EXHIBIT
10.1


 


VEECO INSTRUMENTS INC.


2010 STOCK INCENTIVE
PLAN


 


1.             Purposes of the Plan.  The purposes of this Plan are to attract and
retain the best available personnel, to provide additional incentives to
Employees, Directors and Consultants and to promote the success of the Company’s
business.


 


2.             Definitions.  The following definitions shall apply as used
herein and in the individual Award Agreements except as defined otherwise in an
individual Award Agreement.  In the event
a term is separately defined in an individual Award Agreement, such definition
shall supersede the definition contained in this Section 2.


 


“Administrator”
means the Board or any of the Committees appointed to administer the Plan.  Subject to further designation by the Board,
the Compensation Committee of the Board shall be the Administrator.


 


“Applicable
Laws” means the legal requirements relating to the Plan and the Awards
under applicable provisions of federal securities laws, state corporate and
securities laws, the Code, the rules of any applicable stock exchange or
national market system, and the rules of any non-U.S. jurisdiction
applicable to Awards granted to residents therein.


 


“Assumed”
means that pursuant to a Corporate Transaction either (i) the Award is
expressly affirmed by the Company, or (ii) the contractual obligations
represented by the Award are expressly assumed (and not simply by operation of
law) by the successor entity or its Parent in connection with the Corporate
Transaction with appropriate adjustments to the number and type of securities
of the successor entity or its Parent subject to the Award and the exercise or
purchase price thereof which at least preserves the compensation element of the
Award existing at the time of the Corporate Transaction as determined in
accordance with the instruments evidencing the agreement to assume the Award.


 


“Award”
means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock,
Restricted Stock Unit or other right or benefit under the Plan.


 


“Award
Agreement” means the written agreement or notice evidencing the grant of an
Award by the Company, including the terms and conditions governing the Award
and any amendments to any of them.


 


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


 


“Cause”
means, with respect to the termination by the Company or a Related Entity of
the Grantee’s Continuous Service, that such termination is for “Cause” as such
term (or word of like import) is expressly defined in a then-effective written
agreement between the Grantee and the Company or such Related Entity, or in the
absence of such then-effective written agreement and definition, is based on,
in the determination of the Administrator, the Grantee’s:  (i) performance of any act or failure to
perform any act in bad faith and to the detriment of the Company or a Related
Entity; (ii) dishonesty, intentional misconduct or material breach of any
agreement with the Company or a Related Entity; or (iii) commission of a
crime involving dishonesty, breach of trust, or physical or emotional harm to
any person; provided, however, that with regard to any agreement that defines “Cause”
on the occurrence of or in connection with a Corporate Transaction, such
definition of “Cause” shall not apply until a Corporate Transaction actually
occurs.


 


“Code”
means the Internal Revenue Code of 1986, as amended.


 

















 


“Committee”
means the Compensation Committee of the Board or any other committee composed
of members of the Board appointed by the Board to administer the Plan.


 


“Common
Stock” means the common stock of the Company.


 


“Company”
means Veeco Instruments Inc., a Delaware corporation, or any successor entity
that adopts the Plan in connection with a Corporate Transaction.


 


“Consultant”
means any person (other than an Employee or a Director, solely with respect to
rendering services in such person’s capacity as a Director) who is engaged by
the Company or any Related Entity to render consulting or advisory services to
the Company or such Related Entity.


 


“Continuous
Service” means that the provision of services to the Company or a Related
Entity in any capacity of Employee, Director or Consultant is not interrupted
or terminated.  In jurisdictions
requiring notice in advance of an effective termination as an Employee,
Director or Consultant, Continuous Service shall be deemed terminated upon the
actual cessation of providing services to the Company or a Related Entity
notwithstanding any required notice period that must be fulfilled before a
termination as an Employee, Director or Consultant can be effective under
Applicable Laws.  A Grantee’s Continuous
Service shall be deemed to have terminated either upon an actual termination of
Continuous Service or upon the entity for which the Grantee provides services
ceasing to be a Related Entity. 
Continuous Service shall not be considered interrupted in the case of (i) any
approved leave of absence, (ii) transfers among the Company, any Related
Entity, or any successor, in any capacity of Employee, Director or
Consultant.  Except as otherwise provided
in the Award Agreement or other agreement, any change in status from Consultant
to Employee shall not cause Continuous Service to be interrupted, but change in
status from Employment to Consultant shall cause Continuous Service to be
interrupted.  Notwithstanding the
foregoing, whether a change in status causes a “separation from service” under
Code Section 409A shall be determined under rules applicable under
Code Section 409A.  An approved
leave of absence shall include sick leave, military leave, or any other authorized
personal leave.  For purposes of each
Incentive Stock Option granted under the Plan, if such leave exceeds three (3) months,
and reemployment upon expiration of such leave is not guaranteed by statute or
contract, then the Incentive Stock Option shall be treated as a Non-Qualified
Stock Option on the day three (3) months and one (1) day following
the expiration of such three (3) month period.


 


“Corporate
Transaction” means any of the following transactions, provided, however,
that the Administrator shall determine under parts (i) and (v) whether
multiple transactions are related, and its determination shall be final,
binding and conclusive:


 


(i)            the acquisition
by any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act (each, a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) in a single transaction or a series of related transactions of 30% or more
(on a fully diluted basis) of either (A) the then outstanding shares of
Common Stock, taking into account as outstanding for this purpose such Common
Stock issuable upon the exercise of options or warrants, the conversion of
convertible stock or debt, and the exercise of any similar right to acquire such
common stock (the “Outstanding Company Common Stock”) or (B) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote 


 


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generally
in the election of directors (the “Outstanding Company Voting Securities”);
provided, however that for purposes of the Plan, the following
acquisitions shall not constitute a Corporate Transaction: (I) any
acquisition by the Company, (II) any acquisition by any employee benefit
plan sponsored or maintained by the Company or any Related Entity, (III) any
acquisition by any Person which complies with clauses (A), (B) and (C) of
paragraph (v) of this definition below, or (IV) in respect of an
Award held by a particular Grantee, any acquisition by the Grantee or any “affiliate”
(within the meaning of Rule 405 under the Securities Act of 1933, as
amended) of the Grantee.  Persons
described in clauses (I), (II), and (IV) of the previous sentence are
referred to hereafter as “Excluded Persons”;


 


(ii)           Individuals who, on the date
hereof constitute the Board (the “Incumbent Directors”) cease for any
reason to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to the date hereof, whose election or
nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the corporation in which such person is named as a
nominee for director, without written objection to such nomination) shall be
deemed to be an Incumbent Director; provided, however that no
individual initially elected or nominated as a director of the corporation as a
result of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board shall be deemed to
be an Incumbent Director;


 


(iii)          the dissolution or
liquidation of the Company;


 


(iv)          the sale of all or
substantially all of the business or assets of the Company; or


 


(v)           the
consummation of a merger, consolidation, statutory share exchange or similar
form of corporate transaction involving the Company that requires the approval
of the Company’s stockholders, whether for such transaction or the issuance of
securities in the transaction (a “Business Combination”), unless
immediately following such Business Combination: (A) more than 50% of the
total voting power of (x) the corporation resulting from such Business
Combination (the “Surviving Corporation”), or (y) if applicable,
the ultimate parent corporation that directly or indirectly has beneficial
ownership of sufficient voting securities eligible to elect a majority of the
directors of the Surviving Corporation (the “Parent Corporation”), is
represented by the Outstanding Company Voting Securities that were outstanding
immediately prior to such Business 


 


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Combination
(or, if applicable, is represented by shares into which the Outstanding Company
Voting Securities were converted pursuant to such Business Combination), (B) no
Person (other than any Excluded Person), is or becomes the beneficial owner,
directly or indirectly, of 30% or more of the total voting power of the
outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation)
and (C) at least a majority of the members of the board of directors of
the Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) following the consummation of the Business Combination were
Incumbent Directors.


 


“Covered
Employee” means an Employee who is a “covered employee” under Section 162(m)(3) of
the Code.


 


“Director”
means a member of the Board or the board of directors of any Related Entity.


 


“Disability”
means “disability” as defined under the long-term disability policy of the
Company or the Related Entity to which the Grantee provides services regardless
of whether the Grantee is covered by such policy.  If the Company or the Related Entity to which
the Grantee provides service does not have a long-term disability plan in
place, “Disability” means that a Grantee is unable to carry out the
responsibilities and functions of the position held by the Grantee by reason of
any medically determinable physical or mental impairment for a period of not
less than ninety (90) consecutive days. 
A Grantee will not be considered to have incurred a Disability unless he
or she furnishes proof of such impairment sufficient to satisfy the
Administrator in its discretion.


 


“Dividend
Equivalent Right” means a right entitling the Grantee to compensation
measured by dividends paid with respect to Common Stock.


 


“Employee”
means any person, including an Officer or
Director, who is in the employ of the Company or any Related Entity, subject to
the control and direction of the Company or any Related Entity as to both the
work to be performed and the manner and method of performance.  The payment of director’s fees by the
Company or a Related Entity shall not be sufficient to constitute “employment”
by the Company.


 


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


 


“Fair
Market Value” means, as of any date, the value of Common Stock determined
as follows:


 


(i)            If the Common
Stock is listed on one or more established stock exchanges or national market
systems, including without limitation The NASDAQ Global Select Market, The
NASDAQ Global Market or The NASDAQ Capital Market of The NASDAQ Stock Market
LLC, its Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on the principal exchange
or 


 


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system
on which the Common Stock is listed (as determined by the Administrator) on the
last trading day prior to the date of determination (or, if no closing sales
price or closing bid was reported on that date, as applicable, on the last
trading date such closing sales price or closing bid was reported), as reported
on www.wsj.com or such other source as the Administrator deems reliable;


 


(ii)           In the absence of an
established market for the Common Stock of the type described in (i) above,
if the Common Stock is regularly quoted on an automated quotation system
(including the OTC Bulletin Board) or by a recognized securities dealer, its
Fair Market Value shall be the closing sales price for such stock as quoted on
such system or by such securities dealer on the last trading day prior to the
date of determination, but if selling prices are not reported, the Fair Market
Value of a share of Common Stock shall be the mean between the high bid and low
asked prices for the Common Stock on the date of determination (or, if no such
prices were reported on that date, on the last date such prices were reported),
as reported on www.wsj.com or such other source as the Administrator deems
reliable; or


 


(iii)          In the absence of an established market for the Common Stock of the type
described in (i) and (ii), above, the Fair Market Value thereof shall be
determined by the Administrator in good faith.


 


“Grantee”
means an Employee, Director or Consultant who receives an Award under the Plan.


 


“Incentive
Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code.


 


“Non-Qualified
Stock Option” means an Option not intended to qualify as an Incentive Stock
Option.


 


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


 


“Option”
means an option to purchase Shares pursuant to an Award Agreement granted under
the Plan.


 


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


 


“Performance-Based
Compensation” means compensation qualifying as “performance-based
compensation” under Section 162(m) of the Code.


 


“Plan”
means this 2010 Stock Incentive Plan.


 


“Related
Entity” means any Parent or Subsidiary of the Company.


 


“Replaced” means that pursuant to a Corporate
Transaction the Award is replaced with
a comparable stock award or a cash incentive program of the Company, the
successor entity (if applicable) or Parent of either of them which preserves
the compensation element of such Award existing at the time 


 


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of the Corporate Transaction and provides for subsequent
payout in accordance with the same (or a more favorable) vesting schedule
applicable to such Award.  The
determination of Award comparability shall be made by the Administrator and its
determination shall be final, binding and conclusive.


 


“Restricted
Stock” means Shares issued under the Plan to the Grantee for such
consideration, if any, and subject to such restrictions on transfer, rights of
first refusal, repurchase provisions, forfeiture provisions, and other terms
and conditions as established by the Administrator.


 


“Restricted
Stock Units” means an Award which may be earned in whole or in part upon
the passage of time or the attainment of performance criteria established by
the Administrator and which may be settled for cash, Shares or other securities
or a combination of cash, Shares or other securities as established by the
Administrator.


 


“Rule 16b-3”
means Rule 16b-3 promulgated under the Exchange Act or any successor
thereto.


 


“SAR”
means a stock appreciation right entitling the Grantee to Shares or cash compensation,
as established by the Administrator, measured by appreciation in the value of
Common Stock.


 


“Share”
means a share of the Common Stock.


 


“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)           Subject to the provisions of
Section 10, below, the maximum aggregate number of Shares which may be
issued pursuant to all Awards is 3,500,000 Shares; provided, however, that the
maximum aggregate number of Shares that may be issued pursuant to Incentive
Stock Options is 3,000,000 Shares. 
Notwithstanding the foregoing, any Shares issued in connection with
Awards other than Options and SARs shall be counted against the limit set forth
herein as one and one-half (1.5) Shares for every one (1) Share issued in
connection with such Award (and shall be counted as one and one-half (1.5)
Shares for every one (1) Share returned or deemed not have been issued
from the Plan pursuant to Section 3(b) below in connection with
Awards other than Options and SARs).  The
Shares to be issued pursuant to Awards may be authorized, but unissued, or
reacquired Common Stock.


 


(b)           Any Shares covered by an
Award (or portion of an Award) which is forfeited, canceled or expires (whether
voluntarily or involuntarily) shall again be available for grant and issuance
pursuant to Awards under the Plan. 
Shares that actually have been issued under the Plan pursuant to an
Award shall not be returned to the Plan and shall not become available for
future issuance under the Plan, except that if unvested Shares are forfeited,
or repurchased by the Company at the lower of their original purchase price or
their Fair Market Value at the time of repurchase, such Shares shall become
available for future grant under the Plan. 
Notwithstanding anything to the contrary contained herein: (i) Shares
tendered or withheld in payment of an Option exercise price shall not be
returned to the Plan and shall not become available for future issuance under
the Plan; (ii) Shares withheld by the Company to satisfy any tax
withholding obligation shall not be returned to the Plan and shall not become
available for future issuance under the Plan; and (iii) all Shares covered
by the portion of an SAR that is exercised (whether or not Shares are actually
issued to the Grantee upon exercise of the SAR) shall be considered issued
pursuant to the Plan.


 


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4.                                       Administration of the Plan.


 


(a)                                  Plan Administrator.


 


(i)                                     Administration
with Respect to Directors and Officers.  With respect to grants of Awards to Directors
or Employees who are also Officers or Directors of the Company, the Plan shall
be administered by (A) the Board or (B) a Committee designated by the
Board, which Committee shall be constituted in such a manner as to satisfy the
Applicable Laws and to permit such grants and related transactions under the
Plan to be exempt from Section 16(b) of the Exchange Act in
accordance with Rule 16b-3.  Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board.


 


(ii)                                  Administration
With Respect to Consultants and Other Employees.  With respect to grants of Awards to Employees
or Consultants who are neither Directors nor Officers of the Company, the Plan
shall be administered by (A) the Board or (B) a Committee designated
by the Board, which Committee shall be constituted in such a manner as to
satisfy the Applicable Laws.  Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. 
The Board may authorize one or more Officers to grant such Awards and
may limit such authority as the Board determines from time to time.


 


(iii)                               Administration
With Respect to Covered Employees.  Notwithstanding the foregoing, grants of
Awards to any Covered Employee intended to qualify as Performance-Based
Compensation shall be made only by a Committee (or subcommittee of a Committee)
which is comprised solely of two or more Directors eligible to serve on a
committee making Awards qualifying as Performance-Based Compensation.  In the case of such Awards granted to Covered
Employees, references to the “Administrator” or to a “Committee” shall be
deemed to be references to such Committee or subcommittee.


 


(iv)                              Administration
Errors.  In the event an Award is
granted in a manner inconsistent with the provisions of this
subsection (a), such Award shall be presumptively valid as of its grant
date to the extent permitted by the Applicable Laws.


 


(b)                                 Powers of the
Administrator.  Subject to
Applicable Laws and the provisions of the Plan (including any other powers
given to the Administrator hereunder), and except as otherwise provided by the
Board, the Administrator shall have the authority, in its discretion:


 


(i)                                     to select the
Employees, Directors and Consultants to whom Awards may be granted from time to
time hereunder;


 


(ii)                                  to determine
whether and to what extent Awards are granted hereunder;


 


(iii)                               to determine
the number of Shares or the amount of other consideration to be covered by each
Award granted hereunder;


 


(iv)                              to approve
forms of Award Agreements for use under the Plan;


 


(v)                                 to determine
the terms and conditions of any Award granted hereunder;


 


(vi)                              to amend the
terms of any outstanding Award granted under the Plan, provided that (A) any
amendment that would adversely affect the Grantee’s rights under an outstanding
Award shall not be made without the Grantee’s written consent, provided,
however, that an amendment or modification that may cause an Incentive
Stock Option to become a Non-Qualified Stock Option shall not be treated as
adversely affecting the rights of the Grantee, (B) the reduction of the
exercise price of any Option awarded under the Plan and the base appreciation
amount of any SAR awarded under the Plan 


 


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shall
be subject to stockholder approval, and (C) canceling an Option or SAR at
a time when its exercise price or base appreciation amount (as applicable)
exceeds the Fair Market Value of the underlying Shares, in exchange for another
Option, SAR, Restricted Stock, or other Award shall be subject to stockholder
approval, unless the cancellation and exchange occurs in connection with a
Corporate Transaction.  Notwithstanding
the foregoing, canceling an Option or SAR in exchange for another Option, SAR,
Restricted Stock, or other Award with an exercise price, purchase price or base
appreciation amount (as applicable) that is equal to or greater than the
exercise price or base appreciation amount (as applicable) of the original
Option or SAR shall not be subject to stockholder approval;


 


(vii)                           to construe and
interpret the terms of the Plan and Awards, including without limitation, any
Award Agreement, granted pursuant to the  Plan;


 


(viii)                        to grant Awards
to Employees, Directors and Consultants employed outside the United States on
such terms and conditions different from those specified in the Plan as may, in
the judgment of the Administrator, be necessary or desirable to further the
purpose of the Plan; and


 


(ix)                                to take such
other action, not inconsistent with the terms of the Plan, as the Administrator
deems appropriate.


 


The
express grant in the Plan of any specific power to the Administrator shall not
be construed as limiting any power or authority of the Administrator; provided
that the Administrator may not exercise any right or power reserved to the
Board.  Any decision made, or action
taken, by the Administrator or in connection with the administration of this
Plan shall be final, conclusive and binding on all persons having an interest
in the Plan.


 


(c)                                  Indemnification.  In addition to such other rights of
indemnification as they may have as members of the Board or as Officers or
Employees of the Company or a Related Entity, members of the Board and any
Officers or Employees of the Company or a Related Entity to whom authority to
act for the Board, the Administrator or the Company is delegated shall be
defended and indemnified by the Company to the extent permitted by law on an
after-tax basis against all reasonable expenses, including attorneys’ fees,
actually and necessarily incurred in connection with the defense of any claim,
investigation, action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any Award
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by the Company) or paid by them in
satisfaction of a judgment in any such claim, investigation, action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such claim, investigation, action, suit or proceeding that such person is
liable for gross negligence, bad faith or intentional misconduct; provided,
however, that within thirty (30) days after the institution of such claim,
investigation, action, suit or proceeding, such person shall offer to the
Company, in writing, the opportunity at the Company’s expense to defend the
same.  To the extent required by
Applicable Laws, the payment of expenses incurred in advance of the final
disposition of a proceeding shall be made only upon delivery to the Company of
an undertaking by or on behalf of the individual to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Company.


 


5.                                       Eligibility.  Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.  Incentive Stock Options may be granted only
to Employees of the Company or a Parent or a Subsidiary of the Company.  An Employee, Director or Consultant who has
been granted an Award may, if otherwise eligible, be granted additional
Awards.  Awards may be granted to such 


 


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Employees,
Directors or Consultants who are residing in non-U.S. jurisdictions as the
Administrator may determine from time to time.


 


6.                                       Terms and
Conditions of Awards.


 


(a)                                  Types of Awards. The
Administrator is authorized under the Plan to award any type of arrangement to
an Employee, Director or Consultant that is not inconsistent with the
provisions of the Plan and that by its terms involves or might involve the
issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR, or
similar right with a fixed or variable price related to the Fair Market Value
of the Shares and with an exercise or conversion privilege related to the
passage of time, the occurrence of one or more events, or the satisfaction of
performance criteria or other conditions. 
Such awards include, without limitation, Options, SARs, sales or bonuses
of Restricted Stock, Restricted Stock Units or Dividend Equivalent Rights, and
an Award may consist of one such security or benefit, or two (2) or more
of them in any combination or alternative.


 


(b)                                 Designation of
Award.  Each Award shall be designated
in the Award Agreement.  In the case of
an Option, the Option shall be a Non-Qualified Stock Option unless specifically
designated as an Incentive Stock Option. 
However, notwithstanding such designation, an Option will qualify as an
Incentive Stock Option under the Code only to the extent the $100,000
limitation of Section 422(d) of the Code is not exceeded.  The $100,000 limitation of Section 422(d) of
the Code is calculated based on the aggregate Fair Market Value of the Shares
subject to Options designated as Incentive Stock Options which become exercisable
for the first time by a Grantee during any calendar year (under all plans of
the Company or any Parent or Subsidiary of the Company).  For purposes of this calculation, Incentive
Stock Options shall be taken into account in the order in which they were
granted, and the Fair Market Value of the Shares shall be determined as of the
grant date of the relevant Option.  In
the event that the Code or the regulations promulgated thereunder are amended
after the date the Plan becomes effective to provide for a different limit on
the Fair Market Value of Shares permitted to be subject to Incentive Stock
Options, then such different limit will be automatically incorporated herein
and will apply to any Options granted after the effective date of such amendment.


 


(c)                                  Conditions of
Award.  Subject to the terms of the
Plan, the Administrator shall determine the provisions, terms, and conditions
of each Award, which may include, without limitation, the Award vesting
schedule, repurchase provisions, rights of first refusal, forfeiture
provisions, form of payment (cash, Shares, or other consideration) upon
settlement of the Award, payment contingencies, and satisfaction of any
performance criteria.  The performance
criteria established by the Administrator may be based on any one, or any
combination of, the following: (1) share price, (2) earnings per
share, (3) total stockholder return, (4) operating margin, (5) gross
margin, (6) return on equity, (7) return on assets, (8) return
on investment, (9) operating income, (10) net operating income, (11)
pre-tax profit, (12) cash flow, (13) revenue, (14) expenses, (15) earnings
before interest, taxes and depreciation, (16) economic value added, (17) market
share, (18) net income, (19) personal goals, (20) sales, (21) improvements in
capital structure, (22) earnings  before
interest, taxes and amortization,  (23) budget
comparisons, (24) controllable profits, (25) expense management, (26)
improvements in capital structure), (27) profit margins, (28) operating or
gross margin, (29) profitability of an identifiable business unit or product,
(30) cash flow, operating cash flow, or cash flow or operating cash flow per
share, (31) reduction in costs, (32) return on capital, (33) improvement
in or attainment of expense levels or working capital level, and (34) earnings
before interest, taxes, depreciation and amortization.  The performance criteria may be applicable to
the Company, Related Entities and/or any individual business units of the Company
or any Related Entity.  Partial achievement
of the specified criteria may result in a payment or vesting corresponding to
the degree of achievement as specified in the Award Agreement.  In addition, the performance criteria shall
be calculated in accordance with generally accepted accounting principles, but
excluding the effect (whether positive or negative) of any change in accounting
standards and any extraordinary, unusual or nonrecurring item, as determined by
the Administrator, occurring after the establishment of the performance criteria
applicable to the Award intended to be performance-based compensation.  Each such adjustment, if any, shall be made
solely for the purpose of providing a consistent basis from period to 


 


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period
for the calculation of performance criteria in order to prevent the dilution or
enlargement of the Grantee’s rights with respect to an Award intended to be
performance-based compensation.


 


(d)                                 Acquisitions
and Other Transactions.  The
Administrator may issue Awards under the Plan in settlement, assumption or
substitution for, outstanding awards or obligations to grant future awards in
connection with the Company or a Related Entity acquiring another entity, an
interest in another entity or an additional interest in a Related Entity
whether by merger, stock purchase, asset purchase or other form of transaction.


 


(e)                                  Deferral of
Award Payment.  The
Administrator may establish one or more programs under the Plan to permit
selected Grantees the opportunity to elect to defer receipt of consideration
upon exercise of an Award, satisfaction of performance criteria, or other event
that absent the election would entitle the Grantee to payment or receipt of
Shares or other consideration under an Award. 
The Administrator may establish the election procedures, the timing of
such elections, the mechanisms for payments of, and accrual of interest or
other earnings, if any, on amounts, Shares or other consideration so deferred,
and such other terms, conditions, rules and procedures that the
Administrator deems advisable for the administration of any such deferral
program.


 


(f)                                    Separate
Programs.  The
Administrator may establish one or more separate programs under the Plan for
the purpose of issuing particular forms of Awards to one or more classes of
Grantees on such terms and conditions as determined by the Administrator from
time to time.


 


(g)                                 Individual Limitations on
Awards.


 


(i)                                     Individual
Limit for Options and SARs.  The maximum number of Shares with respect to
which Options and SARs may be granted to any Grantee in any calendar year shall
be three hundred thousand (300,000) Shares. 
The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company’s capitalization pursuant to Section 10,
below.  To the extent required by Section 162(m) of
the Code or the regulations thereunder, in applying the foregoing limitations
with respect to a Grantee, if any Option or SAR is canceled, the canceled
Option or SAR shall continue to count against the maximum number of Shares with
respect to which Options and SARs may be granted to the Grantee.  For this purpose, the repricing of an Option
(or in the case of a SAR, the reduction of the base amount on which the stock
appreciation is calculated to reflect a reduction in the Fair Market Value of
the Common Stock) shall be treated as the cancellation of the existing Option
or SAR and the grant of a new Option or SAR.


 


(iii)                               Individual
Limit for Restricted Stock and Restricted Stock Units.  For awards of Restricted Stock and Restricted
Stock Units, the maximum number of Shares with respect to which such Awards may
be granted to any Grantee in any calendar year shall be two hundred thousand
(200,000) Shares.  The foregoing limitation
shall be adjusted proportionately in connection with any change in the Company’s
capitalization pursuant to Section 10, below.


 


(h)                                 Deferral.  If the vesting or receipt of Shares under an
Award is deferred to a later date, any amount (whether denominated in Shares or
cash) paid in addition to the original number of Shares subject to such Award
will not be treated as an increase in the number of Shares subject to the Award
if the additional amount is based either on a reasonable rate of interest or on
one or more predetermined actual investments such that the amount payable by
the Company at the later date will be based on the actual rate of return of a
specific investment (including any decrease as well as any increase in the
value of an investment).


 


(i)                                     Early Exercise.  The Award Agreement may, but need not,
include a provision whereby the Grantee may elect at any time while an
Employee, Director or Consultant to exercise any part or all of the Award prior
to full vesting of the Award.  Any unvested
Shares received pursuant to 


 


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such
exercise may be subject to a repurchase right in favor of the Company or a
Related Entity or to any other restriction the Administrator determines to be
appropriate.


 


(j)                                     Term of Award.  The term of each Award shall be the term
stated in the Award Agreement, provided, however, that the term of an Award
shall be no more than ten (10) years from the date of grant
thereof.  However, in the case of an
Incentive Stock Option granted to a Grantee who, at the time the 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 of the
Company, the term of the Incentive Stock Option shall be five (5) years
from the date of grant thereof or such shorter term as may be provided in the
Award Agreement.  Notwithstanding the
foregoing, the specified term of any Award shall not include any period for
which the Grantee has elected to defer the receipt of the Shares or cash issuable
pursuant to the Award.


 


(k)                                  Transferability
of Awards.  Awards 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 Grantee, only by the Grantee.  Notwithstanding the foregoing, the Grantee
may designate one or more beneficiaries of the Grantee’s Award in the event of
the Grantee’s death on a beneficiary designation form provided by the
Administrator.


 


(l)                                     Time of
Granting Awards.  The date of
grant of an Award shall for all purposes be the date on which the Administrator
makes the determination to grant such Award, or such other later date as is
determined by the Administrator.


 


7.                                       Award Exercise
or Purchase Price, Consideration and Taxes.


 


(a)                                  Exercise or
Purchase Price.  The
exercise or purchase price, if any, for an Award shall be as follows:


 


(i)                                     In the case of an Incentive
Stock Option:


 


(A)                              granted to an
Employee who, at the time of the grant of such Incentive Stock Option 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 of the Company, the
per Share exercise price shall be not less than one hundred ten percent (110%)
of the Fair Market Value per Share on the date of grant; or


 


(B)                                granted to any
Employee other than an Employee described in the preceding paragraph, the per
Share exercise price shall be not less than one hundred percent (100%) of the
Fair Market Value per Share on the date of grant.


 


(ii)                                  In the case of
a Non-Qualified Stock Option, the per Share exercise price shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on the date
of grant.


 


(iii)                               In the case of
Awards intended to qualify as Performance-Based Compensation, the exercise or
purchase price, if any, shall be not less than one hundred percent (100%) of
the Fair Market Value per Share on the date of grant.


 


(iv)                              In the case of
SARs, the base appreciation amount shall not be less than one hundred percent
(100%) of the Fair Market Value per Share on the date of grant.


 


(v)                                 In the case of
other Awards, such price as is determined by the Administrator.


 


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(vi)                              Notwithstanding
the foregoing provisions of this Section 7(a), in the case of an Award
issued pursuant to Section 6(d), above, the exercise or purchase price for
the Award shall be determined in accordance with the provisions of the relevant
instrument evidencing the agreement to issue such Award.


 


(b)                                 Consideration.  Subject to Applicable Laws, the consideration
to be paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator.  In addition to any other types of
consideration the Administrator may determine, the Administrator is authorized
to accept as consideration for Shares issued under the Plan the following,
provided that the portion of the consideration equal to the par value of the
Shares must be paid in cash or other legal consideration permitted by the
Delaware General Corporation Law:


 


(i)                                     cash;


 


(ii)                                  check;


 


(iii)                               surrender of
Shares or delivery of a properly executed form of attestation of ownership of
Shares as the Administrator may require which have a Fair Market Value on the
date of surrender or attestation equal to the aggregate exercise price of the
Shares as to which said Award shall be exercised;


 


(iv)                              with respect to
Options, payment through a broker-dealer sale and remittance procedure pursuant
to which the Grantee (A) shall provide written instructions to a
Company-designated or Company-approved brokerage firm to effect the immediate
sale of some or all of the purchased Shares and remit to the Company sufficient
funds to cover the aggregate exercise price payable for the purchased Shares
and (B) shall provide written directives to the Company to deliver the
certificates for the purchased Shares directly to such brokerage firm in order
to complete the sale transaction;


 


(v)                                 with respect to
Options, payment through a “net exercise” such that, without the payment of any
funds, the Grantee may exercise the Option and receive the net number of Shares
equal to (i) the number of Shares as to which the Option is being exercised,
multiplied by (ii) a fraction, the numerator of which is the Fair Market
Value per Share (on such date as is determined by the Administrator) less the
Exercise Price per Share, and the denominator of which is such Fair Market
Value per Share (the number of net Shares to be received shall be rounded down
to the nearest whole number of Shares); or


 


(vi)                              any combination
of the foregoing methods of payment.


The
Administrator may at any time or from time to time, by adoption of or by
amendment to the standard forms of Award Agreement described in Section 4(b)(iv),
or by other means, grant Awards which do not permit all of the foregoing forms
of consideration to be used in payment for the Shares or which otherwise
restrict one or more forms of consideration.


 


(c)                                  Taxes.  No Shares shall be delivered under the Plan
to any Grantee or other person until such Grantee or other person has made
arrangements acceptable to the Administrator for the satisfaction of any
non-U.S., federal, state, or local income and employment tax withholding
obligations, including, without limitation, obligations incident to the receipt
of Shares.  Upon exercise or vesting of
an Award, the Company shall withhold or collect from the Grantee an amount
sufficient to satisfy such tax 


 


12

















 


obligations,
including, but not limited to, by surrender of the whole number of Shares
covered by the Award with a Fair Market Value sufficient to satisfy the minimum
applicable tax withholding obligations incident to the exercise or vesting of
an Award (reduced to the lowest whole number of Shares if such number of Shares
withheld would result in withholding a fractional Share with any remaining tax
withholding settled in cash).


 


8.                                       Exercise of
Award.


 


(a)                                  Procedure for Exercise;
Rights as a Stockholder.


 


(i)                                     Any Award
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator under the terms of the Plan and specified in
the Award Agreement.


 


(ii)                                  An Award shall
be deemed to be exercised when written or electronic notice of such exercise
has been given to the Company in accordance with the terms of the Award by the
person entitled to exercise the Award and full payment for the Shares with
respect to which the Award is exercised has been made, including, to the extent
selected, use of the broker-dealer sale and remittance procedure to pay the
purchase price as provided in Section 7(b)(iv).


 


(b)                                 Exercise of Award Following
Termination of Continuous Service.


 


(i)                                     An Award may
not be exercised after the termination date of such Award set forth in the
Award Agreement and may be exercised following the termination of a Grantee’s
Continuous Service only to the extent provided in the Award Agreement or
another applicable agreement between the Company and the Grantee.


 


(ii)                                  Where the Award
Agreement or another applicable agreement between the Company and the Grantee
permits a Grantee to exercise an Award following the termination of the Grantee’s
Continuous Service for a specified period, the Award shall terminate to the
extent not exercised on the last day of the specified period or the last day of
the original term of the Award, whichever occurs first.


 


(iii)                               Any Award
designated as an Incentive Stock Option to the extent not exercised within the
time permitted by law for the exercise of Incentive Stock Options following the
termination of a Grantee’s Continuous Service shall convert automatically to a
Non-Qualified Stock Option and thereafter shall be exercisable as such to the
extent exercisable by its terms for the period specified in the Award Agreement
or another applicable agreement between the Company and the Grantee.


 


9.                                       Conditions Upon
Issuance of Shares.


 


(a)                                  If at any time
the Administrator determines that the delivery of Shares pursuant to the
exercise, vesting or any other provision of an Award is or may be unlawful
under Applicable Laws, the vesting or right to exercise an Award or to
otherwise receive Shares pursuant to the terms of an Award shall be suspended
until the Administrator determines that such delivery is lawful and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.  The Company shall have no
obligation to effect any registration or qualification of the Shares under
federal or state laws.


 


(b)                                 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 by any Applicable Laws.


 


13

















 


10.                                 Adjustments
Upon Changes in Capitalization.  Subject to any required action by the
stockholders of the Company and Section 11 hereof, the number of Shares
covered by each outstanding Award, and the number of Shares which have been
authorized for issuance under the Plan but as to which no Awards have yet been
granted or which have been returned to the Plan, the exercise or purchase price
of each such outstanding Award, the maximum number of Shares with respect to
which Awards may be granted to any Grantee in any calendar year, as well as any
other terms that the Administrator determines require adjustment shall be
proportionately adjusted for (i) any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Shares, or similar transaction
affecting the Shares, (ii) any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the Company, or (iii) 
any other transaction with respect to Common Stock including a corporate
merger, consolidation, acquisition of property or stock, separation (including
a spin-off or other distribution of stock or property), reorganization,
liquidation (whether partial or complete) or any similar transaction; provided,
however that conversion of any convertible securities of the Company shall not
be deemed to have been “effected without receipt of consideration.”  In
the event of any distribution of cash or other assets to stockholders other
than a normal cash dividend, the Administrator shall also make such adjustments
as provided in this Section 10 or substitute, exchange or grant Awards to effect such adjustments
(collectively “adjustments”).  Any such
adjustments to outstanding Awards will be effected in a manner that precludes
the enlargement of rights and benefits under such Awards.  In connection with the foregoing
adjustments, the Administrator may, in its discretion, prohibit the exercise of
Awards or other issuance of Shares, cash or other consideration pursuant to
Awards during certain periods of time. Except as the Administrator determines,
no issuance by the Company of shares of any class, or securities convertible
into shares of any class, shall affect, and no adjustment by reason hereof
shall be made with respect to, the number or price of Shares subject to an
Award.


 


11.                                 Corporate Transactions.


 


(a)                                  Termination of
Award in Connection with Corporate Transaction.  The Administrator may determine that, as
provided in a definitive agreement governing a Corporate Transaction, effective
upon the consummation of a Corporate Transaction, all outstanding Awards under
the Plan shall terminate.  However, all
such Awards shall not terminate to the extent they are Assumed in connection
with the Corporate Transaction.


 


(b)                                 Acceleration of
Award Upon Corporate Transaction.  Except as provided otherwise in an individual
Award Agreement or other applicable agreement between the Company and the
Grantee, in the event of a Corporate Transaction, for the portion of each Award
that is neither Assumed nor Replaced, such portion of the Award shall
automatically become fully vested and exercisable and be released from any
repurchase or forfeiture rights (other than repurchase rights exercisable at
Fair Market Value) for all of the Shares (or other consideration) at the time
represented by such portion of the Award, immediately prior to the specified
effective date of such Corporate Transaction, provided that the Grantee’s
Continuous Service has not terminated prior to such date.


 


(c)                                  Effect of
Acceleration on Incentive Stock Options.  Any Incentive Stock Option accelerated under
this Section 11 in connection with a Corporate Transaction shall remain
exercisable as an Incentive Stock Option under the Code only to the extent the
$100,000 dollar limitation of Section 422(d) of the Code is not
exceeded.


 


12.                                 Effective Date
and Term of Plan.  The Plan
shall become effective upon the earlier to occur of its adoption by the Board
or its approval by the stockholders of the Company.  It shall continue in effect for a term of ten
(10) years unless sooner terminated. 
Subject to Section 17, below, and Applicable Laws, Awards may be
granted under the Plan upon its becoming effective.


 


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13.                                 Amendment, Suspension or
Termination of the Plan.


 


(a)                                  The Board may
at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the
approval of the Company’s stockholders to the extent such approval is required
by Applicable Laws, or if such amendment would lessen the stockholder approval
requirements of Section 4(b)(vi) or this Section 13(a).


 


(b)                                 No Award may be
granted during any suspension of the Plan or after termination of the Plan.


 


(c)                                  No suspension or
termination of the Plan (including termination of the Plan under Section 12,
above) shall adversely affect any rights under Awards already granted to a
Grantee.


 


14.                                 Reservation of Shares.


 


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


 


(b)                                 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, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.


 


15.                                 No Effect on
Terms of Employment/Consulting Relationship.  The Plan shall not confer upon any Grantee
any right with respect to the Grantee’s Continuous Service, nor shall it
interfere in any way with his or her right or the right of the Company or any
Related Entity to terminate the Grantee’s Continuous Service at any time, with
or without cause including, but not limited to, Cause, and with or without
notice.  The ability of the Company or
any Related Entity to terminate the employment of a Grantee who is employed at
will is in no way affected by its determination that the Grantee’s Continuous
Service has been terminated for Cause for the purposes of this Plan.


 


16.                                 No Effect on
Retirement and Other Benefit Plans.  Except as specifically provided in a retirement
or other benefit plan of the Company or a Related Entity, Awards shall not be
deemed compensation for purposes of computing benefits or contributions under
any retirement plan of the Company or a Related Entity, and shall not affect
any benefits under any other benefit plan of any kind or any benefit plan
subsequently instituted under which the availability or amount of benefits is
related to level of compensation.  The
Plan is not a “Pension Plan” or “Welfare Plan” under the Employee Retirement
Income Security Act of 1974, as amended.


 


17.                                 Stockholder
Approval.  The grant
of Incentive Stock Options under the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months before or after the date
the Plan is adopted excluding Incentive Stock Options issued in substitution
for outstanding Incentive Stock Options pursuant to Section 424(a) of
the Code.  Such stockholder approval
shall be obtained in the degree and manner required under Applicable Laws.  The Administrator may grant Incentive Stock
Options under the Plan prior to approval by the stockholders, but until such
approval is obtained, no such Incentive Stock Option shall be exercisable.  In the event that stockholder approval is not
obtained within the twelve (12) month period provided above, all Incentive
Stock Options previously granted under the Plan shall be exercisable as
Non-Qualified Stock Options.


 


18.                                 Unfunded
Obligation.  Grantees
shall have the status of general unsecured creditors of the Company.  Any amounts payable to Grantees pursuant to
the Plan shall be unfunded and unsecured obligations for all purposes,
including, without limitation, Title I of the Employee Retirement Income
Security Act of 1974, as amended. 
Neither the Company nor any Related Entity shall be required to
segregate any monies from its general funds, or to create any trusts, or
establish any special accounts with 


 


15

















 


respect
to such obligations.  The Company shall
retain at all times beneficial ownership of any investments, including trust
investments, which the Company may make to fulfill its payment obligations
hereunder.  Any investments or the
creation or maintenance of any trust or any Grantee account shall not create or
constitute a trust or fiduciary relationship between the Administrator, the
Company or any Related Entity and a Grantee, or otherwise create any vested or
beneficial interest in any Grantee or the Grantee’s creditors in any assets of
the Company or a Related Entity. The Grantees shall have no claim against the
Company or any Related Entity for any changes in the value of any assets that
may be invested or reinvested by the Company with respect to the Plan.


 


19.                                 Construction.  Captions and titles contained herein are for convenience
only and shall not affect the meaning or interpretation of any provision of the
Plan.  Except when otherwise indicated by
the context, the singular shall include the plural and the plural shall include
the singular.  Use of the term “or” is
not intended to be exclusive, unless the context clearly requires otherwise.


 


20.                                 Nonexclusivity
of the Plan.  Neither the
adoption of the Plan by the Board, the submission of the Plan to the
stockholders of the Company for approval, nor any provision of the Plan will be
construed as creating any limitations on the power of the Board to adopt such
additional compensation arrangements as it may deem desirable, including,
without limitation, the granting of Awards otherwise than under the Plan, and
such arrangements may be either generally applicable or applicable only in
specific cases.


 


*     *     *    
*     *


 


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