EXHIBIT 10.117**VERSAR, INC.****2005 STOCK INCENTIVE PLAN**1. **Establishment, Purpose, and Types of Awards**     Versar, Inc. (the “Company”) hereby establishes this equity-based incentive compensation planto be known as the “Versar, Inc. 2005 Stock Incentive Plan” (hereinafter referred to as the“Plan”), in order to provide incentives and awards to select employees and directors of the Companyand its Affiliates.     The Plan permits the granting of the following types of awards (“Awards”), according to theSections of the Plan listed here:       Section 6 Options  Section 7 Share Appreciation Rights  Section 8 Restricted Shares and Restricted Share Units  Section 9 Deferred Share Units  Section 10 Performance Awards     The Plan is not intended to affect and shall not affect any stock options, equity-basedcompensation, or other benefits that the Company or its Affiliates may have provided, or mayseparately provide in the future pursuant to any agreement, plan, or program that is independent ofthis Plan.2. **Defined Terms**     Terms in the Plan that begin with an initial capital letter have the defined meaning set forthin ***Appendix A***, unless defined elsewhere in this Plan or the context of their use clearly indicatesa different meaning.3. **Shares Subject to the Plan**     Subject to the provisions of Section 13 of the Plan, the maximum number of Shares that theCompany may issue for all Awards is 400,000 Shares, subject to the limitation set forth in Section5(c). For all Awards, the Shares issued pursuant to the Plan may be authorized but unissuedShares, or Shares that the Company has reacquired or otherwise holds in treasury.     Shares that are subject to an Award that for any reason expires, is forfeited, is cancelled,or becomes unexercisable, and Shares that are for any other reason not paid or delivered under thePlan shall again, except to the extent prohibited by Applicable Law, be available for subsequentAwards under the Plan. Notwithstanding the foregoing, but subject to adjustments pursuant toSection 13 below, the number of Shares that are available for ISO Awards shall be determined, tothe extent required under applicable tax laws, by reducing the number of Shares designated in thepreceding paragraph by the number of Shares issued pursuant to Awards, provided that any Sharesthat are issued under the Plan and forfeited back to the Plan shall be available for issuancepursuant to future ISO Awards.4. **Administration**     (a) *General***.**The Committee shall administer the Plan in accordance with its terms,provided that the Board may act in lieu of the Committee on any matter. The Committee shall holdmeetings at such times and places as it may determine and shall make such rules and regulations forthe conduct of its business as it deems advisable.
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In the absence of a duly appointed Committee orif the Board otherwise chooses to act in lieu of the Committee, the Board shall function as theCommittee for all purposes of the Plan.     (b) *Committee Composition***.**The Board shall appoint the members of the Committee. Ifand to the extent permitted by Applicable Law, the Committee may authorize one or more ReportingPersons (or other officers) to make Awards to Eligible Persons who are not Reporting Persons (orother officers whom the Committee has specifically authorized to make Awards). The Board may atany time appoint additional members to the Committee, remove and replace members of the Committeewith or without Cause, and fill vacancies on the Committee however caused.     (c) *Powers of the Committee.*Subject to the provisions of the Plan, the Committeeshall have the authority, in its sole discretion:     (i) to determine Eligible Persons to whom Awards shall be granted from timeto time and the number of Shares, units, or SARs to be covered by each Award;     (ii) to determine, from time to time, the Fair Market Value of Shares;     (iii) to determine, and to set forth in Award Agreements, the terms andconditions of all Awards, including any applicable exercise or purchase price, theinstallments and conditions under which an Award shall become vested (which may be based onperformance), terminated, expired, cancelled, or replaced, and the circumstances forvesting acceleration or waiver of forfeiture restrictions, and other restrictions andlimitations;     (iv) to approve the forms of Award Agreements and all other documents,notices and certificates in connection therewith which need not be identical either as totype of Award or among Participants;     (v) to construe and interpret the terms of the Plan and any Award Agreement,to determine the meaning of their terms, and to prescribe, amend, and rescind rules andprocedures relating to the Plan and its administration;     (vi) in order to fulfill the purposes of the Plan and without amending thePlan, modify, cancel, or waive the Company’s rights with respect to any Awards, to adjust orto modify Award Agreements for changes in Applicable Law, and to recognize differences inforeign law, tax policies, or customs; and     (vii) to make all other interpretations and to take all other actions thatthe Committee may consider necessary or advisable to administer the Plan or to effectuateits purposes.     Subject to Applicable Law and the restrictions set forth in the Plan, the Committee maydelegate administrative functions to individuals who are Reporting Persons, officers, or Employeesof the Company or its Affiliates.     (d) *Deference to Committee Determinations.*The Committee shall have the discretionto interpret or construe ambiguous, unclear, or implied (but omitted) terms in any fashion it deemsto be appropriate in its sole discretion, and to make any findings of fact needed in theadministration of the Plan or Award Agreements. The Committee’s prior exercise of itsdiscretionary authority shall not obligate it to exercise its authority in a like fashionthereafter. The Committee’s interpretation and construction of any provision of the Plan, or ofany Award or Award Agreement, shall be final, binding, and conclusive. The validity of any suchinterpretation, construction, decision or finding of fact shall not be given de novo review ifchallenged in court, by arbitration, or in any other forum, and shall be upheld unless clearlyarbitrary or capricious.
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     (e) *No Liability; Indemnification.*Neither the Board nor any Committee member, norany Person acting at the direction of the Board or the Committee, shall be liable for any act,omission, interpretation, construction or determination made in good faith with respect to thePlan, any Award or any Award Agreement. The Company and its Affiliates shall pay or reimburse anymember of the Committee, as well as any Director, Employee, or Consultant who takes action inconnection with the Plan, for all expenses incurred with respect to the Plan, and to the fullextent allowable under Applicable Law shall indemnify each and every one of them for any claims,liabilities, and costs (including reasonable attorney’s fees) arising out of their good faithperformance of duties under the Plan. The Company and its Affiliates may obtain liabilityinsurance for this purpose.5. **Eligibility**     (a) *General Rule*. The Committee may grant ISOs only to Employees (includingofficers who are Employees) of the Company or an Affiliate that is a “parent corporation” or“subsidiary corporation” within the meaning of Section 424 of the Code, and may grant all otherAwards to any Eligible Person. A Participant who has been granted an Award may be granted anadditional Award or Awards if the Committee shall so determine, if such person is otherwise anEligible Person and if otherwise in accordance with the terms of the Plan.     (b) *Grant of Awards*. Subject to the express provisions of the Plan, the Committeeshall determine from the class of Eligible Persons those individuals to whom Awards under the Planmay be granted, the number of Shares subject to each Award, the price (if any) to be paid for theShares or the Award and, in the case of Performance Awards, in addition to the matters addressed inSection 10 below, the specific objectives, goals and performance criteria that further define thePerformance Award. Each Award shall be evidenced by an Award Agreement signed by the Company and,if required by the Committee, by the Participant. The Award Agreement shall set forth the materialterms and conditions of the Award established by the Committee.     (c) *Limits on Awards*. During the term of the Plan, no single Participant mayreceive Awards that in the aggregate relate to more than 100,000 Shares. The Committee will adjustthis limitation pursuant to Section 13 below.     (d) *Replacement Awards*. Subject to Applicable Laws (including any associatedStockholder approval requirements), the Committee may, in its sole discretion and upon such termsas it deems appropriate, require as a condition of the grant of an Award to a Participant that theParticipant surrender for cancellation some or all of the Awards that have previously been grantedto the Participant under this Plan or otherwise. An Award that is conditioned upon such surrendermay or may not be the same type of Award, may cover the same (or a lesser or greater) number ofShares as such surrendered Award, may have other terms that are determined without regard to theterms or conditions of such surrendered Award, and may contain any other terms that the Committeedeems appropriate. In the case of Options, these other terms may not involve an Exercise Pricethat is lower than the Exercise Price of the surrendered Option unless the Company’s stockholdersapprove the grant itself or the program under which the grant is made pursuant to the Plan.6. **Option Awards**     (a) *Types; Documentation*. The Committee may in its discretion grant ISOs to anyEmployee and Non-ISOs to any Eligible Person, and shall evidence any such grants in an AwardAgreement that is delivered to the Participant. Each Option shall be designated in the AwardAgreement as an ISO or a Non-ISO, and the same Award Agreement may grant both types of Options. Atthe sole discretion of the Committee, any Option may be exercisable, in whole or in part,immediately upon the grant thereof, or only after the occurrence of a specified event, or only ininstallments, which installments may vary. Options granted under the Plan may contain such termsand provisions not inconsistent with the Plan that the Committee shall deem advisable in its soleand absolute discretion.     (b) *ISO $100,000 Limitation.*To the extent that the aggregate Fair Market Value ofShares with respect to which Options designated as ISOs first become exercisable by a Participantin any calendar year (under this Plan and any other plan of the Company or any Affiliate) exceeds$100,000, such excess Options shall be treated
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as Non-ISOs. For purposes of determining whetherthe $100,000 limit is exceeded, the Fair Market Value of the Shares subject to an ISO shall bedetermined as of the Grant Date. In reducing the number of Options treated as ISOs to meet the$100,000 limit, the most recently granted Options shall be reduced first. In the event thatSection 422 of the Code is amended to alter the limitation set forth therein, the limitation ofthis Section 6(b) shall be automatically adjusted accordingly.     (c) *Term of Options*. Each Award Agreement shall specify a term at the end of whichthe Option automatically expires, subject to earlier termination provisions contained in Section6(h) hereof; provided, that, the term of any Option may not exceed ten years from the Grant Date;provided that the term of any ISO granted to an Employee who is a Ten Percent Holder on the GrantDate shall not exceed five years from the Grant Date.     (d) *Exercise Price.*The exercise price of an Option shall be determined by theCommittee in its discretion and shall be set forth in the Award Agreement, provided that (i) if anISO is granted to an Employee who on the Grant Date is a Ten Percent Holder, the per Share exerciseprice shall not be less than 110% of the Fair Market Value per Share on the Grant Date, and (ii)for all other Options, such per Share exercise price shall not be less than 100% of the Fair MarketValue per Share on the Grant Date. Neither the Company nor the Committee shall, withoutstockholder approval, allow for a repricing of Options within the meaning of the federal securitieslaws and the rules and regulations of the American Stock Exchange.     (e) *Exercise of Option*. The Committee shall in its sole discretion determine thetimes, circumstances, and conditions under which an Option shall be exercisable, and shall set themforth in the Award Agreement. The Committee shall have the discretion to determine whether and towhat extent the vesting of Options shall be tolled during any unpaid leave of absence; provided,however, that in the absence of such determination, vesting of Options shall be tolled during anysuch leave approved by the Company.     (f) *Minimum Exercise Requirements*. An Option may not be exercised for a fraction ofa Share. The Committee may require in an Award Agreement that an Option be exercised as to aminimum number of Shares, provided that such requirement shall not prevent a Participant frompurchasing the full number of Shares as to which the Option is then exercisable.     (g) *Methods of Exercise.*Prior to its expiration pursuant to the terms of theapplicable Award Agreement, and subject to the times, circumstances and conditions for exercisecontained in the applicable Award Agreement, each Option may be exercised, in whole or in part(provided that the Company shall not be required to issue fractional shares), by delivery ofwritten notice of exercise to the secretary of the Company accompanied by the full exercise priceof the Shares being purchased. In the case of an ISO, the Committee shall determine the acceptablemethods of payment on the Grant Date and shall include such methods in the applicable AwardAgreement. The methods of payment that the Committee may in its discretion accept or commit toaccept in an Award Agreement include:     (i) cash or check payable to the Company (in U.S. dollars);     (ii) other Shares that (A) are owned by the Participant who is purchasingShares pursuant to an Option, (B) have a Fair Market Value on the date of surrender equal tothe aggregate exercise price of the Shares as to which the Option is being exercised, (C)were not acquired by such Participant pursuant to the exercise of an Option, unless suchShares have been owned by such Participant for at least six months or such other period asthe Committee may determine, (D) are all, at the time of such surrender, free and clear ofany and all claims, pledges, liens and encumbrances, or any restrictions which would in anymanner restrict the transfer of such shares to or by the Company (other than suchrestrictions as may have existed prior to an issuance of such Shares by the Company to suchParticipant), and (E) are duly endorsed for transfer to the Company;     (iii) a cashless exercise program that the Committee may approve, from timeto time in its discretion, pursuant to which a Participant may concurrently provideirrevocable instructions (A) to such
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Participant’s broker or dealer to effect the immediatesale of the purchased Shares and remit to the Company, out of the sale proceeds available onthe settlement date, sufficient funds to cover the exercise price of the Option plus allapplicable taxes required to be withheld by the Company by reason of such exercise, and (B)to the Company to deliver the certificates for the purchased Shares directly to such brokeror dealer in order to complete the sale;     (iv) a promissory note in a principal amount equal to the exercise price andotherwise in a form and with such terms as are approved by the Committee or cancellation ofother indebtedness, provided no executive officer or director of the Company shall bepermitted to pay any portion of an Option exercise price by issuance of a promissory note;or     (v) any combination of the foregoing methods of payment.     The Company shall not be required to deliver Shares pursuant to the exercise of an Optionuntil payment of the full exercise price therefore is received by the Company.     (h) *Termination of Continuous Service***.**The Committee may establish and set forth inthe applicable Award Agreement the terms and conditions on which an Option shall remainexercisable, if at all, following termination of a Participant’s Continuous Service. The Committeemay waive or modify these provisions at any time. To the extent that a Participant is not entitledto exercise an Option at the date of his or her termination of Continuous Service, or if theParticipant (or other person entitled to exercise the Option) does not exercise the Option to theextent so entitled within the time specified in the Award Agreement or below (as applicable), theOption shall terminate and the Shares underlying the unexercised portion of the Option shall revertto the Plan and become available for future Awards. In no event may any Option be exercised afterthe expiration of the Option term as set forth in the Award Agreement.     The following provisions shall apply to the extent an Award Agreement does not specify theterms and conditions upon which an Option shall terminate when there is a termination of aParticipant’s Continuous Service:     (i)  Termination other than Upon Disability, Death or Retirement or forCause. In the event of termination of a Participant’s Continuous Service (other than asa result of Participant’s death, disability, retirement or termination for Cause), theParticipant shall have the right to exercise an Option at any time within 90 days followingsuch termination to the extent the Participant was entitled to exercise such Option at thedate of such termination.     (ii)  Disability. In the event of termination of a Participant’sContinuous Service as a result of his or her being Disabled, the Participant shall have theright to exercise an Option at any time within one year following such termination to theextent the Participant was entitled to exercise such Option at the date of such termination.     (iii)  Retirement. In the event of termination of a Participant’sContinuous Service as a result of Participant’s retirement, the Participant shall have theright to exercise the Option at any time within six months following such termination to theextent the Participant was entitled to exercise such Option at the date of such termination.     (iv)  Death. In the event of the death of a Participant during theperiod of Continuous Service since the Grant Date of an Option, or within thirty daysfollowing termination of the Participant’s Continuous Service, the Option may be exercised,at any time within one year following the date of the Participant’s death, by theParticipant’s estate or by a person who acquired the right to exercise the Option by bequestor inheritance, but only to the extent the right to exercise the Option had vested at thedate of death or, if earlier, the date the Participant’s Continuous Service terminated.
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     (v)  Cause. If the Committee determines that a Participant’sContinuous Service terminated due to Cause, the Participant shall immediately forfeit theright to exercise any Option, and it shall be considered immediately null and void.     (i) *Reverse Vesting.*The Committee in its sole and absolute discretion may allow aParticipant to exercise unvested Options, in which case the Shares then issued shall be RestrictedShares having analogous vesting restrictions to the unvested Options.7. **Share Appreciate Rights (SARs)**     (a) *Grants*. The Committee may in its discretion grant Share Appreciation Rights toany Eligible Person, in any of the following forms:     (i)  SARs related to Options. The Committee may grant SARs eitherconcurrently with the grant of an Option or with respect to an outstanding Option, in whichcase the SAR shall extend to all or a portion of the Shares covered by the related Option.An SAR shall entitle the Participant who holds the related Option, upon exercise of the SARand surrender of the related Option, or portion thereof, to the extent the SAR and relatedOption each were previously unexercised, to receive payment of an amount determined pursuantto Section 7(e) below. Any SAR granted in connection with an ISO will contain such terms asmay be required to comply with the provisions of Section 422 of the Code and the regulationspromulgated thereunder.     (ii)  SARs Independent of Options. The Committee may grant SARs whichare independent of any Option subject to such conditions as the Committee may in itsdiscretion determine, which conditions will be set forth in the applicable Award Agreement.     (iii)  Limited SARs. The Committee may grant SARs exercisable onlyupon or in respect of a Change in Control or any other specified event, and such limitedSARs may relate to or operate in tandem or combination with or substitution for Options orother SARs, or on a stand-alone basis, and may be payable in cash or Shares based on thespread between the exercise price of the SAR, and (A) a price based upon or equal to theFair Market Value of the Shares during a specified period, at a specified time within aspecified period before, after or including the date of such event, or (B) a price relatedto consideration payable to Company’s stockholders generally in connection with the event.     (b) *Exercise Price*. The per Share exercise price of an SAR shall be determined inthe sole discretion of the Committee, shall be set forth in the applicable Award Agreement, andshall be no less than 100% of the Fair Market Value of one Share. The exercise price of an SARrelated to an Option shall be the same as the exercise price of the related Option. The exerciseprice of an SAR shall be subject to the special rules on pricing contained in Sections 6(d).Neither the Company nor the Committee shall, without stockholder approval, allow for a repricing ofSARs within the meaning of federal securities laws or the rules and regulations of the AmericanStock Exchange.     (c) *Exercise of SARs*. Unless the Award Agreement otherwise provides, an SAR relatedto an Option will be exercisable at such time or times, and to the extent, that the related Optionwill be exercisable; provided that the Award Agreement shall not, without the approval of thestockholders of the Company, provide for a vesting period for the exercise of the SAR that is morefavorable to the Participant than the exercise period for the related Option. An SAR may not havea term exceeding ten years from its Grant Date. An SAR granted independently of any other Awardwill be exercisable pursuant to the terms of the Award Agreement. Whether an SAR is related to anOption or is granted independently, the SAR may only be exercised when the Fair Market Value of theShares underlying the SAR exceeds the exercise price of the SAR.     (d) *Effect on Available Shares*. All SARs to be settled in shares of the Company’sstock shall be counted in full against the number of shares available for award under the Plan,regardless of the number of shares actually issued upon settlement of the SARs.
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     (e) *Payment.*Upon exercise of an SAR related to an Option and the attendantsurrender of an exercisable portion of any related Award, the Participant will be entitled toreceive payment of an amount determined by multiplying –     (i) the excess of the Fair Market Value of a Share on the date of exercise ofthe SAR over the exercise price per Share of the SAR, by     (ii) the number of Shares with respect to which the SAR has been exercised.     Notwithstanding the foregoing, an SAR granted independently of an Option (i) may limit theamount payable to the Participant to a percentage, specified in the Award Agreement but notexceeding one-hundred percent (100%), of the amount determined pursuant to the preceding sentence,and (ii) shall be subject to any payment or other restrictions that the Committee may at any timeimpose in its discretion, including restrictions intended to conform the SARs with Section 409A ofthe Code.     (f) *Form and Terms of Payment***.**Subject to Applicable Law, the Committee may, in itssole discretion, settle the amount determined under Section 7(e) above solely in cash, solely inShares (valued at their Fair Market Value on the date of exercise of the SAR), or partly in cashand partly in Shares. In any event, cash shall be paid in lieu of fractional Shares. Absent acontrary determination by the Committee, all SARs shall be settled in cash as soon as practicableafter exercise. Notwithstanding the foregoing, the Committee may, in an Award Agreement, determinethe maximum amount of cash or Shares or combination thereof that may be delivered upon exercise ofan SAR.     (g) *Termination of Employment or Consulting Relationship***.**The Committee shallestablish and set forth in the applicable Award Agreement the terms and conditions on which an SARshall remain exercisable, if at all, following termination of a Participant’s Continuous Service.The provisions of Section 6(h) above shall apply to the extent an Award Agreement does not specifythe terms and conditions upon which an SAR shall terminate when there is a termination of aParticipant’s Continuous Service.8. **Restricted Shares and Restricted Share Units**     (a) *Grants.*The Committee may in its discretion grant restricted shares(“Restricted Shares”) to any Eligible Person and shall evidence such grant in an Award Agreementthat is delivered to the Participant and that sets forth the number of Restricted Shares, thepurchase price for such Restricted Shares (if any), and the terms upon which the Restricted Sharesmay become vested. In addition, the Company may in its discretion grant the right to receiveShares after certain vesting requirements are met (“Restricted Share Units”) to any Eligible Personand shall evidence such grant in an Award Agreement that is delivered to the Participant which setsforth the number of Shares (or formula, that may be based on future performance or conditions, fordetermining the number of Shares) that the Participant shall be entitled to receive upon vestingand the terms upon which the Shares subject to a Restricted Share Unit may become vested. TheCommittee may condition any Award of Restricted Shares or Restricted Share Units to a Participanton receiving from the Participant such further assurances and documents as the Committee mayrequire to enforce the restrictions.     (b) *Vesting and Forfeiture*. The Committee shall set forth in an Award Agreementgranting Restricted Shares or Restricted Share Units, the terms and conditions under which theParticipant’s interest in the Restricted Shares or the Shares subject to Restricted Share Unitswill become vested and non-forfeitable. Except as set forth in the applicable Award Agreement orthe Committee otherwise determines, upon termination of a Participant’s Continuous Service for anyother reason, the Participant shall forfeit his or her Restricted Shares and Restricted ShareUnits; provided that if a Participant purchases the Restricted Shares and forfeits them for anyreason, the Company shall return the purchase price to the Participant only if and to the extentset forth in an Award Agreement.     (c) *Issuance of Restricted Shares Prior to Vesting*. The Company shall issue stockcertificates that evidence Restricted Shares pending the lapse of applicable restrictions, and thatbear a legend making appropriate
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reference to such restrictions. Except as set forth in theapplicable Award Agreement or the Committee otherwise determines, the Company or a third party thatthe Company designates shall hold such Restricted Shares and any dividends that accrue with respectto Restricted Shares pursuant to Section 8(e) below.     (d) *Issuance of Shares upon Vesting***.**As soon as practicable after vesting of aParticipant’s Restricted Shares (or Shares underlying Restricted Share Units) and the Participant’ssatisfaction of applicable tax withholding requirements, the Company shall release to theParticipant, free from the vesting restrictions, one Share for each vested Restricted Share (orissue one Share free of the vesting restriction for each vested Restricted Share Unit), unless anAward Agreement provides otherwise. No fractional shares shall be distributed, and cash shall bepaid in lieu thereof.     (e) *Dividends Payable on Vesting*. Whenever Shares are released to a Participantunder Section 8(d) above pursuant to the vesting of Restricted Shares or the Shares underlyingRestricted Share Units are issued to a Participant pursuant to Section 8(d) above, such Participantshall receive (unless otherwise provided in the Award Agreement), with respect to each Sharereleased or issued, an amount equal to any cash dividends (plus, in the discretion of theCommittee, simple interest at a rate as the Committee may determine) and a number of Shares equalto any stock dividends, which were declared and paid to the holders of Shares between the GrantDate and the date such Share is released or issued.     (f) *Section **83(b)**Elections*. A Participant may make an election under Section 83(b)of the Code (the “Section 83(b) Election”) with respect to Restricted Shares. If a Participant whohas received Restricted Share Units provides the Committee with written notice of his or herintention to make Section 83(b) Election with respect to the Shares subject to such RestrictedShare Units, the Committee may in its discretion convert the Participant’s Restricted Share Unitsinto Restricted Shares, on a one-for-one basis, in full satisfaction of the Participant’sRestricted Share Unit Award. The Participant may then make a Section 83(b) Election with respectto those Restricted Shares. Shares with respect to which a Participant makes a Section 83(b)Election shall not be eligible for deferral pursuant to Section 9 below.     (g) *Deferral Elections*. At any time within the thirty-day period (or other shorteror longer period that the Committee selects) in which a Participant who is a member of a selectgroup of management or highly compensated employees (within the meaning of the Code) receives anAward of either Restricted Shares or Restricted Share Units, the Committee may permit theParticipant to irrevocably elect, on a form provided by and acceptable to the Committee, to deferthe receipt of all or a percentage of the Shares that would otherwise be transferred to theParticipant upon the vesting of such Award. If the Participant makes this election, the Sharessubject to the election, and any associated dividends and interest, shall be credited to an accountestablished pursuant to Section 9 hereof on the date such Shares would otherwise have been releasedor issued to the Participant pursuant to Section 8(d) above.9. **Deferred Share Units**     (a) *Elections to Defer.*The Committee may permit any Eligible Person who is aDirector, Consultant or member of a select group of management or highly compensated employees(within the meaning of the Code) to irrevocably elect, on a form provided by and acceptable to theCommittee (the “Election Form”), to forego the receipt of cash or other compensation (including theShares deliverable pursuant to any Award other than Restricted Shares for which a Section 83(b)Election has been made), and in lieu thereof to have the Company credit to an internal Plan account(the “Account”) a number of deferred share units (“Deferred Share Units”) having a Fair MarketValue equal to the Shares and other compensation deferred. These credits will be made at the endof each calendar month during which compensation is deferred. Each Election Form shall take effecton the first day of the next calendar year (or on the first day of the next calendar month in thecase of an initial election by a Participant who is first eligible to defer hereunder) after itsdelivery to the Company, subject to Section 8(g) regarding deferral of Restricted Shares andRestricted Share Units and to Section 10(e) regarding deferral of Performance Awards, unless theCompany sends the Participant a written notice explaining why the Election Form is invalid withinfive business days after the Company receives it. Notwithstanding the foregoing sentence: (i)Election Forms shall be ineffective with respect to any compensation that a Participant earnsbefore the date on which the Company receives
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the Election Form, and (ii) the Committee mayunilaterally make awards in the form of Deferred Share Units, regardless of whether or not theParticipant foregoes other compensation.     (b) *Vesting*. Unless an Award Agreement expressly provides otherwise, eachParticipant shall be 100% vested at all times in any Shares subject to Deferred Share Units.     (c) *Issuances of Shares*. The Company shall provide a Participant with one Share foreach Deferred Share Unit in five substantially equal annual installments that are issued before thelast day of each of the five calendar years that end after the date on which the Participant’sContinuous Service terminates, unless –     (i) the Participant has properly elected a different form of distribution, ona form approved by the Committee, that permits the Participant to select any combination ofa lump sum and annual installments that are completed within ten years following terminationof the Participant’s Continuous Service, and     (ii) the Company received the Participant’s distribution election form at thetime the Participant elects to defer the receipt of cash or other compensation pursuant toSection 9(a), provided that such election may be changed through any subsequent electionthat (i) is delivered to the Administrator at least one year before the date on whichdistributions are otherwise scheduled to commence pursuant to the Participant’s election,and (ii) defers the commencement of distributions by at least five years from the originallyscheduled commencement date.Fractional shares shall not be issued, and instead shall be paid out in cash.     (d) *Crediting of Dividends*. Whenever Shares are issued to a Participant pursuant toSection 9(c) above, such Participant shall also be entitled to receive, with respect to each Shareissued, a cash amount equal to any cash dividends (plus simple interest at a rate of five percentper annum, or such other reasonable rate as the Committee may determine), and a number of Sharesequal to any stock dividends which were declared and paid to the holders of Shares between theGrant Date and the date such Share is issued.     (e) *Emergency Withdrawals.*In the event a Participant suffers an unforeseeableemergency within the contemplation of this Section and Section 409A of the Code, the Participantmay apply to the Company for an immediate distribution of all or a portion of the Participant’sDeferred Share Units. The unforeseeable emergency must result from a sudden and unexpected illnessor accident of the Participant, the Participant’s spouse, or a dependent (within the meaning ofSection 152(a) of the Code) of the Participant, casualty loss of the Participant’s property, orother similar extraordinary and unforeseeable conditions beyond the control of the Participant.Examples of purposes which are not considered unforeseeable emergencies include post-secondaryschool expenses or the desire to purchase a residence. In no event will a distribution be made tothe extent the unforeseeable emergency could be relieved through reimbursement or compensation byinsurance or otherwise, or by liquidation of the Participant’s nonessential assets to the extentsuch liquidation would not itself cause a severe financial hardship. The amount of anydistribution hereunder shall be limited to the amount necessary to relieve the Participant’sunforeseeable emergency plus amounts necessary to pay taxes reasonably anticipated as a result ofthe distribution. The Committee shall determine whether a Participant has a qualifyingunforeseeable emergency and the amount which qualifies for distribution, if any. The Committee mayrequire evidence of the purpose and amount of the need, and may establish such application or otherprocedures as it deems appropriate.     (f) *Unsecured Rights to Deferred Compensation.*A Participant’s right to DeferredShare Units shall at all times constitute an unsecured promise of the Company to pay benefits asthey come due. The right of the Participant or the Participant’s duly-authorized transferee toreceive benefits hereunder shall be solely an unsecured claim against the general assets of theCompany. Neither the Participant nor the Participant’s duly-authorized transferee shall have anyclaim against or rights in any specific assets, shares, or other funds of the Company.
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10. **Performance Awards**     (a) *Performance Units*. Subject to the limitations set forth in paragraph (c)hereof, the Committee may in its discretion grant Performance Units to any Eligible Person andshall evidence such grant in an Award Agreement that is delivered to the Participant which setsforth the terms and conditions of the Award.     (b) *Performance Compensation Awards*. Subject to the limitations set forth inparagraph (c) hereof, the Committee may, at the time of grant of a Performance Unit, designate suchAward as a “Performance Compensation Award” in order that such Award constitutes “qualifiedperformance-based compensation” under Code Section 162(m), in which event the Committee shall havethe power to grant such Performance Compensation Award upon terms and conditions that qualify it as“qualified performance-based compensation” within the meaning of Code Section 162(m). With respectto each such Performance Compensation Award, the Committee shall establish, in writing within thetime required under Code Section 162(m), a “Performance Period,” “Performance Measure(s)”, and“Performance Formula(e)” (each such term being hereinafter defined).     A Participant shall be eligible to receive payment in respect of a Performance CompensationAward only to the extent that the Performance Measure(s) for such Award is achieved and thePerformance Formula(e) as applied against such Performance Measure(s) determines that all or someportion of such Participant’s Award has been earned for the Performance Period. As soon aspracticable after the close of each Performance Period, the Committee shall review and certify inwriting whether, and to what extent, the Performance Measure(s) for the Performance Period havebeen achieved and, if so, determine and certify in writing the amount of the PerformanceCompensation Award to be paid to the Participant and, in so doing, may use negative discretion todecrease, but not increase, the amount of the Award otherwise payable to the Participant based uponsuch performance.     (c) *Limitations on Awards.*The maximum Performance Unit Award including anyperformance Compensation Award, that Participants may receive in the aggregate for any onePerformance Period shall not exceed 100,000 Shares. The Committee shall have the discretion toprovide in any Award Agreement that any amounts earned in excess of these limitations will becredited as Deferred Share Units. Any amounts for which payment to the Participant is deferredpursuant to the preceding sentence shall be paid to the Participant in a future year or years notearlier than, and only to the extent that, the Participant is either not receiving compensation inexcess of these limits for a Performance Period, or is not subject to the restrictions set forthunder Section 162(b) of the Code*.*     (d) *Definitions*.     (i) “Performance Formula” means, for a Performance Period, one or moreobjective formulas or standards established by the Committee for purposes of determiningwhether or the extent to which an Award has been earned based on the level of performanceattained or to be attained with respect to one or more Performance Measure(s). PerformanceFormulae may vary from Performance Period to Performance Period and from Participant toParticipant and may be established on a stand-alone basis, in tandem or in the alternative.     (ii) “Performance Measure” means one or more of the following selected by theCommittee to measure Company, Affiliate, and/or business unit performance for a PerformancePeriod, whether in absolute or relative terms (including, without limitation, terms relativeto a peer group or index): basic, diluted, or adjusted earnings per share; sales orrevenue; earnings before interest, taxes, and other adjustments (in total or on a per sharebasis); basic or adjusted net income; returns on equity, assets, capital, revenue or similarmeasure; economic value added; working capital; total stockholder return; and productdevelopment, product market share, research, licensing, litigation, human resources,information services, mergers, acquisitions, sales of assets of Affiliates or businessunits. Each such measure shall be, to the extent applicable, determined in accordance withgenerally accepted accounting principles as consistently applied by the Company (or suchother standard applied by the Committee) and, if so determined by the Committee, and in thecase of a Performance Compensation Award, to the extent permitted under Code
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Section 162(m),adjusted to omit the effects of extraordinary items, gain or loss on the disposal of abusiness segment, unusual or infrequently occurring events and transactions and cumulativeeffects of changes in accounting principles. Performance Measures may vary from PerformancePeriod to Performance Period and from Participant to Participant, and may be established ona stand-alone basis, in tandem or in the alternative.     (iii) “Performance Period” means one or more periods of time (of not lessthan one fiscal year of the Company), as the Committee may designate, over which theattainment of one or more Performance Measure(s) will be measured for the purpose ofdetermining a Participant’s rights in respect of an Award.     (e) *Deferral Elections*. At any time prior to the date that is at least six monthsbefore the close of a Performance Period (or shorter or longer period that the Committee selects)with respect to an Award of either Performance Units or Performance Compensation, the Committee maypermit a Participant who is a member of a select group of management or highly compensatedemployees (within the meaning of the Code) to irrevocably elect, on a form provided by andacceptable to the Committee, to defer the receipt of all or a percentage of the Shares that wouldotherwise be transferred to the Participant upon the vesting of such Award. If the Participantmakes this election, the Shares subject to the election, and any associated interest and dividends,shall be credited to an account established pursuant to Section 9 hereof on the date such Shareswould otherwise have been released or issued to the Participant pursuant to Section 10(a) orSection 10(b) above.11. **Taxes**     (a) *General.*As a condition to the issuance or distribution of Shares pursuant tothe Plan, the Participant (or in the case of the Participant’s death, the person who succeeds tothe Participant’s rights) shall make such arrangements as the Company may require for thesatisfaction of any applicable federal, state, local or foreign withholding tax obligations thatmay arise in connection with the Award and the issuance of Shares. The Company shall not berequired to issue any Shares until such obligations are satisfied. If the Committee allows thewithholding or surrender of Shares to satisfy a Participant’s tax withholding obligations, theCommittee shall not allow Shares to be withheld in an amount that exceeds the minimum statutorywithholding rates for federal and state tax purposes, including payroll taxes.     (b) *Default Rule for Employees.*In the absence of any other arrangement, an Employeeshall be deemed to have directed the Company to withhold or collect from his or her cashcompensation an amount sufficient to satisfy such tax obligations from the next payroll paymentotherwise payable after the date of the exercise of an Award.     (c) *Special Rules.*In the case of a Participant other than an Employee (or in thecase of an Employee where the next payroll payment is not sufficient to satisfy such taxobligations, with respect to any remaining tax obligations), in the absence of any otherarrangement and to the extent permitted under Applicable Law, the Participant shall be deemed tohave elected to have the Company withhold from the Shares or cash to be issued pursuant to an Awardthat number of Shares having a Fair Market Value determined as of the applicable Tax Date (asdefined below) or cash equal to the amount required to be withheld. For purposes of this Section11, the Fair Market Value of the Shares to be withheld shall be determined on the date that theamount of tax to be withheld is to be determined under the Applicable Law (the “Tax Date”).     (d) *Surrender of Shares.*If permitted by the Committee, in its discretion, aParticipant may satisfy the minimum applicable tax withholding and employment tax obligationsassociated with an Award by surrendering Shares to the Company (including Shares that wouldotherwise be issued pursuant to the Award) that have a Fair Market Value determined as of theapplicable Tax Date equal to the amount required to be withheld. In the case of Shares previouslyacquired from the Company that are surrendered under this Section 11, such Shares must have beenowned by the Participant for more than six months on the date of surrender (or such longer periodof time the Company may in its discretion require).
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     (e) *Income Taxes and Deferred Compensation*. Participants are solely responsible andliable for the satisfaction of all taxes and penalties that may arise in connection with Awards(including any taxes arising under Section 409A of the Code), and the Company shall not have anyobligation to indemnify or otherwise hold any Participant harmless from any or all of such taxes.The Administrator shall have the discretion to organize any deferral program, to require deferralelection forms, and to grant or to unilaterally modify any Award in a manner that (i) conforms withthe requirements of Section 409A of the Code with respect to compensation that is deferred and thatvests after December 31, 2004, (ii) that voids any Participant election to the extent it wouldviolate Section 409A of the Code, and (iii) for any distribution election that would violateSection 409A of the Code, to make distributions pursuant to the Award at the earliest to occur of adistribution event that is allowable under Section 409A of the Code or any distribution event thatis both allowable under Section 409A of the Code and is elected by the Participant, subject to anyvalid second election to defer, provided that the Administrator permits second elections to deferin accordance with Section 409A(a)(4)(C). The Administrator shall have the sole discretion tointerpret the requirements of the Code, including Section 409A, for purposes of the Plan and allAwards.12. **Non-Transferability of Awards**     (a) *General.*Except as set forth in this Section 12, or as otherwise approved bythe Committee, Awards may not be sold, pledged, assigned, hypothecated, transferred or disposed ofin any manner other than by will or by the laws of descent or distribution. The designation of abeneficiary by a Participant will not constitute a transfer. An Award may be exercised, during thelifetime of the holder of an Award, only by such holder, the duly-authorized legal representativeof a Participant who is Disabled, or a transferee permitted by this Section 12.     (b) *Limited Transferability Rights.*Notwithstanding anything else in this Section12, the Committee may in its discretion provide in an Award Agreement that an Award other than anISO may be transferred, on such terms and conditions as the Committee deems appropriate, either (i)by instrument to the Participant’s “Immediate Family” (as defined below), (ii) by instrument to aninter vivos or testamentary trust (or other entity) in which the Award is to be passed to theParticipant’s designated beneficiaries, or (iii) by gift to charitable institutions. Anytransferee of the Participant’s rights shall succeed and be subject to all of the terms of thisAward Agreement and the Plan. “Immediate Family” means any child, stepchild, grandchild, parent,stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall includeadoptive relationships.13. **Adjustments Upon Changes in Capitalization, Merger or Certain OtherTransactions**     (a) *Changes in Capitalization.*The Committee shall equitably adjust the number ofShares covered by each outstanding Award, and the number of Shares that have been authorized forissuance under the Plan but as to which no Awards have yet been granted or that have been returnedto the Plan upon cancellation, forfeiture, or expiration of an Award, as well as the price perShare covered by each such outstanding Award, to reflect any increase or decrease in the number ofissued Shares resulting from a stock-split, reverse stock-split, stock dividend, combination,recapitalization or reclassification of the Shares, or any other increase or decrease in the numberof issued Shares effected without receipt of consideration by the Company. In the event of anysuch transaction or event, the Committee may provide in substitution for any or all outstandingOptions under the Plan such alternative consideration (including securities of any survivingentity) as it may in good faith determine to be equitable under the circumstances and may requirein connection therewith the surrender of all Options so replaced. In any case, such substitutionof securities shall not require the consent of any person who is granted Options pursuant to thePlan. Except as expressly provided herein, or in an Award Agreement, if the Company issues forconsideration shares of stock of any class or securities convertible into shares of stock of anyclass, the issuance shall not affect, and no adjustment by reason thereof shall be required to bemade with respect to the number or price of Shares subject to any award.     (b) *Dissolution or Liquidation.*In the event of the dissolution or liquidation ofthe Company other than as part of a Change of Control, each Award will terminate immediately priorto the consummation of such action, subject to the ability of the Committee to exercise anydiscretion authorized in the case of a Change in Control.
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     (c) *Change in Control.*In the event of a Change in Control, the Committee may inits sole and absolute discretion and authority, without obtaining the approval or consent of theCompany’s stockholders or any Participant with respect to his or her outstanding Awards, take oneor more of the following actions:     (i) arrange for or otherwise provide that each outstanding Awardshall be assumed or a substantially similar award shall be substituted by asuccessor corporation or a parent or subsidiary of such successor corporation (the“Successor Corporation”);     (ii) accelerate the vesting of Awards so that Awards shall vest (and,to the extent applicable, become exercisable) as to the Shares that otherwise wouldhave been unvested and provide that repurchase rights of the Company with respect toShares issued upon exercise of an Award shall lapse as to the Shares subject to suchrepurchase right;     (iii) arrange or otherwise provide for the payment of cash or otherconsideration to Participants in exchange for the satisfaction and cancellation ofoutstanding Awards; or     (iv) make such other modifications, adjustments or amendments tooutstanding Awards or this Plan as the Committee deems necessary or appropriate,subject however to the terms of Section 15(a) below.     Notwithstanding the above, in the event a Participant holding an Award assumed or substitutedby the Successor Corporation in a Change in Control is Involuntarily Terminated by the SuccessorCorporation in connection with, or within 12 months following consummation of, the Change inControl, then any assumed or substituted Award held by the terminated Participant at the time oftermination shall accelerate and become fully vested (and exercisable in full in the case ofOptions and SARs), and any repurchase right applicable to any Shares shall lapse in full, unless anAward Agreement provides for a more restrictive acceleration or vesting schedule or morerestrictive limitations on the lapse of repurchase rights or otherwise places additionalrestrictions, limitations and conditions on an Award. The acceleration of vesting and lapse ofrepurchase rights provided for in the previous sentence shall occur immediately prior to theeffective date of the Participant’s termination, unless an Award Agreement provides otherwise.     (d) *Certain Distributions.*In the event of any distribution to the Company’sstockholders of securities of any other entity or other assets (other than dividends payable incash or stock of the Company) without receipt of consideration by the Company, the Committee may,in its discretion, appropriately adjust the price per Share covered by each outstanding Award toreflect the effect of such distribution.14. **Time of Granting Awards**.     The date of grant (“Grant Date”) of an Award shall be the date on which the Committee makesthe determination granting such Award or such other date as is determined by the Committee,provided that in the case of an ISO, the Grant Date shall be the later of the date on which theCommittee makes the determination granting such ISO or the date of commencement of theParticipant’s employment relationship with the Company.15. **Modification of Awards and Substitution of Options**.     (a) *Modification, Extension, and Renewal of Awards*. Within the limitations of thePlan, the Committee may modify an Award to accelerate the rate at which an Option or SAR may beexercised (including without limitation permitting an Option or SAR to be exercised in full withoutregard to the installment or vesting provisions of the applicable Award Agreement or whether theOption or SAR is at the time exercisable, to the extent it has not previously been exercised), toaccelerate the vesting of any Award, to extend or renew outstanding Awards or to accept thecancellation of outstanding Awards to the extent not previously exercised. However, the Committeemay not cancel an outstanding option that is underwater for the purpose of reissuing the option tothe participant at a lower exercise price or granting a replacement Award of a different type,without stockholder approval.
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Notwithstanding the foregoing provision, no modification of anoutstanding Award shall materially and adversely affect such Participant’s rights thereunder,unless either the Participant provides written consent or there is an express Plan provisionpermitting the Committee to act unilaterally to make the modification.     (b) *Substitution of Options.*Notwithstanding any inconsistent provisions or limitsunder the Plan, in the event the Company or an Affiliate acquires (whether by purchase, merger orotherwise) all or substantially all of outstanding capital stock or assets of another corporationor in the event of any reorganization or other transaction qualifying under Section 424 of theCode, the Committee may, in accordance with the provisions of that Section, substitute Options foroptions under the plan of the acquired company provided (i) the excess of the aggregate fair marketvalue of the shares subject to an option immediately after the substitution over the aggregateoption price of such shares is not more than the similar excess immediately before suchsubstitution and (ii) the new option does not give persons additional benefits, including anyextension of the exercise period.16. **Term of Plan**.     The Plan shall continue in effect for a term of ten (10) years from its effective date asdetermined under Section 20 below, unless the Plan is sooner terminated under Section 17 below.17. **Amendment and Termination of the Plan**.     (a) *Authority to Amend or Terminate.*Subject to Applicable Laws, the Board may fromtime to time amend, alter, suspend, discontinue, or terminate the Plan.     (b) *Effect of Amendment or Termination.*No amendment, suspension, or termination ofthe Plan shall materially and adversely affect Awards already granted unless either it relates toan adjustment pursuant to Section 13 above, or it is otherwise mutually agreed between theParticipant and the Committee, which agreement must be in writing and signed by the Participant andthe Company. Notwithstanding the foregoing, the Committee may amend the Plan to eliminateprovisions which are no longer necessary as a result of changes in tax or securities laws orregulations, or in the interpretation thereof.18. **Conditions Upon Issuance of Shares**.     Notwithstanding any other provision of the Plan or any agreement entered into by the Companypursuant to the Plan, the Company shall not be obligated, and shall have no liability for failure,to issue or deliver any Shares under the Plan unless such issuance or delivery would comply withApplicable Law, with such compliance determined by the Company in consultation with its legalcounsel.19. **Reservation of Shares**.     The Company, during the term of this Plan, will at all times reserve and keep available suchnumber of Shares as shall be sufficient to satisfy the requirements of the Plan.20. **Effective Date**.     This Plan shall become effective on the date of its approval by the Board; provided that thisPlan shall be submitted to the Company’s stockholders for approval, and if not approved by thestockholders in accordance with Applicable Laws (as determined by the Committee in its discretion)within one year from the date of approval by the Board, this Plan and any Awards shall be null,void, and of no force and effect. Awards granted under this Plan before approval of this Plan bythe stockholders shall be granted subject to such approval, and no Shares shall be distributedbefore such approval.
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21. **Controlling Law**.     All disputes relating to or arising from the Plan shall be governed by the internalsubstantive laws (and not the laws of conflicts of laws) of the State of Virginia, to the extentnot preempted by United States federal law. If any provision of this Plan is held by a court ofcompetent jurisdiction to be invalid and unenforceable, the remaining provisions shall continue tobe fully effective.22. **Laws And Regulations**.     (a) *U.S. Securities Laws.*This Plan, the grant of Awards, and the exercise ofOptions and SARs under this Plan, and the obligation of the Company to sell or deliver any of itssecurities (including, without limitation, Options, Restricted Shares, Restricted Share Units,Deferred Share Units, and Shares) under this Plan shall be subject to all Applicable Law. In theevent that the Shares are not registered under the Securities Act of 1933, as amended (the “Act”),or any applicable state securities laws prior to the delivery of such Shares, the Company mayrequire, as a condition to the issuance thereof, that the persons to whom Shares are to be issuedrepresent and warrant in writing to the Company that such Shares are being acquired by him or herfor investment for his or her own account and not with a view to, for resale in connection with, orwith an intent of participating directly or indirectly in, any distribution of such Shares withinthe meaning of the Act, and a legend to that effect may be placed on the certificates representingthe Shares.     (b) *Other Jurisdictions*. To facilitate the making of any grant of an Award underthis Plan, the Committee may provide for such special terms for Awards to Participants who areforeign nationals or who are employed by the Company or any Affiliate outside of the United Statesof America as the Committee may consider necessary or appropriate to accommodate differences inlocal law, tax policy or custom. The Company may adopt rules and procedures relating to theoperation and administration of this Plan to accommodate the specific requirements of local lawsand procedures of particular countries. Without limiting the foregoing, the Company isspecifically authorized to adopt rules and procedures regarding the conversion of local currency,taxes, withholding procedures and handling of stock certificates which vary with the customs andrequirements of particular countries. The Company may adopt sub-plans and establish escrowaccounts and trusts as may be appropriate or applicable to particular locations and countries.     23. **No Stockholder Rights. Neither a Participant nor any transferee of aParticipant shall have any rights as a stockholder of the Company with respect to any Sharesunderlying any Award until the date of issuance of a share certificate to a Participant or atransferee of a Participant for such Shares in accordance with the Company’s governing instrumentsand Applicable Law. Prior to the issuance of Shares pursuant to an Award, a Participant shall nothave the right to vote or to receive dividends or any other rights as a stockholder with respect tothe Shares underlying the Award, notwithstanding its exercise in the case of Options and SARs. Noadjustment will be made for a dividend or other right that is determined based on a record dateprior to the date the stock certificate is issued, except as otherwise specifically provided for inthis Plan.     24. **No Employment Rights**. The Plan shall not confer upon any Participant anyright to continue an employment, service or consulting relationship with the Company, nor shall itaffect in any way a Participant’s right or the Company’s right to terminate the Participant’semployment, service, or consulting relationship at any time, with or without Cause.25. **Termination, Rescission and Recapture.**     (a) Each Award under the Plan is intended to align the Participant’s long-terminterest with those of the Company. If the Participant engages in certain activities discussedbelow, either during employment or after employment with the Company terminates for any reason, theParticipant is acting contrary to the long-term interests of the Company. Accordingly, except asotherwise expressly provided in the AwardAgreement, the Company may terminate any outstanding,unexercised, unexpired, unpaid, or deferred Awards (“Termination”), rescind any exercise, paymentor delivery pursuant to the Award
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(“Rescission”), or recapture any Common Stock (whether restrictedor unrestricted) or proceeds from the Participant’s sale of Shares issued pursuant to the Award(“Recapture”), if the Participant does not comply with the conditions of subsections (b) and (c)hereof (collectively, the “Conditions”).     (b) A Participant shall not, without the Company’s prior written authorization,disclose to anyone outside the Company, or use in other than the Company’s business, anyproprietary or confidential information or material, as those or other similar terms are used inany applicable patent, confidentiality, inventions, secrecy, or other agreement between theParticipant and the Company with regard to any such proprietary or confidential information ormaterial.     (c) Pursuant to any agreement between the Participant and the Company with regard tointellectual property (including but not limited to patents, trademarks, copyrights, trade secrets,inventions, developments, improvements, proprietary information, confidential business andpersonnel information), a Participant shall promptly disclose and assign to the Company or itsdesignee all right, title, and interest in such intellectual property, and shall take allreasonable steps necessary to enable the Company to secure all right, title and interest in suchintellectual property in the United States and in any foreign country.     (d) Upon exercise, payment, or delivery of cash or Common Stock pursuant to anAward, the Participant shall certify on a form acceptable to the Company that he or she is incompliance with the terms and conditions of the Plan and, if a severance of Continuous Service hasoccurred for any reason, shall state the name and address of the Participant’s then-currentemployer or any entity for which the Participant performs business services and the Participant’stitle, and shall identify any organization or business in which the Participant owns agreater-than-five-percent equity interest.     (e) If the Company determines, in its sole and absolute discretion, that (i) aParticipant has violated any of the Conditions or (ii) during his or her Continuous Service, orwithin one year after its termination for any reason, a Participant (a) has rendered services to orotherwise directly or indirectly engaged in or assisted, any organization or business that, in thejudgment of the Company in its sole and absolute discretion, is or is working to become competitivewith the Company; (b) has solicited any non-administrative employee of the Company to terminateemployment with the Company; or (c) has engaged in activities which are materially prejudicial toor in conflict with the interests of the Company, including any breaches of fiduciary duty or theduty of loyalty, or material breach or failure to comply with any Company policy applicable toParticipant, then the Company may, in its sole and absolute discretion, impose a Termination,Rescission, and/or Recapture with respect to any or all of the Participant’s relevant Awards,Shares, and the proceeds thereof.     (f) Within ten days after receiving notice from the Company of any such activity,the Participant shall deliver to the Company the Shares acquired pursuant to the Award, or, ifParticipant has sold the Shares, the gain realized, or payment received as a result of therescinded exercise, payment, or delivery; provided, that if the Participant returns Shares that theParticipant purchased pursuant to the exercise of an Option (or the gains realized from the sale ofsuch Common Stock), the Company shall promptly refund the exercise price, without earnings, thatthe Participant paid for the Shares. Any payment by the Participant to the Company pursuant tothis Section 25 shall be made either in cash or by returning to the Company the number of Sharesthat the Participant received in connection with the rescinded exercise, payment, or delivery. Itshall not be a basis for Termination, Rescission or Recapture if after termination of aParticipant’s Continuous Service, the Participant purchases, as an investment or otherwise, stockor other securities of such an organization or business, so long as (i) such stock or othersecurities are listed upon a recognized securities exchange or traded over-the-counter, and (ii)such investment does not represent more than a five percent (5%) equity interest in theorganization or business.     (g) Notwithstanding the foregoing provisions of this Section, the Company has soleand absolute discretion not to require Termination, Rescission and/or Recapture, and itsdetermination not to require Termination, Rescission and/or Recapture with respect to anyparticular act by a particular Participant or Award shall not in any way reduce or eliminate theCompany’s authority to require Termination, Rescission and/or Recapture with respect to any otheract or Participant or Award. Nothing in this Section shall be construed to impose obligations onthe Participant to refrain from engaging in lawful competition with the Company after thetermination of employment
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that does not violate subsections (b) or (c) of this Section, other thanany obligations that are part of any separate agreement between the Company and the Participant orthat arise under applicable law.     (h) All administrative and discretionary authority given to the Company under thisSection shall be exercised by the most senior human resources executive of the Company or suchother person or committee (including without limitation the Committee) as the Committee maydesignate from time to time.     (i) Notwithstanding any provision of this Section, if any provision of this Sectionis determined to be unenforceable or invalid under any applicable law, such provision will beapplied to the maximum extent permitted by applicable law, and shall automatically be deemedamended in a manner consistent with its objectives to the extent necessary to conform to anylimitations required under applicable law. Furthermore, if any provision of this Section isillegal under any applicable law, such provision shall be null and void to the extent necessary tocomply with applicable law.     Notwithstanding the foregoing, but subject to any contrary terms set forth in any AwardAgreement, this Section shall not be applicable: (i) to any Participant who is not, on the AwardDate, an Employee of the Company or its Affiliates; and (ii) to any Participant from and after hisor her termination of Continuous Service after a Change in Control.
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**Versar, Inc.****2005 Stock Incentive Plan** **Appendix A: Definitions** As used in the Plan, the following definitions shall apply:     **“Affiliate”**means, with respect to any Person (as defined below), any other Person thatdirectly or indirectly controls or is controlled by or under common control with such Person. Forthe purposes of this definition, “control,” when used with respect to any Person, means thepossession, direct or indirect, of the power to direct or cause the direction of the management andpolicies of such Person or the power to elect directors, whether through the ownership of votingsecurities, by contract or otherwise; and the terms “affiliated,” “controlling” and “controlled”have meanings correlative to the foregoing.     **“Applicable Law”**means the legal requirements relating to the administration of optionsand share-based plans under applicable U.S. federal and state laws, the Code, any applicable stockexchange or automated quotation system (including the American Stock Exchange) rules orregulations, and the applicable laws of any other country or jurisdiction where Awards are granted,as such laws, rules, regulations and requirements shall be in place from time to time.     **“Award”**means any award made pursuant to the Plan, including awards made in the form ofan Option, an SAR, a Restricted Share, a Restricted Share Unit, a Deferred Share Unit and aPerformance Award, or any combination thereof, whether alternative or cumulative, authorized by andgranted under this Plan.     **“Award Agreement”**means any written document setting forth the terms of an Award thathas been authorized by the Committee. The Committee shall determine the form or forms of documentsto be used, and may change them from time to time for any reason.     **“Board”**means the Board of Directors of the Company.     **“Cause”**for termination of a Participant’s Continuous Service will exist if theParticipant is terminated from employment or other service with the Company or an Affiliate for anyof the following reasons: (i) the Participant’s willful failure to substantially perform his or herduties and responsibilities to the Company or deliberate violation of a material Company policy;(ii) the Participant’s commission of any material act or acts of fraud, embezzlement, dishonesty,or other willful misconduct; (iii) the Participant’s material unauthorized use or disclosure of anyproprietary information or trade secrets of the Company or any other party to whom the Participantowes an obligation of nondisclosure as a result of his or her relationship with the Company; or(iv) Participant’s willful and material breach of any of his or her obligations under any writtenagreement or covenant with the Company.     The Committee shall in its discretion determine whether or not a Participant is beingterminated for Cause. The Committee’s determination shall, unless arbitrary and capricious, befinal and binding on the Participant, the Company, and all other affected persons. The foregoingdefinition does not in any way limit the Company’s ability to terminate a Participant’s employmentor consulting relationship at any time, and the term “Company” will be interpreted herein toinclude any Affiliate or successor thereto, if appropriate.
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     **“Change in Control”**means any of the following:     (j) The acquisition in one or more transactions by any “Person” (as the term personis used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended(the “1934 Act”)), of “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated underthe 1934 Act) of forty percent (40%) or more of the combined voting power of the Company’s thenoutstanding voting securities (the “Voting Securities”), provided, however, that for purposes ofthis definition, Voting Securities acquired directly from the Company by any Person shall beexcluded from the determination of such Person’s Beneficial Ownership of Voting Securities (butsuch Voting Securities shall be included in the calculation of the total number of VotingSecurities then outstanding); or     (k) The individuals who are members of the Incumbent Board, cease for any reason toconstitute at least two-thirds of the Board; or     (l) Approval by the stockholders of the Company of (i) a merger or consolidationinvolving the Company if the stockholders of the Company immediately before such merger orconsolidation do not own, directly or indirectly, immediately following such merger orconsolidation, more than sixty percent (60%) of the combined voting power of the outstanding votingsecurities of the corporation resulting from such merger or consolidation in substantially the sameproportion as their ownership of the Voting Securities immediately before such merger orconsolidation, or (ii) a complete liquidation or dissolution of the Company or an agreement for thesale or other disposition of all or subsequently all of the assets of the Company.     Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely becauseforty percent (40%) or more of the then outstanding Voting Securities is acquired by (i) a trusteeor other fiduciary holding securities under one or more employee benefit plans maintained by theCompany or any of its Affiliates, or (ii) any corporation, which, immediately prior to suchacquisition, is owned directly or indirectly by the stockholders of the Company in the sameproportion as their ownership of stock in the Company immediately prior to such acquisition.     Moreover, notwithstanding the foregoing, a Change in Control shall not be deemed to occursolely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than thepermitted amount of the outstanding Voting Securities as a result of the acquisition of VotingSecurities by the Company which, by reducing the number of Voting Securities outstanding, increasesthe proportional number of shares Beneficially Owned by the Subject Person, provided, that if aChange in Control would occur (but for the operation of this sentence) as a result of theacquisition of Voting Securities by the Company, and after such share acquisition by the Company,the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increasesthe percentage of the then outstanding Voting Security Beneficially Owned by the Subject Person,then a Change in Control shall occur.     **“Code”**means the U.S. Internal Revenue Code of 1986, as amended.     **“Committee”**means the Compensation Committee or one or more other committees orsubcommittees comprised of at least three directors of the Board appointed by the Board toadminister the Plan in accordance with Section 4 above. With respect to any decision involving anAward intended to satisfy the requirements of Section 162(m) of the Code, the Committee shallconsist of Directors of the Company who are “outside directors” within the meaning of Section162(m) of the Code. With respect to any decision relating to a Reporting Person, the Committeeshall consist of Directors who are non-employee directors within the meaning of Rule 16b-3.     **“Company”**means Versar, Inc., a Delaware corporation; provided, however, that in theevent the Company reincorporates to another jurisdiction, all references to the term “Company”shall refer to the Company in such new jurisdiction.     **“Consultant”**means any person, including an advisor, who is engaged by the Company orany Affiliate to render services and is compensated for such services.
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     **“Continuous Service”**means the absence of any interruption or termination of service asan Employee, Director, or Consultant. Continuous Service shall not be considered interrupted inthe case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by theCommittee, provided that such leave is for a period of not more than 90 days, unless reemploymentupon the expiration of such leave is guaranteed by contract or statute, or unless providedotherwise pursuant to Company policy adopted from time to time; (iv) changes in status fromDirector to advisory director or emeritus status; or (iv) in the case of transfers betweenlocations of the Company or between the Company, its Affiliates or their respective successors.Changes in status between service as an Employee, Director, and a Consultant will not constitute aninterruption of Continuous Service.     **“Deferred Share Units”**mean Awards pursuant to Section 9 of the Plan.     **“Director”**means a member of the Board, or a member of the board of directors of anAffiliate.     **“Disabled”**means a condition under which a Participant —     (a) is unable to engage in any substantial gainful activity by reason of any medicallydeterminable physical or mental impairment which can be expected to result in death or can beexpected to last for a continuous period of not less than 12 months, or     (b) is, by reason of any medically determinable physical or mental impairment which can beexpected to result in death or can be expected to last for a continuous period of not less than 12months, received income replacement benefits for a period of not less than 3 months under anaccident or health plan covering employees of the Company.     **“Eligible Person”**means any Consultant, Director or Employee and includes non-Employeesto whom an offer of employment has been extended.     **“Employee”**means any person whom the Company or any Affiliate classifies as an employee(including an officer) for employment tax purposes. The payment by the Company of a director’s feeto a Director shall not be sufficient to constitute “employment” of such Director by the Company.     **“Exchange Act”**means the Securities Exchange Act of 1934, as amended.     **“Fair Market Value”**means, as of any date (the “Determination Date”) means: (i) theclosing price of a Share on the American Stock Exchange (the “Exchange”), on the DeterminationDate, or, if shares were not traded on the Determination Date, then on the nearest precedingtrading day during which a sale occurred; or (ii) if such stock is not traded on the Exchange butis quoted on NASDAQ or a successor quotation system, (A) the last sales price (if the stock is thenlisted as a National Market Issue under The Nasdaq National Market System) or (B) the mean betweenthe closing representative bid and asked prices (in all other cases) for the stock on theDetermination Date as reported by NASDAQ or such successor quotation system; or (iii) if such stockis not traded on the Exchange or quoted on NASDAQ but is otherwise traded in the over-the-counter,the mean between the representative bid and asked prices on the Determination Date; or (iv) ifsubsections (i)-(iii) do not apply, the fair market value established in good faith by the Board.     **“Grant Date”**has the meaning set forth in Section 14 of the Plan.     **“Incentive Share Option or ISO”**hereinafter means an Option intended to qualify as anincentive stock option within the meaning of Section 422 of the Code, as designated in theapplicable Award Agreement.     **“Incumbent Board”**shall mean the individuals who as of September 7, 2005 are members ofthe Board and any individual becoming a director subsequent to September 7, 2005 whose election, ornomination for election by the Company’s stockholders, was approved by a vote of at leasttwo-thirds of the directors then comprising the Incumbent Board; provided, however, that anyindividual who is not a member of the Incumbent Board at the time he or she becomes a member of theBoard shall become a member of the Incumbent Board upon the completion of
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two full years as amember of the Board; provided, further, however, that notwithstanding the foregoing, no individualshall be considered a member of the Incumbent Board if such individual initially assumed office (i)as a result of either an actual or threatened “election contest” (within the meaning of Rule 14a-11promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consentsby or on behalf of a Person other than the Board (a “Proxy Contest”), or (ii) with the approval ofthe other Board members, but by reason of any agreement intended to avoid or settle a ProxyContest.     **“Involuntary Termination”**means termination of a Participant’s Continuous Service underthe following circumstances occurring on or after a Change in Control: (i) termination withoutCause by the Company or an Affiliate or successor thereto, as appropriate; or (ii) voluntarytermination by the Participant within 60 days following (A) a material reduction in theParticipant’s job responsibilities, provided that neither a mere change in title alone norreassignment to a substantially similar position shall constitute a material reduction in jobresponsibilities; (B) an involuntary relocation of the Participant’s work site to a facility orlocation more than 50 miles from the Participant’s principal work site at the time of the Change inControl; or (C) a material reduction in Participant’s total compensation other than as part of anreduction by the same percentage amount in the compensation of all other similarly-situatedEmployees, Directors or Consultants.     **“Non-ISO”**means an Option not intended to qualify as an ISO, as designated in theapplicable Award Agreement.     **“Option”**means any stock option granted pursuant to Section 6 of the Plan.     **“Participant”**means any holder of one or more Awards, or the Shares issuable or issuedupon exercise of such Awards, under the Plan.     “**Performance Awards**” mean Performance Units and Performance Compensation Awards grantedpursuant to Section 10.     **“Performance Compensation Awards”**mean Awards granted pursuant to Section 10(b) of thePlan.     **“Performance Unit”**means Awards granted pursuant to Section 10(a) of the Plan which maybe paid in cash, in Shares, or such combination of cash and Shares as the Committee in its solediscretion shall determine.     **“Person”**means any natural person, association, trust, business trust, cooperative,corporation, general partnership, joint venture, joint-stock company, limited partnership, limitedliability company, real estate investment trust, regulatory body, governmental agency orinstrumentality, unincorporated organization or organizational entity.     **“Plan”**means this Versar, Inc. 2005 Stock Incentive Plan.     **“Reporting Person”**means an officer, Director, or greater than ten percent stockholderof the Company within the meaning of Rule 16a-2 under the Exchange Act, who is required to filereports pursuant to Rule 16a-3 under the Exchange Act.     **“Restricted Shares”**mean Shares subject to restrictions imposed pursuant to Section 8of the Plan.     **“Restricted Share Units”**mean Awards pursuant to Section 8 of the Plan.     **“Rule 16b-3”**means Rule 16b-3 promulgated under the Exchange Act, as amended from timeto time, or any successor provision.     **“SAR” or “Share Appreciation Right”**means Awards granted pursuant to Section 7 of thePlan.     **“Share”**means a share of common stock of the Company, as adjusted in accordance withSection 13 of the Plan.
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     **“Ten Percent Holder”**means a person who owns stock representing more than ten percent(10%) of the combined voting power of all classes of stock of the Company or any Affiliate.
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