Exhibit 10.1






Exhibit
10.1




PINNACLE ENTERTAINMENT, INC.

2005 EQUITY AND PERFORMANCE INCENTIVE PLAN, AS AMENDED



PINNACLE ENTERTAINMENT, INC., a corporation existing under the laws of the State of
Delaware (the “Company”), hereby establishes and adopts the following 2005 Equity and Performance
Incentive Plan (the “Plan”). Certain capitalized terms used in the Plan are defined in Article 2.



RECITALS




WHEREAS, the Company desires to encourage high levels of performance by those individuals
who are key to the success of the Company, to attract new individuals who are highly motivated and
who are expected to contribute to the success of the Company and to encourage such individuals to
remain as directors, employees, consultants and/or advisors of the Company and its Affiliates by
increasing their proprietary interest in the Company’s growth and success; and



WHEREAS, to attain these ends, the Company has formulated the Plan embodied herein to
authorize the granting of Awards to Participants whose judgment, initiative and efforts are or have
been or are expected to be responsible for the success of the Company.



NOW, THEREFORE, the Company hereby constitutes, establishes and adopts the following Plan
and agrees to the following provisions:



ARTICLE I

PURPOSE OF THE PLAN




1.1 Purpose. The purpose of the Plan is to assist the Company and its Affiliates in
attracting and retaining selected individuals to serve as directors, employees, consultants and/or
advisors of the Company who are expected to contribute to the Company’s success and to achieve
long-term objectives which will inure to the benefit of all stockholders of the Company through the
additional incentives inherent in the Awards hereunder.



ARTICLE II

DEFINITIONS




2.1 “Affiliate” shall mean (i) any person or entity that directly, or through one or more
intermediaries, controls, or is controlled by, or is under common control with, the Company
(including any Parent or Subsidiary) or (ii) any entity in which the Company has a significant
equity interest, as determined by the Committee.



2.2 “Applicable Laws” means the legal requirements relating to the administration of and
issuance of securities under stock incentive plans, including, without limitation, the requirements
of state corporations law, federal and state securities law, federal and state tax law, and the
requirements of any stock exchange or quotation system upon which the Shares may then be listed or
quoted. For all purposes of this Plan, references to statutes and regulations shall be deemed to
include any successor statutes and regulations, to the extent reasonably appropriate as determined
by the Committee.



2.3 “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award,
Performance Award, Dividend Equivalent, Other Stock Unit Award or any other right, interest or
option relating to Shares or other property (including cash) granted pursuant to the provisions of
the Plan.



2.4 “Award Agreement” shall mean any written agreement, contract or other instrument or
document evidencing any Award granted by the Committee hereunder.



2.5 “Board” shall mean the board of directors of the Company.



2.6 “Cause” shall have the meaning set forth in a Participant’s employment or consulting
agreement with the Company (if any), or if not defined therein, shall mean (i) acts or omissions by
the Participant which constitute intentional material misconduct or a knowing violation of a
material policy of the Company or any of its subsidiaries, (ii) the Participant personally
receiving a benefit in money, property or services from the Company or any of its subsidiaries or
from another person dealing with the Company or any of its subsidiaries, in material violation of
applicable law or Company policy, (iii) an act of fraud, conversion, misappropriation, or
embezzlement by the Participant or his conviction of, or entering a guilty plea or plea of no
contest with respect to, a felony, or the equivalent thereof (other than DUI), or (iv) any
deliberate and material misuse or improper disclosure of confidential or proprietary information of
the Company.



2.7 “Change of Control” shall mean the occurrence of any of the following events:


 


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(i) The direct or indirect acquisition by an unrelated “Person” or “Group” of “Beneficial
Ownership” (as such terms are defined below) of more than 50% of the voting power of the
Company’s issued and outstanding voting securities in a single transaction or a series of
related transactions;




(ii) The direct or indirect sale or transfer by the Company of substantially all of its
assets to one or more unrelated Persons or Groups in a single transaction or a series of
related transactions;




(iii) The merger, consolidation or reorganization of the Company with or into another
corporation or other entity in which the Beneficial Owners (as such term is defined below) of
more than 50% of the voting power of the Company’s issued and outstanding voting securities
immediately before such merger or consolidation do not own more than 50% of the voting power of
the issued and outstanding voting securities of the surviving corporation or other entity
immediately after such merger, consolidation or reorganization; or




(iv) During any consecutive 12-month period, individuals who at the beginning of such
period constituted the Board of the Company (together with any new Directors whose election to
such Board or whose nomination for election by the stockholders of the Company was approved by
a vote of a majority of the Directors of the Company then still in office who were either
Directors at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the Board of the
Company then in office.



None of the foregoing events, however, shall constitute a Change of Control if such event is
not a “Change in Control Event” under Treasury Regulations Section 1.409A-3(i)(5) or successor IRS
guidance. For purposes of determining whether a Change of Control has occurred, the following
Persons and Groups shall not be deemed to be “unrelated”: (A) such Person or Group directly or
indirectly has Beneficial Ownership of more than 50% of the issued and outstanding voting power of
the Company’s voting securities immediately before the transaction in question, (B) the Company has
Beneficial Ownership of more than 50% of the voting power of the issued and outstanding voting
securities of such Person or Group, or (C) more than 50% of the voting power of the issued and
outstanding voting securities of such Person or Group are owned, directly or indirectly, by
Beneficial Owners of more than 50% of the issued and outstanding voting power of the Company’s
voting securities immediately before the transaction in question. The terms “Person,” “Group,”
“Beneficial Owner,” and “Beneficial Ownership” shall have the meanings used in the Exchange Act,
and the rules promulgated thereunder. Notwithstanding the foregoing, (I) Persons will not be
considered to be acting as a “Group” solely because they purchase or own stock of this Company at
the same time, or as a result of the same public offering, (II) however, Persons will be considered
to be acting as a “Group” if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock, or similar business transaction, with the Company,
and (III) if a Person, including an entity, owns stock both in the Company and in a corporation
that enters into a merger, consolidation, purchase or acquisition of stock, or similar transaction,
with the Company, such stockholders shall be considered to be acting as a Group with other
stockholders only with respect to the ownership in the corporation before the transaction.



2.8 “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time,
and any successor thereto.



2.9 “Committee” shall mean the Committee constituted under Section 4.2 to administer this
Plan.



2.10 “Company” has the meaning set forth in introductory paragraph of the Plan.



2.11 “Consultant” means any person, including an advisor, who (i) is a natural person,
(ii) provides bona fide services to the Company or a Parent or Subsidiary, and (iii) provides
services that are not in connection with the offer or sale of securities in a capital-raising
transaction, and that do not directly or indirectly promote or maintain a market for the securities
of the Company; provided that the term ‘Consultant’ does not include (i) Employees or
(ii) Directors who are paid only a director’s fee by the Company or who are not compensated by the
Company for their services as Directors.



2.12 “Continuous Status as an Employee, Director or Consultant” means that the
employment, director or consulting relationship is not interrupted or terminated by the Company,
any Parent or Subsidiary, or by the Employee, Director or Consultant. Continuous Status as an
Employee, Director or Consultant will not be considered interrupted in the case of: (i) any leave
of absence approved by the Board, including sick leave, military leave, or any other personal
leave, provided, that for purposes of Incentive Stock Options, any such leave may not exceed 90
days, unless reemployment upon the expiration of such leave is guaranteed by contract (including
certain Company policies) or statute; (ii) transfers between locations of the Company or between
the Company, its Parent, its Subsidiaries or its successor; or (iii) in the case of an Award other
than an Incentive Stock Option, the ceasing of a person to be an Employee while such person remains
a Director or Consultant, the ceasing of a person to be a Director while such person remains an
Employee or Consultant or the ceasing of a person to be a Consultant while such person remains an
Employee or Director.



2.13 “Covered Employee” shall mean a “covered employee” within the meaning of
Section 162(m)(3) of the Code, or any successor provision thereto.


 


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2.14 “Director” shall mean a non-employee member of the Board or a non-employee member of
the board of directors of a Parent or Subsidiary.



2.15 “Disability” shall mean total and permanent disability as defined in
Section 22(e)(3) of the Code.



2.16 “Dividend Equivalents” shall have the meaning set forth in Section 12.5.



2.17 “Employee” shall mean any employee of the Company or any Parent or Subsidiary.



2.18 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.



2.19 “Fair Market Value” shall mean, with respect to any property other than Shares, the
market value of such property determined by such methods or procedures as shall be established from
time to time by the Committee. The Fair Market Value of Shares as of any date shall be determined
as follows:




(i) If the Shares are listed on any established stock exchange or a national market
system, including without limitation, the National Market System of NASDAQ, the Fair Market
Value of a Share will be (i) the closing sales price for such Shares (or the closing bid, if no
sales are reported) as quoted on that system or exchange (or the system or exchange with the
greatest volume of trading in Shares) on the last market trading day prior to the day of
determination or (ii) any sales price for such Shares (or the closing bid, if no sales are
reported) as quoted on that system or exchange (or the system or exchange with the greatest
volume of trading in Shares) on the day of determination, as the Committee may select, in each
case as reported in the Wall Street Journal or any other source the Committee considers
reliable.




(ii) If the Shares are quoted on the NASDAQ System (but not on the NASDAQ National
Market System) or are regularly quoted by recognized securities dealers but selling prices are
not reported, the Fair Market Value of a Share will be the mean between the high bid and low
asked prices for the Shares on (i) the last market trading day prior to the day of
determination or (ii) the day of determination, as the Committee may select, in each case as
reported in the Wall Street Journal or any other source the Committee considers reliable.




(iii) If the Shares are not traded as set forth above, the Fair Market Value will be
determined in good faith by the Committee with reference to the earnings history, book value
and prospects of the Company in light of market conditions generally, and any other factors the
Committee considers appropriate, such determination by the Committee to be final, conclusive
and binding.



2.20 “Family Member” means any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships,
any person sharing the Participant’s household (other than a tenant or employee), a trust in which
these persons (or the Participant) control the management of assets, and any other entity in which
these persons (or the Participant) own more than 50 percent of the voting interests.



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



2.22 “Individual Arrangements” means the Nonqualified Stock Option Agreement dated as of
January 11, 2003 by and between the Company and Stephen H. Capp, the Nonqualified Stock Option
Agreements dated as of April 10, 2002 by and between the Company and Daniel R. Lee, the
Nonqualified Stock Option Agreement dated as of August 1, 2008 by and between the Company and
Carlos Ruisanchez, and the Nonqualified Stock Option Agreement dated as of March 14, 2010 by and
between the Company and Anthony M. Sanfilippo.



2.23 “Limitations” shall have the meaning set forth in Section 3.2.



2.24 “Option” shall mean any right granted to a Participant under the Plan allowing such
Participant to purchase Shares at such price or prices and during such period or periods as the
Committee shall determine.



2.25 “Other Stock Unit Award” shall have the meaning set forth in Section 8.1.



2.26 “Parent” means a “parent corporation” with respect to the Company, whether now or
later existing, as defined in Section 424(e) of the Code.



2.27 “Participant” shall mean an Employee, Director or Consultant who is selected by the
Committee to receive an Award under the Plan.



2.28 “Payee” shall have the meaning set forth in Section 13.1.


 


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2.29 “Performance Award” shall mean any Award of Performance Shares or Performance Units
granted pursuant to Article 9.



2.30 “Performance Period” shall mean that period established by the Committee at the time
any Performance Award is granted or at any time thereafter during which any performance goals
specified by the Committee with respect to such Award are to be measured.



2.31 “Performance Share” shall mean any grant pursuant to Article 9 of a unit valued by
reference to a designated number of Shares, which value may be paid to the Participant by delivery
of such property as the Committee shall determine, including cash, Shares, other property, or any
combination thereof, upon achievement of such performance goals during the Performance Period as
the Committee shall establish at the time of such grant or thereafter.



2.32 “Performance Unit” shall mean any grant pursuant to Article 9 of a unit valued by
reference to a designated amount of property (including cash) other than Shares, which value may be
paid to the Participant by delivery of such property as the Committee shall determine, including
cash, Shares, other property, or any combination thereof, upon achievement of such performance
goals during the Performance Period as the Committee shall establish at the time of such grant or
thereafter.



2.33 “Prior Plans” shall mean, collectively, the Company’s 1993, 1996, 2001 and 2002
Option Plans, as amended.



2.34 “Restricted Stock” shall mean any Share issued with the restriction that the holder
may not sell, transfer, pledge or assign such Share and with such other restrictions as the
Committee, in its sole discretion, may impose (including any restriction on the right to vote such
Share and the right to receive any dividends), which restrictions may lapse separately or in
combination at such time or times, in installments or otherwise, as the Committee may deem
appropriate.



2.35 “Restricted Period” shall have the meaning set forth in Section 7.1.



2.36 “Restricted Stock Award” shall have the meaning set forth in Section 7.1.



2.37 “Shares” shall mean the shares of common stock of the Company, par value $0.10 per
share.



2.38 “Stock Appreciation Right” shall mean the right granted to a Participant pursuant to
Article 6.



2.39 “Subsidiary” shall mean any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if, at the time of the granting of the Award, each
of the corporations other than the last corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of the other corporations
in the chain.



2.40 “Substitute Awards” shall mean Awards granted or Shares issued by the Company in
assumption of, or in substitution or exchange for, awards previously granted, or the right or
obligation to make future awards, by a company acquired by the Company or any Subsidiary or with
which the Company or any Subsidiary combines.



ARTICLE III

SHARES SUBJECT TO THE PLAN




3.1 Number of Shares.




(a) Subject to adjustment as provided in Section 12.2,
a total of 5,850,000 Shares
shall be authorized for grant under the Plan, plus any Shares subject to awards granted under
the Prior Plans and Individual Arrangements, which such awards are forfeited, expire or
otherwise terminate without issuance of Shares, or are settled for cash or otherwise do not
result in the issuance of Shares, on or after the effective date of this Plan. Any Shares that
are subject to Awards of Options or Stock Appreciation Rights shall be counted against this
limit as one Share for every one Share granted. Any Shares that are subject to Awards other
than Options or Stock Appreciation Rights (including, but not limited to, Shares delivered in
satisfaction of Dividend Equivalents) shall be counted against this limit as 1.4 Shares for
every one Share granted.




(b) If any Shares subject to an Award or to an award under the Prior Plans or
Individual Arrangements are forfeited, expire or otherwise terminate without issuance of such
Shares, or any Award or award under the Prior Plans or Individual Arrangements is settled for
cash or otherwise does not result in the issuance of all or a portion of the Shares subject to
such Award, the Shares shall, to the extent of such forfeiture, expiration, termination, cash
settlement or non-issuance, again be available for Awards under the Plan, subject to
Section 3.1(e) below.




(c) In the event that (i) any Option or other Award granted under this Plan or any
option or award granted under the Prior Plans or Individual Arrangements is exercised through
the tendering of Shares (either actually, by attestation, or by the giving of instructions to a
broker to remit to the Company that portion of the sales price required to pay the exercise
price) or by the withholding of Shares by the Company, or (ii) withholding tax liabilities
arising from such Options or Awards under this Plan or
options or awards under a Prior Plan or an Individual Arrangement are satisfied by the
tendering of Shares (either actually, by attestation, or by the giving of instructions to a
broker to remit to the Company that portion of the sales price required to pay the exercise
price) or by the withholding of Shares by the Company, then the Shares so tendered or withheld
shall not again be available for Awards under the Plan.


 


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(d) Substitute Awards shall not reduce the Shares authorized for issuance under the
Plan or authorized for grant to a Participant in any calendar year. Additionally, in the event
that a company acquired by the Company or any Subsidiary, or with which the Company or any
Subsidiary combines, has shares available under a pre-existing plan approved by shareholders
and not adopted in contemplation of such acquisition or combination, the shares available for
grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate,
using the exchange ratio or other adjustment or valuation ratio or formula used in such
acquisition or combination to determine the consideration payable to the holders of common
stock of the entities party to such acquisition or combination) may be used for Awards under
the Plan and shall not reduce the Shares authorized for issuance under the Plan; provided that
Awards using such available shares shall not be made after the date awards or grants could have
been made under the terms of the pre-existing plan, absent the acquisition or combination, and
shall only be made to individuals who were employees, directors or consultants of such acquired
or combined company before such acquisition or combination.




(e) Any Shares that again become available for grant pursuant to this Article 3 shall
be added back as one Share if such Shares were subject to Options or Stock Appreciation Rights
granted under the Plan or options or stock appreciation rights granted under the Prior Plans or
Individual Arrangements, and as 1.4 Shares if such Shares were subject to Awards other than
Options or Stock Appreciation Rights granted under the Plan.



3.2 Limitations on Grants to Individual Participant. Subject to adjustment as provided in
Section 12.2, no Participant may be granted (i) Options or Stock Appreciation Rights during any
12-month period with respect to more than 1,500,000 Shares, or (ii) Restricted Stock, Performance
Awards and/or Other Stock Unit Awards that are denominated in Shares in any 12-month period with
respect to more than 750,000 Shares (the “Limitations”). In addition to the foregoing, the maximum
dollar value payable to any Participant in any 12-month period with respect to Performance Awards
and/or Other Stock Unit Awards that are valued with reference to cash or property other than Shares
is $2,500,000. If an Award is cancelled, the cancelled Award shall continue to be counted toward
the applicable Limitations.



3.3 Character of Shares. Any Shares issued hereunder may consist, in whole or in part, of
authorized and unissued shares, treasury shares or shares purchased in the open market or
otherwise.



ARTICLE IV

ELIGIBILITY AND ADMINISTRATION




4.1 Eligibility. Any Employee, Director or Consultant shall be eligible to be selected as
a Participant. Only Employees may receive awards of Incentive Stock Options.



4.2 Administration.




(a) The Plan shall be administered by the Committee, constituted as follows:




(i) The Committee will consist of the Board, or a committee designated by the
Board, which Committee will be constituted to satisfy Applicable Laws. Once appointed, a
Committee will serve in its designated capacity until otherwise directed by the Board. The
Board may increase the size of the Committee and appoint additional members, remove
members (with or without cause) and substitute new members, fill vacancies (however
caused), and remove all members of the Committee and thereafter directly administer the
Plan. Notwithstanding the foregoing, unless the Board expressly resolves to the contrary,
while the Company is registered pursuant to Section 12 of the Exchange Act, the Plan will
be administered only by the Compensation Committee of the Board (or such other committee
designated by the Compensation Committee of the Board), consisting of no fewer than two
Directors, each of whom is (A) a “non-employee director” within the meaning of Rule 16b-3
(or any successor rule) of the Exchange Act, (B) an “outside director” within the meaning
of Section 162(m)(4)(C)(i) of the Code, and (C) an “independent director” for purpose of
the rules and regulations of the New York Stock Exchange or other exchange or quotation
system on which the Shares are principally traded; provided, however, the failure of the
Committee to be composed solely of individuals who are “non-employee directors,” “outside
directors,” and “independent directors” shall not render ineffective or void any awards or
grants made by, or other actions taken by, such Committee.




(ii) The Plan may be administered by different bodies with respect to Directors,
officers who are not Directors, and Employees and Consultants who are neither Directors
nor officers, and Covered Employees.




(b) The Committee shall have full discretion, power and authority, subject to the
provisions of the Plan and subject to such orders or resolutions not inconsistent with the
provisions of the Plan as may from time to time be adopted by the Board, to:
(i) select the Employees, Consultants and Directors to whom Awards may from time to time
be granted hereunder; (ii) determine the type or types of Awards, not inconsistent with the
provisions of the Plan, to be granted to each Participant hereunder; (iii) determine the number
of Shares to be covered by each Award granted hereunder; (iv) determine the terms and
conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder
and the form and content of any Award Agreement; (v) determine whether, to what extent and
under what circumstances Awards may be settled in cash, Shares or other property, subject to
the provisions of the Plan; (vi) determine whether, to what extent and under what circumstances
any Award shall be modified, amended, canceled or suspended; (vii) interpret and administer the



 


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Plan and any instrument or agreement entered into under or in connection with the Plan,
including any Award Agreement; (viii) correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall
deem desirable to carry it into effect; (ix) establish such rules and regulations and appoint
such agents as it shall deem appropriate for the proper administration of the Plan;
(x) determine whether any Award will have Dividend Equivalents; (xi) determine whether, to what
extent, and under what circumstances cash, Shares, or other property payable with respect to an
Award shall be deferred either automatically or at the election of the Participant; provided
that the Committee shall take no action that would subject the Participant to a penalty tax
under Section 409A of the Code; and (xii) make any other determination and take any other
action that the Committee deems necessary or desirable for administration of the Plan.




(c) Decisions of the Committee shall be final, conclusive and binding on all persons
or entities, including the Company, any Participant, any stockholder and any Employee or any
Affiliate. A majority of the members of the Committee may determine its actions and fix the
time and place of its meetings.




(d) The Committee may delegate to a committee of one or more Directors of the Company
or, to the extent permitted by Applicable Law, to one or more officers or a committee of
officers, the authority to grant Awards to Employees and officers of the Company who are not
Directors, Covered Employees, or “officers,” as such term is defined by Rule 16a-1(f) of the
Exchange Act, and to cancel or suspend Awards to Employees and officers of the Company who are
not Directors, Covered Employees, or “officers,” as such term is defined by Rule 16a-1(f) of
the Exchange Act.



ARTICLE V

OPTIONS




5.1 Grant of Options. Options may be granted hereunder to Participants either alone or in
addition to other Awards granted under the Plan. Any Option shall be subject to the terms and
conditions of this Article 5 and to such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall deem desirable.



5.2 Award Agreements. All Options granted pursuant to this Article 5 shall be evidenced
by a written Award Agreement in such form and containing such terms and conditions as the Committee
shall determine which are not inconsistent with the provisions of the Plan. Granting of an Option
pursuant to the Plan shall impose no obligation on the recipient to exercise such Option. Any
individual who is granted an Option pursuant to this Article 5 may hold more than one Option
granted pursuant to the Plan at the same time.



5.3 Option Price. Other than in connection with Substitute Awards, the option price per
each Share purchasable under any Option granted pursuant to this Article 5 shall not be less than
100% of the Fair Market Value of such Share on the date of grant of such Option. Other than
pursuant to Section 12.2, the Committee shall not be permitted to (a) lower the option price per
Share of an Option after it is granted, (b) cancel an Option when the option price per Share
exceeds the Fair Market Value of the underlying Shares in exchange for another Award (other than in
connection with Substitute Awards), and (c) take any other action with respect to an Option that
may be treated as a repricing under the rules and regulations of the New York Stock Exchange or
other exchange or quotation system on which the Shares are principally traded.



5.4 Option Period. The term of each Option shall be fixed by the Committee in its sole
discretion; provided that no Option shall be exercisable after the expiration of ten years from the
date the Option is granted.



5.5 Exercise of Options. Vested Options granted under the Plan shall be exercised by the
Participant or by a Permitted Assignee thereof (or by the Participant’s executors, administrators,
guardian, beneficiary, or legal representative, or Family Members, as may be provided in an Award
Agreement) as to all or part of the Shares covered thereby, by the giving of written notice of
exercise to the Company or its designated agent, specifying the number of Shares to be purchased,
accompanied by payment of the full purchase price for the Shares being purchased. Unless otherwise
provided in an Award Agreement, full payment of such purchase price shall be made at the time of
exercise and shall be made (a) in cash or by certified check or bank check or wire transfer of
immediately available funds, (b) with the consent of the Committee, by tendering previously
acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that
have been owned for a period of at least six months (or such other period to avoid accounting
charges against the Company’s earnings), (c) with the consent of the Committee, by delivery of
other consideration (including, where permitted by law and the Committee, other Awards) having a
Fair Market Value on the exercise date equal to the total purchase price, (d) with the consent of
the Committee, by withholding Shares otherwise issuable in connection with the exercise of the
Option, (e) with the consent of the Committee, by delivery of a properly executed exercise notice
together with any other documentation as the Committee and the Participant’s broker, if applicable,
require to effect an exercise of the Option and delivery to the Company of the sale or other
proceeds (as permitted by Applicable Law) required to pay the exercise price, (f) through any
other
method specified in an Award Agreement, or (g) any combination of any of the foregoing. In
connection with a tender of previously acquired Shares pursuant to clause (b) above, the Committee,
in its sole discretion, may permit the Participant to constructively exchange Shares already owned
by the Participant in lieu of actually tendering such Shares to the Company, provided that adequate
documentation concerning the ownership of the Shares to be constructively tendered is furnished in
form satisfactory to the Committee. The notice of exercise, accompanied by such payment, shall be
delivered to the Company at its principal business office or such other office as the Committee may
from time to time direct, and shall be in such form, containing such further provisions consistent
with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may
any Option granted hereunder be exercised for a fraction of a Share. No adjustment shall be made
for cash dividends or other rights for which the record date is prior to the date of such issuance.


 


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5.6 Form of Settlement. In its sole discretion, the Committee may provide, at the time of
grant, that the Shares to be issued upon an Option’s exercise shall be in the form of Restricted
Stock or other similar securities, or may reserve the right so to provide after the time of grant.



5.7 Incentive Stock Options. With respect to the Options that may be granted by the
Committee under the Plan, the Committee may grant Options intended to qualify as Incentive Stock
Options to any Employee of the Company or any Parent or Subsidiary, subject to the requirements of
Section 422 of the Code. The Award Agreement of an Option intended to qualify as an Incentive Stock
Option shall designate the Option as an Incentive Stock Option Notwithstanding anything in
Section 3.1 to the contrary and solely for the purposes of determining whether Shares are available
for the grant of Incentive Stock Options under the Plan, the maximum aggregate number of Shares
with respect to which Incentive Stock Options may be granted under
the Plan shall be 5,850,000 Shares. Notwithstanding the provisions of Section 5.3, in the case of an Incentive Stock Option
granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent of the voting power of all classes of capital 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. Notwithstanding the provisions of Section 5.4, in
the case of an Incentive Stock Option granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent of the voting power of all classes
of capital stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option
will be five years from the date of grant or any shorter term specified in the Award Agreement.
Notwithstanding the foregoing, if the Shares subject to an Employee’s Incentive Stock Options
(granted under all plans of the Company or any Parent or Subsidiary), which become exercisable for
the first time during any calendar year, have a Fair Market Value in excess of $100,000, the
Options accounting for this excess will be not be treated as Incentive Stock Options. For purposes
of the preceding sentence, Incentive Stock Options will be taken into account in the order in which
they were granted, and the Fair Market Value of the Shares will be determined as of the time of
grant.



5.8 Termination of Employment or Consulting Relationship or Directorship. If a
Participant holds exercisable Options on the date his or her Continuous Status as an Employee,
Director or Consultant terminates (other than because of termination due to Cause, death or
Disability), the Participant may exercise the Options that were vested and exercisable as of the
date of termination until the end of the original term or for a period of 90 days following such
termination, whichever is earlier (or such other period as is set forth in the Award Agreement or
determined by the Committee). If the Participant is not entitled to exercise his or her entire
Option at the date of such termination, the Shares covered by the unexercisable portion of the
Option will revert to the Plan, unless otherwise set forth in the Award Agreement or determined by
the Committee. The Committee may determine in its sole discretion that such unexercisable portion
of the Option will become exercisable at such times and on such terms as the Committee may
determine in its sole discretion. If the Participant does not exercise an Option within the time
specified above after termination, that Option will expire, and the Shares covered by it will
revert to the Plan, except as otherwise determined by the Committee.



5.9 Disability of Participant. If a Participant holds exercisable Options on the date his
or her Continuous Status as an Employee, Director or Consultant terminates because of Disability,
the Participant may exercise the Options that were vested and exercisable as of the date of
termination until the end of the original term or for a period of 36 months following such
termination, whichever is earlier (or such other period as is set forth in the Award Agreement or
determined by the Committee). If the Participant is not entitled to exercise his or her entire
Option at the date of such termination, the Shares covered by the unexercisable portion of the
Option will revert to the Plan, unless otherwise set forth in the Award Agreement or determined by
the Committee. The Committee may determine in its sole discretion that such unexercisable portion
of the Option will become exercisable at such times and on such terms as the Committee may
determine in its sole discretion. If the Participant does not exercise an Option within the time
specified above after termination, that Option will expire, and the Shares covered by it will
revert to the Plan, except as otherwise determined by the Committee.



5.10 Death of Participant. If a Participant holds exercisable Options on the date his or
her death, the Participant’s estate or a person who acquired the right to exercise the Option by
bequest or inheritance or under Section 12.3 may exercise the Options that were vested and
exercisable as of the date of death until the end of the original term or for a period of 36 months
following the date of death, whichever is earlier (or such other period as is set forth in the
Award Agreement or determined by the Committee). If the Participant is not entitled to exercise
his or her entire Option at the date of death, the Shares covered by the unexercisable portion of
the Option will revert to the Plan, unless otherwise set forth in the Award Agreement or determined
by the Committee. The Committee may determine in its sole discretion that such unexercisable
portion of the Option will become exercisable at such times and on such terms as the Committee may
determine in its sole discretion. If the Participant’s estate or a person who acquired the right
to exercise the Option by bequest or inheritance or under Section 12.3 does not exercise the
Option within the time specified above after the date of death, the Option will expire, and the
Shares covered by it will revert to the Plan, except as otherwise determined by the Committee.


 


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ARTICLE VI

STOCK APPRECIATION RIGHTS




6.1 Grant and Exercise. The Committee may provide Stock Appreciation Rights either alone
or in addition to other Awards upon such terms and conditions as the Committee may establish in its
sole discretion.



6.2 Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to
time by the Committee, including the following:




(a) Upon the exercise of a Stock Appreciation Right, the holder shall have the right
to receive the excess of (i) the Fair Market Value of one Share on the date of exercise or such
other amount as the Committee shall so determine at any time during a specified period before
the date of exercise over (ii) the grant price of the right on the date of grant, which, except
in the case of Substitute Awards or in connection with an adjustment provided in Section 12.2,
shall not be less than the Fair Market Value of one Share on such date of grant of the right.




(b) Upon the exercise of a Stock Appreciation Right, payment shall be made in whole
Shares, or cash to the extent permissible without penalty to the Participant under Section 409A
of the Code.




(c) The provisions of Stock Appreciation Rights need not be the same with respect to
each recipient.




(d) The Committee may impose such other conditions or restrictions on the terms of
exercise and the exercise price of any Stock Appreciation Right, as it shall deem appropriate.
In connection with the foregoing, the Committee shall consider the applicability and effect of
Section 162(m) of the Code. Notwithstanding the foregoing provisions of this Section 6.2, but
subject to Section 12.2, a Stock Appreciation Right shall not have (i) an exercise price less
than Fair Market Value on the date of grant, or (ii) a term of greater than ten years. In
addition to the foregoing, but subject to Section 12.2, the base amount of any Stock
Appreciation Right shall not be reduced after the date of grant. The Committee shall take no
action under this Article 6 that would subject a Participant to a penalty tax under
Section 409A of the Code.



6.3 Termination of Employment or Consulting Relationship or Directorship. If a Participant
holds exercisable Stock Appreciation Rights on the date his or her Continuous Status as an
Employee, Director or Consultant terminates (other than because of termination due to Cause, death
or Disability), the Participant may exercise the Stock Appreciation Rights that were vested and
exercisable as of the date of termination until the end of the original term or for a period of 90
days following such termination, whichever is earlier (or such other period as is set forth in the
Award Agreement or determined by the Committee). If the Participant is not entitled to exercise his
or her entire Stock Appreciation Right at the date of such termination, the Shares covered by the
unexercisable portion of the Stock Appreciation Right will revert to the Plan, unless otherwise set
forth in the Award Agreement or determined by the Committee. The Committee may determine in its
sole discretion that such unexercisable portion of the Stock Appreciation Right will become
exercisable at such times and on such terms as the Committee may determine in its sole discretion.
If the Participant does not exercise a Stock Appreciation Right within the time specified above
after termination, that Stock Appreciation Right will expire, and the Shares covered by it will
revert to the Plan, except as otherwise determined by the Committee.



6.4 Disability of Participant. If a Participant holds exercisable Stock Appreciation
Rights on the date his or her Continuous Status as an Employee, Director or Consultant terminates
because of Disability, the Participant may exercise the Stock Appreciation Rights that were vested
and exercisable as of the date of termination until the end of the original term or for a period of
36 months following such termination, whichever is earlier (or such other period as is set forth in
the Award Agreement or determined by the Committee). If the Participant is not entitled to
exercise his or her entire Stock Appreciation Right at the date of such termination, the Shares
covered by the unexercisable portion of the Stock Appreciation Right will revert to the Plan,
unless otherwise set forth in the Award Agreement or determined by the Committee. The Committee
may determine in its sole discretion that such unexercisable portion of the Stock Appreciation
Right will become exercisable at such times and on such terms as the Committee may determine in its
sole discretion. If the Participant does not exercise a Stock Appreciation Right within the time
specified above after termination, that Stock Appreciation Right will expire, and the Shares
covered by it will revert to the Plan, except as otherwise determined by the Committee.



6.5 Death of Participant. If a Participant holds exercisable Stock Appreciation Rights on
the date his or her death, the Participant’s estate or a person who acquired the right to exercise
the Stock Appreciation Rights by bequest or inheritance or under Section 12.3 may exercise the
Stock Appreciation Rights that were vested and exercisable as of the date of death until the end of
the original term or for a period of 36 months following the date of death, whichever is earlier
(or such other period as is set forth in the Award Agreement or determined by the Committee). If
the Participant is not entitled to exercise his or her entire Stock Appreciation Right at the date
of death, the Shares covered by the unexercisable portion of the Stock Appreciation Right will
revert to the Plan, unless otherwise set forth in the Award Agreement or determined by the
Committee. The Committee may determine in its sole
discretion that such unexercisable portion of the Stock Appreciation Right will become
exercisable at such times and on such terms as the Committee may determine in its sole discretion.
If the Participant’s estate or a person who acquired the right to exercise the Stock Appreciation
Right by bequest or inheritance or under Section 12.3 does not exercise the Stock Appreciation
Right within the time specified above after the date of death, the Stock Appreciation Right will
expire, and the Shares covered by it will revert to the Plan, except as otherwise determined by the
Committee.


 


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ARTICLE VII

RESTRICTED STOCK AWARDS




7.1 Grants. Awards of Restricted Stock may be issued hereunder to Participants either
alone or in addition to other Awards granted under the Plan (a “Restricted Stock Award”). A
Restricted Stock Award shall be subject to restrictions imposed by the Committee covering a period
of time specified by the Committee (the “Restriction Period”). The provisions of Restricted Stock
Awards need not be the same with respect to each recipient. The Committee has absolute discretion
to determine whether any consideration (other than services) is to be received by the Company or
any Affiliate as a condition precedent to the issuance of Restricted Stock.



7.2 Award Agreements. The terms of any Restricted Stock Award granted under the Plan
shall be set forth in a written Award Agreement which shall contain provisions determined by the
Committee and not inconsistent with the Plan.



7.3 Rights of Holders of Restricted Stock. Except as otherwise provided in the Award
Agreement, beginning on the date of grant of the Restricted Stock Award and subject to execution of
the Award Agreement, the Participant shall become a shareholder of the Company with respect to all
Shares subject to the Award Agreement and shall have all of the rights of a shareholder, including
the right to vote such Shares and the right to receive distributions made with respect to such
Shares; provided, however that any Shares or any other property (other than cash) distributed as a
dividend or otherwise with respect to any Restricted Shares as to which the restrictions have not
yet lapsed shall be subject to the same restrictions as such Restricted Shares.



ARTICLE VIII

OTHER STOCK UNIT AWARDS




8.1 Other Stock Unit Awards. Other Awards of Shares and other Awards that are valued in
whole or in part by reference to, or are otherwise based on, Shares or other property (“Other Stock
Unit Awards”) may be granted hereunder to Participants, either alone or in addition to other Awards
granted under the Plan, and such Other Stock Unit Awards shall also be available as a form of
payment in the settlement of other Awards granted under the Plan. Other Stock Unit Awards shall be
paid in Shares or cash. Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the Employees, Consultants and Directors to whom and the time or
times at which such Other Stock Unit Awards shall be made, the number of Shares to be granted
pursuant to such Awards, and all other conditions of the Awards. The provisions of Other Stock Unit
Awards need not be the same with respect to each recipient.



8.2 Terms and Conditions. Shares (including securities convertible into Shares) subject
to Awards granted under this Article 8 may be issued for no consideration or for such minimum
consideration as may be required by Applicable Law. Shares (including securities convertible into
Shares) purchased pursuant to a purchase right awarded under this Article 8 shall be purchased for
such consideration as the Committee shall determine in its sole discretion.



ARTICLE IX

PERFORMANCE AWARDS




9.1 Terms of Performance Awards. Performance Awards may be issued hereunder to
Participants, for no consideration or for such minimum consideration as may be required by
Applicable Law, either alone or in addition to other Awards granted under the Plan. The performance
criteria to be achieved during any Performance Period and the length of the Performance Period
shall be determined by the Committee upon the grant of each Performance Award; provided, however,
that a Performance Period shall not be shorter than six months nor longer than five years. Except
as provided in Article 11 or as may be provided in an Award Agreement, Performance Awards will be
distributed only after the end of the relevant Performance Period. Performance Awards may be paid
in cash, Shares, other property, or any combination thereof, in the sole discretion of the
Committee at the time of payment. The performance goals to be achieved for each Performance Period
shall be conclusively determined by the Committee and may be based upon the criteria set forth in
Section 10.2. The amount of the Award to be distributed shall be conclusively determined by the
Committee. Performance Awards may be paid in a lump sum or in installments following the close of
the Performance Period.



ARTICLE X

CODE SECTION 162(m) PROVISIONS




10.1 Covered Employees. Notwithstanding any other provision of the Plan, if the Committee
determines at the time Restricted Stock, a Performance Award or an Other Stock Unit Award is
granted to a Participant who is, or is likely to be, as of the end of the tax year in which the
Company would claim a tax deduction in connection with such Award, a Covered Employee, then the
Committee may provide that this Article 10 is applicable to such Award.


 


9









 





10.2 Performance Criteria. If Restricted Stock, a Performance Award or an Other Stock
Unit Award is subject to this Article 10, then the lapsing of restrictions thereon and the
distribution of cash, Shares or other property pursuant thereto, as applicable, shall be subject to
the achievement of one or more objective performance goals established by the Committee, which
shall be based on the attainment of specified levels of or growth of one or any combination of the
following factors, or an objective formula determined at the time of the Award that is based on
modified or unmodified calculations of one or any combination of the following factors: net sales;
pretax income before or after allocation of corporate overhead and bonus; earnings per share; net
income; division, group or corporate financial goals; return on stockholders’ equity; return on
assets; attainment of strategic and operational initiatives; appreciation in and/or maintenance of
the price of the Shares or any other publicly-traded securities of the Company; market share; gross
profits; earnings before taxes; earnings before interest and taxes; earnings before interest,
taxes, depreciation and amortization (“EBITDA”); an adjusted formula of EBITDA determined by the
Committee; economic value-added models; comparisons with various stock market indices; reductions
in costs, and/or return on invested capital of the Company or any Affiliate, division or business
unit of the Company for or within which the Participant is primarily employed. Such performance
goals also may be based solely by reference to the Company’s performance or the performance of an
Affiliate, division or business unit of the Company, or based upon the relative performance of
other companies or upon comparisons of any of the indicators of performance relative to other
companies. Unless the Committee specifies otherwise when it sets performance goals for an Award,
objective adjustments shall be made to any of the foregoing measures for items that will not
properly reflect the Company’s financial performance for these purposes, such as the write-off of
debt issuance costs, pre-opening and development costs, gain or loss from asset dispositions, asset
or other impairment charges, litigation settlement costs, and other non-routine items that may
occur during the Performance Period. Also, unless the Committee determines otherwise in setting
the performance goals for an Award, such performance goals shall be applied by excluding the impact
of (a) restructurings, discontinued operations and charges for extraordinary items, (b) an event
either not directly related to the operations of the Company or not within the reasonable control
of the Company’s management, or (c) a change in accounting standards required by generally accepted
accounting principles. Such performance goals shall be set by the Committee within the time period
prescribed by, and shall otherwise comply with the requirements of, Section 162(m) of the Code, or
any successor provision thereto, and the regulations thereunder.



10.3 Adjustments. Notwithstanding any provision of the Plan (other than Article 11), with
respect to any Restricted Stock, Performance Award or Other Stock Unit Award that is subject to
this Article 10, the Committee may adjust downward, but not upward, the amount payable pursuant to
such Award, and the Committee may not waive the achievement of the applicable performance goals,
except in the case of the death or Disability of the Participant or the occurrence of a Change of
Control.



10.4 Determination of Performance. Prior to the vesting, payment, settlement or lapsing
of any restrictions with respect to any Restricted Stock, Performance Award or Other Stock Unit
Award that is subject to this Article 10, the Committee shall certify in writing that the
applicable performance goals have been achieved to the extent necessary for such Award to qualify
as “performance based compensation” within the meaning of Section 162(m)(4)(C) of the Code.



10.5 Restrictions. The Committee shall have the power to impose such other restrictions
on Awards subject to this Article 10 as it may deem necessary or appropriate to ensure that such
Awards satisfy all requirements for “performance-based compensation” within the meaning of
Section 162(m)(4)(C) of the Code, or which are not inconsistent with such requirements.



ARTICLE XI

CHANGE OF CONTROL PROVISIONS




11.1 Impact of Change of Control. The terms of any Award may provide in the Award
Agreement evidencing the Award, or the Committee may determine in its discretion, that, upon a
Change of Control of the Company, (a) Options and Stock Appreciation Rights outstanding as of the
date of the Change of Control immediately vest and become fully exercisable, (b) restrictions and
deferral limitations on Restricted Stock lapse and the Restricted Stock become free of all
restrictions and limitations and become fully vested, (c) all Performance Awards shall be
considered to be earned and payable (either in full or pro-rata based on the portion of Performance
Period completed as of the date of the Change of Control), and any deferral or other restriction
shall lapse and such Performance Awards shall be immediately settled or distributed, (d) the
restrictions and deferral limitations and other conditions applicable to any Other Stock Unit
Awards or any other Awards shall lapse, and such Other Stock Unit Awards or such other Awards shall
become free of all restrictions, limitations or conditions and become fully vested and transferable
to the full extent of the original grant, and (e) such other additional benefits, changes or
adjustments as the Committee deems appropriate and fair shall apply, subject in each case to any
terms and conditions contained in the Award Agreement evidencing such Award. Notwithstanding any
other provision of the Plan, the Committee, in its discretion, may determine that, upon the
occurrence of a Change of Control of the Company, (a) each Option and Stock Appreciation Right
shall remain exercisable for only a limited period of time determined by the Committee (provided
that they remain exercisable for at least 30 days after notice of such action is given to the
Participants), or (b) each Option and Stock Appreciation Right outstanding shall terminate within a
specified number of days after notice to the Participant, and such Participant shall receive, with
respect to each Share subject to such Option or Stock Appreciation Right, an amount equal to the
excess of the Fair Market Value of such Share immediately prior to the occurrence of such Change of
Control over the exercise price per share of such Option and/or Stock Appreciation Right; such
amount to be payable in cash, in one or more kinds of stock or property (including the stock or
property, if any, payable in the transaction) or in a combination thereof, as the
Committee, in its discretion, shall determine. Notwithstanding the foregoing and the
provisions of Section 11.2, the Committee will take no action that would subject any Participant to
a penalty tax under Section 409A of the Code.


 


10









 





11.2 Assumption Upon Change of Control. Notwithstanding the foregoing, the terms of any
Award Agreement may also provide that, if in the event of a Change of Control the successor company
assumes or substitutes for an Option, Stock Appreciation Right, Share of Restricted Stock or Other
Stock Unit Award, then each outstanding Option, Stock Appreciation Right, Share of Restricted Stock
or Other Stock Unit Award shall not be accelerated as described in Sections 11.1(a), (b) and (d).
For the purposes of this Section 11.2, an Option, Stock Appreciation Right, Share of Restricted
Stock or Other Stock Unit Award shall be considered assumed or substituted for if following the
Change of Control the award confers the right to purchase or receive, for each Share subject to the
Option, Stock Appreciation Right, Restricted Stock Award or Other Stock Unit Award immediately
prior to the Change of Control, the consideration (whether stock, cash or other securities or
property) received in the transaction constituting a Change of Control by holders of Shares for
each Share held on the effective date of such 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 transaction constituting a
Change of Control is not solely common stock of the successor company, the Committee may, with the
consent of the successor company, provide that the consideration to be received upon the exercise
or vesting of an Option, Stock Appreciation Right, Restricted Stock Award or Other Stock Unit
Award, for each Share subject thereto, will be solely common stock of the successor company
substantially equal in fair market value to the per share consideration received by holders of
Shares in the transaction constituting a Change of Control. The determination of such substantial
equality of value of consideration shall be made by the Committee in its sole discretion and its
determination shall be conclusive and binding. Any assumption or substitution of an Incentive Stock
Option will be made in a manner that will not be considered a “modification” under the provisions
of Section 424(h)(3) of the Code. Notwithstanding the foregoing, on such terms and conditions as
may be set forth in an Award Agreement, in the event of a termination of a Participant’s employment
in such successor company within a specified time period following such Change of Control, each
Award held by such Participant at the time of the Change of Control shall be accelerated as
described in Sections 11.1(a), (b) and (d) above.



ARTICLE XII

GENERALLY APPLICABLE PROVISIONS




12.1 Amendment and Modification of the Plan. The Board may, from time to time, alter,
amend, suspend or terminate the Plan as it shall deem advisable, subject to any requirement for
stockholder approval imposed by Applicable Law; provided that the Board may not amend the Plan in
any manner that would result in noncompliance with Rule 16b-3 of the Exchange Act; and further
provided that the Board may not, without the approval of the Company’s stockholders, amend the Plan
to (a) increase the number of Shares that may be the subject of Awards under the Plan (except for
adjustments pursuant to Section 12.2), (b) expand the types of awards available under the Plan,
(c) materially expand the class of persons eligible to participate in the Plan, (d) amend any
provision of Section 5.3, (e) increase the maximum permissible term of any Option specified by
Section 5.4, or (f) amend any provision of Section 3.2. In addition, no amendments to, or
termination of, the Plan (other than by reason of the failure of stockholders to approve the Plan
in the manner set forth in Section 13.12) shall in any way impair the rights of a Participant under
any Award previously granted without such Participant’s consent.



12.2 Adjustments. In the event of any merger, reorganization, consolidation,
recapitalization, dividend or distribution (whether in cash, shares or other property), stock
split, reverse stock split, spin-off or similar transaction or other change in corporate structure
affecting the Shares or the value thereof, such adjustments and other substitutions shall be made
to the Plan and to Awards as the Committee, in its sole discretion, deems equitable or appropriate,
including such adjustments in the aggregate number, class and kind of securities that may be
delivered under the Plan and, in the aggregate or to any one Participant, in the number, class,
kind and option or exercise price of securities subject to outstanding Awards granted under the
Plan (including, if the Committee deems appropriate, the substitution of similar options to
purchase the shares of, or other awards denominated in the shares of, another company) as the
Committee may determine to be appropriate in its sole discretion; provided, however, that the
number of Shares subject to any Award shall always be a whole number. Where an adjustment under
this Section 12.2 is made to an Incentive Stock Option, the adjustment will be made in a manner
which will not be considered a “modification” under the provisions of subsection 424(h)(3) of the
Code.



12.3 Transferability of Awards. Except as provided below, and except as otherwise
authorized by the Committee in an Award Agreement, no Award, and no Shares subject to Awards that
have not been issued or as to which any applicable restriction, performance or deferral period has
not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will
or the laws of descent and distribution, and such Award may be exercised during the life of the
Participant only by the Participant or the Participant’s guardian or legal representative.
Notwithstanding the foregoing, to the extent that the Committee so authorizes in the Award
Agreement or otherwise, an Award other than an Incentive Stock Option may be assigned, in whole or
in part, during the Participant’s lifetime to one or more Family Members of the Participant. Rights
under the assigned portion may be exercised by the Family Member(s) who acquire a proprietary
interest in such Award pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the Award immediately before such assignment and shall be
set forth in such documents issued to the assignee as the Committee deems appropriate.


 


11









 






(a) Designation of Beneficiary. A Participant may file a written designation of a
beneficiary who is to receive any Awards that remain unexercised in the event of the
Participant’s death. If a Participant is married and the designated beneficiary is not the
spouse, spousal consent will be required for the designation to be effective. The Participant
may change such designation of beneficiary at any time by written notice to the Committee,
subject to the above spousal consent requirement.




(b) Effect of No Designation. If a Participant dies and there is no beneficiary validly
designated and living at the time of the Participant’s death, the Company will deliver such
Participant’s Awards to the executor or administrator of his or her estate, or if no such
executor or administrator has been appointed (to the knowledge of the Company), the Company, in
its discretion, may deliver such Awards to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.




(c) Death of Spouse or Dissolution of Marriage. If a Participant designates his or
her spouse as beneficiary, that designation will be deemed automatically revoked if the
Participant’s marriage is later dissolved. Similarly, any designation of a beneficiary will be
deemed automatically revoked upon the death of the beneficiary if the beneficiary predeceases
the Participant. Without limiting the generality of the preceding sentence, the interest in
Awards of a spouse of a Participant who has predeceased the Participant or whose marriage has
been dissolved will automatically pass to the Participant, and will not be transferable by such
spouse in any manner, including but not limited to such spouse’s will, nor will any such
interest pass under the laws of intestate succession.



12.4 Termination of Employment. The Committee shall determine and set forth in each Award
Agreement whether any Awards granted in such Award Agreement will continue to be exercisable, and
the terms of such exercise, on and after the date that a Participant ceases to be employed by or to
provide services to the Company or any Affiliate (including as a Director), whether by reason of
death, disability, voluntary or involuntary termination of employment or services, or otherwise.
The date of termination of a Participant’s employment or services will be determined by the
Committee, which determination will be final.



12.5 Dividend Equivalents. Subject to the provisions of the Plan and any Award Agreement,
the recipient of an Award (including any deferred Award) may, if so determined by the Committee, be
entitled to receive, currently or on a deferred basis, cash, stock or other property dividends, or
cash payments in amounts equivalent to stock or other property dividends on Shares (“Dividend
Equivalents”) with respect to the number of Shares covered by the Award, as determined by the
Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall
be deemed to have been reinvested in additional Shares or otherwise reinvested.


 


12









 





ARTICLE XIII

MISCELLANEOUS




13.1 Tax Withholding. The Company shall have the right to make all payments or
distributions pursuant to the Plan to a Participant (or to the Participant’s executors,
administrators, guardian, beneficiary, or legal representative, or Family Members) (any such
person, a “Payee”) net of any applicable Federal, State and local taxes required to be paid or
withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock
Appreciation Rights, (c) the delivery of Shares or cash, (d) the lapse of any restrictions in
connection with any Award, or (e) any other event occurring pursuant to the Plan. The Company or
any Affiliate shall have the right to withhold from wages or other amounts otherwise payable to
such Payee such withholding taxes as may be required by law, or to otherwise require the Payee to
pay such withholding taxes. If the Payee shall fail to make such tax payments as are required, the
Company or its Affiliates shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to such Payee or to take such other action as may
be necessary to satisfy such withholding obligations. The Committee shall be authorized to
establish procedures for election by Participants to satisfy such obligation for the payment of
such taxes by tendering previously acquired Shares (either actually or by attestation, valued at
their then Fair Market Value) that have been owned for a period of at least six months (or such
other period to avoid accounting charges against the Company’s earnings), or by directing the
Company to retain Shares (up to the employee’s minimum required tax withholding rate) otherwise
deliverable in connection with the Award. If Shares acquired upon exercise of any Incentive Stock
Option are disposed of in a disposition that, under Section 422 of the Code, disqualifies the
holder from the application of Section 421(a) of the Code, the holder of the Shares immediately
before the disposition will comply with any requirements imposed by the Company in order to enable
the Company to secure the related income tax deduction to which it is entitled in such event.



13.2 Right of Discharge Reserved; Claims to Awards. Nothing in the Plan nor the grant of
an Award hereunder shall confer upon any Employee, Consultant or Director the right to continue in
the employment or service of the Company or any Affiliate or affect any right that the Company or
any Affiliate may have to terminate the employment or service of (or to demote or to exclude from
future Awards under the Plan) any such Employee, Consultant or Director at any time for any reason.
The Company shall not be liable for the loss of existing or potential profit from an Award granted
in the event of termination of an employment or other relationship. No Employee or Participant
shall have any claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Employees or Participants under the Plan.



13.3 Prospective Recipient. The prospective recipient of any Award under the Plan shall
not, with respect to such Award, be deemed to have become a Participant, or to have any rights with
respect to such Award, until and unless such recipient shall have executed an agreement or other
instrument evidencing the Award and delivered a copy thereof to the Company, and otherwise complied
with the then applicable terms and conditions.



13.4 Cancellation of Award. Notwithstanding anything to the contrary contained herein,
all outstanding Awards granted to any Participant may be canceled in the discretion of the
Committee if the Participant’s Continuous Status as an Employee, Director or Consultant is
terminated for Cause, or if, after the termination of the Participant’s Continuous Status as an
Employee, Director, or Consultant, the Committee determines that Cause existed before such
termination.



13.5 Stop Transfer Orders. All certificates for Shares delivered under the Plan pursuant
to any Award shall be subject to such stop-transfer orders and other restrictions as the Committee
may deem advisable under the provisions of this Plan, the rules, regulations and other requirements
of the Securities and Exchange Commission, any stock exchange upon which the Shares are then
listed, and any applicable federal or state securities law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such restrictions.



13.6 Nature of Payments. All Awards made pursuant to the Plan are in consideration of
services performed or to be performed for the Company or any Affiliate, division or business unit
of the Company. Any income or gain realized pursuant to Awards under the Plan and any Stock
Appreciation Rights constitute a special incentive payment to the Participant and shall not be
taken into account, to the extent permissible under Applicable Law, as compensation for purposes of
any of the employee benefit plans of the Company or any Affiliate except as may be determined by
the Committee or by the Board or board of directors of the applicable Affiliate.



13.7 Other Plans. Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval if such approval is
required; and such arrangements may be either generally applicable or applicable only in specific
cases.



13.8 Severability. If any provision of the Plan shall be held unlawful or otherwise
invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision
shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it
lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and
(b) not affect any other provision of the Plan or part thereof, each of which shall remain in full
force and effect. If the making of any payment or the provision of any other benefit required under
the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent
jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment
or benefit from being made or provided under the Plan, and if the making of any payment in full or
the provision of any other benefit required under the Plan in full would be
unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or
unenforceability shall not prevent such payment or benefit from being made or provided in part, to
the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or
benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the
Plan.


 


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13.9 Construction. All references in the Plan to “Section,” “Sections,” or “Article” are
intended to refer to the Section, Sections or Article, as the case may be, of the Plan. As used in
the Plan, the words “include” and “including,” and variations thereof, shall not be deemed to be
terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”



13.10 Unfunded Status of the Plan. The Plan is intended to constitute an “unfunded” plan
for incentive and deferred compensation. With respect to any payments not yet made to a Participant
by the Company, nothing contained herein shall give any such Participant any rights that are
greater than those of a general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations created under the
Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided,
however, that the existence of such trusts or other arrangements is consistent with the unfunded
status of the Plan.



13.11 Governing Law. The Plan and all determinations made and actions taken thereunder,
to the extent not otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of Delaware and construed accordingly.



13.12 Effective Date of Plan; Termination of Plan. The Plan shall be effective on the
date of its adoption by the Board, subject to the approval of the Plan, within 12 months
thereafter, by affirmative votes representing a majority of the votes cast under Applicable Laws at
a duly constituted meeting of the stockholders of the Company. After the adoption of this Plan by
the Board, Awards may be made, but all such Awards shall be subject to stockholder approval of this
Plan in accordance with the first sentence of this Section 13.12, and no Options or Stock
Appreciation Rights may be exercised prior to such stockholder approval of the Plan. If the
stockholders do not approve this Plan in the manner set forth in the first sentence of this
Section 13.12, this Plan, and all Awards granted hereunder, shall be null and void and of no
effect. Awards may be granted under the Plan at any time and from time to time on or prior to the
tenth anniversary of the effective date of the Plan (unless the Board sooner suspends or terminates
the Plan under Section 12.1), on which date the Plan will expire except as to Awards then
outstanding under the Plan. Notwithstanding the foregoing, unless affirmative votes representing a
majority of the votes cast under Applicable Laws approve the continuation of Article 10 at the
first duly constituted meeting of the stockholders of the Company that occurs in the fifth year
following the later of i) the  effective date of this Plan or ii) the then most recent
re-approval of the continuation of Article 10 of the  Plan, no Awards other than Options or
Stock Appreciation Rights shall be made to Covered Employees following the date of such meeting.
Except as set forth in the third sentence of this Section 13.12, outstanding Awards shall remain in
effect until they have been exercised or terminated, or have expired.



13.13 Foreign Employees. Awards may be granted to Participants who are foreign nationals
or employed outside the United States, or both, on such terms and conditions different from those
applicable to Awards to Employees employed in the United States as may, in the judgment of the
Committee, be necessary or desirable in order to recognize differences in local law or tax policy.
The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize
the Company’s obligation with respect to tax equalization for Employees on assignments outside
their home country.



13.14 Effect on Prior Plans. On the approval of this Plan by the stockholders of the
Company in the manner set forth in Section 13.12, the Prior Plans shall be cancelled and no further
grants or awards shall be made under the Prior Plans. Grants and awards made under the Prior Plans
before the date of such cancellation, however, shall continue in effect in accordance with their
terms. Grants and awards made under the Individual Arrangements shall likewise continue in effect
in accordance with their terms.



13.15 Other Company Compensation Plans. Shares available for Awards under the Plan may be
used by the Company as a form of payment of compensation under other Company compensation plans,
whether or not existing on the date hereof. To the extent any Shares are used as such by the
Company, such Shares will reduce the then number of Shares available under Article 3 of the Plan
for future Awards.



13.16 Captions. The captions in the Plan are for convenience of reference only, and are
not intended to narrow, limit or affect the substance or interpretation of the provisions contained
herein.



 


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