TELLABS, INC. 2004 INCENTIVE COMPENSATION PLAN





EXHIBIT 10.1











TELLABS, INC.

2004 INCENTIVE COMPENSATION PLAN











TELLABS, INC.

2004 INCENTIVE COMPENSATION PLAN


	Table of Contents	 	Page
	Article 1.	 	Establishment, Purpose and Duration	 	 
	 	 	1.1   Establishment of the Plan	 	1
	 	 	1.2   Purpose of the Plan	 	1
	 	 	1.3   Duration of the Plan	 	1
	Article 2.	 	Definitions and Construction	 	 
	 	 	2.1   Definitions	 	1
	 	 	2.2   Gender and Number	 	4
	 	 	2.3   Severability	 	4
	Article 3.	 	Administration	 	 
	 	 	3.1   Authority of the Committee	 	5
	 	 	3.2   Decisions Binding	 	5
	 	 	3.3   Delegation of Certain Responsibilities	 	6
	 	 	3.4   Procedures of the Committee	 	6
	 	 	3.5   Award Agreements	 	6
	Article 4.	 	Stock Subject to the Plan	 	 
	 	 	4.1   Number of Shares	 	6
	 	 	4.2   Adjustments in Authorized Shares	 	7
	Article 5.	 	Eligibility and Participation	 	 
	 	 	5.1   Eligibility	 	8
	 	 	5.2   Actual Participation	 	8
	Article 6.	 	Options	 	 
	 	 	6.1   Grant of Options	 	8
	 	 	6.2   Option Price	 	8
	 	 	6.3   Payment	 	8
	 	 	6.4   Special Provisions Applicable to Incentive Stock Options	 	9
	Article 7.	 	Stock Appreciation Rights	 	 
	 	 	7.1   Grant of Stock Appreciation Rights	 	9
	 	 	7.2   Payment of SAR Amount	 	9
	 	 	7.3   Form of Payment	 	9
	Article 8.	 	Restricted Stock and Restricted Stock Units	 	 
	 	 	8.1   Grant of Restricted Stock and Restricted Stock Units	 	9
	 	 	8.2   End of Period of Restriction	 	9
	Article 9.	 	Performance Units and Performance Shares	 	 
	 	 	9.1   Grant of Performance Units or Performance Shares	 	10
	 	 	9.2   Value of Performance Units and Performance Shares	 	10
	 	 	9.3   Payment of Performance Units and Performance Shares	 	10
	Article 10.	 	Annual and Other Incentive Awards	 	 
	 	 	10.1   Annual Incentive Awards	 	10
	 	 	10.2   Grant of Other Incentive Awards	 	11
	 	 	10.3   Limitations	 	11





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	Article 11.	 	Performance Goals	 	 
	 	 	11.1   Performance Goals	 	12
	Article 12.	 	Beneficiary Designation	 	 
	Article 13.	 	Rights of Participants	 	 
	 	 	13.1   Employment of Service	 	13
	 	 	13.2   Participation	 	13
	 	 	13.3   No Right to Company Assets	 	13
	 	 	13.4   Rights as Stockholder; Fractional Shares	 	13
	 	 	13.5   Nontransferability of Awards	 	13
	 	 	13.6   Election to Defer	 	14
	 	 	13.7   Other Restrictions and Limitations	 	14
	 	 	13.8   Awards to Participants Outside the United States	 	14
	Article 14.	 	Change in Control	 	 
	 	 	14.1   Stock-Based Awards	 	14
	 	 	14.2   Performance-Based Awards	 	14
	Article 15.	 	Amendment, Modification and Termination	 	 
	 	 	15.1   Amendment, Modification and Termination of Plan	 	14
	 	 	15.2   Amendment or Modification Awards	 	15
	 	 	15.3   Effect on Outstanding Awards	 	15
	Article 16.	 	Withholding	 	 
	 	 	16.1   Tax Withholding	 	15
	 	 	16.2   Stock Delivery or Withholding	 	15
	Article 17.	 	Successors	 	 
	Article 18.	 	Requirements of Law	 	 
	 	 	18.1   Requirements of Law	 	15
	 	 	18.2   Governing Law	 	15





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Article 1.
Establishment, Purpose and Duration 



     



	1.1 	  	
Establishment of the Plan. On February 20, 2004, the Board of Directors of Tellabs,
Inc. (the “Company”) adopted, subject to the approval of stockholders, this
incentive compensation plan known as the “Tellabs, Inc. Incentive Compensation
Plan” (hereinafter referred to as the “Plan”), which permits the grant of
short-term and long-term incentive and other stock and cash awards. 






	1.2 	  	
 Purpose of the Plan. The purpose of the Plan is to promote the success of the
Company and its Subsidiaries by providing incentives to Employees, Directors and
Consultants of the Company and its Subsidiaries that will link their personal interests to
the financial success of the Company and its Subsidiaries and to growth in stockholder
value. The Plan is designed to provide flexibility to the Company and its Subsidiaries in
their ability to motivate, attract, and retain the services of Employees, Directors and
Consultants upon whose judgment, interest, and special effort the successful conduct of
their operations is largely dependent. 






	1.3 	  	
Duration of the Plan. The Plan was approved by the Board on February 20, 2004,
shall become effective on the date it is approved by the Company’s stockholders (the
“Effective Date”), and shall remain in effect, subject to the right of the Board
of Directors to terminate the Plan at any time pursuant to Article 15 herein, until all
Shares subject to it shall have been purchased or acquired according to the provisions
herein. However, in no event may an Award be granted under the Plan on or after the tenth
(10th) anniversary of the Effective Date of the Plan. 






     




Article 2. Definitions
and Construction 



     



	2.1 	  	
Definitions. Whenever used in the Plan, the following terms shall have the meanings
set forth below and, when the meaning is intended, the initial letter of the word is
capitalized: 






	  	 	(a)	
“Award” includes, without limitation, Options, Stock Appreciation Rights, Performance Share or
Unit Awards, Dividend or Dividend Equivalent Rights, Stock Awards, Restricted Stock or
Unit Awards, Cash Awards, Annual Incentive Awards or Other Incentive Awards as described
in or granted under this Plan. 






	  	 	(b)	
“Award Agreement” means the agreement or other writing (which may be framed as a plan or
program) that sets forth the terms and conditions of each Award under the Plan, including
any amendment or modification thereof. 





	  	 	(c)	“Change
in Control” shall be deemed to have occurred the first to occur of: 






	  	 	 	(i) Any “person”
          (as defined in Section 13(d) and 14(d) of the Securities
          Exchange Act of 1934, as amended (the “Exchange Act”)), excluding for
          this purpose, the Company or any subsidiary of the Company, or any employee
          benefit plan of the Company or any subsidiary of the Company, or any person or
          entity organized, appointed or established by the Company for or pursuant to the
          terms of any such plan which acquires beneficial ownership of voting securities


          




  







	  	 	 	
          of the Company, is or becomes the “beneficial owner” (as defined in
          Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the
          Company representing 20% or more of the combined voting power of the
          Company’s then outstanding securities; provided, however, that no Change in
          Control will be deemed to have occurred as a result of a change in ownership
          percentage resulting solely from an acquisition of securities by the Company;
          and provided further that no Change in Control will be deemed to have occurred
          if a person inadvertently acquires an ownership interest of 20% or more but then
          promptly reduces that ownership interest below 20%; 


          



	  	 	 	(ii) During any two
          consecutive years, individuals who at the beginning of such
          two-year period constitute the Board and any new director (except for a director
          designated by a person who has entered into an agreement with the Company to
          effect a transaction described elsewhere in this definition of Change in
          Control) whose election by the Board or nomination
          for election by the Company’s stockholders was approved by a vote of at least
          two-thirds of the directors then still in office who either were directors at the
          beginning of the period or whose election or nomination for election was previously so
          approved (such individuals and any such new director, the “Incumbent Board”)
          cease for any reason to constitute at least a majority of the Board; 


          



	  	 	 	(iii)
           Consummation of a reorganization, merger or consolidation or sale or other
          disposition of all or substantially all of the assets of the Company (a
          “Business Combination”), in each case, unless, following such Business
          Combination, 


          



	  	 	 	(A) 	 	
           all or substantially all of the individuals and entities who were the
          beneficial owners of outstanding voting securities of the Company immediately
          prior to such Business Combination beneficially own, directly or indirectly,
          more than 50% of the combined voting power of the then outstanding voting
          securities entitled to vote generally in the election of directors, as the case
          may be, of the corporation resulting from such Business Combination (including,
          without limitation, a corporation which as a result of such transaction owns the
          Company or all or substantially all of the Company’s assets either directly
          or through one or more subsidiaries) (the “Resulting Company”) in
          substantially the same proportions as their ownership, immediately prior to such
          Business Combination of the outstanding voting securities of the Company; 


          



	  	 	 	(B) 	 	
           no person (as defined in Section 13(d) and 14(d) of the Exchange Act) (other
          than the Company, the Resulting Company or any employee benefit plan (or related
          trust) of the Company or such Resulting Company) beneficially owns, directly or
          indirectly, 20% or more of, respectively, the then combined voting power of the
          then outstanding voting securities of the Resulting Company, except to the
          extent that such ownership resulted solely from ownership of securities of the
          Company prior to the Business Combination; and 


          


	  	 	 	(C) 	 	
           at least a majority of the members of the board of directors of the Resulting
          Company were members of the Incumbent Board at the time of the execution of the
          initial agreement, or of the action of the Board, providing for such Business
          Combination. 


          


2








	  	 	 	(iv)
          Approval by the stockholders of the Company of a complete liquidation or
          dissolution of the Company; or 


          


	  	 	 	(v)
           A tender offer (for which a filing has been made with the Securities and
          Exchange Commission (“SEC”) which purports to comply with the
          requirements of Section 14(d) of the Exchange Act and the corresponding SEC
          rules) is made for voting securities of the Company, and then the first to occur
          of: 


          



	  	 	 	(A) 	 	
           Any time during the offer when the person making the offer owns or has accepted
          for payment stock of the Company with 25% or more of the total voting power of
          the Company’s securities, or 


          



	  	 	 	(B) 	 	
           Three (3) business days before the offer is to terminate unless the offer is
          withdrawn first if the person making the offer could own, by the terms of the
          offer plus any shares owned by the person, stock with 50% or more of total
          voting power of the Company’s securities when the offer terminates. 


          



	  	 	(d)	
          “Code” means the Internal Revenue Code of 1986, as amended from time
          to time. 


          




	  	 	(e)	“Committee” means
          the Tellabs, Inc., Compensation Committee, or such
          other committee designated by the Board of Directors to administer this Plan.
          The Committee shall be appointed by the Board, shall consist of three or more
          outside, independent members of the Board, and in the judgment of the Board,
          shall be qualified to administer the Plan as contemplated by (i) Rule 16b-3 of
          the Securities Exchange Act of 1934 (or any successor rule), (ii) Section 162(m)
          of the Code, as amended, and the regulations thereunder (or any successor
          Section and regulations), and (iii) any rules and regulations of the NASDAQ
          Stock Market (or such other stock exchange on which the Common Stock is traded).
          Any member of the Committee who does not satisfy the qualifications set out in the preceding
          sentence may recuse himself or herself from any vote or other action taken by the
          Committee. The Board may, at any time and in its complete discretion, remove any member of
          the Committee and may fill any vacancy in the Committee. 






	  	 	(f)	
           “Common Stock,” “Shares” or “Stock” means the
          common stock, par value $.01 per share, of the Company. 


          



	  	 	(g)	
          “Company” means Tellabs, Inc., a Delaware corporation, or any
          successor thereto as provided in Article 15 herein. 


          



	  	 	(h)	
           “Consultant” means any person, including an advisor (other than a
          person who is an Employee or a Director), or any entity that renders services to
          the Company and/or a Subsidiary. 


          



	  	 	(i)	
           “Covered Employee” means any Participant who is or may be a
          “covered employee” within the meaning of Section 162(m)(3) of the Code
          in the year in which an Award becomes taxable to such Participant. 


          



	  	 	(j)	
           “Director” means a director of the Company or a Subsidiary. 


          




3 







	  	 	(k)	
           “Effective Date” means the date this Plan is approved by the
          Company’s stockholders. 


          



	  	 	(l)	
           “Employee” means an employee of the Company or any of its
          Subsidiaries, including an employee who is an officer or a Director. 


          



	  	 	(m)	
           “Exchange Act” means the Securities Exchange Act of 1934, as amended
          from time to time. 


          



	  	 	(n)	
           As used in this Plan (unless a different method of calculation is required by
          applicable law) “Fair Market Value” on or as of any date shall mean
          (i) the closing price of the Stock as reported by the Nasdaq Stock Market (or,
          if the Stock is not listed for trading on the NASDAQ Stock Market, then on such
          other national exchange upon which the Stock is then listed) for such date, or
          if there are no sales on such date, on the next preceding day on which there
          were sales, or (ii) in the event that the Stock is no longer listed for trading
          on a national exchange, an amount determined in accordance with standards
          adopted by the Committee. 


          



	  	 	(o)	
           “Participant” means an Employee, a Director or a Consultant who has
          been granted an Award under the Plan. 


          



	  	 	(p)	
           “Plan” means this Tellabs, Inc. 2004 Incentive Compensation Plan, as
          herein described and as hereafter from time to time amended. 


          



	  	 	(q)	
           “Predecessor Plans” means the 1984 Incentive Stock Option Plan, as
          amended and restated, 1986 Non-Qualified Stock Option Plan, as amended and
          restated, 1987 Stock Option Plan for Non-Employee Corporate Directors, as
          amended and restated, 1989 Stock Option Plan, as amended and restated, 1991
          Stock Option Plan, as amended and restated, 1994 Stock Option Plan, Tellabs,
          Inc., 1998 Stock Option Plan, 1999
          Tellabs, Inc., Stock Bonus Plan, and the Tellabs, Inc., 2001 Stock Option Plan. 


          



	  	 	(r)	
           “Previously Acquired Shares” means shares of Stock acquired by the
          Participant or any beneficiary of a Participant, which Shares have been held for
          a period of not less than six months, or such longer or shorter period as the
          Committee may require or permit. 


          



	  	 	(s)	
           “Subsidiary” shall mean any corporation which is a subsidiary
          corporation of the Company, as that term is defined in Section 424(f) of the
          Code. 


          



	2.2 	  	
Gender and Number. Except
where otherwise indicated by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular, and the singular shall
include the plural. 






	2.3 	  	
Severability. In the event
any provision of the Plan shall be held illegal or invalid for any reason, the illegality
or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been included. 





4







     




Article 3. Administration 



     



	3.1 	  	Authority of the Committee. The Plan shall be administered by the Committee. Subject
to the provisions of the Plan, the Committee shall have all powers vested in it by the
terms of the Plan, such powers to include the authority to: 






	  	 	 	(i)
           Select the persons to be granted Awards under the Plan; 


          



	  	 	 	(ii)
           Determine the terms, conditions, form and amount of Awards to be made to each
          person selected; 


          



	  	 	 	(iii)
           Determine the time when Awards are to be made and any conditions which must be
          satisfied before an Award is made; 


          



	  	 	 	(iv)
           Establish objectives and conditions for earning Awards; 


          



	  	 	 	(v)
           Determine the terms of each Award Agreement and any amendments or modifications
          thereof (which shall not be inconsistent with the Plan); 


          



	  	 	 	(vi)
           Determine whether the conditions for earning an Award have been met and whether
          an Award will be paid at the end of the Performance Period; 


          



	  	 	 	(vii)
           Determine if and when an Award may be deferred; 


          



	  	 	 	(viii)
           Determine whether the amount or payment of an Award should be reduced or
          eliminated; and 


          



	  	 	 	(ix)
           Determine guidelines and/or procedures for the payment or exercise of Awards;
          and 


          



	  	 	 	(x)
           Make such other determinations and take such other actions relating to Awards
          as the Committee deems necessary or appropriate. 


          



	  	 	 	Notwithstanding
the foregoing, no action of the Committee (other than pursuant to Sections 4.2, 9.3, 10.1
or Article 11) may, without the consent of the person or persons entitled to exercise any
outstanding Option or Stock Appreciation Right or to receive payment of any other
outstanding Award, adversely affect the rights of such person or persons with respect to
such Awards. 






	3.2 	  	
Decisions Binding. The Committee shall have full power and authority to administer and
interpret the Plan and to adopt or establish such rules, regulations, agreements,
guidelines, procedures and instruments, which are not contrary to the terms of the Plan
and which, in its opinion, may be necessary or advisable for the administration and
operation of the Plan. All determinations and decisions made by the Committee pursuant to
the provisions of the Plan and all related orders or resolutions of the Board of Directors
shall be final, conclusive and binding on all persons, including the Company and its
Subsidiaries, its stockholders, employees, and Participants and their estates and
beneficiaries, and such determinations and decisions shall not be reviewable. 







5







	3.3 	  	
Delegation of Certain Responsibilities. The Committee may, subject to the terms of the
Plan and applicable law, appoint such agents as it deems necessary or advisable for the
proper administration of the Plan under this Article 3; provided, however, that except as
provided below, the Committee may not delegate its authority to grant Awards under the
Plan or to correct errors, omissions or inconsistencies in the Plan. The Committee may
delegate to the Company’s Chief Executive Officer and/or to other officers of the
Company its authority under this Article 3, provided that such delegation shall not extend
to the grant of Awards or the exercise of discretion with respect to Awards to Employees
who, at the time of such action, are (a) Covered Employees or (b) officers of the Company
or its Subsidiaries who are subject to the reporting requirements of Section 16(a) of the
Exchange Act. All authority delegated by the Committee under this Section 3.3 shall be
exercised in accordance with the provisions of the Plan and any guidelines for the
exercise of such authority that may from time to time be established by the Committee. 






	3.4 	  	
Procedures of the Committee. Except as may otherwise be provided in the charter or
similar governing document applicable to the Committee, (a) all determinations of the
Committee shall be made by not less than a majority of its members present at the meeting
(in person or otherwise) at which a quorum is present; (b) a majority of the entire
Committee shall constitute a quorum for the transaction of business; and (c) any action
required or permitted to be taken at a meeting of the Committee may be taken without a
meeting if a unanimous written consent, which sets forth the action, is signed by each
member of the Committee and filed with the minutes for proceedings of the Committee. 






	3.5 	  	
Award Agreements. Each Award under the Plan shall be evidenced by an Award Agreement
which shall be signed by an authorized officer of the Company and, if required, by the
Participant, and shall contain such terms and conditions as may be authorized or approved
by the Committee. Such terms and conditions need not be the same in all cases. 






     




Article 4. Stock Subject
to the Plan 



     



	4.1 	  	Number of Shares.






	  	 	(a)	
               Subject to adjustment as provided in Section 4.2 herein, the aggregate number of
               shares of Common Stock that may be delivered under the Plan at any time shall
               not exceed (i) 10,000,000 Shares, plus (ii) the number of Shares that remain
               available for issuance under the Predecessor Plans as of the Effective Date
               (increased by any Shares subject to any award (or portion thereof) outstanding
               under the Predecessor Plans on the Effective Date which are not issued upon or
               due to the subsequent exercise, termination, expiration or lapse of such award).
               Stock delivered under the Plan may consist, in whole or in part, of authorized
               and unissued Shares or treasury Shares. To the extent that shares of Stock
               subject to an outstanding Award or an award under the Predecessor Plan are not
               issued by reason of the forfeiture, termination, surrender, cancellation or
               expiration while unexercised of such award, by reason of the tendering or
               withholding of Shares (by either actual delivery or by attestation) to pay all
               or a portion of the purchase price or to satisfy all or a portion of the tax
               with holding obligations relating to an Award, by reason of being settled in
               cash in lieu of Stock or settled in a manner such that some or all of the Shares
               covered by the Award are not issued to a Participant, or being exchanged for a
               grant under this Plan that does not involve Stock, then such shares shall
               immediately again be available for issuance under this Plan. The Committee may
               from time to time adopt and observe such procedures concerning the counting of
               Shares against the Plan maximum as it may deem appropriate. 


               




6







	  	 	(b)	
               Shares of Common Stock issued in connection with awards that are assumed,
               converted or substituted pursuant to a merger, acquisition or similar
               transaction entered into by the Company or any of its Subsidiaries shall not
               reduce the number of Shares available for issuance under this Plan. 


               



	  	 	(c)	
           Subject to Section 4.2, the following limitations shall apply to Awards under
          the Plan: 


               



	  	 	 	(i)
           All of the Shares that may be issued under this Plan may be issued pursuant to
          SARs, Options or other Awards hereunder, provided, however, that the number of
          shares of Common Stock that may be issued under this Plan pursuant to Options
          which are Incentive Stock Options shall be limited to 10,000,000, and provided,
          further, that not more than 9,000,000 shares of Common Stock may be delivered
          pursuant to Awards of Restricted Stock or Restricted Stock Units. 


          



	  	 	 	(ii)
           The maximum number of Shares that may be covered by Awards granted under this
          Plan to any single Participant shall be 1,000,000 Shares during any one calendar
          year. For purposes of applying the limitations set forth in this paragraph (ii),
          if an Award, including, but not limited to Options, SARs, Restricted Stock,
          Restricted Stock Units and Performance Shares, is denominated in Shares or the
          amount of the payment to be made thereunder shall be determined by reference to
          the value of Shares, then such Award shall be counted in the year the Award is
          granted as covering the number of Shares set forth in the Award. If an Award is
          granted in tandem with a Stock Appreciation Right, such that the exercise of the
          Award right or Stock Appreciation Right with respect to a share of Common Stock
          cancels the tandem Stock Appreciation Right or Award right, respectively, with
          respect to such share, the tandem Award right and Stock Appreciation Right with
          respect to each share of Stock shall be counted as covering but one share of
          Stock for purposes of applying the limitations of this paragraph (ii). 


          



	4.2 	  	
Adjustments in Authorized Shares. In the event of any merger, reorganization,
consolidation, recapitalization, separation, liquidation, Common stock dividend, split-up,
share combination, or other change in the corporate structure of the Company affecting the
Common stock, such adjustment shall be made in the number and class of shares which may be
delivered under the Plan, in the maximum number of Shares set forth in paragraph 4.1(c)
above, and in the number and class of and/or price of shares subject to outstanding Awards
granted under the Plan, as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of rights; and
provided that the number of shares subject to any Award shall always be a whole number.
Any adjustment of an Incentive Stock Option under this paragraph shall be made in such a
manner so as not to constitute a modification within the meaning of Section 424(h)(3) of
the Code. 







7







     




Article 5. Eligibility
and Participation 



     



	5.1 	  	
Eligibility. Persons eligible to participate in this Plan include all Employees,
Directors and Consultants.


          



	5.2 	  	
Actual Participation. Subject to the provisions of the Plan, the Committee may from
time to time select those Employees, Directors and Consultants to whom Awards shall be
granted and determine the nature and amount of each Award. 






     




Article 6. Options 



     



	6.1 	  	
Grant of Options. Subject to the terms and provisions of the Plan, Options may be
granted to Employees, Directors, and/or Consultants at any time and from time to time as
shall be determined by the Committee. The Committee may grant any type of Option to
purchase Stock that is permitted by law at the time of grant including, but not limited to
Incentive Stock Options (“ISOs”) or Nonqualified Stock Options
(“NQSOs”). However, only Employees may receive an Award of Incentive Stock
Option. Unless the Award Agreement shall specify that the Option is intended to be an
Incentive Stock Option within the meaning of Section 422 of the Code, the Option shall be
a Nonqualified Stock Option whose grant is not intended to be subject to the provisions of
Code Section 422. Each Option shall expire at such time as the Committee shall determine
in the Award Agreement, however, no Option shall be exercisable later than the tenth
(10th) anniversary date of its grant. 







	6.2 	  	
Option Price. The purchase price per share of Stock covered by an Option shall be
determined by the Committee but shall not be less than 100% of the Fair Market Value of
such Stock on the date the Option is granted. Notwithstanding the authority granted to the
Committee pursuant to Section 3.1 of the Plan, once an Option is granted, the Committee
shall have no authority to reduce the Option price, nor may any Option granted under the
Plan be surrendered to the Company as consideration for the grant of a new Option with a
lower exercise price without the approval of the Company’s stockholders, except
pursuant to Section 4.2 of the Plan related to an adjustment in the number of Shares. 






	6.3 	  	
Payment. Options shall be exercised by the delivery of a written notice to the Company
setting forth the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Option price of any Option shall be
payable to the Company in full either (a) in cash or its equivalent, including, but not
limited to, delivery of a properly completed exercise notice, together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale proceeds
from the sale of the Shares subject to the Option exercise or to deliver loan proceeds
from such broker to pay the exercise price and any withholding taxes due, (b) by delivery
or deemed delivery through attestation of Previously Acquired Shares having a Fair Market
Value at the time of exercise equal to the total Option price, (c) by a combination of (a)
or (b) or (d) such other methods as the Committee may permit. 






	6.4 	  	
Special Provisions Applicable to Incentive Stock Options. To the extent provided or
required under Section 422 of the Code or regulations thereunder (or any successor section
or regulations) the Award of Incentive Stock Options shall be subject to the following: 







8







	  	 	(a)	
               In the event that the aggregate Fair Market Value of the Common Stock
               (determined at the time the Options are granted) subject to ISOs held by a
               Participant that first becomes exercisable during any calendar year exceeds
               $100,000 then the portion of such ISOs equal to such excess shall be NQSOs. 


               



	  	 	(b)	
               An Incentive Stock Option granted to an employee who, at the time of grant, owns
               (within the meaning of Section 424(d) of the Code) stock possessing more than
               10% of the total combined voting power of all classes of Stock of the Company,
               shall have an exercise price which is at least 110% of the Fair Market Value of
               the Common Stock subject to the Option, and shall be exercisable no later than
               the fifth (5th) anniversary date of its grant. 


               



     




Article 7. Stock
Appreciation Rights 



     



	7.1 	  	
Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan,
stock appreciation rights (“SARs”) may be granted to Employees, Directors and/or
Consultants at any time and from time to time, at the discretion of the Committee. Each
SAR shall expire at such time as the Committee shall determine in the Award Agreement,
however, no SAR shall be exercisable later than the tenth (10th) anniversary of the date
of its grant. 






	7.2 	  	
Payment of SAR Amount. Upon exercise of the SAR, the holder shall be entitled to
receive payment of an amount determined by multiplying: 






	  	 	(a)	
               The difference between the Fair Market Value of a Share on the date of exercise
               over the price fixed by the Committee at the date of grant (which price shall
               not be less than 100% of the Fair Market Value of a Share on the date of grant);
               by 


               



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


               



	7.3 	  	
Form of Payment. Payment to a Participant of the amount due upon SAR exercise will be
made in Shares having a Fair Market Value as of the date of exercise equal to the amount
determined under Section 6.2 above, except as the Committee may otherwise provide for the
payment in cash in the applicable Award Agreement or any amendment or modification
thereof. 






     




Article 8. Restricted
Stock and Restricted Stock Units 



     



	8.1 	  	
Grant of Restricted Stock and Restricted Stock Units. Subject to the terms and
conditions of the Plan, the Committee, at any time and from time to time, may grant
restricted stock (“Restricted Stock”) and restricted stock units
(“Restricted Stock Units”) under the Plan to such Employees, Directors and/or
Consultants and in such amounts and on such terms and conditions as it shall determine. 






	8.2 	  	
End of Period of Restriction. Restricted Stock and Restricted Stock Units shall be
subject to such restrictions as the Committee determines, including, without limitation,
prohibition against sale, transfer, assignment or encumbrance for a specified period, and
a requirement to forfeit or return Restricted Stock or Restricted Stock Units in the event
of termination of employment or service during the specified period. After the last day of
the period of restriction, (a) Shares of Restricted Stock covered by each Restricted Stock
grant made under the Plan shall become freely transferable by the Participant, and (b) the
Participant shall be entitled to receive one Share of Common Stock with respect to each
Restricted Stock Unit. 







9







     




Article 9. Performance
Units and Performance Shares 



     



	9.1 	  	
Grant of Performance Units or Performance Shares. Subject to the terms and conditions
of the Plan, performance units (“Performance Units”) or performance shares
(“Performance Shares”) may be granted to Employees, Directors and/or Consultants
at any time and from time to time as shall be determined by the Committee. 






	9.2 	  	
Value of Performance Units and Performance Shares. With respect to each grant of
Performance Units or Performance Shares, the Committee shall establish an initial value
for each Performance Unit and an initial number of Shares for each Performance Share
granted to each Participant, the performance goals that will be used to determine the
extent to which the Participant receives a payment of the value of the Performance Units
or number of Shares for the Performance Shares awarded, and the period over which such
performance will be measured (“Performance Period”). These goals will be based
on the attainment, by the Company or its Subsidiaries, of one or more certain performance
criteria and objectives described in Article 11 herein. With respect to each such
performance measure utilized during a Performance Period, the Committee shall assign
percentages to various levels of performance which shall be applied to determine the
extent to which the Participant shall receive a payout of the values of Performance Units
and number of Performance Shares awarded. Subject to limitations applicable to payments to
Covered Employees, the Committee shall have the authority to modify, amend or adjust the
terms and conditions of any Performance Unit award or Performance Share award, at any time
or from time to time, including but not limited to the performance goals. 






	9.3 	  	
Payment of Performance Units and Performance Shares. After a Performance Period has
ended, the holder of a Performance Unit or Performance Share shall be entitled to receive
the value thereof as determined by the Committee. The Committee shall make this
determination by first determining the extent to which the performance goals set pursuant
to Section 9.2 have been met. It will then determine the applicable percentage to be
applied to, and will apply such percentage to, the value of Performance Units or number of
Performance Shares to determine the payout to be received by the Participant. In addition,
with respect to Performance Units and Performance Shares granted to any Covered Employee,
no payout shall be made hereunder except upon written certification by the Committee that
the applicable performance goal or goals have been satisfied to a particular extent. The
payment described in this Section 9.3 herein shall be made in cash, Common Stock, or a
combination thereof as determined by the Committee. 






     




Article 10. Annual and
Other Incentive Awards 



     



	10.1 	  	
Annual Incentive Awards. The Committee may from time to time, subject to the
provisions of the Plan and such other terms and conditions as the Committee may determine,
grant annual incentive awards (“Annual Incentive Awards”) to Employees,
including, but not limited to, Covered Employees. Each such Award shall be subject to the
following provisions. 







10







	  	 	(a)	
           Amounts earned by and paid to Participants under Annual Incentive Awards will
          be based upon achievement of performance goals established pursuant to Article
          11 over a one-year Performance Period, subject to the Committee’s authority
          to reduce, but not increase, such amount; 


          



	  	 	(b)	
           The maximum amount any Participant may earn under an Annual Incentive Award for
          any calendar year shall not exceed $3,000,000; 


          



	  	 	(c)	
           Annual Incentive Awards shall be paid in cash, subject to the Committee
          providing that all or a portion of any such amount may be paid in Shares. 


          



	10.2 	  	
Grant of Other Incentive Awards. In addition to Awards under Sections 6 through 9, and
Section 10.1 above, the Committee may grant other incentive awards (“Other Incentive
Awards”) payable in cash or in Common Stock under the Plan as it determines in its
sole discretion. Other Incentive Awards may be granted to Employees, Directors and/or
Consultants at any time and from time to time as shall be determined by the Committee.
Such Awards may include, but are not limited to: 






	  	 	(a)	
           Dividend or Dividend Equivalent Right. A right to receive dividends or
          their equivalent in value in Stock, cash or in a combination of both with
          respect to any new or previously existing Award; 


          



	  	 	(b)	
           Stock Award. An unrestricted transfer of ownership of Stock; 


          



	  	 	(c)	
           Awards under Deferred Compensation or Similar Plans. The right to
          receive Stock or a fixed or variable share denominated unit granted under this
          Plan or any deferred compensation or similar plan established from time to time
          by the Company; 


          



	  	 	(d)	
           Cash Award. An award denominated in cash, subject to the achievement of
          performance goals set forth in Section 11.1 during a Performance Period
          determined by the Committee, or that may be earned under a Company or Subsidiary
          bonus or incentive plan or program; 


          



	  	 	(e)	
          Other Incentive Awards. Other Incentive Awards which are related to or
          serve a similar function to those Awards set forth in this Section 10.2. 


          



	10.3 	  	
Limitations. The number of Shares covered by Other Incentive Awards granted to a
Participant during a calendar year shall be taken into account for purposes of the annual
limitation set forth in Section 4.1(c)(ii) above. The maximum amount that may be earned
under the Plan during any calendar year with respect to any Cash Award or Other Incentive
Award described in Section 10.2, shall be $3,000,000. Any amount earned with respect to
which performance is measured over a period greater than one year shall be deemed to have
been earned ratably over the full and partial calendar years in such period. 







11







     




Article 11. Performance
Goals 



     



	11.1 	  	
Performance Goals. For purposes of this Plan, including, but not limited to, Awards of
Performance Shares and Performance Units under Article 9, and of Annual Incentive Awards
or other performance-based Awards under Article 10, “performance goals” shall
mean the criteria and objectives, determined by the Committee, which shall be satisfied or
met during the applicable period of restriction or Performance Period, as the case may be,
as a condition to the Participant’s receipt, of Shares or cash with respect to such
Award. The criteria or objectives for an Award shall be determined by the Committee in
writing, shall be measured for achievement or satisfaction during the Performance Period
or period of restriction in which the Committee established for such Participant to
satisfy or achieve such criteria and objectives and may be absolute in their terms or
measured against or in relationship to other companies comparably, similarly or otherwise
situated or other external or internal measure and may be based on or adjusted for any
other objective goals, events, or occurrences established by the Committee, provided that
such criteria and objectives relate to one or more of the following: total stockholder
return, earnings, earnings per share, net income, gross margin, earnings before interest,
taxes, depreciation and/or amortization, revenues, expenses, cash flow, indebtedness,
market share, return on assets, return on equity, economic value added, assets, Fair
Market Value of the Common Stock, value of assets, regulatory compliance, satisfactory
internal or external audits, improvement of financial ratings, achievement of balance
sheet or income statement objectives, or other financial, accounting or quantitative
objective established by the Committee. Performance criteria and objectives may include or
exclude extraordinary charges, losses from discontinued operations, restatements and
accounting changes and other unplanned special charges such as restructuring expenses,
acquisitions, acquisition expenses, including expenses related to goodwill and other
intangible assets, stock offerings and stock repurchases. Such performance criteria and
objectives may be particular to a line of business, Subsidiary or other unit or the
Company generally, and may, but need not be, based upon a change or an increase or
positive result. In interpreting Plan provisions applicable to performance criteria and
objectives and to performance-based Awards to Participants who are Covered Employees, it
is the intent of the Plan to conform with the standards of Section 162(m) of the Code and
the regulations thereunder. The Committee, in establishing performance criteria and
objectives applicable to such performance-based Awards, and in interpreting the Plan,
shall be guided by such standards, including, but not limited to providing that the
performance-based Award shall be paid, vested or otherwise delivered solely as a function
of attainment of objective performance criteria and objectives based on one or more of the
specific criteria and objectives set forth in this Article 11 established by the Committee
not later than 90 days after the Performance Period or Period of Restriction applicable to
the Award has commenced (or, if such period of service is less than one year, not later
than the date on which 25% of such period has elapsed). Prior to the payment of any
compensation based on achievement of performance criteria and objectives to any such
Covered Employee, the Committee must certify in writing the extent to which the applicable
performance criteria and objectives were, in fact, achieved and the amounts to be paid,
vested or delivered as a result thereof, provided the Committee may reduce, but not
increase, such amount. 






     




Article 12. Beneficiary
Designation 



     



Each Participant under the Plan may,
from time to time, name any beneficiary or beneficiaries (who may be named contingently or
successively and who may include a trustee under a will or living trust) to whom any
benefit under the Plan is to be paid in case of his death before he receives any or all of
such benefit. Each designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Committee, and will be effective only when filed by
the Participant in writing with the Committee during his lifetime. In the absence of any
such designation or if all designated beneficiaries predecease the Participant, benefits
remaining unpaid at the Participant’s death shall be paid to the Participant’s
estate. 




12







     




Article 13. Rights of
Participants 



     



	13.1 	  	
Employment or Service. Nothing in the Plan shall interfere with or limit in any way
the right of the Company or any of its Subsidiaries to terminate any Participant’s
employment or service as a Director or Consultant at any time, nor confer upon any
Participant any right to continue in the employ or to so serve as a Director or Consultant
of the Company or any of its Subsidiaries. 






	13.2 	  	
Participation. No Employee, Director or Consultant shall have a right to be selected
as a Participant, or, having been so selected, to be selected again as a Participant. 






	13.3 	  	
No Right to Company Assets. Neither the Participant nor any other person shall
acquire, by reason of the Plan, any right in or title to any assets, funds or property of
the Company or any of its Subsidiaries whatsoever including, without limiting the
generality of the foregoing, any specific funds, assets, or other property which the
Company or any of its Subsidiaries, in its sole discretion, may set aside in anticipation
of a liability hereunder. Any benefits which become payable hereunder shall be paid from
the general assets of the Company or the applicable Subsidiary. 






	13.4 	  	
Rights as Stockholder; Fractional Shares. Except as otherwise provided under the Plan,
a Participant or Beneficiary shall have no rights as a holder of Shares with respect to
Awards hereunder, unless and until Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the Company).
Fractional Shares shall not be issued or transferred under an Award, but the Committee may
authorize payment of cash in lieu of a fraction, or round the fraction down. To the extent
the Common Stock is uncertificated, references in this Plan to certificates shall be
deemed to include references to any book-entry evidencing such Shares. 






	13.5 	  	
Nontransferability of Awards. The Committee may permit the transfer of Awards, and may
impose such restrictions on transferability, and establish such operational procedures
regarding transferability, as it may deem appropriate, necessary, or advisable. Except as
the Committee may permit, no Award granted under the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by
the laws of descent and distribution. Further, all Awards granted to a Participant under
the Plan shall be exercisable during his lifetime only by such Participant. 






	13.6 	  	
Election to Defer. The receipt of payment of cash or delivery of Shares that would
otherwise be due to a Participant pursuant to an Award hereunder may be deferred at the
election of the Participant pursuant to an applicable deferral plan established by the
Company or a Subsidiary. Such deferrals shall be made in accordance with such rules and
procedures as the Committee may establish under this Plan or the applicable deferral plan. 






	13.7 	  	
Other Restrictions and Limitations. The Committee may impose such restrictions and
limitations on any Awards and/or any amounts payable thereunder as it may deem advisable,
including, without limitation, restrictions intended to comply with applicable Federal or
state securities laws, Share ownership or holding period requirements, or requirements to
enter into or to comply with confidentiality, non-competition and/or other restrictive or
similar covenants (including provisions relating to forfeiture of awards for violation of
such covenants, and may legend the certificates issued in connection with an Award to give
appropriate notice of any such restrictions). 







13







	13.8 	  	
Awards to Participants Outside the United States. In the event any Award under this
Plan is granted to a Participant who is employed or providing services outside the United
States and who is not compensated from a payroll maintained in the United States, the
Committee may, in its discretion, modify the provisions of this Plan as they pertain to
such individuals to comply with applicable law, regulation or accounting rules. 






     




Article 14. Change in
Control 



     



	14.1 	  	
Stock-Based Awards. Notwithstanding any other provisions of the Plan, and except as
otherwise provided in the Award Agreement, in the event of a Change in Control, all
Stock-based Awards granted under this Plan shall immediately vest 100% in each
Participant, including Options, SARs, Restricted Stock and Restricted Stock Units. 






	14.2 	  	
Performance-Based Awards. Notwithstanding any other provisions of the Plan, and except
as otherwise provided in the Award Agreement, in the event of a Change in Control, all
Awards granted under this Plan which are subject to performance goals shall be immediately
paid out, including Performance Units and Performance Shares. The amount of the payout
shall be based on the higher of: (i) the extent, as determined by the Committee, to which
performance goals, established for the Performance Period then in progress have been met
up through and including the effective date of the Change in Control, or (ii) 100% of the
value on the date of grant of the Performance Units or number of Performance Shares. 






     




Article 15. Amendment,
Modification and Termination 



     



	15.1 	  	
Amendment, Modification and Termination of Plan. The Board may terminate the Plan or
any portion thereof at any time, and may amend or modify the Plan from time to time in
such respects as the Board may deem advisable in order that any Awards thereunder shall
conform to any change in applicable laws or regulations or in any other respect the Board
may deem to be in the best interests of the Company; provided, however, that no such
amendment or modification shall, without stockholder approval, (i) except as provided in
Section 4.2, increase the number of shares of Stock which may be issued under the Plan,
(ii) expand the types of Awards available to Participants under the Plan, (iii) materially
expand the class of persons eligible to participate in the Plan; (iv) delete or limit the
provisions in Section 6.2 prohibiting the repricing of Options or reduce the price at
which Shares may be offered under Options; or (v) extend the termination date for making
Awards under the Plan. In addition, the Plan shall not be amended without approval of such
amendment by the Company’s stockholders if such amendment is required under (1) the
rules and regulations of the NASDAQ Stock Market or any other national exchange on which
the Stock is then listed, or (2) other applicable law, rules or regulations. 







14







	15.2 	  	
Amendment or Modification Awards. The Committee may amend or modify any outstanding
Awards in any manner to the extent that the Committee would have had the authority under
the Plan initially to make such Award as so modified or amended, including without
limitation, to change the date or dates as of which Awards may be exercised, to remove the
restrictions on Awards, or to modify the manner in which Awards are determined and paid. 






	15.3 	  	
Effect on Outstanding Awards. No such amendment, modification or termination of the
Plan pursuant to Section 15.1 above, or amendment or modification of an Award pursuant to
Section 15.2 above, shall materially adversely alter or impair any outstanding Awards
without the consent of the Participant affected thereby. 






     




Article 16. Withholding 



     



	16.1 	  	
Tax Withholding. The Company and any of its Subsidiaries shall have the power and the
right to deduct or withhold, or require a Participant to remit to the Company or any of
its Subsidiaries, an amount sufficient to satisfy Federal, state and local taxes
(including the Participant’s FICA obligation) required by law to be withheld with
respect to any grant, exercise or payment made under or as a result of this Plan. 






	16.2 	  	
Stock Delivery or Withholding. With respect to withholding required upon the exercise
of Options or SARs, upon the lapse of restrictions on Restricted Stock or Restricted Stock
Units, or upon any other taxable event arising as a result of Awards granted hereunder,
Participants may elect to satisfy the withholding requirement, in whole or in part, by
having the Company withhold shares of Common Stock having a Fair Market Value on the date
the tax is to be determined equal to the minimum (or such greater amount as the Committee
may permit) statutory total tax which would be imposed on the transaction. All such
elections shall be subject to any procedures, restrictions or limitations that the
Committee, in its sole discretion, deems appropriate. 






     




Article 17. Successors 



     



All obligations of the Company under
the Plan, with respect to Awards granted hereunder, shall be binding on any successor to
the Company, whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company. 



     




Article 18. Requirements
of Law 



     



	18.1 	  	
Requirements of Law. The granting of Awards and the issuance of Shares of Stock under
this Plan shall be subject to all applicable laws, rules, and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may be
required. 






	18.2 	  	
Governing Law. The Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Delaware. 







15