Exhibit 4.1


 


ALIGN TECHNOLOGY, INC.


 


Amended 2005 INCENTIVE PLAN


 


(amended March 2007)


 


1.                                       Purposes of the Plan. 
The purposes of this Plan are:


 


·                  to attract and retain the best available
personnel for positions of substantial responsibility,


 


·                  to provide incentives to individuals who
perform services to the Company, and


 


·                  to promote the success of the Company’s
business.


 


The Plan permits the grant of Incentive Stock Options, Nonstatutory
Stock Options, Restricted Stock, SARs, Performance Units, Performance Shares
and other stock or cash awards as the Administrator may determine.


 


2.                                       Definitions. 
As used herein, the following definitions will apply:


 


(a)                                  “Administrator” means the Board or
any of its Committees as will be administering the Plan, in accordance with Section 4
of the Plan.


 


(b)                                 “Affiliate” means any corporation
or any other entity (including, but not limited to, partnerships and joint
ventures) controlling, controlled by, or under common control with the Company.


 


(c)                                  “Applicable Laws” means the
requirements relating to the administration of equity-based awards under U.S.
state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or
quoted and the applicable laws of any foreign country or jurisdiction where
Awards are, or will be, granted under the Plan.


 


(d)                                 “Award” means, individually or
collectively, a grant under the Plan of Options, Restricted Stock, SARs,
Performance Units, Performance Shares and other stock or cash awards as the
Administrator may determine.


 


(e)                                  “Award Agreement” means the
written or electronic agreement setting forth the terms and provisions
applicable to each Award granted under the Plan.  The Award Agreement is subject to the terms
and conditions of the Plan.


 


(f)                                    “Board” means the Board of
Directors of the Company.


 


(g)                                 “Change in Control” means the
occurrence of any of the following events:


 

















 


(i)                                     Any “person” (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial
owner” (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company’s then outstanding
voting securities; or


 


(ii)                                  The consummation of the sale or
disposition by the Company of all or substantially all of the Company’s assets;


 


(iii)                               A change in the composition of the Board
occurring within a two-year period, as a result of which fewer than a majority
of the directors are Incumbent Directors. 
“Incumbent Directors” means directors who either (A) are Directors
as of the effective date of the Plan, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but will not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or


 


(iv)                              The consummation of a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or its parent) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity or its parent outstanding immediately after such merger or
consolidation.


 


(h)                                 “Code” means the Internal Revenue
Code of 1986, as amended.  Any reference
to a section of the Code herein will be a reference to any successor or amended
section of the Code.


 


(i)                                     “Committee” means a
committee of Directors or of other individuals satisfying Applicable Laws
appointed by the Board in accordance with Section 4 hereof.


 


(j)                                     “Common Stock” means the common
stock of the Company.


 


(k)                                  “Company” means Align Technology, Inc.,
a Delaware corporation, or any successor thereto.


 


(l)                                     “Consultant” means any person,
including an advisor, engaged by the Company or its Affiliate to render
services to such entity.


 


(m)                               “Determination Date” means the
latest possible date that will not jeopardize the qualification of an Award
granted under the Plan as “performance-based compensation” under Section 162(m) of
the Code.


 


(n)                                 “Director” means a member of the
Board.


 


(o)                                 “Disability” means total and
permanent disability as defined in Section 22(e)(3) of the Code, provided that
in the case of Awards other than Incentive Stock Options, the Administrator in
its discretion may determine whether a permanent and total disability 


 


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exists
in accordance with uniform and non-discriminatory standards adopted by the
Administrator from time to time.


 


(p)                                 “Employee” means any person,
including Officers and Directors, employed by the Company or its
Affiliates.  Neither service as a
Director nor payment of a director’s fee by the Company will be sufficient to
constitute “employment” by the Company.


 


(q)                                 “Exchange Act” means the
Securities Exchange Act of 1934, as amended.


 


(r)                                    “Fair Market Value” means, as of
any date, the value of Common Stock as the Administrator may determine in good
faith by reference to the price of such stock on any established stock
exchange or a national market system on the day of determination if the Common
Stock is so listed on any established stock exchange or a national market
system.  If the Common Stock is not
listed on any established stock exchange or a national market system, the value
of the Common Stock as
the Administrator may determine in good faith.


 


(s)                                  “Fiscal Year”
means the fiscal year of the Company.


 


(t)                                    “Incentive Stock Option” means an
Option that by its terms qualifies and is otherwise intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.


 


(u)                                 “Inside
Director” means a Director who is an Employee.


 


(v)                                 “Misconduct” means the commission
of any act of fraud, embezzlement or dishonesty by the Participant, any
unauthorized use or disclosure by such person of confidential information or
trade secrets of the Company or its Affiliates, or any other intentional
misconduct by such person adversely affecting the business or affairs of the
Company or its Affiliates in a material manner. 
The foregoing definition will not in any way preclude or restrict the right
of the Company or its Affiliates to discharge or dismiss any Participant for
any other acts or omissions, but such other acts or omissions will not be
deemed, for purposes of the Plan, to constitute grounds for termination for
Misconduct.


 


(w)                               “Nonstatutory Stock Option” means
an Option that by its terms does not qualify or is not intended to qualify as
an Incentive Stock Option.


 


(x)                                   “Officer” means a person who is an
officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.


 


(y)                                 “Option” means a stock option
granted pursuant to the Plan.


 


(z)                                   “Outside Director” means a
Director who is not an Employee.


 


(aa)                            “Parent” means a “parent
corporation,” whether now or hereafter existing, as defined in Section 424(e) of
the Code.


 


(bb)                          “Participant”
means the holder of an outstanding Award.


 


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(cc)                            “Performance Period” means any
Fiscal Year of the Company or such other period as determined by the
Administrator in its sole discretion.


 


(dd)                          “Performance Share” means an Award
denominated in Shares which may be earned in whole or in part upon attainment
of “Performance Goals” (as defined in Section 11) or other vesting
criteria as the Administrator may determine pursuant to Section 9.


 


(ee)                            “Performance Unit” means an Award
which may be earned in whole or in part upon attainment of Performance Goals or
other vesting criteria as the Administrator may determine and which may be
settled for cash, Shares or other securities or a combination of the foregoing
pursuant to Section 9.


 


(ff)                                “Period of Restriction” means the
period during which the transfer of Shares of Restricted Stock are subject to
restrictions and therefore, the Shares are subject to a substantial risk of
forfeiture.  Such restrictions may be
based on the passage of time, the achievement of target levels of performance,
or the occurrence of other events as determined by the Administrator.


 


(gg)                          “Plan” means this 2005 Incentive
Plan.


 


(hh)                          “Restricted Stock” means Shares
issued pursuant to a Restricted Stock award under Section 7 of the Plan,
or issued pursuant to the early exercise of an Option.


 


(ii)                                  “Rule 16b-3” means Rule 16b-3
of the Exchange Act or any successor to Rule 16b-3, as in effect when
discretion is being exercised with respect to the Plan.


 


(jj)                                  “Section 16(b)”  means Section 16(b) of the Exchange
Act.


 


(kk)                            “Service Provider” means an
Employee, Director or Consultant.


 


(ll)                                  “Share” means a share of the
Common Stock, as adjusted in accordance with Section 16 of the Plan.


 


(mm)                      “Stock Appreciation Right” or “SAR”
means an Award, granted alone or in connection with an Option, that pursuant to
Section 8 is designated as a SAR.


 


(nn)                          “Subsidiary” means a “subsidiary
corporation,” whether now or hereafter existing, as defined in Section 424(f) of
the Code.


 


3.                                       Stock Subject to the Plan.


 


(a)                                  Stock Subject to the Plan. 
Subject to the provisions of Section 16 of the Plan, the maximum aggregate number of Shares that may be
awarded and sold under the Plan is 9,983,379 Shares (the number of
Shares which have been reserved but not issued under the Company’s 2001 Stock
Incentive Plan (the “2001 Plan”) as of March 28, 2005), plus up to an
aggregate of 5,000,000 Shares that are or would have been returned to the 2001
Plan as a result of termination of options or repurchase of Shares on or after March 28,
2005.  The Shares may be authorized, but unissued, or
reacquired Common Stock.


 


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(b)                                 Full Value Awards. 
Any Shares subject to Options or SARs will be counted against the
numerical limits of this Section 3 as one Share for every Share subject
thereto.  Any Shares subject to
Restricted Stock or Performance Shares with a per share or unit purchase price
lower than 100% of Fair Market Value on the date of grant will be counted
against the numerical limits of this Section 3 as two Shares for every one
Share subject thereto.  To the extent
that a Share that was subject to an Award that counted as two Shares against
the Plan reserve pursuant to the preceding sentence is recycled back into the
Plan under the next paragraph of this Section 3, the Plan will be credited
with two Shares.


 


(c)                                  Lapsed Awards. 
If an Award expires or becomes unexercisable without having been
exercised in full, or, with respect to Restricted Stock, Performance Shares or
Performance Units, is forfeited to or repurchased by the Company, the
unpurchased Shares (or for Awards other than Options and SARs, the forfeited or
repurchased shares) which were subject thereto will become available for future
grant or sale under the Plan (unless the Plan has terminated).  With respect to SARs, Shares actually issued
pursuant to a SAR as well as the Shares that represent payment of the exercise
price will cease to be available under the Plan.  Shares that have actually been issued under
the Plan under any Award will not be returned to the Plan and will not become
available for future distribution under the Plan; provided, however, that if
Shares of Restricted Stock, Performance Shares or Performance Units are
repurchased by the Company or are forfeited to the Company, such Shares will
become available for future grant under the Plan.  Shares used to pay the exercise price of an
Option will not become available for future grant or sale under the Plan.  Shares used to satisfy tax withholding
obligations will not become available for future grant or sale under the
Plan.  To the extent an Award under the
Plan is paid out in cash rather than Shares, such cash payment will not reduce
the number of Shares available for issuance under the Plan.  Notwithstanding the foregoing and, subject to
adjustment provided in Section 16, the maximum number of Shares that may
be issued upon the exercise of Incentive Stock Options will equal the aggregate
Share number stated in Section 3(a), plus, to the extent allowable under Section 422
of the Code, any Shares that become available for issuance under the Plan under
this Section 3(c).


 


(d)                                 Share Reserve. 
The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as will be sufficient to satisfy the
requirements of the Plan.


 


4.                                       Administration of the Plan.


 


(a)                                  Procedure.


 


(i)                                     Multiple Administrative Bodies. 
Different Committees with respect to different groups of Service
Providers may administer the Plan.


 


(ii)                                  Section 162(m). 
To the extent that the Administrator determines it to be desirable to
qualify Awards granted hereunder as “performance-based compensation” within the
meaning of Section 162(m) of the Code, the Plan will be administered
by a Committee of two or more “outside directors” within the meaning of Section 162(m) of
the Code.


 


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(iii)                               Rule 16b-3. 
To the extent desirable to qualify transactions hereunder as exempt
under Rule 16b-3, the transactions contemplated hereunder will be
structured to satisfy the requirements for exemption under Rule 16b-3.


 


(iv)                              Other Administration. 
Other than as provided above, the Plan will be administered by (A) the
Board or (B) a Committee, which committee will be constituted to satisfy
Applicable Laws.


 


(b)                                 Powers of the Administrator. 
Subject to the provisions of the Plan, and in the case of a Committee,
subject to the specific duties delegated by the Board to such Committee, the
Administrator will have the authority, in its discretion:


 


(i)                                     to determine the Fair Market Value;


 


(ii)                                  to select the Service Providers to whom
Awards may be granted hereunder;


 


(iii)                               to determine the terms and conditions,
not inconsistent with the terms of the Plan, of any Award granted hereunder;


 


(iv)                              to construe and interpret the terms of
the Plan and Awards granted pursuant to the Plan;


 


(v)                                 to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating
to sub-plans established for the purpose of satisfying applicable foreign laws;


 


(vi)                              to modify or amend each Award (subject to
Section 21(c) of the
Plan) including, without limitation, the discretionary authority to extend the
post-termination exercisability period of Awards longer than is otherwise
provided for in the Plan. 
Notwithstanding the previous sentence, the Administrator may not modify
or amend an Option or SAR to reduce the exercise price of such Option or SAR
after it has been granted (except for adjustments made pursuant to Section 16)
nor may the Administrator cancel any outstanding Option or SAR and replace it
with a new Option or SAR with a lower exercise price, unless, in either case,
such action is approved by the Company’s stockholders;


 


(vii)                           to authorize any person to execute on
behalf of the Company any instrument required to effect the grant of an Award
previously granted by the Administrator;


 


(viii)                        to allow a Participant to defer the
receipt of the payment of cash or the delivery of Shares that would otherwise
be due to such Participant under an Award pursuant to such procedures as the
Administrator may determine;


 


(ix)                                to grant in addition to the incentives
described in Sections 6, 7, 8 and 9 below, other incentives payable in cash or
Shares under the Plan as determined by the Administrator to be in the best
interests of the Company and subject to any terms and conditions the
Administrator deems advisable; and


 


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(x)                                   to make all other determinations deemed
necessary or advisable for administering the Plan.


 


(c)                                  Effect of Administrator’s Decision. 
The Administrator’s decisions, determinations and interpretations will
be final and binding on all Participants and any other holders of Awards.


 


5.                                       Eligibility. 
Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights,
Performance Units, Performance Shares and such other cash or stock awards as
the Administrator determines may be granted to Service Providers.  Incentive Stock Options may be granted only
to Employees of the Company or any Parent or Subsidiary of the Company.


 


6.                                       Stock Options.


 


(a)                                  Limitations.


 


(i)                                     Each Option will be designated in the
Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option.  However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of the Shares
with respect to which Incentive Stock Options are exercisable for the first time
by the Participant during any calendar year (under all plans of the Company and
any Parent or Subsidiary) exceeds $100,000, such Options will be treated as
Nonstatutory Stock Options.  For purposes
of this Section 6(a), Incentive Stock Options will be taken into account
in the order in which they were granted. 
The Fair Market Value of the Shares will be determined as of the time
the Option with respect to such Shares is granted.


 


(ii)                                  The following limitations will apply to
grants of Options:


 


(1)                                  No Service Provider will be granted, in
any Fiscal Year, Options or SARs to purchase more than 1,000,000 Shares.


 


(2)                                  In connection with his or her initial
service, a Service Provider may be granted Options or SARs to purchase up to an
additional 1,000,000 Shares, which will not count against the limit set forth
in Section 6(a)(2)(ii)(1) above.


 


(3)                                  The foregoing limitations will be
adjusted proportionately in connection with any change in the Company’s
capitalization as described in Section 16.


 


(4)                                  If an Option or SAR is cancelled in the
same Fiscal Year in which it was granted (other than in connection with a
transaction described in Section 16), the cancelled Option or SAR, as
applicable, will be counted against the limits set forth in subsections (1) and
(2) above.  For this purpose, if the
exercise price of an Option or SAR is reduced, the transaction will be treated
as a cancellation of the Option or SAR, as applicable, and the grant of a new
Option or SAR, as applicable.


 


(b)                                 Term of Option. 
The Administrator will determine the term of each Option in its sole
discretion.  In the case of an Incentive
Stock Option, the term will be ten (10) years from the date of grant or
such shorter term as may be provided in the Award Agreement.  Moreover, in the case of an Incentive Stock
Option granted to a Participant who, at the time the Incentive Stock 


 


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Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option will be five (5) years from the date of
grant or such shorter term as may be provided in the Award Agreement.


 


(c)                                  Option Exercise Price and Consideration.


 


(i)                                     Exercise Price. 
The per share exercise price for the Shares to be issued pursuant to
exercise of an Option will be determined by the Administrator, subject to the
following:


 


(1)                                  In the case of an Incentive Stock Option


 


a)                                      granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price will be no less than 110% of
the Fair Market Value per Share on the date of grant.


 


b)                                     granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share
exercise price will be no less than 100% of the Fair Market Value per Share on
the date of grant.


 


(2)                                  In the case of
a Nonstatutory Stock Option, the per Share exercise price will be determined by
the Administrator, but will be no less than 100% of the Fair Market Value per
Share on the date of grant.


 


(3)                                  Notwithstanding
the foregoing, Options may be granted with a per Share exercise price of less
than 100% of the Fair Market Value per Share on the date of grant pursuant to a
transaction described in, and in a manner consistent with, Section 424(a) of
the Code.


 


(ii)                                  Waiting Period and Exercise Dates. 
At the time an Option is granted, the Administrator will fix the period
within which the Option may be exercised and will determine any conditions that
must be satisfied before the Option may be exercised.


 


(iii)                               Form of Consideration. 
The Administrator will determine the acceptable form(s) of
consideration for exercising an Option, including the method of payment, to the
extent permitted by Applicable Laws.


 


(d)                                 Exercise of Option.


 


(i)                                     Procedure for Exercise; Rights as a
Stockholder.  Any Option granted hereunder will be
exercisable according to the terms of the Plan and at such times and under such
conditions as determined by the Administrator and set forth in the Award
Agreement.  An Option may not be
exercised for a fraction of a Share.


 


An Option will be
deemed exercised when the Company receives: (i) notice of exercise (in
such form as the Administrator specify from time to time) from the person
entitled to exercise the Option, and (ii) full payment for the Shares with
respect to which the Option is exercised (together with an applicable withholding
taxes).  No adjustment will be made for a



 


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dividend or other
right for which the record date is prior to the date the Shares are issued,
except as provided in Section 16 of the Plan.


 


(ii)                                  Termination of Relationship as a Service
Provider.  If a Participant ceases to be a Service
Provider, other than upon the Participant’s death, Disability or Misconduct,
the Participant may exercise his or her Option within such period of time as is
specified in the Award Agreement to the extent that the Option is vested on the
date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Award Agreement).  In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for three (3) months
following the Participant’s termination. 
Unless otherwise provided by the Administrator, if on the date of
termination the Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option will revert to the
Plan.  If after termination the
Participant does not exercise his or her Option within the time specified by
the Administrator, the Option will terminate, and the Shares covered by such
Option will revert to the Plan.


 


(iii)                               Disability of Participant. 
If a Participant ceases to be a Service Provider as a result of the
Participant’s Disability, the Participant may exercise his or her Option within
such period of time as is specified in the Award Agreement to the extent the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Award
Agreement).  In the absence of a
specified time in the Award Agreement, the Option will remain exercisable for
twelve (12) months following the Participant’s termination.  Unless otherwise provided by the
Administrator, if on the date of termination the Participant is not vested as
to his or her entire Option, the Shares covered by the unvested portion of the
Option will revert to the Plan.  If after
termination the Participant does not exercise his or her Option within the time
specified herein, the Option will terminate, and the Shares covered by such Option
will revert to the Plan.


 


(iv)                              Death of Participant. 
If a Participant dies while a Service Provider, the Option may be
exercised following the Participant’s death within such period of time as is
specified in the Award Agreement to the extent that the Option is vested on the
date of death (but in no event may the option be exercised later than the
expiration of the term of such Option as set forth in the Award Agreement), by
the Participant’s designated beneficiary, provided such beneficiary has been
designated prior to Participant’s death in a form acceptable to the
Administrator.  If no such beneficiary
has been designated by the Participant, then such Option may be exercised by
the personal representative of the Participant’s estate or by the person(s) to
whom the Option is transferred pursuant to the Participant’s will or in
accordance with the laws of descent and distribution.  In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for twelve (12) months
following Participant’s death.  Unless
otherwise provided by the Administrator, if at the time of death Participant is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will immediately revert to the Plan.  If the Option is not so exercised within the
time specified herein, the Option will terminate, and the Shares covered by
such Option will revert to the Plan.


 


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7.             Restricted Stock.


 


(a)           Grant of Restricted Stock.  Subject to the terms and provisions of the
Plan, the Administrator, at any time and from time to time, may grant Shares of
Restricted Stock to Service Providers in such amounts as the Administrator, in
its sole discretion, will determine.


 


(b)           Restricted Stock Agreement.  Each Award of Restricted Stock will be
evidenced by an Award Agreement that will specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.  Notwithstanding the foregoing, during any
Fiscal Year no Participant will receive more than an aggregate of 500,000
Shares of Restricted Stock; provided, however, that in connection with a Participant’s
initial service as an Employee, an Employee may be granted an aggregate of up
to an additional 500,000 Shares of Restricted Stock.  Unless the Administrator determines
otherwise, Shares of Restricted Stock will be held by the Company as escrow
agent until the restrictions on such Shares have lapsed.


 


(c)           Transferability.  Except as provided in this Section 7,
Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction.


 


(d)           Other Restrictions.  The Administrator, in its sole discretion,
may impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate.


 


(e)           Removal of Restrictions.  Except as otherwise provided in this Section 7,
Shares of Restricted Stock covered by each Restricted Stock grant made under
the Plan will be released from escrow as soon as practicable after the last day
of the Period of Restriction.  The
restrictions will lapse at a rate determined by the Administrator; provided,
however, that Shares of Restricted Stock will vest no earlier than one-third
(1/3rd) of the total
number Shares of Restricted Stock subject to an Award each year from the date
of grant, unless the Administrator determines that the Award is to vest upon
the achievement of a performance objective, provided the period for measuring
performance will be at least twelve months.  After the
grant of Restricted Stock, the Administrator, in its sole discretion, may
reduce or waive any restrictions for such Restricted Stock upon or in
connection with a Change in Control or upon or in connection with a Participant’s
termination of service, including, without limitation, due to death or
Disability.


 


(f)            Voting Rights.  During the Period of Restriction, Service
Providers holding Shares of Restricted Stock granted hereunder may exercise
full voting rights with respect to those Shares, unless the Administrator
determines otherwise.


 


(g)           Dividends and Other Distributions.  During the Period of Restriction, Service
Providers holding Shares of Restricted Stock will be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement. 
If any such dividends or distributions are paid in Shares, the Shares
will be subject to the same restrictions on transferability and forfeitability
as the Shares of Restricted Stock with respect to which they were paid.


 


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(h)           Return of Restricted Stock to
Company.  On the date set forth in
the Award Agreement, the Restricted Stock for which restrictions have not
lapsed will revert to the Company and again will become available for grant
under the Plan.


 


8.             Stock Appreciation Rights.


 


(a)           Grant of SARs.  Subject to the terms and conditions of the
Plan, a SAR may be granted to Service Providers at any time and from time to
time as will be determined by the Administrator, in its sole discretion.


 


(b)           Number of Shares.  The Administrator will have complete
discretion to determine the number of SARs granted to any Participant, provided
that during any Fiscal Year, no Participant will be granted SARs or Options
covering more than 1,000,000 Shares. 
Notwithstanding the foregoing limitation, in connection with a
Participant’s initial service as an Employee, an Employee may be granted SARs
or Options covering up to an additional 1,000,000 Shares.


 


(c)           Exercise Price and Other Terms.  The Administrator, subject to the provisions
of the Plan, will have complete discretion to determine the terms and
conditions of SARs granted under the Plan, provided, however, that the exercise
price will be not less than one hundred percent (100%) of the Fair Market Value
of a Share on the date of grant.


 


(d)           SAR Agreement.  Each SAR grant will be evidenced by an Award
Agreement that will specify the exercise price, the term of the SAR, the
conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.


 


(e)           Expiration of SARs.  A SAR granted under the Plan will expire upon
the date determined by the Administrator, in its sole discretion, and set forth
in the Award Agreement.  Notwithstanding
the foregoing, the rules of Section 6(d) also will apply to
SARs.


 


(f)            Payment of SAR Amount.  Upon exercise of a SAR, a Participant will be
entitled to receive payment from the Company in an amount determined by
multiplying:


 


(i)            The difference between the Fair
Market Value of a Share on the date of exercise over the exercise price; times


 


(ii)           The number of Shares with respect to
which the SAR is exercised.


 


At the discretion
of the Administrator, the payment upon SAR exercise may be in cash, in Shares
of equivalent value, or in some combination thereof.


 


9.             Performance Units and Performance Shares.


 


(a)           Grant of Performance Units/Shares.  Performance Units and Performance Shares may
be granted to Service Providers at any time and from time to time, as will be
determined by the Administrator, in its sole discretion.  The Administrator will have complete
discretion in determining the number of Performance Units/Shares granted to
each Participant provided that during any Fiscal Year, (a) no Participant
will receive Performance Units having an initial value greater than $5,000,000,
and (b) no Participant will receive more than 500,000 Performance
Shares.  


 


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Notwithstanding the
foregoing limitation, in connection with a Participant’s initial service as an
Employee, an Employee may be granted up to an additional 500,000 Performance
Shares.


 


(b)           Value of Performance Units/Shares.  Each Performance Unit will have an initial
value that is established by the Administrator on or before the date of
grant.  Each Performance Share will have
an initial value equal to the Fair Market Value of a Share on the date of
grant.


 


(c)           Performance Objectives and Other
Terms.  The Administrator will set
performance objectives or other vesting provisions (including, without
limitation, continued status as a Service Provider) in its discretion which,
depending on the extent to which they are met, will determine the number or
value of Performance Units/Shares that will be paid out to the Participant
..  Each Award of Performance Units/Shares
will be evidenced by an Award Agreement that will specify the Performance
Period, and such other terms and conditions as the Administrator, in its sole
discretion, will determine; provided, however, that Awards of
Performance Units/Shares will vest no earlier than one-third (1/3) of the total
number units or Shares subject to such Award each year from the date of grant,
unless the Administrator determines that the Award is to vest upon the
achievement of a performance objective, provided the period for measuring
performance will be at least twelve months.


 


(d)           Earning of Performance
Units/Shares.  After the applicable
Performance Period has ended, the holder of Performance Units/Shares will be
entitled to receive a payout of the number of Performance Units/Shares earned by
the Participant over the Performance Period, to be determined as a function of
the extent to which the corresponding performance objectives or other vesting
provisions have been achieved.  After the
grant of a Performance Unit/Share, the Administrator, in its sole discretion,
may reduce or waive any performance objectives or other vesting provisions for
such Performance Unit/Share upon or in connection with a Change in Control or
upon or in connection with a Participant’s termination of service, including,
without limitation, due to death or Disability.


 


(e)           Form and Timing of Payment of
Performance Units/Shares.  Payment of
earned Performance Units/Shares will be made as soon as practicable after the
expiration of the applicable Performance Period.  The Administrator, in its sole discretion,
may pay earned Performance Units/Shares in the form of cash, in Shares (which
have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period) or
in a combination thereof.


 


(f)            Cancellation of Performance
Units/Shares.  On the date set forth
in the Award Agreement, all unearned or unvested Performance Units/Shares will
be forfeited to the Company, and again will be available for grant under the
Plan.


 


10.           Other Cash or Stock Awards.  In addition to the incentives described in
Sections 6 through 9 above, the Administrator may grant other incentives
payable in cash or Shares under the Plan as it determines to be in the best
interests of the Company and subject to such other terms and conditions as it
deems appropriate, provided that in any Fiscal Year, a Participant will not
receive a cash Award under this Section in excess of $5,000,000.


 


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11.           Performance Goals.  Awards of Restricted Stock, Performance
Shares and Performance Units and other incentives under the Plan may be made
subject to the attainment of performance goals relating to one or more business
criteria within the meaning of Section 162(m) of the Code and may
provide for a targeted level or levels of achievement (“Performance Goals”)
including cash flow; cash position; earnings before interest and taxes;
earnings before interest, taxes, depreciation and amortization; earnings per
Share; economic profit; economic value added; equity or stockholder’s equity;
market share; net income; net profit; net sales; operating earnings; operating
income; profit before tax; ratio of debt to debt plus equity; ratio of
operating earnings to capital spending; sales growth; return on net assets; or
total return to stockholders.  Any
Performance Goals may be used to measure the performance of the Company as a
whole or a business unit of the Company and may be measured relative to a peer
group or index.  The Performance Goals for
a Participant will be determined by the Administrator based on the Company’s
tactical and strategic business objectives, which may differ from Participant
to Participant and from Award to Award. 
Prior to the Determination Date, the Administrator will determine
whether to make any adjustments to the calculation of any Performance Goal with
respect to any Participant for any significant or extraordinary events
affecting the Company.  In all other
respects, Performance Goals will be calculated in accordance with the Company’s
financial statements, generally accepted accounting principles, or under a
methodology established by the Administrator prior to the issuance of an Award,
which is consistently applied and identified in the financial statements,
including footnotes, or the management discussion and analysis section of the
Company’s annual report.


 


12.           Leaves of Absence.  Unless the Administrator provides otherwise,
vesting of Awards granted hereunder will be suspended during any unpaid leave
of absence.  A Service Provider will not
cease to be an Employee in the case of (i) any leave of absence approved
by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, or any Subsidiary.  For purposes of Incentive Stock Options, no
such leave may exceed ninety (90) days, unless reemployment upon expiration of
such leave is guaranteed by statute or contract.  If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, then three (3) months
following the 91st day of such leave any Incentive Stock Option held by the
Participant will cease to be treated as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option.


 


13.           Transferability of Awards.  Unless determined otherwise by the
Administrator, an Award may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Participant, only by the Participant.  If
the Administrator makes an Award transferable, such Award will contain such
additional terms and conditions as the Administrator deems appropriate.


 


14.           Termination of Relationship as a
Service Provider due to Misconduct. 
If a Participant ceases to be a Service Provider due to his or her
Misconduct or should a Participant engage in Misconduct while holding an
outstanding Award, then all Awards that the Participant then holds will immediately
terminate and the Participant will have no further rights with respect to such
Awards.  Upon such a termination, the
Shares covered by the Awards that so terminate will revert to the Plan.


 


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15.           Awards to Outside Directors.


 


(a)           General.  Outside Directors will be entitled to receive
all types of Awards under this Plan, including discretionary Awards not covered
under this Section 15.  All grants
of Options and Restricted Stock Units to Outside Directors pursuant to this Section will
be automatic and nondiscretionary, except as otherwise provided herein, and
will be made in accordance with the following provisions:


 


(b)           Options.


 


(i)            First Option.  Each Outside Director who becomes an Outside
Director after March 7, 2007 will be automatically granted a Nonstatutory
Stock Option to purchase 30,000 Shares (the “First Option”) on the date on
which such person first becomes an Outside Director, whether through election
by the stockholders of the Company or appointment by the Board to fill a
vacancy; provided, however, that an Inside Director who ceases to be an Inside
Director but who remains a Director will not receive a First Option.


 


(ii)           Subsequent Option.  Each Outside Director will be automatically
granted a Nonstatutory Stock Option to purchase 10,000 Shares (a “Subsequent
Option”) on the date of each annual meeting of the Company’s stockholders
following March 7, 2007; provided that he or she is then an Outside
Director and, provided  further, that as of such date, he or she
will have served on the Board for at least the preceding six (6) months.


 


(iii)          Terms of Options. The terms of
First Options and Subsequent Options granted hereunder will be as follows:


 


(1)           the term of each Option will be ten (10) years.


 


(2)           the exercise price per Share will be
100% of the Fair Market Value per Share on the date of grant.


 


(3)           twenty-five percent (25%) of the
Shares subject to each First Option will vest on each anniversary of the date
of grant of such Option, so that 100% of the Shares subject to such Option will
be vested four (4) years from the grant date, subject to Optionee
continuing to be a Director through such dates. 
One hundred percent (100%) of the Shares subject to each Subsequent
Option will vest on the earlier of (i) the one-year anniversary of the
date of grant and (ii) the date of the next annual meeting of the Company’s
stockholders following the date of grant, subject to the Optionee continuing to
be a Director through such date.


 


(4)           each Option granted under this Section 15
will have such other terms and conditions as the Administrator determines.


 


(c)           Restricted Stock Units.


 


(i)            Annual Restricted Stock Units.  Each Outside Director will be automatically
granted an Award of 3,000 Restricted Stock Units (“Annual Restricted Stock
Units”) on the date of each annual meeting of the Company’s stockholders
following March 7, 2007; 


 


14

















 


provided that he or she is then an Outside
Director and, provided  further, that as of such date, he or she
will have served on the Board for at least the preceding six (6) months.


 


(ii)           Terms of Restricted Stock Units.
The terms of Annual Restricted Stock Units granted hereunder will be as
follows:


 


(1)           one hundred percent (100%) of the Annual
Restricted Stock Units will vest on the earlier of (i) the one-year
anniversary of the date of grant and (ii) the date of the next annual
meeting of the Company’s stockholders following the date of grant, subject to
the Optionee continuing to be a Director through such date.


 


(2)           each Restricted Stock Unit will
represent the right to receive a Share and will be settled in Common Stock upon
vesting.


 


(3)           Awards of Restricted Stock Units
granted under this Section 15 will have such other terms and conditions as
the Administrator determines.


 


(d)           Adjustments.  The Administrator in its discretion may
change and otherwise revise the terms of Awards granted under this Section 15,
including, without limitation, the number of Shares, exercise prices and other
terms thereof, for Awards granted on or after the date the Administrator
determines to make any such change or revision.


 


16.           Adjustments; Dissolution or
Liquidation; Merger or Change in Control.


 


(a)           Adjustments.  In the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Shares or other securities of the Company, or other change in the corporate
structure of the Company affecting the Shares occurs, the Administrator, in
order to prevent diminution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, may (in its sole
discretion) adjust the number and class of Shares that may be delivered under
the Plan and/or the number, class, and price of Shares covered by each
outstanding Award, and the numerical Share and unit limits set forth in Sections 3,
6, 7, 8, 9 and 15.


 


(b)           Dissolution or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify each Participant as
soon as practicable prior to the effective date of such proposed transaction.  To the extent it has not been previously
exercised, an Award will terminate immediately prior to the consummation of
such proposed action.


 


(c)           Change in Control.  In the event of a Change in Control, each
outstanding Award will be assumed or an equivalent option or right substituted
by the successor corporation or a Parent or Subsidiary of the successor
corporation.  In the event that the
successor corporation refuses to assume or substitute for the Award, the Participant
will fully vest in and have the right to exercise all of his or her outstanding
Options and Stock Appreciation Rights, including Shares as to which such Awards
would not otherwise be vested or exercisable, all restrictions on Restricted
Stock will lapse, and, with respect to Performance Shares and Performance
Units, all Performance Goals or other vesting criteria will be deemed achieved
at target levels and all other terms and conditions met.  In addition, if an Option or Stock
Appreciation Right becomes fully vested and exercisable in lieu of 


 


15

















 


assumption or
substitution in the event of a Change in Control, the Administrator will notify
the Participant in writing or electronically that the Option or Stock
Appreciation Right will be fully vested and exercisable for a period of time
determined by the Administrator in its sole discretion, and the Option or Stock
Appreciation Right will terminate upon the expiration of such period.


 


With respect to Awards granted to Outside Directors that are assumed or
substituted for, if on the date of or following such assumption or substitution
the Participant’s status as a Director or a director of the successor
corporation, as applicable, is terminated other than upon a voluntary
resignation by the Participant, then the Participant will fully vest in and
have the right to exercise Options and/or Stock Appreciation Rights as to all
of the Shares subject thereto, including Shares as to which such Awards would
not otherwise be vested or exercisable, all restrictions on Restricted Stock
will lapse, and, with respect to Performance Shares and Performance Units, all
Performance Goals or other vesting criteria will be deemed achieved at target
levels and all other terms and conditions met.


 


For the purposes
of this subsection (c), an Award will be considered assumed if, following the
Change in Control, the Award confers the right to purchase or receive, for each
Share subject to the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, or other securities or property) or, in the
case of a Stock Appreciation Right upon the exercise of which the Administrator
determines to pay cash or a Performance Share or Performance Unit which the
Administrator can determine to pay in cash, the fair market value of the
consideration received in the merger or Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares); provided, however,
that if such consideration received in the Change in Control is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of an Option or Stock Appreciation Right or upon
the payout of a Performance Share or Performance Unit, for each Share subject
to such Award (or in the case of Performance Units, the number of implied
shares determined by dividing the value of the Performance Units by the per
share consideration received by holders of Common Stock in the Change in
Control), to be solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration received by holders
of Common Stock in the Change in Control.


 


Notwithstanding
anything in this Section 16(c) to the contrary, an Award that vests,
is earned or paid-out upon the satisfaction of one or more Performance Goals
will not be considered assumed if the Company or its successor modifies any of
such Performance Goals without the Participant’s consent; provided, however, a
modification to such Performance Goals only to reflect the successor
corporation’s post-Change in Control corporate structure will not be deemed to
invalidate an otherwise valid Award assumption.


 


17.           Tax Withholding


 


(a)           Withholding Requirements.  Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company will have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, 


 


16

















 


state, local, foreign or
other taxes (including the Participant’s FICA obligation) required to be
withheld with respect to such Award (or exercise thereof).


 


(b)           Withholding Arrangements.  The Administrator, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part by (a) paying
cash, (b) electing to have the Company withhold otherwise deliverable cash
or Shares having a Fair Market Value equal to the amount required to be
withheld, (c) delivering to the Company already-owned Shares having a Fair
Market Value equal to the amount required to be withheld, or (d) selling
a sufficient number of Shares otherwise deliverable to the Participant through
such means as the Administrator may determine in its sole discretion (whether
through a broker or otherwise) equal to the amount required to be withheld. 
The amount of the withholding requirement will be deemed to include any
amount which the Administrator agrees may be withheld at the time the election
is made, not to exceed the amount determined by using the maximum federal,
state or local marginal income tax rates applicable to the Participant with
respect to the Award on the date that the amount of tax to be withheld is to be
determined.  The Fair Market Value of the
Shares to be withheld or delivered will be determined as of the date that the
taxes are required to be withheld.


 


18.           No Effect on Employment or Service.  Neither the Plan nor any Award will confer
upon a Participant any right with respect to continuing the Participant’s
relationship as a Service Provider with the Company, nor will they interfere in
any way with the Participant’s right or the Company’s right to terminate such
relationship at any time, with or without cause, to the extent permitted by
Applicable Laws.


 


19.           Date of Grant.  The date of grant of an Award will be, for
all purposes, the date on which the Administrator makes the determination
granting such Award, or such other later date as is determined by the
Administrator.  Notice of the
determination will be provided to each Participant within a reasonable time
after the date of such grant.


 


20.           Term of Plan.  Subject to Section 24  of the Plan, the Plan will become effective upon its
adoption by the Board.  It will continue
in effect for a term ending on December 31, 2010 unless terminated earlier
under Section 21  of the Plan.


 


21.           Amendment and Termination of the
Plan.


 


(a)           Amendment and Termination.  The Administrator may at any time amend, alter,
suspend or terminate the Plan.


 


(b)           Stockholder Approval.  The Company will obtain stockholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.  Without limiting the
foregoing sentence, the number of Shares available under the Plan pursuant to Section 3
herein may not be increased without approval of the Company’s stockholders,
except as provided in Section 3.


 


(c)           Effect of Amendment or Termination.  No amendment, alteration, suspension or
termination of the Plan will impair the rights of any Participant, unless
mutually agreed otherwise between the Participant and the Administrator, which
agreement must be in writing and signed by the Participant and the
Company.  Termination of the Plan will
not affect the Administrator’s ability 


 


17

















 


to exercise the powers
granted to it hereunder with respect to Awards granted under the Plan prior to
the date of such termination.


 


22.           Conditions Upon Issuance of Shares.


 


(a)           Legal Compliance.  Shares will not be issued pursuant to the
exercise of an Award unless the exercise of such Award and the issuance and
delivery of such Shares will comply with Applicable Laws and will be further
subject to the approval of counsel for the Company with respect to such
compliance.


 


(b)           Investment Representations.  As a condition to the exercise of an Award,
the Company may require the person exercising such Award to represent and
warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute
such Shares if, in the opinion of counsel for the Company, such a
representation is required.


 


23.           Inability to Obtain Authority.  The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, will relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite
authority will not have been obtained.


 


24.           Stockholder Approval.  The Plan will be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan
is adopted.  Such stockholder approval
will be obtained in the manner and to the degree required under Applicable
Laws.


 


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