and may be exercised for all or any portion of such shares.




ARTICLE IV.

OTHER EQUITY BASED AWARDS PROGRAM




     Subject to any limitations contained in the Plan, the Committee shall have sole and exclusive
authority (subject to the express provisions of the Plan) to determine which Eligible Persons are
to be granted Awards under the Other Equity Based Awards Program, and the terms and conditions of
any such Awards. Such Awards shall be evidenced by Award Agreements in such form as the Committee
shall from time to time approve.



I. STOCK APPRECIATION RIGHTS.




     The Committee is authorized to grant free-standing Stock Appreciation Rights to Eligible
Persons subject to the terms of the Plan and any applicable Award Agreement. Each such Stock
Appreciation Right granted under the Plan shall confer on the holder upon exercise the right to
receive a number of Shares equal to the excess of (a) the Fair Market Value of one Share on the
date of exercise (or, if the Committee shall so determine, at any time during a specified period
before or after the date of exercise) over (b) the grant price of the Stock Appreciation Right as
determined by the Committee, which grant price shall not be less than 100% of the Fair Market Value
of one Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the
Plan, the grant price, term, methods of exercise, dates of exercise and any other terms and
conditions (including conditions or restrictions on the exercise thereof) of any Stock Appreciation
Right shall be as determined by the Committee.



II. RESTRICTED STOCK AND RESTRICTED STOCK UNITS



A. The Committee is hereby authorized to grant Restricted Stock and Restricted Stock Units to
Eligible Persons with the following terms and conditions and with such additional terms and
conditions not inconsistent with the provisions of the Plan as the Committee shall determine:




     (i) Restrictions. Shares of Restricted Stock and Restricted Stock Units shall be
subject to such restrictions as the Committee may impose (including, without limitation, a
restriction on or prohibition against the right to receive any dividend or other right or property
with respect thereto), which restrictions may lapse separately or in combination at such time or
times, in such installments or otherwise as the Committee may deem appropriate.



     (ii) Stock Certificates. Any Restricted Stock granted under the Plan shall be
evidenced by the issuance of a stock certificate or certificates, which shall be held by the
Company. Such certificate or certificates shall be registered in the name of the Participant and
shall bear an appropriate legend referring to the applicable Award Agreement and possible
forfeiture of such shares of Restricted Stock.



     (iii) Forfeiture. Except as otherwise determined by the Committee, upon a
Participant’s termination of employment (as determined under criteria established by the Committee)
during the applicable restriction period, all applicable Shares of Restricted Stock and Restricted
Stock Units at such time subject to restriction shall be forfeited and reacquired by the Company;
provided, however, that the Committee may, when it finds that a waiver would be in the best
interest of the Company, waive in whole or in part any or all remaining restrictions with respect
to Shares of Restricted Stock or Restricted Stock Units.



III. PERFORMANCE AWARDS




 









 







A. The Committee is hereby authorized to grant Performance Awards to Eligible Persons subject to
the terms of the Plan. A Performance Award granted under the Plan (a) may be denominated or
payable in cash, Shares (including, without limitation, Restricted Stock and Restricted Stock
Units), other securities, other Awards or other property and (b) shall confer on the holder thereof
the right to receive payments, in whole or in part, upon the achievement of such performance goals
during such performance periods as the Committee shall establish. Subject to the terms of the
Plan, the performance goals to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award granted, the amount of any payment or
transfer to be made pursuant to any Performance Award and any other terms and conditions of any
Performance Award shall be determined by the Committee. From time to time, the Committee may
designate a Performance Award granted hereunder as an award of “qualified performance-based
compensation” within the meaning of Section 162(m) of the Code (a “Qualified Performance Based
Award”), and such awards shall comply with the following requirements.




     (i) Performance Goals; Timing of Designations. Qualified Performance Based Awards
shall, to the extent required by Section 162(m), be conditioned solely on the achievement of one or
more objective performance goals, and such performance goals shall be established by the Committee
within the time period prescribed by, and shall otherwise comply with the requirements of, Section
162(m) (“Performance Goals”). The Committee shall, not later than 90 days after the beginning of
each performance period, (A) designate all Participants for such performance period, and
(B) establish the objective Performance Goals for each Participant for that performance period on
the basis of one or more of the business criteria set forth in (ii) below.



     (ii) Business Criteria. Unless and until the Committee proposes for stockholder
approval and the Company’s stockholders approve a change in the general business criteria set forth
in this section, the attainment of which may determine the amount and/or vesting with respect to
Qualified Performance Based Awards, the business criteria to be used for purposes of establishing
Performance Goals for Qualified Performance Based Awards shall be selected from the following
alternatives. Performance goals may be based upon based upon one or more of the following business
criteria, either individually, alternatively or in any combination, applied on a corporate,
subsidiary or business unit basis: revenue, cash flow, gross profit, earnings before interest and
taxes, earnings before interest, taxes, depreciation and amortization and net earnings, earnings
per share, margins (including one or more of gross, operating and net income margins), returns
(including one or more of return on assets, equity, investment, capital and revenue and total
stockholder return), stock price, economic value added, working capital, market share, cost
reductions, workforce satisfaction and diversity goals, employee retention, customer satisfaction,
completion of key projects and strategic plan development and implementation. Such Performance
Goals may reflect absolute entity or business unit performance or a relative comparison to the
performance of a peer group of entities or other external measure of the selected performance
criteria. Pursuant to rules and conditions adopted by the Committee on or before the 90th day of
the applicable performance period for which Performance Goals are established, the Committee may
appropriately adjust any evaluation of performance under such goals to exclude the effect of
certain events, including any of the following events: asset write-downs; litigation or claim
judgments or settlements; changes in tax law, accounting principles or other such laws or
provisions affecting reported results; severance, contract termination and other costs related to
exiting certain business activities; and gains or losses from the disposition of businesses or
assets or from the early extinguishment of debt.



     (iii) Payment of Qualified Performance Based Awards. Unless another specified payment
date or schedule of payment dates is provided in the applicable Award Agreement, Qualified
Performance Based Awards shall be paid within 2 1/2 months after the end of the calendar year in
which the applicable performance condition ends. The Committee shall certify in writing that
Performance Goals have been met prior to payment of the Qualified Performance Based Awards to the
extent required by Section 162(m). The Committee may, in its discretion, reduce the amount of a
payout otherwise to be made in connection with a Qualified Performance Based Award, but may not
exercise discretion to increase such amount.



     (iv) Certain Events. If a Participant dies or becomes permanently and totally
disabled before the end of a performance period or after the performance period and before a
Qualified Performance Based Award is paid, the Committee may, in its discretion, determine that the
Participant shall be paid a pro rated portion of the award that the Participant would have received
but for such death or disability.



     (v) Stockholder Approval of Plan. Any Qualified Performance Based Award shall be null
and void and have no effect whatsoever unless the Plan shall have been approved by the stockholders
of the Company at the Company’s 2006 Annual Stockholders Meeting. No Qualified Performance Based
Award shall be granted more than five years after the date of such 2006 Annual Stockholders Meeting
unless the stockholders have re-approved the Plan to the extent required by Section 162(m) of the
Code.



     (vi) Interpretation. The provisions in this Section III of Article IV, and all of the
other terms and conditions of the Plan as it applies to any Qualified Performance Based Award,
shall be interpreted in such a fashion as to qualify all compensation paid thereunder as “qualified
performance-based compensation” within the meaning of Section 162(m) of the Code.



IV. DIVIDEND EQUIVALENTS




     The Committee is authorized to grant Dividend Equivalents to Eligible Persons under which the
Participant shall be entitled to receive payments (in cash, Shares, other securities, other Awards
or other property as determined in the discretion of the



 









 







Committee) equivalent to the amount of cash dividends paid by the Company to holders of Shares with
respect to a number of Shares determined by the Committee. Subject to the terms of the Plan, such
Dividend Equivalents may have such terms and conditions as the Committee shall determine.



V. OTHER STOCK-BASED AWARDS




     The Committee is authorized to grant to Eligible Persons, subject to the terms of the Plan,
such other Awards that are denominated or payable in, valued in whole or in part by reference to,
or otherwise based on or related to, Shares (including, without limitation, securities convertible
into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan. Shares
or other securities delivered pursuant to a purchase right granted under this Section V shall be
purchased for such consideration, which may be paid by such method or methods and in such form or
forms (including, without limitation, cash, Shares, promissory notes, promissory notes (provided,
however, that the par value of any Shares to be issued pursuant to such exercise shall be paid in
the form of cash, services rendered, personal property, real property or a combination thereof and
the acceptance such promissory notes does not conflict with Section 402 of the Sarbanes-Oxley Act
of 2002), other securities, other Awards or other property or any combination thereof, as the
Committee shall determine, the value of which consideration, as established by the Committee, shall
not be less than 100% of the Fair Market Value of such Shares or other securities as of the date
such purchase right is granted.



ARTICLE V.

MISCELLANEOUS




I. LOANS OR GUARANTEE OF LOANS




     The Committee may assist a Participant (including any officer or director) in the exercise of
one or more outstanding options under the Discretionary Option Grant Program or one or more
outstanding Awards under the Other Equity Based Awards Program by (a) authorizing the extension of
a full-recourse interest-bearing loan to such Optionee from the Company, (b) permitting the
Participant to pay the exercise price or other purchase price with respect to such Award in
installments over a period of years or (c) authorizing a guarantee by the Company of a third-party
loan to the Participant, but in each case only to the extent any such action does not conflict with
Section 402 of the Sarbanes-Oxley Act of 2002. The terms of any loan, installment method of payment
or guarantee (including the interest rate and terms of repayment) shall be established by the
Committee in its sole discretion. The maximum credit available to the Participant shall not
exceed the sum of (i) the aggregate exercise price of the option shares (less the par value) or
the aggregate purchase price for the Award plus (ii) any Federal and state income and employment
tax liability incurred by the Participant in connection with the exercise of the option or Award.



II. TAX WITHHOLDING



A. The Company’s obligation to deliver shares or cash upon the exercise or surrender of stock
options or any Awards granted under the Plan shall be subject to the satisfaction by the
Participant of all applicable Federal, state and local income and employment tax withholding
requirements.



B. The Committee may, in its discretion and upon such terms and conditions as it may deem
appropriate (including the applicable safe-harbor provisions of SEC Rule 16b-3 or any successor
rule or regulation) provide any or all holders of outstanding option grants under the Plan (other
than grants made to non-Employees) with the election to surrender previously acquired shares of
Common Stock or have shares withheld in satisfaction of the tax withholding obligations. To the
extent necessary to avoid adverse accounting treatment, the number of shares that may be withheld
for this purpose shall not exceed the minimum number needed to satisfy the applicable income and
employment tax withholding rules. If Common Stock is used to satisfy the Company’s tax withholding
obligations, the stock shall be valued at its Fair Market Value when the tax withholding is
required to be made.




III. EXTENSION OF EXERCISE PERIOD




     The Committee shall have full power and authority to extend the period of time for which any
option granted under the Discretionary Option Grant Program is to remain exercisable following the
Optionee’s termination of service from the period set forth in the option agreement to such greater
period of time as the Committee shall deem appropriate; provided, however, that in no event shall
such extension exceed the limitations set forth by applicable law and regulations under Code
Section 409A; and provided further, that in no event shall such option be exercisable after the
specified expiration date of the option term.



IV. AMENDMENT OF THE PLAN




     The Board shall have the complete and exclusive authority to amend, modify, suspend,
discontinue or terminate the Plan; provided, however, that if and to the extent required by Code
Section 409A and applicable guidance thereunder, such authority



 









 







will not include the authority to terminate deferred compensation arrangements in violation of Code
Section 409A; and provided further, that no amendment or modification shall, without the consent of
the holders, adversely affect rights and obligations with respect to any stock options, stock
appreciation rights, or other Awards at the time outstanding under the Plan. In addition, certain
amendments, including increasing the number of shares issuable under the Plan or modifying the
requirements for eligibility, will require stockholder approval pursuant to applicable laws or
regulations.



V. EFFECTIVE DATE AND TERM OF PLAN



A. The Plan was initially adopted by the Board and approved by the Company’s sole stockholder on
August 1, 1988.



B. The Board and sole stockholder amended and restated the Plan effective May 15, 1991 to (i)
increase the number of shares issuable pursuant to the Plan, (ii) conform the provisions of the
Plan to the SEC rules under Section 16 of the Exchange Act applicable to certain transactions
effected under the Plan by Section 16(b) Insiders and (iii) provide for the ability to grant
incentive stock options.



C. The Plan was further restated on June 15, 1992 (the “1992 Restatement”) to (i) increase the
number of shares of Common Stock authorized for issuance under the Plan by an additional 400,000
shares, (ii) bring the Plan into compliance with revisions to SEC Rule 16b-3 which became effective
on September 1, 1993 and would exempt certain officer and director transactions under the Plan from
the short-swing liability provisions of the federal securities laws and (iii) effect certain
technical revisions to the provisions of the Plan to facilitate plan administration and
interpretation. The 1992 Restatement was approved by the Company’s stockholders at the 1992 Annual
Meeting.



D. The Plan was further restated and amended by the Board in June 1993 (the “1993 Restatement”) to
add the Automatic Option Grant Program. The 1993 Restatement was approved by the Company’s
stockholders at the 1993 Annual Meeting.



E. On May 4, 1994, the Board approved an amendment and restatement of the Plan (the “1994
Restatement”) to (i) increase the aggregate number of shares issuable over the term thereof by
400,000 shares to a total of 2,670,000 shares and (ii) impose a limitation of 1,600,000 shares on
the maximum number of shares of Common Stock for which any one participant may be granted stock
options and separately exercisable stock appreciation rights over the remaining term of the Plan.
The 1994 Restatement was approved by the Company’s stockholders at the 1994 Annual Meeting.



F. On June 21, 1996, the Board approved an amendment and restatement of the Plan (the “1996
Restatement”) to (i) increase the aggregate number of shares issuable over the term thereof by
400,000 shares to 3,070,000 shares, and (ii) extend the expiration date of the Plan to June 30,
2006. The 1996 Restatement was approved by the Company’s stockholders at the 1996 Annual Meeting.



G. In June 1997, the Board further amended and restated the Plan (the “1997 Restatement”) to effect
the following revisions: (i) increase the number of shares of Common Stock reserved for issuance
over the term of the Plan by an additional 400,000 shares to 3,470,000 shares, (ii) render the
non-Employee Board members eligible to receive option grants under the Discretionary Option Grant
Program, (iii) allow unvested shares issued under the Plan and subsequently repurchased by the
Company at the option exercise price paid per share to be reissued under the Plan, (iv) remove
certain restrictions on the eligibility of non-Employee Board members to serve as members of the
Committee and (v) effect a series of additional changes to the provisions of the Plan in order to
take advantage of certain amendments to SEC Rule 16b-3. The 1997 Restatement was approved by the
Company’s stockholders at the 1997 Annual Meeting.



H. In February 1999, the Board further amended and restated the Plan to permit optionees under the
Discretionary Option Grant and Automatic Option Programs of the Plan to designate a beneficiary or
beneficiaries to whom their options may be transferred upon their death.



I. On May 10, 2001, the Board further amended and restated the Plan (the “2001 Restatement”) to (i)
effect certain technical revisions to the provisions of the Plan in order to facilitate the
administration and interpretation of the Plan, (ii) clarify the group of employees who are eligible
to participate in the Plan and (iii) increase the number of shares of Common Stock reserved for
issuance over the term of the Plan by an additional 500,000 shares to 3,970,000 shares. The 2001
Restatement was approved by the Company’s stockholders at the 2001 Annual Meeting.



J. On June 27, 2006, the Board further amended and restated the Plan (the “2006 Restatement”) to
(i) address changes in applicable law and accounting principles, (ii) permit the Committee to make
awards of free-standing stock appreciation rights, restricted stock, restricted stock units,
performance awards, dividend equivalents, and Other Stock-Based Awards under the Plan, subject to
such terms and conditions as determined by the Committee, (iii) extend the term of the Plan until
June 30, 2016, (iv) rename the Plan and (v) increase the number of shares of Common Stock reserved
for issuance over the term of the Plan by an additional 500,000 shares to 6,455,000 shares. The
2006 Restatement was approved by the Company’s stockholders approval at the 2006 Annual Meeting.




 









 







K. All share numbers in the 2006 Restatement reflect (i) the two-for-one split of the Common Stock
effected on June 14, 1999 and (ii) the three-for-two split of the Common Stock effected on August
31, 2001, and all share numbers in the 2008 Restatement (defined below) reflect the 3-for-2 split
of the Common Stock effected on December 8, 2006, all of which were effected in the form of a stock
dividend.



L. On May 6, 2008, the Board further amended and restated the Plan (the “2008 Restatement”) to
reduce the number of shares of common stock underlying options to be granted under the automatic
option grant program from 11,250 to 7,500 shares for initial automatic option grants to be awarded
to a director upon first joining the Board and from 4,500 to 3,000 shares for annual automatic
option grants to be awarded to directors on the date of each annual meeting of stockholders. The
2008 Restatement is subject to stockholder approval at the 2008 Annual Meeting.



M. The provisions of the various restatements of the Plan apply only to stock options, stock
appreciation rights, and other Awards granted under the Plan from and after the respective
effective dates of such Restatements. All stock options and stock appreciation rights issued and
outstanding under the Plan immediately prior to such effective dates of the restatements of the
Plan shall continue to be governed by the terms and conditions of the Plan (and the instrument
evidencing each such option or stock appreciation right) as in effect on the date each such option
or stock appreciation was previously granted, and nothing in the restatements of the Plan shall be
deemed to affect or otherwise modify the rights or obligations of the holders of such options or
stock appreciation rights with respect to the acquisition of shares of Common Stock thereunder or
the exercise of their outstanding stock appreciation rights.



N. The sale and remittance procedure authorized for the exercise of outstanding options shall be
available for all options granted under the Plan from and after November 6, 1991 and for all
Non-Statutory Options outstanding on such date.



O. Subject to Section IV of Article V, the Plan shall in all events terminate upon the EARLIEST of
(i) June 30, 2016, (ii) the date on which all shares available for issuance under the Plan shall
have been issued or cancelled pursuant to the exercise or surrender of stock options, stock
appreciation rights or other Awards under the Plan, (iii) the termination of all outstanding Awards
in connection with a Corporate Transaction or (iv) termination by the Board. If the date of
termination is determined under clause (i) above, then any stock options, stock appreciation rights
or other Awards at the time outstanding under the Plan shall continue to have force and effect in
accordance with the provisions of the instruments evidencing such grants.




VI. MISCELLANEOUS MATTERS



A. Any cash proceeds received by the Company from the issuance of shares hereunder shall be used
for any corporate purpose.



B. The implementation of the Plan, the granting of any stock option or other Award , and the
issuance of Common Stock or other Award hereunder, shall be subject to the Company’s procurement of
all approvals and permits required by regulatory authorities having jurisdiction over the Plan, and
the stock options and other Awards granted under it and the Common Stock issued pursuant to it. The
inability of the Company to obtain the requisite approvals shall relieve the Company of any
liability with respect to the non-issuance or sale of the Common Stock as to which such approvals
shall not have been obtained. The Company, however, shall attempt to obtain all requisite
approvals.



C. No shares of Common Stock or other property shall be issued or delivered under the Plan unless
and until there shall have been compliance with all applicable requirements of Federal and state
securities laws, including the filing and effectiveness of the Form S-8 registration statement for
the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any
stock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed
for trading. No shares of Common Stock or other property shall be issued or delivered under the
Plan if doing so would violate any internal policies of the Company.



D. Neither the action of the Company in establishing the Plan, nor any action taken by the Board or
the Committee hereunder, nor any provision of the Plan itself shall be construed so as to grant any
individual the right to remain in the employ or service of the Company or any Parent or Subsidiary
for any period of specific duration, and the Company (or any Parent or Subsidiary retaining the
services of such individual) may terminate such individual’s employment or service at any time and
for any reason, with or without cause.



E. Nothing contained in the Plan shall be construed to limit the authority of the Company to
exercise its corporate rights and powers, including (without limitation) the right of the Company
(a) to grant options for corporate purposes otherwise than under this Plan to any Eligible Person
or other Person, firm or company or association or (b) to grant options to, or assume the option
of, any Person in connection with the acquisition (by purchase, lease, merger, consolidation or
otherwise) of the business and assets (in whole or in part) of any Person, firm, company or
association.



F. No Participant will have rights under an Award granted to such Participant unless and until an
Award Agreement shall have been duly executed on behalf of the Company and, if requested by the
Company, signed by the Participant. In the event that


 









 






any provision of an Award Agreement conflicts with or is inconsistent in any respect with the terms
of the Plan as set forth herein or subsequently amended, the terms of the Plan shall control.



G. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Company or any Parent or Subsidiary and an
Eligible Person or any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Parent or Subsidiary pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any Affiliate.



H. The Plan is intended to comply in all respects with Rule 16b-3 or any successor provision, as in
effect from time to time, and in all events the Plan shall be construed in accordance with the
requirements of Rule 16b-3. If any Plan provision does not comply with Rule 16b-3 as hereafter
amended or interpreted, the provision shall be deemed inoperative. The Board, in its absolute
discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision
of the Plan with respect to persons who are officers or directors subject to Section 16 of the
Exchange Act without so restricting, limiting or conditioning the Plan with respect to other
Eligible Persons. With respect to Options and Stock Appreciation Rights, the Company intends to
have the Plan administered in accordance with the requirements for the award of “qualified
performance-based compensation” within the meaning of Section 162(m) of the Code.



I. No compensation or benefit awarded to or realized by any Participant under the Plan shall be
included for the purpose of computing such Participant’s compensation under any compensation-based
retirement, disability, or similar plan of the Company unless required by law or otherwise provided
by such other plan.



J. Except with respect to Shares of Restricted Stock as to which the Participant has been granted
the right to vote, neither a Participant nor the Participant’s legal representative shall be, or
have any of the rights and privileges of, a stockholder of the Company with respect to any Shares
issuable to such Participant upon the exercise or payment of any Award, in whole or in part, unless
and until such Shares have been issued in the name of such Participant or such Participant’s legal
representative without restrictions thereto.



K. No Award and no right under any such Award shall be assignable or transferable by a Participant
other than by will or the laws of descent and distribution following the Participant’s death;
provided, however, that at any time such Participant holds a Non-Statutory Option, such Participant
may transfer such Option to any “Family Member” (as such term is defined in the General
Instructions to Form S-8 (or any successor to such Instructions or such Form) under the Securities
Act), provided that the Participant may not receive any consideration for such transfer, the Family
Member may not make any subsequent transfers other than by will or by the laws of descent and
distribution and the Company receives written notice of such transfer. The assigned portion may
only be exercised by the person or persons who acquire a proprietary interest in the Award pursuant
to the assignment. The terms applicable to the assigned portion shall be the same as those in
effect for the Award immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Committee may deem appropriate. Notwithstanding the foregoing, the
Participant may also designate one or more persons as the beneficiary or beneficiaries of his or
her outstanding Awards under the Plan, and those Awards shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the Participant’s death
while holding those Awards. Such beneficiary or beneficiaries shall take the transferred Awards
subject to all the terms and conditions of the applicable agreement evidencing each such
transferred Award.



L. The validity, construction and effect of the Plan or any Award, and any rules and regulations
relating to the Plan or any Award, shall be determined in accordance with the internal laws, and
not the law of conflicts, of the State of Delaware.



M. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in the determination of
the Committee, materially altering the purpose or intent of the Plan or the Award, such provision
shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award
shall remain in full force and effect.



N. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the
Committee shall determine whether cash shall be paid in lieu of any fractional Shares or whether
such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.



O. Headings are given to the Sections and subsections of the 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 the Plan or any provision thereof.