dec08ammd2007stock_plan.htm


    Exhibit
10.2

    
      

      

    

     

        

     

    COSTAR
GROUP, INC.

     

    2007
STOCK INCENTIVE PLAN

    (Amended
effective December 11, 2008)

     

    1. Purpose

     

    The
purpose of the CoStar Group, Inc. 2007 Stock Incentive Plan (the “Plan”) is to
advance the interests of CoStar Group, Inc. (the “Company”) by enabling the
Company and its subsidiaries to attract, retain and motivate employees of the
Company by providing for or increasing the proprietary interests of such
individuals in the Company, and by enabling the Company to attract, retain and
motivate its nonemployee directors and further align their interests with those
of the shareholders of the Company by providing for or increasing the
proprietary interests of such directors in the Company. The Plan provides for
the grant of Incentive and Nonqualified Stock Options, Stock Appreciation
Rights, Restricted Stock and Restricted Stock Units, any of which may be
performance-based, as determined by the Committee.

     

    2. Definitions

     

    As used
in the Plan, the following terms shall have the meanings set forth
below:

     

    (a) “Award”
means an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation
Right, Restricted Stock, or Restricted Stock Unit granted to a Participant
pursuant to the provisions of the Plan, any of which the Committee may structure
to qualify in whole or in part as a Performance Award.

     

    (b) “Award
Agreement” means a written agreement or other instrument as may be approved from
time to time by the Committee implementing the grant of each Award. An Agreement
may be in the form of an agreement to be executed by both the Participant and
the Company (or an authorized representative of the Company) or certificates,
notices or similar instruments as approved by the Committee.

     

    (c) “Board”
means the board of directors of the Company.

     

    (d) “Code”
means the Internal Revenue Code of 1986, as amended from time to time, and the
rulings and regulations issues thereunder.

     

    (e) “Committee”
means the Committee delegated the authority to administer the Plan in accordance
with Section 16.

     

    (f) “Common
Share” means a share of the Company’s common stock, subject to adjustment as
provided in Section 11.

     

    (g) “Company”
means CoStar Group, Inc., a Delaware corporation.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (h) “Fair
Market Value” means, as of any given
date, the closing sales price on such date during normal trading hours (or, if
there are no reported sales on such date, on the last date prior to such date on
which there were sales) of the Common Shares on NASDAQ, the New York Stock
Exchange Composite Tape or, if not listed on such exchanges, on any other
national securities exchange on which the Common Shares are listed, in any case,
as reporting in such source as the Committee shall select. If there is no
regular public trading market for such Common Shares, the Fair Market Value of
the Common Shares shall be determined by the Committee in good faith and in
compliance with Section 409A of the Code.

     

    (i) “Incentive
Stock Option” means a stock option that is intended to qualify as an “incentive
stock option” within the meaning of Section 422 of the Code.

     

    (j) “Nonemployee
Director” means each person who is, or is elected to be, a member of the Board
or the board of directors of any Subsidiary and who is not an employee of the
Company or any Subsidiary.

     

    (k) “Nonqualified
Stock Option” means a stock option that is not intended to qualify as an
“incentive stock option” within the meaning of Section 422 of the
Code.

     

    (l) “Option”
means an Incentive Stock Option and/or a Nonqualified Stock Option granted
pursuant to Section 6 of the Plan.

     

    (m) “Participant”
means any individual described in Section 3 to whom Awards have been
granted from time to time by the Committee and any authorized transferee of such
individual.

     

    (n) “Performance
Award” means an Award, the grant, issuance, retention, vesting or settlement of
which is subject to satisfaction of one or more performance criteria pursuant to
Section 12.

     

    (o) “Plan”
means the CoStar Group, Inc. 2007 Stock Incentive Plan as set forth herein and
as amended from time to time.

     

    (p) “Prior
Plan” means the CoStar Group, Inc. 1998 Stock Incentive Plan.

     

    (q) “Qualifying
Performance Criteria” has the meaning set forth in
Section 12(b).

     

    (r) “Restricted
Stock” means Common Shares granted pursuant to Section 8 of the
Plan.

     

    (s) “Restricted
Stock Unit” means an Award granted to a Participant pursuant to Section 8
pursuant to which Common Shares or cash in lieu thereof may be issued in the
future.

     

    (t) “Stock
Appreciation Right” means a right granted pursuant to Section 7 of the Plan
that entitles the Participant to receive, in cash or Common Shares or a
combination thereof, as determined by the Committee, value equal to or otherwise
based on the excess of (i) the market price of a specified number of Common
Shares at the time of exercise over (ii) the exercise price of the right, as
established by the Committee on the date of grant.

     

    
      
        
        

      

      
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    (u) “Subsidiary”
means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company where each of the corporations in the
unbroken chain other than the last corporation owns stock possessing at least 50
percent or more of the total combined voting power of all classes of stock in
one of the other corporations in the chain, and if specifically determined by
the Committee in the context other than with respect to Incentive Stock Options,
may include an entity in which the Company has a significant ownership interest
or that is directly or indirectly controlled by the Company.

     

    (v) “Substitute
Awards” means Awards granted or Common 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 corporation acquired by the
Company or any Subsidiary or with which the Company or any Subsidiary
combines.

     

    3. Eligibility

     

    Any
person who is an officer or employee of the Company or of any Subsidiary
(including any director who is also an employee, in his or her capacity as such)
shall be eligible for selection by the Committee for the grant of Awards
hereunder. In addition, Nonemployee Directors shall be eligible for the grant of
Awards hereunder as determined by the Committee. In addition any service
provider who has been retained to provide consulting, advisory or other services
to the Company or to any Subsidiary shall be eligible for selection by the
Committee for the grant of Awards hereunder. Options intending to qualify as
Incentive Stock Options may only be granted to employees of the Company or any
Subsidiary within the meaning of the Code, as selected by the
Committee.

     

    4. Effective
Date and Termination of Plan

     

    This Plan
was adopted by the Board and became effective as of April 26, 2007 (the
“Effective Date”), subject to the approval by the Company’s stockholders. All
Awards granted under this Plan are subject to, and may not be exercised before,
the approval of this Plan by the stockholders prior to the first anniversary
date of the effective date of the Plan by the affirmative vote of the holders of
a majority of the outstanding Common Shares of the Company present, or
represented by proxy, and entitled to vote, at a meeting of the Company’s
stockholders or by written consent in accordance with the laws of the State of
Delaware; provided that if such approval by the stockholders of the Company is
not forthcoming, all Awards previously granted under this Plan shall be void.
The Plan shall remain available for the grant of Awards until the tenth (10th)
anniversary of the Effective Date. Notwithstanding the foregoing, the Plan may
be terminated at such earlier time as the Board may determine. Termination of
the Plan will not affect the rights and obligations of the Participants and the
Company arising under Awards theretofore granted and then in
effect.

     

    
      
        
        

      

      
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    5. Common
Shares Subject to the Plan and to Awards

     

    (a) Aggregate Limits. The
aggregate number of Shares issuable pursuant to all Awards shall not exceed
1,000,000 shares, plus (i) any Shares that were authorized for issuance
under the Prior Plan that, as of June 7, 2007, remain available for issuance
under the Prior Plan (not including any Shares that are subject to, as of June
7, 2007, outstanding awards under the Prior Plan or any Shares that prior to
June 7, 2007 were issued pursuant to awards granted under the Prior Plan) and
(ii) any Shares subject to outstanding awards under the Prior Plan as of
June 7, 2007 that on or after such date cease for any reason to be subject to
such awards (other than by reason of exercise or settlement of the awards to the
extent they are exercised for or settled in vested and nonforfeitable shares).
The aggregate number of Common Shares available for grant under this Plan and
the number of Common Shares subject to outstanding Awards shall be subject to
adjustment as provided in Section 11. The Common Shares issued pursuant to
Awards granted under this Plan may be shares that are authorized and unissued or
shares that were reacquired by the Company, including shares purchased in the
open market.

     

    (b) Issuance of Common Shares.
For purposes of this Section 5, the aggregate number of Common Shares
available for Awards under this Plan at any time shall not be reduced by
(i) shares subject to Awards that have been terminated, expired
unexercised, forfeited or settled in cash, (ii) shares subject to Awards
that have been retained by the Company in payment or satisfaction of the
exercise price, purchase price or tax withholding obligation of an Award, or
(iii) shares subject to Awards that otherwise do not result in the issuance
of Common Shares in connection with payment or settlement of an Award. In
addition, Common Shares that have been delivered (either actually or by
attestation) to the Company in payment or satisfaction of the exercise price,
purchase price or tax withholding obligation of an Award shall be available for
Awards under this Plan.

     

    (c) Tax Code Limits. The
aggregate number of Common Shares subject to Awards granted under this Plan
during any calendar year to any one Participant shall not exceed 200,000, which
number shall be calculated and adjusted pursuant to Section 11 only to the
extent that such calculation or adjustment will not affect the status of any
Award intended to qualify as “performance based compensation” under
Section 162(m) of the Code but which number shall not count any tandem SARs
(as defined in Section 7). Any Common Shares that may be
issued under this Plan may be issued pursuant to the exercise of Incentive
Stock Options.

     

    (d) Substitute Awards. Substitute
Awards shall not reduce the Common Shares authorized for issuance under the Plan
or authorized for grant to a Participant in any calendar year. Additionally, in
the event that a corporation 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
Common 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 not employees,
directors or consultants of the Company or its Subsidiaries immediately before
such acquisition or combination.

     

    
      
        
        

      

      
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    6. Options

     

    (a) Option Awards. Options may be
granted at any time and from time to time prior to the termination of the Plan
to Participants as determined by the Committee. No Participant shall have any
rights as a stockholder with respect to any Common Shares subject to Option
hereunder until said Common Shares have been issued, except that the Committee
may authorize dividend equivalent accruals with respect to such Common Shares.
Each Option shall be evidenced by an Award Agreement. Options granted pursuant
to the Plan need not be identical but each Option must contain and be subject to
the terms and conditions set forth below.

     

    (b) Price. The Committee will
establish the exercise price per Common Share under each Option, which, in no
event will be less than the Fair Market Value of the Common Shares on the date
of grant; provided, however, that the exercise price per Common Share with
respect to an Option that is granted in connection with a merger or other
acquisition as a substitute or replacement award for options held by optionees
of the acquired entity may be less than 100% of the market price of the Common
Shares on the date such Option is granted if such exercise price is based on a
formula set forth in the terms of the options held by such optionees or in the
terms of the agreement providing for such merger or other acquisition. The
exercise price of any Option may be paid in Common Shares, cash, certified
check, money order or a combination thereof, as determined by the Committee,
including an irrevocable commitment by a broker to pay over such amount from a
sale of the Common Shares issuable under an Option, the delivery of previously
owned Common Shares and withholding of Common Shares deliverable upon
exercise.

     

    (c) No Repricing. Other than in
connection with a change in the Company’s capitalization (as described in
Section 11) the exercise price of an Option may not be reduced without
stockholder approval (including canceling previously awarded Options and
regranting them with a lower exercise price).

     

    (d) Provisions Applicable to
Options. The date on which Options become exercisable shall be determined
at the sole discretion of the Committee and set forth in an Award Agreement.
Unless provided otherwise in the applicable Award Agreement, to the extent that
the Committee determines that an approved leave of absence or employment on a
less than full-time basis is not a termination of employment, the vesting period
and/or exercisability of an Option shall be adjusted by the Committee during or
to reflect the effects of any period during which the Participant is on an
approved leave of absence or is employed on a less than full-time
basis.

     

    (e) Term of Options and Termination of
Employment:  The Committee shall establish the term of each
Option, which in no case shall exceed a period of ten (10) years from the date
of grant. Unless an Option earlier expires upon the expiration date established
pursuant to the foregoing sentence, upon the termination of the Participant’s
employment, his or her rights to exercise an Option then held shall be
determined by the Committee and set forth in an Award Agreement.

     

    
      
        
        

      

      
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    (f) Incentive Stock Options.
Notwithstanding anything to the contrary in this Section 6, in the case of
the grant of an Option intending to qualify as an Incentive Stock Option:
(i) if the Participant owns stock possessing more than 10 percent of the
combined voting power of all classes of stock of the Company (a “10% Common
Shareholder”), the exercise price of such Option must be at least 110 percent of
the Fair Market Value of the Common Shares on the date of grant and the Option
must expire within a period of not more than five (5) years from the date of
grant, and (ii) termination of employment will occur when the person to
whom an Award was granted ceases to be an employee (as determined in accordance
with Section 3401(c) of the Code and the regulations promulgated
thereunder) of the Company and its Subsidiaries. Notwithstanding anything in
this Section 6 to the contrary, options designated as Incentive Stock
Options shall not be eligible for treatment under the Code as Incentive Stock
Options (and will be deemed to be Nonqualified Stock Options) to the extent that
either (a) the aggregate Fair Market Value of Common Shares (determined as of
the time of grant) with respect to which such Options are exercisable for the
first time by the Participant during any calendar year (under all plans of the
Company and any Subsidiary) exceeds $100,000, taking Options into account in the
order in which they were granted, or (b) such Options otherwise remain
exercisable but are not exercised within three (3) months of Termination of
employment (or such other period of time provided in Section 422 of the
Code).

     

    7. Stock
Appreciation Rights

     

    Stock
Appreciation Rights may be granted to Participants from time to time either in
tandem with or as a component of other Awards granted under the Plan (“tandem
SARs”) or not in conjunction with other Awards (“freestanding SARs”) and may,
but need not, relate to a specific Option granted under Section 6. The
provisions of Stock Appreciation Rights need not be the same with respect to
each grant or each recipient. Any Stock Appreciation Right granted in tandem
with an Award may be granted at the same time such Award is granted or at any
time thereafter before exercise or expiration of such Award. All freestanding
SARs shall be granted subject to the same terms and conditions applicable to
Options as set forth in Section 6 and all tandem SARs shall have the same
exercise price, vesting, exercisability, forfeiture and termination provisions
as the Award to which they relate. Subject to the provisions of Section 6
and the immediately preceding sentence, the Committee may impose such other
conditions or restrictions on any Stock Appreciation Right as it shall deem
appropriate. Stock Appreciation Rights may be settled in Common Shares, cash or
a combination thereof, as determined by the Committee and set forth in the
applicable Award Agreement. Other than in connection with a change in the
Company’s capitalization (as described in Section 11) the exercise price of
Stock Appreciation Rights may not be reduced without stockholder approval
(including canceling previously awarded Stock Appreciation Rights and regranting
them with a lower exercise price).

     

    8. Restricted
Stock and Restricted Stock Units

     

    (a) Restricted Stock and Restricted
Stock Unit Awards. Restricted Stock and Restricted Stock Units may be
granted at any time and from time to time prior to the termination of the Plan
to Participants as determined by the Committee. Restricted Stock is an award or
issuance of Common Shares the grant, issuance, retention, vesting and/or
transferability of which is subject during specified periods of time to such
conditions (including continued employment or performance conditions) and terms
as the Committee deems appropriate. Restricted Stock Units are Awards
denominated in units of Common Shares under which the issuance of Common Shares
is subject to such conditions (including continued employment or performance
conditions) and terms as the Committee deems appropriate. Each grant of
Restricted Stock and Restricted Stock Units shall be evidenced by an Award
Agreement. 

     

    
      
        
        

      

      
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      Unless
determined otherwise by the Committee, each Restricted Stock Unit will be equal
to one Common Share and will entitle a Participant to either the issuance of
Common Shares or payment of an amount of cash determined with reference to the
value of Common Shares. To the extent determined by the Committee, Restricted
Stock and Restricted Stock Units may be satisfied or settled in Common Shares,
cash or a combination thereof. Restricted Stock and Restricted Stock Units
granted pursuant to the Plan need not be identical but each grant of Restricted
Stock and Restricted Stock Units must contain and be subject to the terms and
conditions set forth below.

    

     

    (b) Contents of Agreement. Each
Award Agreement shall contain provisions regarding (i) the number of Common
Shares or Restricted Stock Units subject to such Award or a formula for
determining such number, (ii) the purchase price of the Common Shares, if any,
and the means of payment, (iii) the performance criteria, if any, and level of
achievement versus these criteria that shall determine the number of Common
Shares or Restricted Stock Units granted, issued, retainable and/or vested, (iv)
such terms and conditions on the grant, issuance, vesting and/or forfeiture of
the Common Shares or Restricted Stock Units as may be determined from time to
time by the Committee, (v) the term of the performance period, if any, as
to which performance will be measured for determining the number of such Common
Shares or Restricted Stock Units, and (vi) restrictions on the transferability
of the Common Shares or Restricted Stock Units. Common Shares issued under a
Restricted Stock Award may be issued in the name of the Participant and held by
the Participant or held by the Company, in each case as the Committee may
provide.

     

    (c) Vesting and Performance
Criteria. The grant, issuance, retention, vesting and/or settlement of
shares of Restricted Stock and Restricted Stock Units will occur when and in
such installments as the Committee determines or under criteria the Committee
establishes, which may include Qualifying Performance Criteria; provided,
however, that, except in the case of a change of control of the Company, the
death or disability of the Participant or awards granted to employees of the
Company or any Subsidiary in appreciation of past service to the Company or a
Subsidiary pursuant to a Company program or policy that applies to all such
employees on an equal basis, vesting of Restricted Stock and Restricted Stock
Units shall be no earlier than three (3) years from the date of grant for Awards
not subject to vesting based on performance criteria and one (1) year from the
date of grant for Awards that vest based on the achievement of performance
criteria. Notwithstanding anything in this Plan to the contrary, the performance
criteria for any Restricted Stock or Restricted Stock Unit that is intended to
satisfy the requirements for “performance-based compensation” under
Section 162(m) of the Code will be a measure based on one or more
Qualifying Performance Criteria selected by the Committee and specified when the
Award is granted.

     

    (d) Discretionary Adjustments and
Limits. Subject to the limits imposed under Section 162(m) of the
Code for Awards that are intended to qualify as “performance based
compensation,” notwithstanding the satisfaction of any performance goals, the
number of Common Shares granted, issued, retainable and/or vested under an Award
of Restricted Stock or Restricted Stock Units on account of either financial
performance or personal performance evaluations may, to the extent specified in
the Award Agreement, be reduced by the Committee on the basis of such further
considerations as the Committee shall determine.

     

    
      
        
        

      

      
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    (e) Voting Rights. Unless
otherwise determined by the Committee, Participants holding shares of Restricted
Stock granted hereunder may exercise full voting rights with respect to those
shares during the period of restriction. Participants shall have no voting
rights with respect to Common Shares underlying Restricted Stock Units unless
and until such Common Shares are reflected as issued and outstanding shares on
the Company’s stock ledger.

     

    (f) Dividends and Distributions.
Participants in whose name Restricted Stock is granted shall be entitled to
receive all dividends and other distributions paid with respect to those Common
Shares, unless determined otherwise by the Committee. The Committee will
determine whether any such dividends or distributions will be automatically
reinvested in additional shares of Restricted Stock and subject to the same
restrictions on transferability as the Restricted Stock with respect to which
they were distributed or whether such dividends or distributions will be paid in
cash. Common Shares underlying Restricted Stock Units shall be entitled to
dividends or dividend equivalents only to the extent provided by the
Committee.

     

    9. Deferral
of Gains

     

    The
Committee may, in an Award Agreement or otherwise, provide for the deferred
delivery of Common Shares upon settlement, vesting or other events with respect
to Restricted Stock or Restricted Stock Units. Notwithstanding anything herein
to the contrary, in no event will any deferral of the delivery of Common Shares
or any other payment with respect to any Award be allowed if the Committee
determines, in its sole discretion, that the deferral would result in the
imposition of the additional tax under Section 409A(a)(1)(B) of the
Code.

     

    10. Conditions
and Restrictions Upon Securities Subject to Awards

     

    The
Committee may provide that the Common Shares issued upon exercise of an Option
or Stock Appreciation Right or otherwise subject to or issued under an Award
shall be subject to such further agreements, restrictions, conditions or
limitations as the Committee in its discretion may specify prior to the exercise
of such Option or Stock Appreciation Right or the grant, vesting or settlement
of such Award, including without limitation, conditions on vesting or
transferability, forfeiture or repurchase provisions and method of payment for
the Common Shares issued upon exercise, vesting or settlement of such Award
(including the actual or constructive surrender of Common Shares already owned
by the Participant) or payment of taxes arising in connection with an Award.
Without limiting the foregoing, such restrictions may address the timing and
manner of any resales by the Participant or other subsequent transfers by the
Participant of any Common Shares issued under an Award, including without
limitation (i) restrictions under an insider trading policy or pursuant to
applicable law, (ii) restrictions designed to delay and/or coordinate the timing
and manner of sales by Participant and holders of other Company equity
compensation arrangements, (iii) restrictions as to the use of a specified
brokerage firm for such resales or other transfers, and (iv) provisions
requiring Common Shares to be sold on the open market or to the Company in order
to satisfy tax withholding or other obligations.

     

    
      
        
        

      

      
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    11. Adjustment
of and Changes in the Stock

     

    The
number and kind of Common Shares available for issuance under this Plan
(including under any Awards then outstanding), and the number and kind of Common
Shares subject to the limits set forth in Section 5 of this Plan, shall be
equitably adjusted by the Committee to reflect any reorganization,
reclassification, combination of shares, stock split, reverse stock split,
spin-off, dividend or distribution of securities, property or cash (other than
regular, quarterly cash dividends), or any other equity restructuring
transaction, as that term is defined in Statement of Financial Accounting
Standards No. 123 (revised). Such adjustment may be designed to comply with
Section 425 of the Code or, except as otherwise expressly provided in
Section 5(c) of this Plan, may be designed to treat the Common Shares
available under the Plan and subject to Awards as if they were all outstanding
on the record date for such event or transaction or to increase the number of
such Common Shares to reflect a deemed reinvestment in Common Shares of the
amount distributed to the Company’s securityholders. The terms of any
outstanding Award shall also be equitably adjusted by the Committee as to price,
number or kind of Common Shares subject to such Award, vesting, and other terms
to reflect the foregoing events, which adjustments need not be uniform as
between different Awards or different types of Awards.

     

    In the
event there shall be any other change in the number or kind of outstanding
Common Shares, or any stock or other securities into which such Common Shares
shall have been changed, or for which it shall have been exchanged, by reason of
a change of control, other merger, consolidation or otherwise in circumstances
that do not involve an equity restructuring transaction, as that term is defined
in Statement of Financial Accounting Standards No. 123 (revised), then the
Committee shall determine the appropriate adjustment, if any, to be effected. In
addition, in the event of such change described in this paragraph, the Committee
may accelerate the time or times at which any Award may be exercised and may
provide for cancellation of such accelerated Awards that are not exercised
within a time prescribed by the Committee in its sole discretion.

     

    No right
to purchase fractional shares shall result from any adjustment in Awards
pursuant to this Section 11. In case of any such adjustment, the Common
Shares subject to the Award shall be rounded down to the nearest whole share.
The Company shall notify Participants holding Awards subject to any adjustments
pursuant to this Section 11 of such adjustment, but (whether or not notice
is given) such adjustment shall be effective and binding for all purposes of the
Plan.

     

    12. Qualifying
Performance-Based Compensation

     

    (a) General. The Committee may
establish performance criteria and level of achievement versus such criteria
that shall determine the number of Common Shares, units, or cash to be granted,
retained, vested, issued or issuable under or in settlement of or the amount
payable pursuant to an Award, which criteria may be based on Qualifying
Performance Criteria or other standards of financial performance and/or personal
performance evaluations. In addition, the Committee may specify that an Award or
a portion of an Award is intended to satisfy the requirements for
“performance-based compensation” under Section 162(m) of the Code, provided
that the performance criteria for 

     

    
      
        
        

      

      
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      such
Award or portion of an Award that is intended by the Committee to satisfy the
requirements for “performance-based compensation” under Section 162(m) of
the Code shall be a measure based on one or more Qualifying Performance Criteria
selected by the Committee and specified at the time the Award is granted. The
Committee shall certify the extent to which any Qualifying Performance Criteria
has been satisfied, and the amount payable as a result thereof, prior to
payment, settlement or vesting of any Award that is intended to satisfy the
requirements for “performance-based compensation” under Section 162(m) of
the Code. Notwithstanding satisfaction of any performance goals, the number of
Common Shares issued under or the amount paid under an award may, to the extent
specified in the Award Agreement, be reduced by the Committee on the basis of
such further considerations as the Committee in its sole discretion shall
determine.

    

     

    (b) Qualifying Performance
Criteria. For purposes of this Plan, the term “Qualifying Performance
Criteria” shall mean any one or more of the following performance criteria,
either individually, alternatively or in any combination, applied to either the
Company as a whole or to a business unit or Subsidiary, either individually,
alternatively or in any combination, and measured either annually or
cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years’ results or to a designated comparison
group, in each case as specified by the Committee: (i) cash flow (before or
after dividends), (ii) earnings or earnings per share (including earnings before
interest, taxes, depreciation and amortization), (iii) stock price, (iv)
return on equity, (v) total stockholder return, (vi) return on capital or
investment (including return on total capital, return on invested capital, or
return on investment), (vii) return on assets or net assets, (viii) market
capitalization, (ix) economic value added, (x) debt leverage (debt to
capital), (xi) revenue, (xii) income or net income, (xiii) operating income,
(xiv) operating profit or net operating profit, (xv) operating margin or profit
margin, (xvi) return on operating revenue, (xvii) cash from operations, (xviii)
operating ratio, (xix) operating revenue, or (xx) customer service. To the
extent consistent with Section 162(m) of the Code, the Committee
(A) shall appropriately adjust any evaluation of performance under a
Qualifying Performance Criteria to eliminate the effects of charges for
restructurings, discontinued operations, extraordinary items and all items of
gain, loss or expense determined to be extraordinary or unusual in nature or
related to the acquisition or disposal of a segment of a business or related to
a change in accounting principle all as determined in accordance with standards
established by opinion No. 30 of the Accounting Principles Board (APA
Opinion No. 30) or other applicable or successor accounting provisions, as well
as the cumulative effect of accounting changes, in each case as determined in
accordance with generally accepted accounting principles or identified in the
Company’s financial statements or notes to the financial statements, and (B) may
appropriately adjust any evaluation of performance under a Qualifying
Performance Criteria to exclude any of the following events that occurs during a
performance period: (i) asset write-downs, (ii) litigation, claims, judgments or
settlements, (iii) the effect of changes in tax law or other such laws or
provisions affecting reported results, (iv) accruals for reorganization and
restructuring programs and (v) accruals of any amounts for payment under this
Plan or any other compensation arrangement maintained by the
Company.

     

    
      
        
        

      

      
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    13. Transferability

     

    Unless
the Committee provides otherwise, each Award may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated by a Participant other
than by will or the laws of descent and distribution, and each Option or Stock
Appreciation Right shall be exercisable only by the Participant during his or
her lifetime.

     

    14. Compliance
with Laws and Regulations

     

    This
Plan, the grant, issuance, vesting, exercise and settlement of Awards
thereunder, and the obligation of the Company to sell, issue or deliver Common
Shares under such Awards, shall be subject to all applicable foreign, federal,
state and local laws, rules and regulations, stock exchange rules and
regulations, and to such approvals by any governmental or regulatory agency as
may be required. The Company shall not be required to register in a
Participant’s name or deliver any Common Shares prior to the completion of any
registration or qualification of such shares under any foreign, federal, state
or local law or any ruling or regulation of any government body which the
Committee shall determine to be necessary or advisable. To the extent the
Company is unable to or the Committee deems it infeasible 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 Common
Shares hereunder, the Company and its Subsidiaries shall be relieved of any
liability with respect to the failure to issue or sell such Common Shares as to
which such requisite authority shall not have been obtained. No Option shall be
exercisable and no Common Shares shall be issued and/or transferable under any
other Award unless a registration statement with respect to the Common Shares
underlying such Option is effective and current or the Company has determined
that such registration is unnecessary.

     

    15. Withholding

     

    To the
extent required by applicable federal, state, local or foreign law, a
Participant shall be required to satisfy, in a manner satisfactory to the
Company, any withholding tax obligations that arise by reason of an Option
exercise, disposition of Common Shares issued under an Incentive Stock Option,
the vesting of or settlement of an Award, an election pursuant to
Section 83(b) of the Code or otherwise with respect to an Award. The
Company and its Subsidiaries shall not be required to issue Common Shares, make
any payment or to recognize the transfer or disposition of Common Shares until
such obligations are satisfied. The Committee may provide for or permit the
minimum statutory withholding obligations to be satisfied through the mandatory
or elective sale of Common Shares and/or by having the Company withhold a
portion of the Common Shares that otherwise would be issued to him or her upon
exercise of the Option or the vesting or settlement of an Award, or by tendering
Common Shares previously acquired.

     

    16. Administration
of the Plan

     

    (a) Committee of the Plan. The
Plan shall be administered by the Compensation Committee of the Board or the
Board itself. Any power of the Committee may also be exercised by the Board,
except to the extent that the grant or exercise of such authority would cause
any Award or transaction to become subject to (or lose an exemption under) the
short-swing profit recovery provisions of Section 16 of the Securities
Exchange Act of 1934 or cause an Award designated as a Performance Award not to
qualify for treatment as performance-based compensation under
Section 162(m) of the Code. To the extent that any permitted action taken
by the Board conflicts with action taken by

     

    
      
        
        

      

      
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      the
Committee, the Board action shall control. The Compensation Committee may by
resolution authorize one or more officers of the Company to perform any or all
things that the Committee is authorized and empowered to do or perform under the
Plan, and for all purposes under this Plan, such officer or officers shall be
treated as the Committee; provided, however, that the resolution so authorizing
such officer or officers shall specify the total number of Awards (if any) such
officer or officers may award pursuant to such delegated authority, and any such
Award shall be subject to the form of Award Agreement theretofore approved by
the Compensation Committee. No such officer shall designate himself or herself
as a recipient of any Awards granted under authority delegated to such officer.
In addition, the Compensation Committee may delegate any or all aspects of the
day-to-day administration of  the Plan to one or more officers or
employees of the Company or any Subsidiary, and/or to one or more
agents.

    

     

    (b) Powers of Committee. Subject
to the express provisions of this Plan, the Committee shall be authorized and
empowered to do all things that it determines to be necessary or appropriate in
connection with the administration of this Plan, including, without limitation:
(i) to prescribe, amend and rescind rules and regulations relating to this Plan
and to define terms not otherwise defined herein; (ii) to determine which
persons are Participants, to which of such Participants, if any, Awards shall be
granted hereunder and the timing of any such Awards; (iii) to grant Awards
to Participants and determine the terms and conditions thereof, including the
number of Common Shares subject to Awards and the exercise or purchase price of
such Common Shares and the circumstances under which Awards become exercisable
or vested or are forfeited or expire, which terms may but need not be
conditioned upon the passage of time, continued employment, the satisfaction of
performance criteria, the occurrence of certain events (including events which
constitute a change of control), or other factors; (iv) to establish and verify
the extent of satisfaction of any performance goals or other conditions
applicable to the grant, issuance, exercisability, vesting and/or ability to
retain any Award; (v) to prescribe and amend the terms of the agreements or
other documents evidencing Awards made under this Plan (which need not be
identical) and the terms of or form of any document or notice required to be
delivered to the Company by Participants under this Plan; (vi) to determine the
extent to which adjustments are required pursuant to Section 11; (vii) to
interpret and construe this Plan, any rules and regulations under this Plan and
the terms and conditions of any Award granted hereunder, and to make exceptions
to any such provisions in good faith and for the benefit of the Company; and
(viii) to make all other determinations deemed necessary or advisable for the
administration of this Plan.

     

    (c) Determinations by the
Committee. All decisions, determinations and interpretations by the
Committee regarding the Plan, any rules and regulations under the Plan and the
terms and conditions of or operation of any Award granted hereunder, shall be
final and binding on all Participants, beneficiaries, heirs, assigns or other
persons holding or claiming rights under the Plan or any Award. The Committee
shall consider such factors as it deems relevant, in its sole and absolute
discretion, to making such decisions, determinations and interpretations
including, without limitation, the recommendations or advice of any officer or
other employee of the Company and such attorneys, consultants and accountants as
it may select.

     

    
      
        
        

      

      
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    17. Amendment
of the Plan or Awards

     

    The Board
may amend, alter or discontinue this Plan and the Committee may amend, or alter
any agreement or other document evidencing an Award made under this Plan but,
except as specifically provided for hereunder, no such amendment shall, without
the approval of the stockholders of the Company (a) reduce the exercise
price of outstanding Options or Stock Appreciation Rights, (b) reduce the
price at which Options may be granted below the price provided for in
Section 6 or (c) otherwise amend the Plan in any manner requiring
stockholder approval by law or under the NASDAQ’s listing requirements. No
amendment or alteration to the Plan or an Award or Award Agreement shall be made
which would impair the rights of the holder of an Award, without such holder’s
consent, provided that no such consent shall be required if the Committee
determines in its sole discretion and prior to the date of any change of control
that such amendment or alteration either is required or advisable in order for
the Company, the Plan or the Award to satisfy any law or regulation or to meet
the requirements of or avoid adverse financial accounting consequences under any
accounting standard.

     

    18. Miscellaneous

     

    (a) No Liability of Company. The Company and any
Subsidiary or affiliate which is in existence or hereafter comes into existence
shall not be liable to a Participant or any other person as to: (i) the
non-issuance or sale of Common Shares as to which the Company has been unable to
obtain from any regulatory body having jurisdiction the authority deemed by the
Company’s counsel to be necessary to the lawful issuance and sale of any Common
Shares hereunder; and (ii) any tax consequence expected, but not realized, by
any Participant or other person due to the receipt, exercise or settlement of
any Award granted hereunder.

     

    (b) Non-Exclusivity of Plan.
Neither the adoption of this Plan by the Board nor the submission of this Plan
to the stockholders of the Company for approval shall be construed as creating
any limitations on the power of the Board or the Committee to adopt such other
incentive arrangements as either may deem desirable, including without
limitation, the granting of restricted stock or stock options otherwise than
under this Plan or an arrangement not intended to qualify under Code
Section 162(m), and such arrangements may be either generally applicable or
applicable only in specific cases. 

     

    (c) Governing Law. This Plan and
any agreements or other documents hereunder shall be interpreted and construed
in accordance with the laws of the Delaware and applicable federal law.


     

    (d) No Right to Employment, Reelection
or Continued Service. Nothing in this Plan or an Award Agreement shall
interfere with or limit in any way the right of the Company, its Subsidiaries
and/or its affiliates to terminate any Participant’s employment, service on the
Board or service for the Company at any time or for any reason not prohibited by
law, nor shall this Plan or an Award itself confer upon any Participant any
right to continue his or her employment or service for any specified period of
time. Neither an Award nor any benefits arising under this Plan shall constitute
an employment contract with the Company, any Subsidiary and/or its affiliates.


     

    (e) Unfunded Plan. The Plan is
intended to be an unfunded plan. Participants are and shall at all times be
general creditors of the Company with respect to their Awards. If the Committee
or the Company chooses to set aside funds in a trust or otherwise for the
payment of Awards under the Plan, such funds shall at all times be subject to
the claims of the creditors of the Company in the event of its bankruptcy or
insolvency.

     

    
      
        
        

      

      
        13