Exhibit 10.2


 


ADOBE SYSTEMS INCORPORATED


 


2005 EQUITY INCENTIVE 

ASSUMPTION PLAN


 





















 


	
  1.

  	
  Establishment,
  Purpose and Term of Plan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Establishment

  	
   

  
	
   

  	
  1.2

  	
  Background
  and Purpose

  	
   

  
	
   

  	
  1.3

  	
  Term
  of Plan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Definitions and Construction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Definitions

  	
   

  
	
   

  	
  2.2

  	
  Construction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Administration

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Administration
  by the Committee

  	
   

  
	
   

  	
  3.2

  	
  Authority
  of Officers

  	
   

  
	
   

  	
  3.3

  	
  Administration
  with Respect to Insiders

  	
   

  
	
   

  	
  3.4

  	
  Powers
  of the Committee

  	
   

  
	
   

  	
  3.5

  	
  Option
  Repricing

  	
   

  
	
   

  	
  3.6

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Shares Subject to Plan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Maximum
  Number of Shares Issuable

  	
   

  
	
   

  	
  4.2

  	
  Adjustments
  for Changes in Capital Structure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Eligibility and Award
  Limitations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Persons
  Eligible for Awards

  	
   

  
	
   

  	
  5.2

  	
  Participation

  	
   

  
	
   

  	
  5.3

  	
  Award
  Limits

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Terms and Conditions of
  Options

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Exercise
  Price

  	
   

  
	
   

  	
  6.2

  	
  Exercisability
  and Term of Options

  	
   

  
	
   

  	
  6.3

  	
  Payment
  of Exercise Price

  	
   

  
	
   

  	
  6.4

  	
  Effect
  of Termination of Service

  	
   

  
	
   

  	
  6.5

  	
  Transferability
  of Options

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Terms and Conditions of
  Stock Appreciation Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Types
  of SARs Authorized

  	
   

  
	
   

  	
  7.2

  	
  Exercise
  Price

  	
   

  
	
   

  	
  7.3

  	
  Exercisability
  and Term of SARs

  	
   

  
	
   

  	
  7.4

  	
  Exercise
  of SARs

  	
   

  
	
   

  	
  7.5

  	
  Deemed
  Exercise of SARs

  	
   

  
	
   

  	
  7.6

  	
  Effect
  of Termination of Service

  	
   

  
	
   

  	
  7.7

  	
  Nontransferability
  of SARs

  	
   

  



 


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  8.

  	
  Terms and Conditions of
  Stock Awards

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Types
  of Stock Awards Authorized

  	
   

  
	
   

  	
  8.2

  	
  Purchase
  Price

  	
   

  
	
   

  	
  8.3

  	
  Purchase
  Period

  	
   

  
	
   

  	
  8.4

  	
  Payment
  of Purchase Price

  	
   

  
	
   

  	
  8.5

  	
  Vesting
  and Restrictions on Transfer

  	
   

  
	
   

  	
  8.6

  	
  Voting
  Rights; Dividends and Distributions

  	
   

  
	
   

  	
  8.7

  	
  Effect
  of Termination of Service

  	
   

  
	
   

  	
  8.8

  	
  Nontransferability
  of Stock Award Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Terms and Conditions of
  Performance Awards

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Types
  of Performance Awards Authorized

  	
   

  
	
   

  	
  9.2

  	
  Initial
  Value of Performance Shares and Performance Units

  	
   

  
	
   

  	
  9.3

  	
  Establishment
  of Performance Period, Performance Goals and Performance Award Formula

  	
   

  
	
   

  	
  9.4

  	
  Measurement of Performance
  Goals

  	
   

  
	
   

  	
  9.5

  	
  Settlement
  of Performance Awards

  	
   

  
	
   

  	
  9.6

  	
  Dividend
  Equivalents

  	
   

  
	
   

  	
  9.7

  	
  Effect
  of Termination of Service

  	
   

  
	
   

  	
  9.8

  	
  Nontransferability
  of Performance Awards

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Standard Forms of Award
  Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Award
  Agreements

  	
   

  
	
   

  	
  10.2

  	
  Authority
  to Vary Terms

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Change in Control

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Definitions

  	
   

  
	
   

  	
  11.2

  	
  Effect
  of Change in Control on Options and SARs

  	
   

  
	
   

  	
  11.3

  	
  Effect
  of Change in Control on Stock Awards

  	
   

  
	
   

  	
  11.4

  	
  Effect
  of Change in Control on Performance Awards

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Compliance with Securities
  Law

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  Tax Withholding

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Tax
  Withholding in General

  	
   

  
	
   

  	
  13.2

  	
  Withholding
  in Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  Termination or Amendment of
  Plan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  Miscellaneous Provisions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Repurchase
  Rights

  	
   

  
	
   

  	
  15.2

  	
  Provision
  of Information

  	
   

  



 


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  15.3

  	
  Rights
  as Employee

  	
   

  
	
   

  	
  15.4

  	
  Rights
  as a Stockholder

  	
   

  
	
   

  	
  15.5

  	
  Fractional
  Shares

  	
   

  
	
   

  	
  15.6

  	
  Beneficiary
  Designation

  	
   

  
	
   

  	
  15.7

  	
  Unfunded
  Obligation

  	
   

  



 


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ADOBE SYSTEMS INCORPORATED


2005 EQUITY INCENTIVE ASSUMPTION PLAN


 


1.                                       ESTABLISHMENT, PURPOSE AND TERM
OF PLAN.


 


1.1                                 Establishment.  Adobe Systems Incorporated, a Delaware
corporation, hereby establishes the Adobe Systems Incorporated 2005 Equity
Incentive Assumption Plan (the “Plan”)
effective as of December 3, 2005 (the “Effective Date”).


 


1.2                                 Background and Purpose.  The Plan is established in connection with
the acquisition by the Company of Macromedia, Inc. and is intended to comply
with Rule 4350(i)(1)(A)(iii) of the Nasdaq Qualitative Listing Requirements.  The purpose of the Plan is to advance the
interests of the Participating Company Group and its stockholders by providing
an incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group.  The Plan seeks to achieve this purpose by
providing for Awards in the form of Options, Stock Appreciation Rights, Stock
Purchase Rights, Stock Bonuses, Performance Shares and Performance Units.  Outstanding Awards shall continue to be
governed by and administered under the terms of the Macromedia Plans pursuant
to which they originally were granted. 
Awards granted on or after the Effective Date shall be subject to the
terms of this Plan.


 


1.3                                 Term of Plan.  The Plan
shall continue in effect until the earlier of its termination by the Board or
the date on which all of the shares of Stock available for issuance under the
Plan have been issued and all restrictions on such shares under the terms of
the Plan and the agreements evidencing Awards granted under the Plan have
lapsed; provided, however, that no Awards may be
made from Reserve A after August 1, 2009, and no Awards may be made from
Reserve B after November 10, 2014.


 


2.                                       DEFINITIONS AND CONSTRUCTION.


 


2.1                                 Definitions.  Whenever
used herein, the following terms shall have their respective meanings set forth
below:


 


(a)                                  “Affiliate” means (i) an
entity, other than a Parent Corporation, that directly, or indirectly through
one or more intermediary entities, controls the Company or (ii) an entity,
other than a Subsidiary Corporation, that is controlled by the Company
directly, or indirectly through one or more intermediary entities.  For this purpose, the term “control”
(including the term “controlled by”) means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
the relevant entity, whether through the ownership of voting securities, by
contract or otherwise; or shall have such other meaning assigned such term for
the purposes of registration on Form S-8 under the Securities Act.


 


(b)                                 “Award” means any Option,
SAR, Stock Purchase Right, Stock Bonus, Performance Share or Performance Unit
granted under the Plan.


 


1





















 


(c)                                  “Award Agreement” means a
written agreement between the Company and a Participant setting forth the
terms, conditions and restrictions of the Award granted to the
Participant.  An Award Agreement may be
an “Option Agreement,” an “SAR Agreement,” a “Stock Purchase Agreement,” a “Stock
Bonus Agreement,” a “Performance Share Agreement” or a “Performance Unit
Agreement.”


 


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


 


(e)                                  “Code” means the Internal Revenue Code of 1986, as amended, and any
applicable regulations promulgated thereunder.


 


(f)                                    “Committee” means the Executive Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. 
If no committee of the Board has been appointed to administer the Plan,
the Board shall exercise all of the powers of the Committee granted herein,
and, in any event, the Board may in its discretion exercise any or all of such
powers.


 


(g)                                 “Company” means Adobe Systems Incorporated, a Delaware corporation,
or any successor corporation thereto.


 


(h)                                 “Disability” means the permanent and total disability of the
Participant, within the meaning of Section 22(e)(3) of the Code.


 


(i)                                     “Dividend Equivalent” means a
credit, made at the discretion of the Committee or as otherwise provided by the
Plan, to the account of a Participant in an amount equal to the cash dividends
paid on one share of Stock for each share of Stock represented by an Award held
by such Participant.


 


(j)                                     “Employee” means any person treated as an employee in the records of
a Participating Company (including an Officer or a member of the Board who is
also an employee); provided, however,
that neither service as a member of the Board nor payment of a director’s fee shall
be sufficient to constitute employment for purposes of the Plan.


 


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


 


(l)                                     “Fair Market Value” means, as of any date, the value of a share of Stock or
other property as determined by the Committee, in its discretion, or by the
Company, in its discretion, if such determination is expressly allocated to the
Company herein, subject to the following:


 


(i)                                     If,
on such date, the Stock is listed on a national or regional securities exchange
or market system, the Fair Market Value of a share of Stock shall be the
closing price of a share of Stock (or the mean of the closing bid and asked
prices of a share of Stock if the Stock is so quoted instead) as quoted on the
Nasdaq National Market, The Nasdaq SmallCap Market or such other national or
regional securities exchange or market system constituting the primary market
for the Stock, as reported in The Wall
Street Journal or such other source as the Company deems
reliable.  If the relevant date does not
fall on a day on which 


 


2





















 


the Stock has traded on such securities exchange or market system, the
date on which the Fair Market Value shall be established shall be the last day
on which the Stock was so traded prior to the relevant date, or such other
appropriate day as shall be determined by the Committee, in its discretion.


 


(ii)                                  If,
on such date, the Stock is not listed on a national or regional securities
exchange or market system, the Fair Market Value of a share of Stock shall be
as determined by the Committee in good faith without regard to any restriction
other than a restriction which, by its terms, will never lapse.


 


(m)                               “Insider”
means an Officer, a member of the Board or any other person whose transactions
in Stock are subject to Section 16 of the Exchange Act.


 


(n)                                 “Macromedia Plans” means the equity
incentive plans of Macromedia, Inc described in Section 4.1 of the Plan.


 


(o)                                 “Nonstatutory Stock Option” means an Option not intended to be (as
set forth in the Award Agreement) an incentive stock option within the meaning
of Section 422(b) of the Code.


 


(p)                                 “Officer” means any person
designated by the Board as an officer of the Company.


 


(q)                                 “Option” means the right to purchase Stock at a stated price for a
specified period of time granted to a participant pursuant to Section 6 of
the Plan.  All Options shall be Nonstatutory
Stock Options.


 


(r)                                    “Outstanding Award” means an award outstanding immediately prior to the
Effective Date under the Macromedia Plans.


 


(s)                                  “Parent Corporation” means any present or future “parent corporation” of the
Company, as defined in Section 424(e) of the Code.


 


(t)                                    “Participant” means any
eligible person who has been granted one or more Awards.


 


(u)                                 “Participating Company” means the Company or any Parent Corporation, Subsidiary
Corporation or Affiliate.


 


(v)                                 “Participating Company Group” means, at any point in time, all
corporations collectively which are then Participating Companies.


 


(w)                               “Performance Award” means an
Award of Performance Shares or Performance Units.


 


(x)                                   “Performance Award Formula”
means, for any Performance Award, a formula or table established by the
Committee pursuant to Section 9.3 of the Plan which provides the basis for
computing the value of a Performance Award at one or more 


 


3





















 


threshold levels of attainment of the applicable Performance Goal(s)
measured as of the end of the applicable Performance Period.


 


(y)                                 “Performance Goal” means a
performance goal established by the Committee pursuant to Section 9.3 of
the Plan.


 


(z)                                   “Performance Period” means a
period established by the Committee pursuant to Section 9.3 of the Plan at
the end of which one or more Performance Goals are to be measured.


 


(aa)                            “Performance Share” means a
bookkeeping entry representing a right granted to a Participant pursuant to Section 9
of the Plan to receive a payment equal to the value of a Performance Share, as
determined by the Committee, based on performance.


 


(bb)                          “Performance Unit” means a
bookkeeping entry representing a right granted to a Participant pursuant to Section 9
of the Plan to receive a payment equal to the value of a Performance Unit, as
determined by the Committee, based upon performance.


 


(cc)                            “Reserve A” means the shares of
Stock described in Section 4.1 of the Plan as being allocated to such
reserve.


 


(dd)                          “Reserve B” means the shares of
Stock described in Section 4.1 of the Plan as being allocated to such
reserve.


 


(ee)                            “Restriction Period” means
the period established in accordance with Section 8.5 of the Plan during
which shares subject to a Stock Award are subject to Vesting Conditions.


 


(ff)                                “Rule 16b-3”
means Rule 16b-3 under the Exchange Act, as amended from time to time, or
any successor rule or regulation.


 


(gg)                          “SAR” or “Stock Appreciation Right” means a bookkeeping
entry representing, for each share of Stock subject to such SAR, a right
granted to a Participant pursuant to Section 7 of the Plan to receive
payment of an amount equal to the excess, if any, of the Fair Market Value of a
share of Stock on the date of exercise of the SAR over the exercise price.


 


(hh)                          “Section 162(m)”
means Section 162(m) of the Code.


 


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


 


(jj)                                  “Service” means a Participant’s employment with the Participating
Company Group as an Employee.  Unless
otherwise determined by the Board, a Participant’s Service shall be deemed to
have terminated if the Participant ceases to render service to the
Participating Company Group as an Employee. 
However, a Participant’s Service shall not be deemed to have terminated
merely because of a change in the Participating Company for which the
Participant renders such Service as an Employee, provided that there is no
interruption or termination of the Participant’s Service.  Furthermore, a Participant’s Service 


 


4





















 


shall not be deemed to have terminated if the Participant takes any
bona fide leave of absence approved by the Company of ninety (90) days or
less.  In the event of a leave in excess
of ninety (90) days, the Participant’s Service shall be deemed to terminate on
the ninety-first (91st) day of the leave unless the Participant’s right to
return to Service is guaranteed by statute or contract.  Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, a leave of absence
shall not be treated as Service for purposes of determining vesting under the
Participant’s Award Agreement.  A
Participant’s Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Participant
performs Service ceasing to be a Participating Company.  Subject to the foregoing, the Company, in its
discretion, shall determine whether the Participant’s Service has terminated
and the effective date of such termination.


 


(kk)                            “Stock” means the common stock of the Company, as adjusted from
time to time in accordance with Section 4.2 of the Plan.


 


(ll)                                  “Stock Award” means an Award
of a Stock Bonus or a Stock Purchase Right.


 


(mm)                      “Stock Bonus” means Stock
granted to a Participant pursuant to Section 8 of the Plan.


 


(nn)                          “Stock Purchase Right” means
a right to purchase Stock granted to a Participant pursuant to Section 8
of the Plan.


 


(oo)                          “Subsidiary Corporation” means any present or future “subsidiary
corporation” of the Company, as defined in Section 424(f) of the
Code.


 


(pp)                          “Vesting Conditions” mean
those conditions established in accordance with Section 8.5 of the Plan
prior to the satisfaction of which shares subject to a Stock Award remain
subject to forfeiture or a repurchase option in favor of the Company.


 


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


 


3.                                       ADMINISTRATION.


 


3.1                                 Administration by the Committee.  The Plan shall be administered by the
Committee.  All questions of
interpretation of the Plan or of any Award shall be determined by the
Committee, and such determinations shall be final and binding upon all persons
having an interest in the Plan or such Award.


 


3.2                                 Authority of Officers. 
Any Officer shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or election which
is the responsibility of or which is allocated to the Company herein, provided
the Officer has apparent authority with respect to such matter, right,
obligation, determination or election.  


 


5





















 


The Board may, in its discretion, delegate to a committee comprised of
one or more Officers the authority to grant one or more Options, without
further approval of the Board or the Committee, to any Employee, other than a
person who, at the time of such grant, is an Insider; provided,
however, that (i) such Awards shall not be granted for shares
in excess of the maximum aggregate number of shares of Stock authorized for
issuance pursuant to Section 4.1, (ii) the exercise price per share
of each Option shall be not less than the Fair Market Value per share of the
Stock on the effective date of grant (or, if the Stock has not traded on such
date, on the last day preceding the effective date of grant on which the Stock
was traded), and (iii) each such Award shall be subject to the terms and
conditions of the appropriate standard form of Award Agreement approved by the
Board or the Committee and shall conform to the provisions of the Plan and such
other guidelines as shall be established from time to time by the Board or the
Committee.


 


3.3                                 Administration with Respect to Insiders.  With respect to participation by Insiders in
the Plan, at any time that any class of equity security of the Company is
registered pursuant to Section 12 of the Exchange Act, the Plan shall be
administered in compliance with the requirements, if any, of Rule 16b-3.


 


3.4                                 Powers of the Committee.  In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Committee shall have
the full and final power and authority, in its discretion:


 


(a)                                  to
determine the persons to whom, and the time or times at which, Awards shall be
granted and the number of shares of Stock or units to be subject to each Award;


 


(b)                                 to
determine the type of Award granted;


 


(c)                                  to
determine the Fair Market Value of shares of Stock or other property;


 


(d)                                 to
determine the terms, conditions and restrictions applicable to each Award
(which need not be identical) and any shares acquired pursuant thereto,
including, without limitation, (i) the exercise or purchase price of
shares purchased pursuant to any Award, (ii) the method of payment for
shares purchased pursuant to any Award, (iii) the method for satisfaction
of any tax withholding obligation arising in connection with Award, including
by the withholding or delivery of shares of Stock, (iv) the timing, terms
and conditions of the exercisability or vesting of any Award or any shares
acquired pursuant thereto, (v) the Performance Award Formula and
Performance Goals applicable to any Award and the extent to which such
Performance Goals have been attained, (vi) the time of the expiration of
any Award, (vii) the effect of the Participant’s termination of Service on
any of the foregoing, and (viii) all other terms, conditions and restrictions
applicable to any Award or shares acquired pursuant thereto not inconsistent
with the terms of the Plan;


 


(e)                                  to
determine whether an Award of SARs, Performance Shares or Performance Units
will be settled in shares of Stock, cash, or in any combination thereof;


 


(f)                                    to
approve one or more forms of Award Agreement;


 


6





















 


(g)                                 to
amend, modify, extend, cancel or renew any Award or to waive any restrictions
or conditions applicable to any Award or any shares acquired pursuant thereto;


 


(h)                                 to
accelerate, continue, extend or defer the exercisability or vesting of any
Award or any shares acquired pursuant thereto, including with respect to the
period following a Participant’s termination of Service;


 


(i)                                     to
prescribe, amend or rescind rules, guidelines and policies relating to the
plan, or to adopt sub-plans or supplements to, or alternative versions of, the
Plan, including, without limitation, as the Committee deems necessary or
desirable to comply with the laws of or to accommodate the laws, regulations,
tax or accounting effectiveness, accounting principles or custom of, foreign
jurisdictions whose citizens may be granted Awards; and


 


(j)                                     to
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award Agreement and to make all other determinations and take such
other actions with respect to the Plan or any Award as the Committee may deem
advisable to the extent not inconsistent with the provisions of the Plan or
applicable law.


 


3.5                                 Option Repricing.  Without the affirmative vote of holders of a
majority of the shares of Stock cast in person or by proxy at a meeting of the
stockholders of the Company at which a quorum representing a majority of all
outstanding shares of Stock is present or represented by proxy, the Board shall
not approve a program providing for either (a) the cancellation of
outstanding Options and the grant in substitution therefore of new Options
having a lower exercise price or (b) the amendment of outstanding Options
to reduce the exercise price thereof. 
This paragraph shall not be construed to apply to “issuing or assuming a
stock option in a transaction to which section 424(a) applies,”
within the meaning of Section 424 of the Code.


 


3.6                                 Indemnification.  In
addition to such other rights of indemnification as they may have as members of
the Board or the Committee or as officers or employees of the Participating
Company Group, members of the Board or the Committee and any officers or
employees of the Participating Company Group to whom authority to act for the
Board, the Committee or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys’ fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them
in satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.


 


7





















 


4.                                       SHARES SUBJECT TO PLAN.


 


4.1                                 Maximum Number of Shares Issuable.  The Plan shall have two separate share
reserves (“Reserve A” and “Reserve B”) reflecting the unused share reserves and
potential reversions to such reserves, as of the Effective Date, with respect
to the following equity incentive plans that were maintained by Macromedia, Inc.
prior to the Effective Date:


 


Reserve A:                                     Andromedia, Inc.
1999 Stock Plan


 


Reserve B:                                       Macromedia, Inc.
2002 Equity Incentive Plan; Allaire Corp. 1997 Stock Incentive Plan; Allaire
Corporation 1998 Stock Incentive Plan; Allaire Corporation 2000 Stock Incentive
Plan


 


Accordingly, as of the
Effective Date, Reserve A consists of 190,678 shares of Stock, of which there
are Outstanding Awards covering 186,279 shares of Stock and 4,399 shares of
Stock remaining available for Awards; and Reserve B consists of 8,648,196 shares
of Stock, of which there are Outstanding Awards covering 8,382,090 shares of
Stock and 266,106 shares of Stock remaining available for Awards.  Outstanding Awards shall continue to be governed
by and administered under the terms of the Macromedia Plans pursuant to which
they originally were granted, but in the event of their forfeiture or
expiration unexercised, the shares of Stock associated with such forfeited or
expired Outstanding Awards shall become available for award pursuant to the
terms of this Plan from Reserve A or Reserve B, as applicable.  Reserve A and Reserve B shall both be subject
to adjustment as provided in Section 4.2 of the Plan.  Such shares shall consist of authorized but
unissued or reacquired shares of Stock or any combination thereof.  If an Award for any reason expires or is
terminated or canceled without having been exercised or settled in full, or if
shares of Stock acquired pursuant to an Award subject to forfeiture or
repurchase are forfeited or repurchased by the Company at the Participant’s
purchase price to effect a forfeiture of unvested shares upon termination of
Service, the shares of Stock allocable to the terminated portion of such Award
or such forfeited or repurchased shares of Stock shall again be available for
issuance under the Plan from Reserve A or Reserve B, as applicable.  Shares of Stock shall not be deemed to have
been issued pursuant to the Plan with respect to any portion of an Award (other
than an SAR that may be settled in shares of Stock or cash) that is settled in
cash.  Shares withheld in satisfaction of
tax withholding obligations pursuant to Section 13.2 shall not again
become available for issuance under the Plan. 
Upon payment in shares of Stock pursuant to the exercise of an SAR, the
number of shares available for issuance under the Plan shall be reduced by the gross
number of shares for which the SAR is exercised.  If the exercise price of an Option is paid by
tender to the Company, or attestation to the ownership, of shares of Stock
owned by the Participant, the number of shares available for issuance under the
Plan shall be reduced by the gross number of shares for which the Option is
exercised.


 


4.2                                 Adjustments for Changes in Capital Structure.  In the event of any change in the Stock
through merger, consolidation, reorganization, reincorporation,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares
or similar change in the capital structure of the Company, or in the event of
payment of a dividend or distribution to the stockholders of the Company in a
form other than Stock (excepting normal cash dividends) that has a material
effect


 


8





















 


on the Fair Market Value of shares of Stock, appropriate adjustments
shall be made in the number and class of shares subject to the Plan, in the
Award limits set forth in Section 5.3 and in the number of shares of Stock
subject to, and the exercise or purchase price per share under, any Award then
outstanding under this Plan. 
Notwithstanding the foregoing, any fractional share resulting from an
adjustment pursuant to this Section 4.2 shall be rounded down to the
nearest whole number, and in no event may the exercise or purchase price under
any Award be decreased to an amount less than the par value, if any, of the
stock subject to such Award.  The
adjustments determined by the Committee pursuant to this Section 4.2 shall
be final, binding and conclusive.


 


5.                                       ELIGIBILITY AND AWARD LIMITATIONS.


 


5.1                                 Persons Eligible for Awards.  Awards may be granted only to
Employees who were not employed by or providing service to any Participating
Company (other than Macromedia, Inc. and its Affiliates and Subsidiaries) prior
to the Effective Date.  For purposes of
the foregoing sentence, “Employees” shall include prospective
Employees to whom Awards are granted in connection with written offers of an
employment with the Participating Company Group; provided,
however, that no Stock subject to any such Award shall vest, become
exercisable or be issued prior to the date on which such person commences
Service.


 


5.2                                 Participation.  Awards are granted solely at the discretion
of the Committee.  Eligible persons may
be granted more than one (1) Award. 
However, eligibility in accordance with this Section shall not
entitle any person to be granted an Award, or, having been granted an Award, to
be granted an additional Award.


 


5.3                                 Award Limits.  Subject
to adjustment as provided in Section 4.2, in no event shall more than one
hundred thousand (100,000) shares of Stock in the aggregate be issued under the
Plan pursuant to the exercise or settlement of Stock Awards and Performance
Awards.


 


6.                                       TERMS AND CONDITIONS OF OPTIONS.


 


Options shall be evidenced by Award Agreements
specifying the number of shares of Stock covered thereby, in such form as the
Committee shall from time to time establish. 
No Option or purported Option shall be a valid and binding obligation of
the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Options may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:


 


6.1                                 Exercise Price.  The exercise price for each Option shall be
established in the discretion of the Committee; provided,
however, that the exercise price per share shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option.  Notwithstanding the foregoing,
an Option may be granted with an exercise price lower than the minimum exercise
price set forth above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying under the provisions of Section 424(a) of
the Code.


 


6.2                                 Exercisability and Term of Options.  Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,


 


9





















 


performance criteria and restrictions as shall be determined by the
Committee and set forth in the Award Agreement evidencing such Option; provided, however, that (a) no Option shall be
exercisable after the expiration of eight (8) years after the effective
date of grant of such Option, and (b) no Option granted to a prospective
Employee may become exercisable prior to the date on which such person
commences Service.  Subject to the
foregoing, unless otherwise specified by the Committee in the grant of an
Option, any Option granted hereunder shall terminate eight (8) years after
the effective date of grant of the Option, unless earlier terminated in
accordance with its provisions.


 


6.3                                 Payment of Exercise Price.


 


(a)                                  Forms of Consideration Authorized.  Except as otherwise provided below, payment
of the exercise price for the number of shares of Stock being purchased
pursuant to any Option shall be made (i) in cash, by check or cash
equivalent, (ii) by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Participant having a Fair Market Value not less
than the exercise price, (iii) by delivery of a properly executed notice
of exercise together with irrevocable instructions to a broker providing for
the assignment to the Company of the proceeds of a sale or loan with respect to
some or all of the shares being acquired upon the exercise of the Option
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board
of Governors of the Federal Reserve System) (a “Cashless Exercise”), (iv) by such other
consideration (including, without limitation, a net exercise) as may be
approved by the Committee from time to time to the extent permitted by applicable
law, or (v) by any combination thereof. 
The Committee may at any time or from time to time grant Options which
do not permit all of the foregoing forms of consideration to be used in payment
of the exercise price or which otherwise restrict one or more forms of
consideration.


 


(b)                                 Limitations on Forms of Consideration.


 


(i)                                     Tender of Stock. 
Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the
extent such tender or attestation would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of
the Company’s stock.  Unless otherwise
provided by the Committee, an Option may not be exercised by tender to the
Company, or attestation to the ownership, of shares of Stock unless such shares
either have been owned by the Participant for more than six (6) months
(and not used for another Option exercise by attestation during such period) or
were not acquired, directly or indirectly, from the Company.


 


(ii)                                  Cashless Exercise. 
The Company reserves, at any and all times, the right, in the Company’s
sole and absolute discretion, to establish, decline to approve or terminate any
program or procedures for the exercise of Options by means of a Cashless
Exercise.


 


6.4                                 Effect of Termination of Service. 
An Option shall be exercisable after a Participant’s
termination of Service to such extent and during such period as determined by
the Committee, in its discretion, and set forth in the Award Agreement
evidencing such Option.


 


10





















 


6.5                                 Transferability of Options. 
During the lifetime of the Participant, an Option shall be exercisable
only by the Participant or the Participant’s guardian or legal
representative.  No Option shall be
assignable or transferable by the Participant, except by will or by the laws of
descent and distribution. 
Notwithstanding the foregoing, to the extent permitted by the Committee,
in its discretion, and set forth in the Award Agreement evidencing such Option,
an Option shall be assignable or transferable subject to the applicable
limitations, if any, described in the General Instructions to Form S-8
Registration Statement under the Securities Act.


 


7.                                       TERMS AND CONDITIONS OF STOCK
APPRECIATION RIGHTS.


 


SARs shall be evidenced by Award Agreements specifying
the number of shares of Stock subject to the Award, in such form as the
Committee shall from time to time establish. 
No SAR or purported SAR shall be a valid and binding obligation of the
Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing SARs may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:


 


7.1                                 Types of SARs Authorized. 
SARs may be granted in tandem with all or any portion of a related
Option (a “Tandem SAR”)
or may be granted independently of any Option (a “Freestanding SAR”).  A Tandem SAR may be granted either
concurrently with the grant of the related Option or at any time thereafter
prior to the complete exercise, termination, expiration or cancellation of such
related Option.


 


7.2                                 Exercise Price.  The
exercise price for each SAR shall be established in the discretion of the Committee;
provided, however, that (a) the
exercise price per share subject to a Tandem SAR shall be the exercise price
per share under the related Option and (b) the exercise price per share
subject to a Freestanding SAR shall be not less than the Fair Market Value of a
share of Stock on the effective date of grant of the SAR.


 


7.3                                 Exercisability and Term of SARs.


 


(a)                                  Tandem SARs.  Tandem SARs shall be exercisable only at the
time and to the extent, and only to the extent, that the related Option is
exercisable, subject to such provisions as the Committee may specify where the
Tandem SAR is granted with respect to less than the full number of shares of
Stock subject to the related Option.  The
Committee may, in its discretion, provide in any Award Agreement evidencing a
Tandem SAR that such SAR may not be exercised without the advance approval of
the Company and, if such approval is not given, then the Option shall
nevertheless remain exercisable in accordance with its terms.  A Tandem SAR shall terminate and cease to be
exercisable no later than the date on which the related Option expires or is
terminated or canceled.  Upon the
exercise of a Tandem SAR with respect to some or all of the shares subject to
such SAR, the related Option shall be canceled automatically as to the number
of shares with respect to which the Tandem SAR was exercised.  Upon the exercise of an Option related to a
Tandem SAR as to some or all of the shares subject to such Option, the related
Tandem SAR shall be canceled automatically as to the number of shares with
respect to which the related Option was exercised.


 


11





















 


(b)                                 Freestanding SARs.  Freestanding SARs shall be exercisable at
such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Committee and set forth in the Award Agreement evidencing such SAR; provided, however, that no Freestanding SAR shall be
exercisable after the expiration of eight (8) years after the effective
date of grant of such SAR.


 


7.4                                 Exercise of SARs. 
Upon the exercise (or deemed exercise pursuant to Section 7.5) of
an SAR, the Participant (or the Participant’s legal representative or other
person who acquired the right to exercise the SAR by reason of the Participant’s
death) shall be entitled to receive payment of an amount for each share with
respect to which the SAR is exercised equal to the excess, if any, of the Fair
Market Value of a share of Stock on the date of exercise of the SAR over the
exercise price.  Payment of such amount
shall be made in cash, shares of Stock, or any combination thereof as
determined by the Committee.  Unless
otherwise provided in the Award Agreement evidencing such SAR, payment shall be
made in a lump sum as soon as practicable following the date of exercise of the
SAR.  The Award Agreement evidencing any
SAR may provide for deferred payment in a lump sum or in installments.  When payment is to be made in shares of
Stock, the number of shares to be issued shall be determined on the basis of
the Fair Market Value of a share of Stock on the date of exercise of the
SAR.  For purposes of Section 7, an
SAR shall be deemed exercised on the date on which the Company receives notice
of exercise from the Participant.


 


7.5                                 Deemed Exercise of SARs. 
If, on the date on which an SAR would otherwise terminate or expire, the
SAR by its terms remains exercisable immediately prior to such termination or
expiration and, if so exercised, would result in a payment to the holder of
such SAR, then any portion of such SAR which has not previously been exercised
shall automatically be deemed to be exercised as of such date with respect to
such portion.


 


7.6                                 Effect of Termination of Service.  An SAR shall be exercisable after a
Participant’s termination of Service to such extent and during such period as
determined by the Committee, in its discretion, and set forth in the Award
Agreement evidencing such SAR.


 


7.7                                 Nontransferability of SARs. 
SARs may not be assigned or transferred in any manner except by will or
the laws of descent and distribution, and, during the lifetime of the
Participant, shall be exercisable only by the Participant or the Participant’s
guardian or legal representative.


 


8.                                       TERMS AND CONDITIONS OF STOCK
AWARDS.


 


Stock Awards shall be evidenced by Award Agreements
specifying whether the Award is a Stock Bonus or a Stock Purchase Right and the
number of shares of Stock subject to the Award, in such form as the Committee
shall from time to time establish.  No
Stock Award or purported Stock Award shall be a valid and binding obligation of
the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Stock Awards may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:


 


12





















 


8.1                                 Types of Stock Awards Authorized.  Stock Awards may be in the form of either a
Stock Bonus or a Stock Purchase Right. 
Stock Awards may be granted upon such conditions as the Committee shall
determine, including, without limitation, upon the attainment of one or more
Performance Goals described in Section 9.4.  If either the grant of a Stock Award or the
lapsing of the Restriction Period is to be contingent upon the attainment of
one or more Performance Goals, the Committee shall follow procedures
substantially equivalent to those set forth in Sections 9.3 through
9.5(a).


 


8.2                                 Purchase Price.  The purchase price for shares of Stock
issuable under each Stock Purchase Right shall be established by the Committee
in its discretion.  No monetary payment
(other than applicable tax withholding) shall be required as a condition of
receiving shares of Stock pursuant to a Stock Bonus, the consideration for
which shall be services actually rendered to a Participating Company or for its
benefit.  Notwithstanding the foregoing,
the Participant shall furnish consideration in the form of cash or past
services rendered to a Participating Company or for its benefit having a value
not less than the par value of the shares of Stock subject to such Stock Award.


 


8.3                                 Purchase Period.  A Stock Purchase Right shall be exercisable
within a period established by the Committee, which shall in no event exceed
thirty (30) days from the effective date of the grant of the Stock Purchase
Right; provided, however, that no Stock
Purchase Right granted to a prospective Employee may become exercisable prior
to the date on which such person commences Service.


 


8.4                                 Payment of Purchase Price.  Except
as otherwise provided below, payment of the purchase price for the number of
shares of Stock being purchased pursuant to any Stock Purchase Right shall be
made (i) in cash, by check, or cash equivalent, (ii) by such other
consideration as may be approved by the Committee from time to time to the
extent permitted by applicable law, or (iii) by any combination
thereof.  The Committee may at any time
or from time to time grant Stock Purchase Rights which do not permit all of the
foregoing forms of consideration to be used in payment of the purchase price or
which otherwise restrict one or more forms of consideration.  Stock Bonuses shall be issued in
consideration for past services actually rendered to a Participating Company or
for its benefit.


 


8.5                                 Vesting and Restrictions on Transfer.  Shares issued
pursuant to any Stock Award may or may not be made subject to vesting
conditioned upon the satisfaction of such Service requirements, conditions,
restrictions or performance criteria, including, without limitation,
Performance Goals as described in Section 9.4 (the “Vesting Conditions”), as shall be established by
the Committee and set forth in the Award Agreement evidencing such Award.  During any period (the “Restriction Period”) in which shares acquired
pursuant to a Stock Award remain subject to Vesting Conditions, such shares may
not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of
other than pursuant to an Ownership Change Event, as defined in Section 11.1,
or as provided in Section 8.8.  Upon
request by the Company, each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.


 


13





















 


8.6                                 Voting Rights; Dividends and Distributions.  Except as provided in this Section, Section 8.5
and any Award Agreement, during the Restriction Period applicable to shares
subject to a Stock Award, the Participant shall have all of the rights of a
stockholder of the Company holding shares of Stock, including the right to vote
such shares and to receive all dividends and other distributions paid with
respect to such shares.  However, in the
event of a dividend or distribution paid in shares of Stock or any other
adjustment made upon a change in the capital structure of the Company as
described in Section 4.2, then any and all new, substituted or additional
securities or other property (other than normal cash dividends) to which the
Participant is entitled by reason of the Participant’s Stock Award shall be
immediately subject to the same Vesting Conditions as the shares subject to the
Stock Award with respect to which such dividends or distributions were paid or
adjustments were made.


 


8.7                                 Effect of Termination of Service.  Unless otherwise
provided by the Committee in the grant of a Stock Award and set forth in the
Award Agreement, if a Participant’s Service terminates for any reason, whether
voluntary or involuntary (including the Participant’s death or disability),
then (i) the Company shall have the option to repurchase for the purchase
price paid by the Participant any shares acquired by the Participant pursuant
to a Stock Purchase Right which remain subject to Vesting Conditions as of the
date of the Participant’s termination of Service and (ii) the Participant
shall forfeit to the Company any shares acquired by the Participant pursuant to
a Stock Bonus which remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service. 
The Company shall have the right to assign at any time any repurchase
right it may have, whether or not such right is then exercisable, to one or
more persons as may be selected by the Company.


 


8.8                                 Nontransferability of Stock Award Rights.  Rights to acquire
shares of Stock pursuant to a Stock Award may not be subject in any manner to
anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance or garnishment by creditors of the Participant or the Participant’s
beneficiary, except by will or the laws of descent and distribution, and,
during the lifetime of the Participant, shall be exercisable only by the
Participant or the Participant’s guardian or legal representative.


 


9.                                       TERMS AND CONDITIONS OF
PERFORMANCE AWARDS.


 


Performance Awards shall be evidenced by Award
Agreements in such form as the Committee shall from time to time
establish.  No Performance Award or
purported Performance Award shall be a valid and binding obligation of the
Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Performance
Awards may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:


 


9.1                                 Types of Performance Awards Authorized.  Performance Awards may be in the form of
either Performance Shares or Performance Units. 
Each Award Agreement evidencing a Performance Award shall specify the
number of Performance Shares or Performance Units subject thereto, the
Performance Award Formula, the Performance Goal(s) and Performance Period
applicable to the Award, and the other terms, conditions and restrictions of
the Award.


 


14





















 


9.2                                 Initial Value of Performance Shares and Performance Units.  Unless otherwise provided by the Committee in
granting a Performance Award, each Performance Share shall have an initial
value equal to the Fair Market Value of one (1) share of Stock, subject to
adjustment as provided in Section 4.2, on the effective date of grant of
the Performance Share, and each Performance Unit shall have an initial value of
one hundred dollars ($100).  The final
value payable to the Participant in settlement of a Performance Award
determined on the basis of the applicable Performance Award Formula will depend
on the extent to which Performance Goals established by the Committee are
attained within the applicable Performance Period established by the Committee.


 


9.3                                 Establishment of Performance Period, Performance Goals and Performance
Award Formula.  In granting
each Performance Award, the Committee shall establish in writing the applicable
Performance Period, Performance Award Formula and one or more Performance Goals
which, when measured at the end of the Performance Period, shall determine on
the basis of the Performance Award Formula the final value of the Performance
Award to be paid to the Participant.  Although
Performance Awards under the Plan will not qualify as performance-based
compensation for purposes of Section 162(m) because stockholders of the
Company have not approved certain provisions of the Plan as required by Section 162(m),
the Committee shall seek to comply with Section 162(m) with respect to
Performance Awards, except as otherwise provided herein.  Accordingly, unless otherwise permitted in
compliance with the requirements under Section 162(m) with respect to “performance-based
compensation,” the Committee shall establish the Performance Goal(s) and
Performance Award Formula applicable to each Performance Award no later than
the earlier of (a) the date ninety (90) days after the commencement of the
applicable Performance Period or (b) the date on which 25% of the
Performance Period has elapsed, and, in any event, at a time when the outcome
of the Performance Goals remains substantially uncertain.  Once established, the Performance Goals and
Performance Award Formula shall not be changed during the Performance
Period.  The Company shall notify each
Participant granted a Performance Award of the terms of such Award, including
the Performance Period, Performance Goal(s) and Performance Award Formula.


 


9.4                                 Measurement of Performance Goals.  Performance Goals shall be established by the
Committee on the basis of targets to be attained (“Performance Targets”) with respect to one or more
measures of business or financial performance (each, a “Performance Measure”), subject to the following:


 


(a)                                  Performance Measures.  Performance Measures shall have the same
meanings as used in the Company’s financial statements, or, if such terms are
not used in the Company’s financial statements, they shall have the meaning
applied pursuant to generally accepted accounting principles, or as used
generally in the Company’s industry. 
Performance Measures shall be calculated with respect to the Company and
each Subsidiary Corporation consolidated therewith for financial reporting
purposes or such division or other business unit as may be selected by the
Committee.  For purposes of the Plan, the
Performance Measures applicable to a Performance Award shall be calculated in
accordance with generally accepted accounting principles, but prior to the
accrual or payment of any Performance Award for the same Performance Period and
excluding the effect (whether positive or negative) of any change in accounting
standards or any extraordinary, unusual or nonrecurring item, as determined by
the 


 


15





















 


Committee, occurring after the establishment of the Performance Goals
applicable to the Performance Award. 
Performance Measures may be one or more of the following, as determined
by the Committee:


 


(i)                                     growth
in revenue;


 


(ii)                                  growth
in the market price of the Stock;


 


(iii)                               operating margin;


 


(iv)                              gross
margin;


 


(v)                                 operating
income;


 


(vi)                              pre-tax
profit;


 


(vii)                           earnings before interest,
taxes and depreciation;


 


(viii)                        net income;


 


(ix)                                total
return on shares of Stock relative to the increase in an appropriate index as
may be selected by the Committee;


 


(x)                                   earnings
per share;


 


(xi)                                return
on stockholder equity;


 


(xii)                             return on net assets;


 


(xiii)                          expenses;


 


(xiv)                         return on capital;


 


(xv)                            economic
value added;


 


(xvi)                         market share; and


 


(xvii)                      cash flow, as indicated by book
earnings before interest, taxes, depreciation and amortization.


 


(b)                                 Performance Targets.  Performance Targets may include a minimum,
maximum, target level and intermediate levels of performance, with the final
value of a Performance Award determined under the applicable Performance Award
Formula by the level attained during the applicable Performance Period.  A Performance Target may be stated as an
absolute value or as a value determined relative to a standard selected by the
Committee.


 


16





















 


9.5                                 Settlement of Performance Awards.


 


(a)                                  Determination of Final Value.  As soon as practicable following the
completion of the Performance Period applicable to a Performance Award, the
Committee shall certify in writing the extent to which the applicable
Performance Goals have been attained and the resulting final value of the Award
earned by the Participant and to be paid upon its settlement in accordance with
the applicable Performance Award Formula.


 


(b)                                 Discretionary Adjustment of Award
Formula.  In its
discretion, the Committee may, either at the time it grants a Performance Award
or at any time thereafter, provide for the positive or negative adjustment of
the Performance Award Formula applicable to a Performance Award granted to any
Participant who is not a “covered employee” within the meaning of Section 162(m)
(a “Covered
Employee”) to reflect such Participant’s individual
performance in his or her position with the Company or such other factors as
the Committee may determine.  If
permitted under a Covered Employee’s Award Agreement, the Committee shall have
the discretion, on the basis of such criteria as may be established by the
Committee, to reduce some or all of the value of the Performance Award that
would otherwise be paid to the Covered Employee upon its settlement
notwithstanding the attainment of any Performance Goal and the resulting value
of the Performance Award determined in accordance with the Performance Award
Formula.  No such reduction may result in
an increase in the amount payable upon settlement of another Participant’s
Performance Award.


 


(c)                                  Effect of Leaves of Absence.  Unless otherwise required by law, payment of
the final value, if any, of a Performance Award held by a Participant who has
taken in excess of thirty (30) days of leaves of absence during a Performance
Period shall be prorated on the basis of the number of days of the Participant’s
Service during the Performance Period during which the Participant was not on a
leave of absence.


 


(d)                                 Notice to Participants.  As soon as practicable following the
Committee’s determination and certification in accordance with Sections 9.5(a) and
(b), the Company shall notify each Participant of the determination of the
Committee.


 


(e)                                  Payment in Settlement of Performance Awards.  As soon as practicable following the
Committee’s determination and certification in accordance with Sections 9.5(a) and
(b), payment shall be made to each eligible Participant (or such Participant’s
legal representative or other person who acquired the right to receive such
payment by reason of the Participant’s death) of the final value of the
Participant’s Performance Award.  Payment
of such amount shall be made in cash, shares of Stock, or a combination thereof
as determined by the Committee.  Unless
otherwise provided in the Award Agreement evidencing a Performance Award,
payment shall be made in a lump sum.  An
Award Agreement may provide for deferred payment in a lump sum or in
installments.  If any payment is to be
made on a deferred basis, the Committee may, but shall not be obligated to,
provide for the payment during the deferral period of Dividend Equivalents or
interest.


 


(f)                                    Provisions Applicable to Payment in Shares.  If payment is to be made in shares of Stock,
the number of such shares shall be determined by dividing the final value of
the Performance Award by the value of a share of Stock determined by the method



 


17





















 


specified in the Award Agreement. 
Such methods may include, without limitation, the closing market price
on a specified date (such as the settlement date) or an average of market
prices over a series of trading days. 
Shares of Stock issued in payment of any Performance Award may be fully
vested and freely transferable shares or may be shares of Stock subject to
Vesting Conditions as provided in Section 8.5.  Any shares subject to Vesting Conditions
shall be evidenced by an appropriate Award Agreement and shall be subject to
the provisions of Sections 8.5 through 8.8 above.


 


9.6                                 Dividend Equivalents. 
In its discretion, the Committee may provide in the Award Agreement
evidencing any Performance Share Award that the Participant shall be entitled
to receive Dividend Equivalents with respect to the payment of cash dividends
on Stock having a record date prior to the date on which the Performance Shares
are settled or forfeited.  Dividend
Equivalents may be paid currently or may be accumulated and paid to the extent
that Performance Shares become nonforfeitable, as determined by the
Committee.  Settlement of Dividend
Equivalents may be made in cash, shares of Stock, or a combination thereof as
determined by the Committee, and may be paid on the same basis as settlement of
the related Performance Share as provided in Section 9.5.  Dividend Equivalents shall not be paid with
respect to Performance Units.


 


9.7                                 Effect of Termination of Service.  The effect of a Participant’s termination of
Service on the Participant’s Performance Award shall be as determined by the
Committee, in its discretion, and set forth in the Award Agreement evidencing
such Performance Award.


 


9.8                                 Nontransferability of Performance Awards.  Prior to settlement in accordance with the
provisions of the Plan, no Performance Award may be subject in any manner to
anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s
beneficiary, except by will or by the laws of descent and distribution.  All rights with respect to a Performance
Award granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.


 


10.                                 STANDARD FORMS OF AWARD AGREEMENT.


 


10.1                           Award Agreements.  Each Award shall comply with and be subject
to the terms and conditions set forth in the appropriate form of Award
Agreement approved by the Committee and as amended from time to time.  Any Award Agreement may consist of an
appropriate form of Notice of Grant and a form of Agreement incorporated
therein by reference, or such other form or forms as the Committee may approve
from time to time.


 


10.2                           Authority to Vary Terms.  The Committee shall have the authority from
time to time to vary the terms of any standard form of Award Agreement either
in connection with the grant or amendment of an individual Award or in
connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such
new, revised or amended standard form or forms of Award Agreement are not
inconsistent with the terms of the Plan.


 


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11.                                 CHANGE IN CONTROL.


 


11.1                           Definitions.


 


(a)                                  An
“Ownership Change Event” shall be deemed to have occurred if
any of the following occurs with respect to the Company:  (i) the direct or indirect sale or
exchange by the stockholders of the Company of all or substantially all of the
voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company (other than a sale, exchange or
transfer to one or more subsidiaries of the Company); or (iv) a
liquidation or dissolution of the Company.


 


(b)                                 A
“Change in Control” shall mean an Ownership Change Event or series of related
Ownership Change Events (collectively, a “Transaction”) in which the
stockholders of the Company immediately before the Transaction do not retain
immediately after the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting securities of the Company or, in the case of an Ownership
Change Event described in Section 11.1(a)(iii), the entity to which the
assets of the Company were transferred.


 


11.2                           Effect of Change in Control on Options and SARs.  In the event of a Change in Control, the
surviving, continuing, successor, or purchasing entity or parent thereof, as
the case may be (the “Acquiror”), may, without the consent of any Participant, either
assume the Company’s rights and obligations under outstanding Options and SARs
or substitute for outstanding Options and SARs substantially equivalent options
and SARs (as the case may be) for the Acquiror’s stock.  In the event the Acquiror elects not to
assume or substitute for outstanding Options or SARs in connection with a Change
in Control, the Committee shall provide that any unexercised and/or unvested
portions of outstanding Options and SARs shall be immediately exercisable and
vested in full as of the date thirty (30) days prior to the date of the Change
in Control.  The exercise and/or vesting
of any Option or SAR that was permissible solely by reason of this
paragraph 11.2 shall be conditioned upon the consummation of the Change in
Control.  Any Options or SARs which are
not assumed by the Acquiror in connection with the Change in Control nor
exercised as of the time of consummation of the Change in Control shall
terminate and cease to be outstanding effective as of the time of consummation
of the Change in Control.


 


11.3                           Effect of Change in Control on Stock Awards.  The Committee may, in its discretion, provide
in any Award Agreement evidencing a Stock Award that, in the event of a Change
in Control, the lapsing of the Restriction Period applicable to the shares
subject to the Stock Award held by a Participant whose Service has not
terminated prior to such date shall be accelerated effective as of the date of
the Change in Control to such extent as specified in such Award Agreement.  Any acceleration of the lapsing of the
Restriction Period that was permissible solely by reason of this Section 11.3
and the provisions of such Award Agreement shall be conditioned upon the
consummation of the Change in Control.


 


11.4                           Effect of Change in Control on Performance Awards.  The Committee may, in its discretion, provide
in any Award Agreement evidencing a Performance Award that, 


 


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in the event of a Change in Control, the Performance Award held by a
Participant whose Service has not terminated prior to such date shall become
payable effective as of the date of the Change in Control to such extent as
specified in such Award Agreement.


 


12.                                 COMPLIANCE WITH SECURITIES LAW.


 


The grant of Awards and the issuance of shares of
Stock pursuant to any Award shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such securities
and the requirements of any stock exchange or market system upon which the
Stock may then be listed.  In addition,
no Award may be exercised or shares issued pursuant to an Award unless (i) a
registration statement under the Securities Act shall at the time of such
exercise or issuance be in effect with respect to the shares issuable pursuant
to the Award or (ii) in the opinion of legal counsel to the Company, the shares
issuable pursuant to the Award may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities
Act.  The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company’s legal counsel to be necessary to the lawful issuance
and sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. 
As a condition to issuance of any Stock, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.


 


13.                                 TAX WITHHOLDING.


 


13.1                           Tax Withholding in General. 
The Company shall have the right to deduct from any and all payments
made under the Plan, or to require the Participant, through payroll
withholding, cash payment or otherwise, including by means of a Cashless
Exercise of an Option, to make adequate provision for, the federal, state,
local and foreign taxes, if any, required by law to be withheld by the Participating
Company Group with respect to an Award or the shares acquired pursuant
thereto.  The Company shall have no
obligation to deliver shares of Stock, to release shares of Stock from an
escrow established pursuant to an Award Agreement, or to make any payment in
cash under the Plan until the Participating Company Group’s tax withholding
obligations have been satisfied by the Participant.


 


13.2                           Withholding in Shares. 
The Company shall have the right, but not the obligation, to deduct from
the shares of Stock issuable to a Participant upon the exercise or settlement
of an Award, or to accept from the Participant the tender of, a number of whole
shares of Stock having a Fair Market Value, as determined by the Company, equal
to all or any part of the tax withholding obligations of the Participating
Company Group.  The Fair Market Value of
any shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates.


 


14.                                 TERMINATION OR AMENDMENT OF PLAN.


 


The Committee may terminate or amend the Plan at any
time.  However, without the approval of
the Company’s stockholders, there shall be (a) no increase in the maximum


 


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aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Section 4.2), (b) no
change in the class of persons eligible to receive Awards, and (c)  no
other amendment of the Plan that would require approval of the Company’s
stockholders under any applicable law, regulation or rule; provided, however,
that the maximum aggregate number of shares of Stock that may be issued under
the Plan may be increased without stockholder approval in accordance with Rule 4350(i)(1)(A)(iii) of
the Nasdaq Qualitative Listing Requirements (or any other applicable rule of
the securities exchange on which shares of Stock are then trading) in
connection with business acquisitions by the Company following the Effective
Date.  No termination or amendment of the
Plan shall affect any then outstanding Award unless expressly provided by the
Committee.  In any event, no termination
or amendment of the Plan may adversely affect any then outstanding Award
without the consent of the Participant, unless such termination or amendment is
necessary to comply with any applicable law, regulation or rule.


 


15.                                 MISCELLANEOUS PROVISIONS.


 


15.1                           Repurchase Rights.  Shares issued under the Plan may be subject
to one or more repurchase options, or other conditions and restrictions as
determined by the Committee in its discretion at the time the Award is
granted.  The Company shall have the
right to assign at any time any repurchase right it may have, whether or not
such right is then exercisable, to one or more persons as may be selected by
the Company.  Upon request by the
Company, each Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.


 


15.2                           Provision of Information. 
Each Participant shall be given access to information concerning the
Company equivalent to that information generally made available to the Company’s
common stockholders.


 


15.3                           Rights as Employee. 
No person, even though eligible pursuant to Section 5, shall have a
right to be selected as a Participant, or, having been so selected, to be
selected again as a Participant.  Nothing
in the Plan or any Award granted under the Plan shall confer on any Participant
a right to remain an Employee, or interfere with or limit in any way any right
of a Participating Company to terminate the Participant’s Service at any
time.  To the extent that an Employee of
a Participating Company other than the Company receives an Award under the
Plan, that Award can in no event be understood or interpreted to mean that the
Company is the Employee’s employer or that the Employee has an employment
relationship with the Company.


 


15.4                           Rights as a Stockholder. 
A Participant shall have no rights as a stockholder with respect to any
shares covered by an Award until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). 
No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date such shares are issued, except
as provided in Section 4.2 or another provision of the Plan.


 


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15.5                           Fractional Shares.  The Company shall not be required to issue
fractional shares upon the exercise or settlement of any Award.


 


15.6                           Beneficiary Designation. 
Subject to local laws and procedures, each Participant may file with the
Company a written designation of a beneficiary who is to receive any benefit
under the Plan to which the Participant is entitled in the event of such
Participant’s death before he or she 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
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant’s lifetime.  If a married Participant designates a
beneficiary other than the Participant’s spouse, the effectiveness of such
designation may be subject to the consent of the Participant’s spouse.  If a Participant dies without an effective
designation of a beneficiary who is living at the time of the Participant’s
death, the Company will pay any remaining unpaid benefits to the Participant’s
legal representative.


 


15.7                           Unfunded Obligation. 
Participants shall have the status of general unsecured creditors of the
Company.  Any amounts payable to
Participants pursuant to the Plan shall be unfunded and unsecured obligations
for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974. 
No Participating Company shall be required to segregate any monies from
its general funds, or to create any trusts, or establish any special accounts
with respect to such obligations.  The
Company shall retain at all times beneficial ownership of any investments,
including trust investments, which the Company may make to fulfill its payment
obligations hereunder.  Any investments
or the creation or maintenance of any trust or any Participant account shall
not create or constitute a trust or fiduciary relationship between the
Committee or any Participating Company and a Participant, or otherwise create
any vested or beneficial interest in any Participant or the Participant’s
creditors in any assets of any Participating Company.  The Participants shall have no claim against
any Participating Company for any changes in the value of any assets which may
be invested or reinvested by the Company with respect to the Plan.


 


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