Exhibit 10.2


 


TD HOLDING CORPORATION


 


THIRD AMENDED AND RESTATED


 


2003 STOCK OPTION PLAN


 


Section 1.              PURPOSE.


 


The Plan is intended as an incentive to
improve the performance, encourage the continued employment and increase the
proprietary interest of certain employees of the Company selected for
participation in the Plan.  The Plan is
designed to grant such employees the opportunity to share in the Company’s
long-term success through stock ownership and to afford them the opportunity
for additional compensation related to the value of Stock of the Company.  It is intended that certain options granted
under this Plan may qualify as “incentive stock options” under Section 422
of the Code.


 


Section 2.              DEFINITIONS.


 


(a)           “Affiliate”
means any parent corporation or subsidiary corporation of the Company, whether
now or hereafter existing, as those terms are defined in Sections 424(e) and
(f), respectively, of the Code.


 


(b)           “Annual
EBITDA” means, for any fiscal year, an amount equal to the Consolidated
EBITDA (as such term is defined in that certain Credit Agreement, dated as of July 22,
2003, among TransDigm Inc. (as successor by merger to TD Funding Corporation),
TransDigm Holding Company (as successor by merger to TD Acquisition
Corporation), certain lenders named therein and Credit Suisse First Boston, as
administrative agent and collateral agent) for such fiscal year.


 


(c)           “Annual
EBITDA Target” means:


 


(i)            for
fiscal year 2004 (ending September 30, 2004), $134.7 million;


 


(ii)           for
fiscal year 2005, $163 million;


 


(iii)          for
fiscal year 2006, $190.1 million;


 


(iv)          for
fiscal year 2007, $212.9 million; and


 


(v)           for
fiscal year 2008, $235.7 million;


 


provided, however, the Annual EBITDA Target
shall be appropriately adjusted in good faith by the Board for any acquisitions,
dispositions or other similar events that effect the determination of Annual
EBITDA.


 


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


 


(e)           “Change
in Control” means a change in ownership or control of the Company effected
through a transaction or series of transactions (other than an offering of
Stock


 





















 


to the
general public through a registration statement filed with the Securities and
Exchange Commission) whereby any “person” or related “group” of “persons” (as
such terms are used in Sections 13(d) and 14(d)(2) of the Exchange
Act) (other than the Company, any of its subsidiaries, an employee benefit plan
maintained by the Company or any of its subsidiaries, a Principal Stockholder
or a “person” that, prior to such transaction, directly or indirectly controls,
is controlled by, or is under common control with, the Company or a Principal
Stockholder) directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of securities of the Company
possessing more than fifty percent (50%) of the total combined voting power of
the Company’s securities outstanding immediately after such acquisition.


 


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


 


(g)           “Committee”
means the Compensation Committee of the Board.


 


(h)           “Company”
means TD Holding Corporation, a Delaware corporation.


 


(i)            “Cumulative
EBITDA” means, for any fiscal year, the sum of the Annual EBITDA for each
fiscal year prior to and including such fiscal year, commencing with fiscal
year 2004.


 


(j)            “Cumulative
EBITDA Target” means


 


(i)            for
fiscal year 2004, $134.7 million;


 


(ii)           for
fiscal year 2005, $297.7 million;


 


(iii)          for
fiscal year 2006, $487.8 million;


 


(iv)          for
fiscal year 2007, $700.7 million; and


 


(v)           for
fiscal year 2008, $936.4 million;


 


provided, however, the Cumulative EBITDA
Target shall be appropriately adjusted in good faith by the Board for any
acquisitions, dispositions or other similar events that effect the
determination of Cumulative EBITDA.


 


(k)           “Disability”
means the permanent and total disability of a person within the meaning
of Section 22(e)(3) of the Code.


 


(l)            “Disqualifying
Disposition” means any disposition (including any sale) of Stock acquired
by exercise of an Incentive Stock Option made within the period which is (a) two
years after the date the Participant was granted the Incentive Stock Option or (b) one
year after the date the Participant acquired Stock by exercising the Incentive
Stock Option.


 


(m)          “Effective
Time” shall have the meaning ascribed to such term in the Merger Agreement.


 


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(n)           “Eligible
Person” means any Employee, or in the discretion of the Committee, in the
case of Rollover Options that are Nonqualified Stock Options, any entity that
held Prior Options.


 


(o)           “Employee”
means any person employed by the Company or an Affiliate.


 


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


 


(q)           “Existing
Participant” means any Participant of the Plan as of January 1, 2004.


 


(r)            “Expiration
Date” means the date that an Option expires, after which the Option may no
longer be exercised.


 


(s)           “Fair
Market Value” means (i) prior to an IPO, the fair market value per
share of Stock, determined in accordance with Section 6.2 of the
Management Stockholders’ Agreement, (ii) at the time of an IPO, the per
share price to the public in such IPO, and (iii) after an IPO, on any date
(A) if the Stock is listed on a national securities exchange, the mean
between the highest and lowest sale prices reported as having occurred on the
primary exchange with which the Stock is listed and traded on the date prior to
such date, or, if there is no such sale on that date, then on the last
preceding date on which such a sale was reported, or (B) if the Stock is
not listed on any national securities exchange but is quoted in the National
Market System of the National Association of Securities Dealers Automated
Quotation System (“NASDAQ-NMS”) on a last sale basis, the average
between the high bid price and low ask price reported on the date prior to such
date, or, if there is no such sale on that date then on the last preceding date
on which such a sale was reported.  If,
after an IPO, the Stock is not quoted on NASDAQ-NMS or listed on an exchange,
or representative quotes are not otherwise available, the Fair Market Value
shall mean the amount determined by the Board in good faith to be the fair
market value per share of Stock, on a fully diluted basis.


 


(t)            “Fund”
means Warburg Pincus Private Equity VIII, L.P.


 


(u)           “IPO”
means an initial public offering of the Stock registered under the Securities
Act pursuant to an effective registration statement.


 


(v)           “IPO
Date” means the effective date of the registration statement for the IPO.


 


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


 


(x)            “Management
Stockholders’ Agreement” means that certain Management Stockholders’
Agreement, dated as of July 22, 2003, by and among the Company, the Fund
and the other parties named therein.


 


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(y)           “Merger
Agreement” means the Agreement and Plan of Merger, dated as of June 6,
2003, between TD Acquisition Corporation, a Delaware corporation, and TransDigm
Holding Company, a Delaware corporation.


 


(z)            “New
Management Options” means Options that are not Rollover Options or
Repurchase Options.


 


(aa)         “Nonqualified
Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.


 


(bb)         “Option”
means any Rollover Option, New Management Option or Repurchase Option granted
pursuant to the Plan.


 


(cc)         “Option
Agreement” means a written agreement between the Company and a Participant
evidencing the terms and conditions of an individual Option grant.


 


(dd)         “Participant”
means a person or entity to whom an Option is granted pursuant to the
Plan or, if applicable, such other person or entity who holds an outstanding
Option.


 


(ee)         “Performance
Vested Options” shall mean New Management Options to which the vesting schedule set
forth in Section 8(b)(ii) hereof applies.


 


(ff)           “Plan”
means the TD Holding Corporation Second Amended and Restated 2003 Stock Option
Plan, as the same may be amended from time to time.


 


(gg)         “Principal
Stockholder” means the Fund and any of its permitted assignees under that
certain Stockholders’ Agreement, dated as of July 22, 2003, among the
Company, the Fund and the other parties named therein.


 


(hh)         “Prior
Options” means those options held by Participants prior to the closing of
the transactions contemplated by the Merger Agreement that were replaced by the
Rollover Options.


 


(ii)           “Repurchase
Options” means Options the underlying shares of Stock of which are
allocated out of the Repurchase Pool.


 


(jj)           “Repurchase
Price” means, with respect to any Repurchase Option, the purchase price per
share paid by the Company in connection with its repurchase of the shares of
Stock or the vested Option to which the Repurchase Option relates in accordance
with the terms of the Management Stockholders’ Agreement.


 


(kk)         “Repurchase
Pool” means a pool of shares of Stock allocated under the Plan pursuant to Section 4(d) hereof.


 


(ll)           “Rollover
Options” means Options granted to a Participant to replace Prior Options.


 


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(mm)       “Securities
Act” means the Securities Act of 1933, as amended.


 


(nn)         “Stock”
means the common stock of the Company, par value $.001 per share.


 


(oo)         “Time
Vested Options” shall mean New Management Options to which the vesting schedule set
forth in Section 8(b)(i) hereof applies.


 


(pp)         “Warburg
Pincus” means Warburg Pincus & Co.


 


Section 3.              ADMINISTRATION.


 


(a)           General.  The Plan shall be administered by the
Committee.


 


(b)           Powers
of the Committee.  Subject to the
provisions of the Plan, the Committee shall have sole authority, in its
absolute discretion:


 


(i)            Subject
to subsection (d) below, to determine from time to time which of the
Eligible Persons shall be granted Options, when and how each Option shall be
granted, what type or combination of types of Option shall be granted, the
provisions of each Option granted (which need not be identical), including the
time or times when a person shall be permitted to receive Stock pursuant to an
Option, the number of shares of Stock with respect to which an Option shall be
granted to each such person, and the Option exercise price;


 


(ii)           To
construe and interpret the Plan and Options granted under it, and to establish,
amend and revoke rules and regulations for its administration;


 


(iii)          To
amend the Plan or an Option as provided in Section 17; and


 


(iv)          To
exercise such powers and to perform such acts as the Committee deems necessary
or expedient to promote the best interests of the Company which are not in
conflict with the provisions of the Plan.


 


(c)           Committee
Determinations.  All determinations,
interpretations and constructions made by the Committee in good faith shall not
be subject to review by any person or entity and shall be final, binding and
conclusive on all persons and entities.


 


(d)           Chief
Executive Officer Recommendation. 
The number of Options granted under the Plan to any individual shall be
based upon the recommendations of the Company’s Chief Executive Officer, and the
Committee shall not unreasonably object to such recommendations.


 


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Section 4.              STOCK
SUBJECT TO THE PLAN.


 


(a)           Share
Reserve.


 


(i)            Rollover Options.  Subject to Section 11 hereof relating to
adjustments, the total number of shares of Stock which may be issued pursuant
to the exercise of Rollover Options hereunder shall not exceed, in the
aggregate, 25,870 shares of Stock.


 


(ii)           New Management Options.  Subject to Section 11 hereof relating to
adjustments, the total number of shares of Stock which may be issued pursuant
to the exercise of New Management Options shall not exceed, in the aggregate,
36,559.5 shares of Stock.  Of the shares
reserved for New Management Options, twenty percent (20%) shall be available
for grant of Time Vested Options, and eighty percent (80%) shall be available
for grant of Performance Vested Options.


 


(b)           Source.  The Stock to be optioned under the Plan shall
be shares of authorized but unissued Stock or previously issued shares of Stock
reacquired by the Company on the open market, by private purchase or otherwise.


 


(c)           Reversion
of Shares.  Except as otherwise
provided in subsection (d) below, if any New Management Option shall
for any reason expire, be forfeited or otherwise terminate, in whole or in
part, the shares of Stock not acquired under such New Management Option shall
revert to and again become available for issuance under the Plan as a New
Management Option, which New Management Option shall be allocated as to Time Vested
Options and Performance Vested Options as the New Management Option expired,
forfeited of terminated.


 


(d)           Repurchase
Pool.  Following the Effective Time,
if, pursuant the Management Stockholders’ Agreement, the Company repurchases (i) any
shares of Stock acquired upon exercise of any Option, or (ii) any vested
Option, such shares of Stock repurchased, or the shares of Stock underlying the
Option repurchased, as applicable, shall be allocated to the Repurchase Pool,
and again become available for issuance under the Plan as a Repurchase Option.


 


Section 5.              ELIGIBILITY.


 


Participation shall be limited to Eligible
Persons who have received written notification from the Committee, or from a
person designated by the Committee, that they have been selected to participate
in the Plan.  Except in the case of
Incentive Stock Options, Options may be granted to Eligible Persons; Incentive
Stock Options may be granted only to Employees.


 


Section 6.              OPTIONS.


 


(a)           General.  Options granted hereunder shall be in such
form and shall contain such terms and conditions as the Committee shall deem
appropriate.  All Options shall be
separately designated Incentive Stock Options or Nonqualified Stock Options at
the time of grant, and, if certificates are issued, a separate certificate or
certificates will be issued for shares of Stock purchased on exercise of each
type of Option; provided, however, that, New


 


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Management
Options and Repurchase Options shall be Nonqualified Stock Options.  The provisions of separate Options shall be
set forth in an Option Agreement, which agreements need not be identical.


 


(b)           Payment for Stock. 
Payment for shares of Stock acquired pursuant to Options granted
hereunder shall be made in full, upon exercise of the Options (i) in
immediately available funds in United States dollars, by certified or bank
cashier’s check, (ii) by surrender to the Company of shares of Stock which
either (A) have been held by the Participant for at least six-months, or (B) were
acquired from a person other than the Company, (iii) by a combination of (i) and
(ii), (iv) prior to an IPO, by delivery of a notice of “net exercise” to
the Company, pursuant to which the Participant shall receive the number of
shares of Stock underlying the Options so exercised reduced by the number of
shares of Stock equal to the aggregate exercise price of the Options divided by
the Fair Market Value on the date of exercise, or (v) following an IPO, by
any other means approved by the Committee. 
Anything herein to the contrary notwithstanding, the Company shall not
directly or indirectly extend or maintain credit, or arrange for the extension
of credit, in the form of a personal loan to or for any director or executive
officer of the Company through the Plan in violation of Section 402 of the
Sarbanes-Oxley Act of 2002 (“Section 402 of SOX”), and to the
extent that any form of payment would, in the opinion of the Company’s counsel,
result in a violation of Section 402 of SOX, such form of payment shall
not be available.


 


(c)           Transferability
of Options.  An Option shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Participant only by the
Participant; provided, however, that subject to the consent of
the Committee (such consent not to be unreasonably withheld), a Nonqualified
Stock Option may be transferred for legitimate estate planning purposes to
immediate family members and/or trusts or partnerships of which such family
members are the sole beneficiaries.  The
Committee may impose reasonable and customary conditions on any such transfers.


 


(d)           Disqualifying
Dispositions.  Each Participant who
receives an Incentive Stock Option must agree to notify the Company in writing
immediately after the Participant makes a Disqualifying Disposition of any
Stock acquired pursuant to the exercise of an Incentive Stock Option.


 


(e)           Termination
of Employment or Service.


 


(i)            If
prior to the Expiration Date, the Participant’s employment or service with the
Company and its Affiliates terminates for any reason other than by reason of
the Participant’s death or Disability, then (1) all vesting with respect
to the Options shall cease, (2) any unvested Options shall expire as of
the date of such termination, and (3) any vested Options shall remain
exercisable until the earlier of the Expiration Date or the date that is
one-hundred-eighty (180) days after the date of such termination of employment
or service.


 


(ii)           If
prior to the Expiration Date, the Participant’s employment or service with the
Company and its Affiliates terminates by reason of death or Disability, (1) all
vesting with respect to the Options shall cease, (2) any unvested Options
shall expire as of the date of such termination, and (3) any vested
Options shall expire on the earlier of the Expiration


 


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Date or
the date that is twelve (12) months after the date of such termination due to
death or Disability of the Participant. 
In the event of a Participant’s death, the Options shall remain
exercisable by the person or persons to whom the Participant’s rights under the
Options pass by will or the applicable laws of descent and distribution until
its expiration, but only to the extent the Options were vested by the
Participant at the time of such termination due to death or Disability.


 


Section 7.              ROLLOVER
OPTIONS


 


Rollover Options shall be fully vested as of
the date of grant and shall be Nonqualified Stock Options, irrespective of whether
the Prior Options which they replace were Incentive Stock Options or
Nonqualified Stock Options, except that a Rollover Option which replaces a
Prior Option designated as an Incentive Stock Option and is designated as an
Incentive Stock Option in a Participant’s Option Agreement shall retain such
designation as an Incentive Stock Option and shall not be entitled to any
benefit under the Plan not included in the Prior Option such option
replaces.  Subject to Section 6(e) hereof
and unless provided otherwise in a Participant’s Option Agreement, Rollover
Options shall have an Expiration Date of the later to occur of (x) the
expiration date of the related Prior Options, or (y) January 1, 2010.


 


Section 8.              NEW
MANAGEMENT OPTIONS


 


(a)           General.  Each New Management Option shall include
(through incorporation of provisions hereof by reference in the Option
Agreement or otherwise) the substance of each of the following provisions:


 


(i)            Expiration
Date.  No New Management Option
granted hereunder shall have an Expiration Date beyond the tenth (10th)
anniversary of the date it was granted.


 


(ii)           Exercise
Price.  The exercise price per share
of Stock for each New Management Option shall be the Fair Market Value of a
share of Stock as of the date of grant.


 


(b)           Vesting.  New Management Options shall vest and become
exercisable in such manner and on such date or dates set forth in subsections (i) and
(ii) below; provided, however, that notwithstanding such
vesting dates, the Committee may in its sole discretion accelerate the vesting
of any New Management Option, which acceleration shall not affect the terms and
conditions of any such New Management Option other than with respect to
vesting.  Unless otherwise specifically
determined by the Committee, the vesting of a New Management Option shall occur
only while the Participant is employed or rendering services to the Company or
its Affiliates and all vesting shall cease upon a Participant’s termination of
employment or services for any reason. 
If a New Management Option is exercisable in installments, such
installments or portions thereof which become exercisable shall remain
exercisable until the New Management Option expires.


 


(i)            Time Vested Options.  Except as otherwise provided in a Participant’s
Option Agreement, twenty percent (20%) of the Time Vested Options granted to a
Participant shall vest and become exercisable on the date of grant, and an
additional twenty percent (20%) shall vest and become exercisable on each of
the first, second, third and fourth


 


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anniversaries
of the date of grant.  All Time Vested
Options shall become fully vested and exercisable upon a Change in Control.


 


(ii)           Performance Vested Options.


 


(A)          Vesting Based on Annual Performance.  For each fiscal year of the Company beginning
with fiscal year 2004 and ending with fiscal year 2008, ten percent (10%) of
the Performance Vested Options granted to a Participant shall be eligible to
become vested and exercisable, provided that the Company has achieved an Annual
EBITDA equal to, or in excess of, the Annual EBITDA Target for such fiscal
year.  Such Performance Vested Options
shall become vested and exercisable as of the date that the Committee verifies
that such Annual EBITDA Target has been achieved.  For each such fiscal year, the Committee
shall verify whether the Annual EBITDA Target has been achieved, and shall
notify the Company’s Chief Executive Officer of its determination with respect
thereto, within ten (10) business days after the Committee receives the
Company’s audited financial statements for that fiscal year.  If the Company does not achieve the required
Annual EBITDA Target for a fiscal year, but in the immediately following fiscal
year, the Company has achieved a Cumulative EBITDA equal to, or in excess of,
the Cumulative EBITDA Target for such immediately following fiscal year, in
addition to any Performance Vested Options that vest and become exercisable in
such immediately following fiscal year in accordance with the preceding sentence,
the Performance Vested Options that were eligible for vesting in the
immediately prior fiscal year shall also vest and become exercisable as of the
date that the Committee verifies (in the manner specified above) that such
Cumulative EBITDA Target has been achieved.


 


(B)           Cumulative Target. Provided that the
Cumulative EBITDA for fiscal year 2008 is equal to, or in excess of, the
Cumulative EBITDA Target for fiscal year 2008, fifty percent (50%) of the
Performance Vested Options shall become vested and exercisable as of the date
that the Committee verifies that the Cumulative EBITDA Target for fiscal year
2008 has been achieved.  If the
Cumulative EBITDA for fiscal year 2008 is in excess of ninety (90%) of the Cumulative
EBITDA Target for fiscal year 2008 but less than one hundred percent (100%) of
the Cumulative EBITDA Target for fiscal year 2008, for each whole percentage
point between ninety percent (90%) and one hundred percent (100%), five (5%) of
the Performance Vested Options shall become vested and exercisable as of the
date that the Committee verifies that such percentage of the Cumulative EBITDA
Target for fiscal year 2008 has been achieved. 
If the Cumulative EBITDA for fiscal year 2008 is less than ninety (90%)
of the Cumulative EBITDA Target for such fiscal year, no Performance Vested
Options shall vest and become exercisable based upon achievement of Cumulative
EBITDA Target for fiscal year 2008.  The
Committee shall verify whether the Cumulative EBITDA Target for fiscal year
2008 has been achieved, and shall notify the Company’s Chief Executive Officer
of its determination with respect thereto, within ten (10) business days
after the Committee receives the Company’s audited financial statements for
fiscal year 2008.


 


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(C)           Change in Control.  In the event of a Change in Control, (1) if
the annualized net rate of return to the Company’s shareholders (excluding any
Participants) immediately following the Effective Time from the Effective Time
until the date of consummation of such Change in Control (the “NRR”),
equals, or is in excess of, twenty five percent (25%), all Performance Vested
Options shall vest and become exercisable on the Change in Control; (2) if
the NRR is twenty percent (20%), an additional number of Performance Vested
Options shall vest and become exercisable such that, in the aggregate, seventy
five percent (75%) of the Performance Vested Options shall be vested and
exercisable on the Change in Control, and (3) in addition to the number of
Performance Vested Options that shall vest in accordance with clause (2) above,
for each additional one percent (1%) of NRR in excess of twenty percent (20%)
to and including 24.9%, an additional number of Performance Vested Options
shall vest and become exercisable such that, in the aggregate, an additional
five percent (5%) of the Performance Vested Options shall be vested and
exercisable on the Change in Control. 
Any Performance Vested Options which have not vested prior to, or upon,
a Change in Control, shall terminate. 
For purposes of determining NRR, securities of the Company purchased by
the Company’s shareholders at the Effective Time shall be valued at the face
amount of such securities at such time. 
In addition, and for the avoidance of doubt, NRR shall be determined
before the dilutive effect of any management fees or carried interest paid to
Warburg Pincus by the Fund.


 


(D)          Expiration of Unvested Options.  Performance Vested Options which do not vest
in accordance with the provisions of this Section 8(b)(ii) shall
terminate.


 


(E)           Non-Existing Participants.  Notwithstanding the vesting provisions
described above, with respect to any Performance Vested Options granted to any
Participant who is not an Existing Participant, the Committee shall have the
discretion to alter the performance criteria to which the Performance Vested
Options so granted will vest.  If the
Committee elects to alter the performance criteria applicable to any
Performance Vested Options granted to any Participant who is not an Existing
Participant as contemplated by this Section 8(b)(ii)(E), the Option
Agreement evidencing the Performance Vested Options so granted shall
specifically set forth such altered performance vesting criteria.


 


Section 9.              REPURCHASE
OPTIONS


 


(a)           General.  Each Repurchase Option shall include (through
incorporation of provisions hereof by reference in the Option Agreement or
otherwise) the substance of each of the following provisions:


 


(i)            Expiration
Date.  No Repurchase Option granted
hereunder shall have an Expiration Date beyond the tenth (10th)
anniversary of the date it was granted.


 


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(ii)           Exercise
Price.  The exercise price per share
of Stock for each Repurchase Option shall be the greater of (x) the Repurchase
Price, and (y) the Fair Market Value of a share of Stock on the date of grant.


 


(b)           Vesting.  Repurchase Options shall vest and become
exercisable in such manner and on such date or dates set forth in the Option
Agreement, as may be determined by the Committee; provided, however,
that notwithstanding such vesting dates, the Committee may in its sole
discretion accelerate the vesting of any Repurchase Option, which acceleration
shall not affect the terms and conditions of any such Repurchase Option other
than with respect to vesting.  Unless
otherwise specifically determined by the Committee, the vesting of a Repurchase
Option shall occur only while the Participant is employed or rendering services
to the Company or its Affiliates and all vesting shall cease upon a Participant’s
termination of employment or services for any reason.  If a Repurchase Option is exercisable in
installments, such installments or portions thereof which become exercisable
shall remain exercisable until the Repurchase Option expires.


 


Section 10.            MANAGEMENT
STOCKHOLDERS’ AGREEMENT.


 


As a condition of the grant of an Option, if
a Participant has not previously executed a copy of the Management Stockholders’
Agreement, the Company may require a Participant to execute a copy of the
Management Stockholders’ Agreement and to be bound by the terms and conditions
contained therein.


 


Section 11.            ADJUSTMENT
FOR RECAPITALIZATION, MERGER, ETC.


 


(a)           Capitalization
Adjustments.  The aggregate number of
shares of Stock which may be granted or purchased pursuant to Options granted
hereunder, the number of shares of Stock covered by each outstanding Option,
and the price per share thereof in each such Option may be subject to
adjustment or substitution, as determined by the Committee in its sole
discretion, as to the number, price or kind of a share of Stock or other
consideration subject to such Options or as otherwise determined by the
Committee to be equitable (i) in the event of changes in the outstanding
Stock or in the capital structure of the Company by reason of stock dividends,
stock splits, reverse stock splits, recapitalizations, reorganizations,
mergers, consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the date of grant of any such Option, (ii) in
the event of any change in applicable laws or any change in circumstances which
results in or would result in any substantial dilution or enlargement of the
rights granted to, or available for, Participants in the Plan, or (iii) for
any other reason which the Committee, in its sole discretion, determines
otherwise warrants equitable adjustment because it interferes with the intended
operation of the Plan.  Any adjustment
shall be conclusively determined by the Committee; provided, in each case, the
fair value of the Option immediately following any such adjustment shall be
equal to the fair value of the Option immediately prior to such adjustment.


 


(b)           Corporate
Events.  Notwithstanding subsection (a) above,
in the event of (i) a merger or consolidation such that after such merger
or consolidation the Company is not the surviving entity or the ultimate parent
of the surviving entity, (ii) the sale of all or substantially all of the
assets of the Company, or (iii) the reorganization or liquidation of the


 


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Company
(a “Corporate Event”), the Company shall require the successor entity or
parent thereof to assume all outstanding Options; provided, however,
the Committee may, in its discretion and in lieu of requiring such assumption,
provide that all outstanding Options shall terminate as of the consummation of
such Corporate Event, and (x) accelerate the exercisability of, or cause all
vesting restrictions to lapse on, all outstanding Time Vested Options to a date
at least ten days prior to the date of such Corporate Event and/or (y) provide
that holders of vested Options will receive a cash payment in respect of
cancellation of their Options based on the amount (if any) by which the per
share consideration being paid for the Stock in connection with such Corporate
Event exceeds the applicable exercise price. 
If a Corporate Event occurs which does not constitute a Change in
Control, the Committee shall take such actions with respect to unvested
Performance Vested Options and Repurchase Options as it considers reasonable
and equitable under the circumstances, and to the extent practicable will
require the successor entity or parent thereof to assume such options and
adjust the vesting schedule thereon in a manner that is designed to ensure
treatment thereof that is consistent with Section 8(b)(ii)(A) and (B) and
Section 9.


 


(c)           Assumption.  For purposes of Section 11(b) above,
an Option shall be considered assumed, without limitation, if, at the time of
issuance of the stock or other consideration upon a Corporate Event, each
holder of an Option would be entitled to receive upon exercise of the award the
same number and kind of shares of stock or the same amount of property, cash or
securities as such holder would have been entitled to receive upon the
occurrence of the transaction if the holder had been, immediately prior to such
transaction, the holder of the number of shares of Stock covered by the Option
at such time; provided, that if such consideration received in the
transaction is not solely equity securities of the successor entity and the
successor entity’s equity securities are listed on a national securities
exchange or quoted in the NASDAQ-NSM, the Committee may, with the consent of
the successor entity, provide for the consideration to be received upon
exercise of the Option to be solely such equity securities of the successor
entity equal to the Fair Market Value of the per share consideration received
by holders of Stock in the Corporate Event.


 


(d)           Fractional
Shares.  Any such adjustment may
provide for the elimination of any fractional share which might otherwise
become subject to an Option.


 


Section 12.            USE OF
PROCEEDS.


 


The proceeds received from the sale of Stock
pursuant to the Plan shall be used for general corporate purposes.


 


Section 13.            RIGHTS AND
PRIVILEGES AS A STOCKHOLDER.


 


Except as otherwise specifically provided in
the Plan, no person shall be entitled to the rights and privileges of stock
ownership in respect of shares of Stock which are subject to Options hereunder
until the related Options have been exercised.


 


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Section 14.            EMPLOYMENT
OR SERVICE RIGHTS.


 


No individual shall have any claim or right
to be granted an Option under the Plan or, having been selected for the grant
of an Option, to be selected for a grant of any other Option.  Neither the Plan nor any action taken
hereunder shall be construed as giving any individual any right to be retained
in the employ or service of the Company or an Affiliate.


 


Section 15.            COMPLIANCE
WITH LAWS.


 


The obligation of the Company to make payment
of Options in Stock or otherwise shall be subject to all applicable laws,
rules, and regulations, and to such approvals by governmental agencies as may
be required.  Notwithstanding any terms
or conditions of any Option to the contrary, the Company shall be under no
obligation to offer to sell or to sell and shall be prohibited from offering to
sell or selling any shares of Stock pursuant to an Option unless such shares
have been properly registered for sale pursuant to the Securities Act with the
Securities and Exchange Commission or unless the Company has received an
opinion of counsel, satisfactory to the Company, that such shares may be
offered or sold without such registration pursuant to an available exemption
therefrom and the terms and conditions of such exemption have been fully
complied with.  The Company shall be
under no obligation to register for sale or resale under the Securities Act any
of the shares of Stock to be offered or sold under the Plan or any shares of
Stock issued upon exercise of Options unless the Stock is registered under Section 12(b) or
12(g) of the Securities Exchange Act of 1934 and such registration is
necessary in order to permit issuance of the Stock upon exercise in accordance
with the Plan.  If the shares of Stock
offered for sale or sold under the Plan are offered or sold pursuant to an
exemption from registration under the Securities Act, the Company may restrict
the transfer of such shares and may legend the Stock certificates representing
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.


 


Section 16.            WITHHOLDING
OBLIGATIONS.


 


The Company is authorized to withhold from
any Option granted, any payment relating to an Option under the Plan, including
from a distribution of shares of Stock, or any payroll or other payment to a
Participant, amounts of withholding and other taxes required to be withheld by
applicable law in connection with any transaction involving an Option, and to
take such other action as the Committee may deem advisable to enable the
Company and Participants to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any Option. This authority shall
include authority to withhold or receive shares of Stock or other property and
to make cash payments in respect thereof in satisfaction of a Participant’s tax
obligations.  In addition to the Company’s
right to withhold from any compensation paid to the Participant by the Company,
a Participant may satisfy any federal, state or local tax withholding
obligation relating to the exercise or acquisition of Stock under an Option by
tendering a cash payment or, in the sole discretion of the Committee, by any of
the following means or by a combination of such means:  (i) authorizing the Company to withhold
shares of Stock from the shares of Stock otherwise issuable to the Participant
as a result of the exercise or acquisition of Stock under the Option, provided,
however, that no shares of Stock are withheld with a value exceeding the
minimum amount of tax required to be withheld by law; or (ii) delivering
to the Company owned and unencumbered shares of Stock that either (A) have
been held by the


 


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Participant
for at least six-months, or (B) were acquired from a person other than the
Company.  For purposes of this Section 16,
the term “Company” shall be deemed to mean any Affiliate that may have a tax
withholding obligation due to its relationship with a Participant.


 


Section 17.            AMENDMENT
OF THE PLAN OR OPTIONS.


 


(a)           Amendment of Plan.  The Board at any time, and from time to time,
may amend the Plan; provided, however, that without further stockholder
approval the Board shall not make any amendment to the Plan which would
increase the maximum number of shares of Stock which may be issued pursuant to
Options under the Plan, except as contemplated by Section 11 hereof.


 


(b)           No Impairment of Rights. 
Rights under any Option granted before amendment of the Plan shall not
be impaired by any amendment of the Plan unless (i) the Company requests
the consent of the Participant and (ii) the Participant consents in
writing.


 


(c)           Amendment of Stock Options. 
The Committee, at any time, and from time to time, may amend the terms
of any one or more Options; provided, however, that the rights
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the Participant and (ii) the Participant
consents in writing.


 


Section 18.            TERMINATION
OR SUSPENSION OF THE PLAN.


 


The Board may suspend or terminate the Plan
at any time.  Unless sooner terminated,
the Plan shall terminate on the day before the tenth (10th)
anniversary of the date the Plan was originally adopted by the Board or
approved by the stockholders of the Company, whichever is earlier, where for
purposes of this sentence, the term “Plan” shall mean the Company’s 2003 Stock
Option Plan, as in effect prior to any amendment and restatement thereof.  No Options may be granted under the Plan
while the Plan is suspended or after it is terminated.  Rights under any Option granted before
suspension or termination of the Plan shall not be impaired by such suspension
or termination of the Plan unless (i) the Company requests the consent of
the Participant and (ii) the Participant consents in writing.


 


Section 19.            EFFECTIVE
DATE OF THE PLAN.


 


The Plan shall be effective immediately
following the Effective Time.


 


Section 20.            MISCELLANEOUS.


 


(a)           No Liability of Committee Members.  No member of the Committee shall be
personally liable by reason of any contract or other instrument executed by
such member or on his behalf in his capacity as a member of the Committee nor
for any mistake of judgment made in good faith, and the Company shall indemnify
and hold harmless each member of the Committee and each other employee, officer
or director of the Company to whom any duty or power relating to the administration
or interpretation of the Plan may be allocated or delegated, against any cost
or expense (including counsel fees) or liability (including any sum paid in
settlement of a claim) arising out of any act or omission to act in connection
with the Plan unless arising out of such person’s own fraud or willful bad
faith; provided, however, that approval of


 


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the
Board shall be required for the payment of any amount in settlement of a claim
against any such person.  The foregoing
right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company’s
Certificate of Incorporation or By-Laws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold them harmless.


 


(b)           Payments
Following Accidents or Illness.  If
the Committee shall find that any person to whom any amount is payable under
the Plan is unable to care for his affairs because of illness or accident, or
is a minor, or has died, then any payment due to such person or his estate
(unless a prior claim therefor has been made by a duly appointed legal
representative) may, if the Committee so directs the Company, be paid to his
spouse, child, relative, an institution maintaining or having custody of such
person, or any other person deemed by the Committee to be a proper recipient on
behalf of such person otherwise entitled to payment.  Any such payment shall be a complete
discharge of the liability of the Committee and the Company therefor.


 


(c)           Governing
Law.  The Plan shall be governed by
and construed in accordance with the internal laws of the State of Delaware
without reference to the principles of conflicts of laws thereof.


 


(d)           Funding.  No provision of the Plan shall require the
Company, for the purpose of satisfying any obligations under the Plan, to
purchase assets or place any assets in a trust or other entity to which
contributions are made or otherwise to segregate any assets, nor shall the
Company maintain separate bank accounts, books, records or other evidence of
the existence of a segregated or separately maintained or administered fund for
such purposes.  Participants shall have
no rights under the Plan other than as unsecured general creditors of the
Company, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.


 


(e)           Reliance on Reports.  Each member of the Committee and each member
of the Board shall be fully justified in relying, acting or failing to act, and
shall not be liable for having so relied, acted or failed to act in good faith,
upon any report made by the independent public accountant of the Company and
its Affiliates and upon any other information furnished in connection with the
Plan by any person or persons other than himself.


 


(f)            Titles and Headings.  The titles and headings of the sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings shall
control.


 


*     *    
*


 


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