Document:

Exhibit 10.13

 

STANLEY, INC.

2006 Omnibus Incentive Compensation Plan

 

SECTION 1. 
Purpose.  The purpose of
this Stanley, Inc. 2006 Omnibus Incentive Compensation Plan is to promote
the interests of Stanley, Inc., a Delaware corporation (the “Company”), and its
stockholders by (a) attracting and retaining exceptional directors,
officers, employees and consultants (including prospective directors, officers,
employees and consultants) of the Company and its Affiliates (as defined below)
and (b) enabling such individuals to participate in the long-term growth
and financial success of the Company.

 

SECTION
2.  Definitions.  As used herein, the following terms shall
have the meanings set forth below:

 

“Affiliate” means (a) any entity that,
directly or indirectly, is controlled by, controls or is under common control
with, the Company and (b) any entity in which the Company has a
significant equity interest, in either case as determined by the Committee.

 

“Award” means any award that is permitted
under Section 6 and granted under the Plan.

 

“Award Agreement” means any written agreement,
contract or other instrument or document evidencing any Award, which may, but
need not, require execution or acknowledgment by a Participant.

 

“Board” means the Board of Directors of the
Company.

 

“Cash Incentive Award” shall have the meaning
specified in Section 6(f).

 

“Change of Control” shall (a) have the
meaning set forth in an Award Agreement or (b) if there is no definition
set forth in an Award Agreement, mean the occurrence of any of the following
events, not including any events occurring prior to or in connection with the
initial public offering of Shares (including the occurrence of such initial
public offering):

 

(i)  during
any period of 24 consecutive months, individuals who were directors of the
Company at the beginning of such period (the “Incumbent Directors”) cease at
any time during such period for any reason to constitute a majority of the
Board; provided that any individual becoming a director subsequent to the beginning
of such period whose election, or nomination for election, by the Company’s
stockholders was approved by a vote of at least a majority of the Incumbent
Directors shall be deemed to be an Incumbent Director, except that any such
individual whose initial assumption of office occurs as a result of an actual
or threatened proxy contest with respect to election or removal of directors or
other actual or threatened solicitation of proxies or consents by or on behalf
of any “person” (as such term is used in Section 13(d) of the Exchange Act)
(each, a “Person”), other than the management of the Company or the Board,
shall be deemed to not be an Incumbent Director;

 

 

(ii)  the
consummation of (A) a merger, consolidation, statutory share exchange or
similar form of corporate transaction involving (x) the Company or (y) any of
its subsidiaries, but in the case of this clause (y) only if Company Voting
Securities (as defined below) are issued or issuable in connection with such
transaction (each of the transactions referred to in this clause (A), a “Reorganization”)
or (B) a sale or other disposition of all or substantially all the assets of
the Company to a person that is not an Affiliate of the Company (a “Sale”), in
each case, if such Reorganization or Sale requires the approval of the Company’s
stockholders under the law of the Company’s jurisdiction of organization
(whether such approval is required for such Reorganization or Sale or for the
issuance of securities in such Reorganization or Sale), unless, immediately
following such Reorganization or Sale, (1) all or substantially all the persons
who were the “beneficial owners” (as such term is defined in Rule 13d-3 under
the Exchange Act) of the securities eligible to vote for the election of the
Board (“Company Voting Securities”) outstanding immediately prior to the
consummation of such Reorganization or Sale beneficially own, directly or
indirectly, more than 50% of the combined voting power of the then outstanding
voting securities of the corporation or other entity resulting from such
Reorganization or Sale (including a corporation or other entity that as a
result of such transaction directly or indirectly owns the Company or all or
substantially all the Company’s assets) (the “Continuing Company”) in substantially
the same proportions as their ownership, immediately prior to the consummation
of such Reorganization or Sale, of the outstanding Company Voting Securities
(excluding any outstanding voting securities of the Continuing Company that
such beneficial owners hold immediately following the consummation of such
Reorganization or Sale as a result of their ownership prior to such
consummation of voting securities of any corporation or other entity (other
than the Company) involved in or forming part of such Reorganization or Sale),
(2) no Person (excluding (x) any employee benefit plan (or related trust or
fiduciary) sponsored or maintained by the Company or its Affiliates and (y) the
Company and its Affiliates) beneficially owns, directly or indirectly, 20% or
more of the combined voting power of the outstanding voting securities of the
Continuing Company immediately following the consummation of such
Reorganization or Sale and (3) immediately following the consummation of such
Reorganization or Sale, at least a majority of the members of the board of
directors (or equivalent body) of the Continuing Company are Incumbent
Directors;

 

(iii)  the
stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company, unless such liquidation or dissolution is part of a
transaction or series of transactions described in paragraph (ii) above that
does not otherwise constitute a Change of Control; or

 

(iv)  any
Person or “group” (as used in Section 14(d)(2) of the Exchange Act) (excluding
(x) any employee benefit plan (or related trust or fiduciary) sponsored or
maintained by the Company or its Affiliates and (y) the Company and its Affiliates)
becomes the beneficial owner, directly or indirectly, of Company Voting
Securities representing 20% or more of the combined voting power of the then
outstanding Company Voting Securities; provided, however, that, for purposes of
this subparagraph (iv), no acquisition of Company Voting Securities (x)
directly from the

 

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Company or (y) by any employee benefit plan (or related trust or
fiduciary) sponsored or maintained by the Company or its Affiliates shall
constitute a Change of Control.

 

“Code” means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated thereunder.

 

“Committee” means the compensation committee
of the Board, or such other committee of the Board as may be designated by the
Board from time to time to administer the Plan.

 

“Exchange Act” means the Securities Exchange
Act of 1934, as amended, or any successor statute thereto.

 

“Exercise Price” means (a) in the case
of Options, the price specified in the applicable Award Agreement as the
price-per-Share at which Shares may be purchased pursuant to such Option or (b) in
the case of SARs, the price specified in the applicable Award Agreement as the
reference price-per-Share used to calculate the amount payable to the
Participant.

 

“Fair Market Value” means (a) with
respect to any property other than Shares, the fair market value of such
property determined by such methods or procedures as shall be established from
time to time by the Committee and (b) with respect to the Shares, as of
any date, (i) the mean between the high and low sales prices of the Shares (A) as
reported by the NYSE for such date or (B) if the Shares are listed on any
other national stock exchange, as reported on the stock exchange composite tape
for securities traded on such stock exchange for such date or, with respect to
each of clauses (A) and (B), if there were no sales on such date, on the
closest preceding date on which there were sales of Shares or (ii) in the
event there shall be no public market for the Shares on such date, the fair
market value of the Shares as determined in good faith by the Committee.

 

“Incentive Stock Option” means an option to
purchase Shares from the Company that (a) is granted under Section 6
and (b) is intended to qualify for special Federal income tax treatment
pursuant to Sections 421 and 422 of the Code, as now constituted or
subsequently amended, or pursuant to a successor provision of the Code, and
which is so designated in the applicable Award Agreement.

 

“Independent Director” means a member of the
Board who is neither (a) an employee of the Company nor (b) an
employee of any Affiliate, and who, at the time of acting, is a “Non-Employee
Director” under Rule 16b-3.

 

“IRS” means the Internal Revenue Service or
any successor thereto and includes the staff thereof.

 

“Nonqualified Stock Option” means an option to
purchase Shares from the Company that (a) is granted under Section 6
and (b) is not an Incentive Stock Option.

 

“NYSE” means the New York Stock Exchange or
any successor thereto.

 

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“Option” means an Incentive Stock Option or a
Nonqualified Stock Option or both, as the context requires.

 

“Participant” means any director, officer, employee
or consultant (including any prospective director, officer, employee or
consultant) of the Company or its Affiliates who is eligible for an Award under
Section 5 and who is selected by the Committee to receive an Award under
the Plan or who receives a Substitute Award pursuant to Section 4(c).

 

“Performance Compensation Award” means any
Award designated by the Committee as a Performance Compensation Award pursuant
to Section 6(i).

 

“Performance
Criteria” means the criterion or criteria that the Committee shall select for
purposes of establishing a Performance Goal for a Performance Period with
respect to any Performance Compensation Award, Performance Unit or Cash
Incentive Award under the Plan.

 

“Performance
Formula” means, for a Performance Period, the one or more objective formulas
applied against the relevant Performance Goal to determine, with regard to the
Performance Compensation Award, Performance Unit or Cash Incentive Award of a
particular Participant, whether all, a portion or none of the Award has been
earned for the Performance Period.

 

“Performance Goal” means, for a Performance
Period, the one or more goals established by the Committee for the Performance
Period based upon the Performance Criteria.

 

“Performance Period” means the one or more
periods of time as the Committee may select over which the attainment of one or
more Performance Goals will be measured for the purpose of determining a
Participant’s right to and the payment of a Performance Compensation Award,
Performance Unit or Cash Incentive Award.

 

“Performance Unit” means an Award under Section
6(e) that has a value set by the Committee (or that is determined by reference
to a valuation formula specified by the Committee or the Fair Market Value of
Shares), which value may be paid to the Participant by delivery of such
property as the Committee shall determine, including without limitation, cash or
Shares, or any combination thereof, upon achievement of such Performance Goals
during the relevant Performance Period as the Committee shall establish at the
time of such Award or thereafter.

 

“Plan” means this Stanley, Inc. 2006 Omnibus
Incentive Compensation Plan, as in effect from time to time.

 

“Restricted Share” means a Share delivered
under the Plan that is subject to certain transfer restrictions, forfeiture
provisions and/or other terms and conditions specified herein and in the
applicable Award Agreement.

 

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“RSU” means a restricted stock unit Award that
is designated as such in the applicable Award Agreement and that represents an
unfunded and unsecured promise to deliver Shares, cash, other securities, other
Awards or other property in accordance with the terms of the applicable Award
Agreement.

 

“Rule 16b-3” means Rule 16b-3 as
promulgated and interpreted by the SEC under the Exchange Act or any successor
rule or regulation thereto as in effect from time to time.

 

“SAR” means a stock appreciation right Award
that represents an unfunded and unsecured promise to deliver Shares, cash,
other securities, other Awards or other property equal in value to the excess,
if any, of the Fair Market Value per Share over the Exercise Price per Share of
the SAR, subject to the terms of the applicable Award Agreement.

 

“SEC” means the Securities and Exchange
Commission or any successor thereto and shall include the staff thereof.

 

“Shares” means shares of common stock of the
Company, $0.01 par value, or such other securities of the Company (a) into
which such shares shall be changed by reason of a recapitalization, merger,
consolidation, split-up, combination, exchange of shares or other similar
transaction or (b) as may be determined by the Committee pursuant to
Section 4(b).

 

“Subsidiary” means any entity in which the
Company, directly or indirectly, possesses 50% or more of the total combined
voting power of all classes of its stock.

 

“Substitute Awards” shall have the meaning
specified in Section 4(c).

 

SECTION 3. 
Administration.  (a)  Composition of Committee.  The Plan shall be administered by the
Committee, which shall be composed of one or more directors, as determined by
the Board; provided that after the date of the consummation of the initial
public offering of Shares, to the extent necessary to comply with the rules of
the NYSE and Rule 16b-3 and to satisfy any applicable requirements of Section
162(m) of the Code and any other applicable laws or rules, the Committee shall
be composed of two or more directors, all of whom shall be Independent
Directors and all of whom shall (i) qualify as “outside directors” under
Section 162(m) of the Code and (ii) meet the independence requirements of the
NYSE.

 

(b)  Authority
of Committee.  Subject to the terms
of the Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have
sole and plenary authority to administer the Plan, including, but not limited
to, the authority to (i) designate Participants, (ii) determine the
type or types of Awards to be granted to a Participant, (iii) determine
the number of Shares to be covered by, or with respect to which payments,
rights or other matters are to be calculated in connection with, Awards, (iv) determine
the terms and conditions of any Awards, (v) determine the vesting
schedules of Awards and,

 

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if certain performance criteria must be attained in order for an Award
to vest or be settled or paid, establish such performance criteria and certify
whether, and to what extent, such performance criteria have been attained, (vi)
determine whether, to what extent and under what circumstances Awards may be
settled or exercised in cash, Shares, other securities, other Awards or other
property, or canceled, forfeited or suspended and the method or methods by
which Awards may be settled, exercised, canceled, forfeited or suspended, (vii) determine
whether, to what extent and under what circumstances cash, Shares, other
securities, other Awards, other property and other amounts payable with respect
to an Award shall be deferred either automatically or at the election of the
holder thereof or of the Committee, (viii) interpret, administer,
reconcile any inconsistency in, correct any default in and supply any omission
in, the Plan and any instrument or agreement relating to, or Award made under,
the Plan, (ix) establish, amend, suspend or waive such rules and regulations
and appoint such agents as it shall deem appropriate for the proper
administration of the Plan, (x) accelerate the vesting or exercisability of, payment
for or lapse of restrictions on, Awards, (xi) amend an outstanding Award or
grant a replacement Award for an Award previously granted under the Plan if, in
its sole discretion, the Committee determines that (A) the tax consequences of
such Award to the Company or the Participant differ from those consequences
that were expected to occur on the date the Award was granted or (B) clarifications or interpretations
of, or changes to, tax law or regulations permit Awards to be granted that have
more favorable tax consequences than initially anticipated and (xii) make
any other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan.

 

(c)  Committee
Decisions.  Unless otherwise
expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any Award
shall be within the sole and plenary discretion of the Committee, may be made
at any time and shall be final, conclusive and binding upon all persons,
including the Company, any Affiliate, any Participant, any holder or beneficiary
of any Award and any stockholder.

 

(d)  Indemnification.  No member of the Board, the Committee or any
employee of the Company (each such person, a “Covered Person”) shall be liable
for any action taken or omitted to be taken or any determination made in good
faith with respect to the Plan or any Award hereunder.  Each Covered Person shall be indemnified and
held harmless by the Company against and from (i) any loss, cost,
liability or expense (including attorneys’ fees) that may be imposed upon or
incurred by such Covered Person in connection with or resulting from any
action, suit or proceeding to which such Covered Person may be a party or in
which such Covered Person may be involved by reason of any action taken or
omitted to be taken under the Plan or any Award Agreement and (ii) any and
all amounts paid by such Covered Person, with the Company’s approval, in
settlement thereof, or paid by such Covered Person in satisfaction of any
judgment in any such action, suit or proceeding against such Covered Person; provided
that the Company shall have the right, at its own expense, to assume and defend
any such action, suit or proceeding, and, once the Company gives notice of its
intent to assume the defense, the Company shall have sole control over such
defense with counsel of the Company’s choice. 
The foregoing right of indemnification shall not be available to a
Covered Person to the extent that a court of competent jurisdiction in a final
judgment or

 

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other final adjudication, in either case not subject to further appeal,
determines that the acts or omissions of such Covered Person giving rise to the
indemnification claim resulted from such Covered Person’s bad faith, fraud or
willful criminal act or omission or that such right of indemnification is
otherwise prohibited by law or by the Company’s Certificate of Incorporation or
Bylaws.  The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which Covered Persons may be entitled under the Company’s Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any other power
that the Company may have to indemnify such persons or hold them harmless.

 

(e)  Delegation
of Authority to Senior Officers.  The
Committee may delegate, on such terms and conditions as it determines in its
sole and plenary discretion, to one or more senior officers of the Company the
authority to make grants of Awards to officers (other than executive officers),
employees and consultants of the Company and its Affiliates (including any
prospective officer, employee or consultant) and all necessary and appropriate
decisions and determinations with respect thereto.

 

(f)  Awards
to Independent Directors.  Notwithstanding
anything to the contrary contained herein, the Board may, in its sole and
plenary discretion, at any time and from time to time, grant Awards to
Independent Directors or administer the Plan with respect to such Awards.  In any such case, the Board shall have all
the authority and responsibility granted to the Committee herein.

 

SECTION 4. 
Shares Available for Awards; Other Limits.  (a)  Shares
Available.  Subject to adjustment as
provided in Section 4(b), the aggregate number of Shares that may be
delivered pursuant to Awards granted under the Plan shall be 4,000,000, of
which the maximum number of Shares that may be delivered pursuant to Incentive
Stock Options granted under the Plan shall be 2,300,000 and the maximum number
of Shares that may be delivered pursuant to Awards of Restricted Shares under
the Plan shall be 800,000.  If, after the
effective date of the Plan, any Award granted under the Plan is forfeited, or
otherwise expires, terminates or is canceled without the delivery of Shares,
then the Shares covered by such forfeited, expired, terminated or canceled
Award shall again become available to be delivered pursuant to Awards under the
Plan.  If Shares issued upon exercise,
vesting or settlement of an Award, or Shares owned by a Participant (which are
not subject to any pledge or other security interest), are surrendered or tendered
to the Company in payment of the Exercise Price of an Award or any taxes
required to be withheld in respect of an Award, in each case, in accordance
with the terms and conditions of the Plan and any applicable Award Agreement,
such surrendered or tendered Shares shall again become available to be
delivered pursuant to Awards under the Plan; provided, however, that in no
event shall such Shares increase the number of Shares that may be delivered
pursuant to Incentive Stock Options granted under the Plan.  Subject to adjustment as provided in
Section 4(b), (i) the maximum aggregate number of Shares with respect
to which Awards may be granted to any Participant in any fiscal year of the
Company shall be 100,000,

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and (ii) the maximum aggregate amount of cash and other property
(valued at its Fair Market Value) other than Shares that may be paid or
delivered pursuant to Awards under the Plan to any Participant in any fiscal
year of the Company shall be $1,000,000.

 

(b)  Adjustments
for Changes in Capitalization and Similar Events.  In the event that the Committee determines
that any dividend or other distribution (whether in the form of cash, Shares,
other securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee in
its discretion to be appropriate or desirable, then the Committee may (i) in
such manner as it may deem equitable or desirable, adjust any or all of (A) the
number of Shares or other securities of the Company (or number and kind of
other securities or property) with respect to which Awards may be granted,
including (1) the aggregate number of Shares that may be delivered
pursuant to Awards granted under the Plan, as provided in Section 4(a) and
(2) the maximum number of Shares or other securities of the Company (or
number and kind of other securities or property) with respect to which Awards
may be granted to any Participant in any fiscal year of the Company and (B) the
terms of any outstanding Award, including (1) the number of Shares or
other securities of the Company (or number and kind of other securities or
property) subject to outstanding Awards or to which outstanding Awards relate and
(2) the Exercise Price with respect to any Award, (ii) if deemed appropriate
or desirable by the Committee, make provision for a cash payment to the holder
of an outstanding Award in consideration for the cancelation of such Award,
including, in the case of an outstanding Option or SAR, a cash payment to the
holder of such Option or SAR in consideration for the cancelation of such Option
or SAR in an amount equal to the excess, if any, of the Fair Market Value (as
of a date specified by the Committee) of the Shares subject to such Option or
SAR over the aggregate Exercise Price of such Option or SAR and (iii) if deemed
appropriate or desirable by the Committee, cancel and terminate any Option or
SAR having a per Share Exercise Price equal to, or in excess of, the Fair
Market Value of a Share subject to such Option or SAR without any payment or
consideration therefor.

 

(c)  Substitute
Awards.  Awards may, in the discretion
of the Committee, be granted under the Plan in assumption of, or in
substitution for, outstanding awards previously granted by the Company or any
of its Affiliates or a company acquired by the Company or any of its Affiliates
or with which the Company or any of its Affiliates combines (“Substitute Awards”).  The number of Shares underlying any
Substitute Awards shall be counted against the aggregate number of Shares
available for Awards under the Plan; provided, however, that Substitute Awards
issued in connection with the assumption of, or in substitution for,
outstanding awards previously granted by an entity that is acquired by the
Company or any of its Affiliates or with which the Company or any of its
Affiliates combines shall not be counted against the aggregate number of Shares
available for Awards under the Plan; provided further, however, that Substitute

 

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Awards issued in connection with the assumption of, or in substitution
for, outstanding stock options intended to qualify for special tax treatment
under Sections 421 and 422 of the Code that were previously granted by an
entity that is acquired by the Company or any of its Affiliates or with which
the Company or any of its Affiliates combines shall be counted against the
aggregate number of Shares available for Incentive Stock Options under the Plan.

 

(d)  Sources
of Shares Deliverable Under Awards. 
Any Shares delivered pursuant to an Award may consist, in whole or in
part, of authorized and unissued Shares or of treasury Shares.

 

SECTION 5. 
Eligibility.  Any director,
officer, employee or consultant (including any prospective director, officer, employee
or consultant) of the Company or any of its Affiliates shall be eligible to be
designated a Participant.

 

SECTION 6. 
Awards.  (a)  Types of Awards.  Awards may be made under the Plan in the form
of (i) Options, (ii) SARs, (iii) Restricted Shares, (iv) RSUs, (v) Performance
Units, (vi) Cash Incentive Awards and (viii) other equity-based or equity-related
Awards that the Committee determines are consistent with the purpose of the
Plan and the interests of the Company. 
Awards may be granted in tandem with other Awards.  No Incentive Stock Option (other than an
Incentive Stock Option that may be assumed or issued by the Company in
connection with a transaction to which Section 424(a) of the Code applies)
may be granted to a person who is ineligible to receive an Incentive Stock
Option under the Code.

 

(b)  Options.  (i)  Grant.  Subject to the provisions of the Plan, the
Committee shall have sole and plenary authority to determine the Participants
to whom Options shall be granted, the number of Shares to be covered by each
Option, whether the Option will be an Incentive Stock Option or a Nonqualified
Stock Option and the conditions and limitations applicable to the vesting and exercise
of the Option.  In the case of Incentive
Stock Options, the terms and conditions of such grants shall be subject to and
comply with such rules as may be prescribed by Section 422 of the Code and
any regulations related thereto, as may be amended from time to time.  All Options granted under the Plan shall be
Nonqualified Stock Options unless the applicable Award Agreement expressly
states that the Option is intended to be an Incentive Stock Option.  If an Option is intended to be an Incentive
Stock Option, and if for any reason such Option (or any portion thereof) shall
not qualify as an Incentive Stock Option, then, to the extent of such
nonqualification, such Option (or portion thereof) shall be regarded as a
Nonqualified Stock Option appropriately granted under the Plan; provided that
such Option (or portion thereof) otherwise complies with the Plan’s
requirements relating to Nonqualified Stock Options.

 

(ii)  Exercise
Price.  Except as otherwise
established by the Committee at the time an Option is granted and set forth in
the applicable Award Agreement, the Exercise Price of each Share covered by an
Option shall be not less than 100% of the Fair Market Value of such Share
(determined as of the date the Option is granted); provided, however, that (A) except
as otherwise established by the Committee at the time an Option

 

9

 

is granted and set forth in the applicable Award Agreement, the Exercise
Price of each Share covered by an Option that is granted effective as of the
Company’s initial public offering of Shares shall be the initial public
offering price per Share and (B) in the case of an Incentive Stock Option granted
to an employee who, at the time of the grant of such Option, owns stock
representing more than 10% of the voting power of all classes of stock of the
Company or any Affiliate, the per Share Exercise Price shall be no less than
110% of the Fair Market Value per Share on the date of the grant.  Options are intended to qualify as “qualified
performance-based compensation” under Section 162(m) of the Code.

 

(iii)  Vesting
and Exercise.  Each Option shall be
vested and exercisable at such times, in such manner and subject to such terms
and conditions as the Committee may, in its sole and plenary discretion,
specify in the applicable Award Agreement or thereafter.  Except as otherwise specified by the
Committee in the applicable Award Agreement, an Option may only be exercised to
the extent that it has already vested at the time of exercise.  Except as otherwise specified by the
Committee in the Award Agreement, Options shall become vested and exercisable
with respect to one-third of the Shares subject to such Options on each of the
first three anniversaries of the date of grant. 
An Option shall be deemed to be exercised when written or electronic
notice of such exercise has been given to the Company in accordance with the
terms of the Award by the person entitled to exercise the Award and full
payment pursuant to Section 6(b)(iv) for the Shares with respect to which the
Award is exercised has been received by the Company.  Exercise of an Option in any manner shall
result in a decrease in the number of Shares that thereafter may be available
for sale under the Option and, except as expressly set forth in Section 4(c),
in the number of Shares that may be available for purposes of the Plan, by the
number of Shares as to which the Option is exercised.  The Committee may impose such conditions with
respect to the exercise of Options, including, without limitation, any relating
to the application of Federal or state securities laws, as it may deem
necessary or advisable.

 

(iv)  Payment.  (A)  No
Shares shall be delivered pursuant to any exercise of an Option until payment
in full of the aggregate Exercise Price therefor is received by the Company,
and the Participant has paid to the Company an amount equal to any Federal,
state, local and foreign income and employment taxes required to be withheld.  Such payments may be made in cash (or its
equivalent) or, in the Committee’s sole and plenary discretion, (1) by
exchanging Shares owned by the Participant (which are not the subject of any pledge
or other security interest) or (2) if there shall be a public market for
the Shares at such time, subject to such rules as may be established by the
Committee, through delivery of irrevocable instructions to a broker to sell the
Shares otherwise deliverable upon the exercise of the Option and to deliver
promptly to the Company an amount equal to the aggregate Exercise Price, or by
a combination of the foregoing; provided that the combined value of all cash
and cash equivalents and the Fair Market Value of any such Shares so tendered
to the Company as of the date of such tender is at least equal to such
aggregate Exercise Price and the amount of any Federal, state, local or foreign
income or employment taxes required to be withheld.

 

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(B)  Wherever
in the Plan or any Award Agreement a Participant is permitted to pay the
Exercise Price of an Option or taxes relating to the exercise of an Option by
delivering Shares, the Participant may, subject to procedures satisfactory to
the Committee, satisfy such delivery requirement by presenting proof of
beneficial ownership of such Shares, in which case the Company shall treat the
Option as exercised without further payment and shall withhold such number of
Shares from the Shares acquired by the exercise of the Option.

 

(v)  Expiration.  Except as otherwise set forth in the
applicable Award Agreement, each Option shall expire immediately, without any
payment, upon the earlier of (A) the tenth anniversary of the date the
Option is granted and (B) either (x) 90 days after the date the Participant who
is holding the Option ceases to be a director, officer, employee or consultant
of the Company or one of its Affiliates for any reason other than the
Participant’s death or (y) six months after the date the Participant who is
holding the Option ceases to be a director, officer, employee or consultant of
the Company or one of its Affiliates by reason of the Participant’s death.  In no event may an Option be exercisable
after the tenth anniversary of the date the Option is granted.

 

(c)  SARs.  (i)  Grant.  Subject to the provisions of the Plan, the
Committee shall have sole and plenary authority to determine the Participants
to whom SARs shall be granted, the number of Shares to be covered by each SAR,
the Exercise Price thereof and the conditions and limitations applicable to the
exercise thereof.  SARs may be granted in
tandem with another Award, in addition to another Award or freestanding and
unrelated to another Award.  SARs granted
in tandem with, or in addition to, an Award may be granted either at the same
time as the Award or at a later time.

 

(ii)  Exercise
Price.  Except as otherwise
established by the Committee at the time a SAR is granted and set forth in the
applicable Award Agreement, the Exercise Price of each Share covered by a SAR
shall be not less than 100% of the Fair Market Value of such Share (determined
as of the date the SAR is granted).  SARs
are intended to qualify as “qualified performance-based compensation” under
Section 162(m) of the Code.

 

(iii)  Exercise.  A SAR shall entitle the Participant to
receive an amount equal to the excess, if any, of the Fair Market Value of a
Share on the date of exercise of the SAR over the Exercise Price thereof.  The Committee shall determine, in its sole and
plenary discretion, whether a SAR shall be settled in cash, Shares, other
securities, other Awards, other property or a combination of any of the
foregoing.

 

(iv)  Other
Terms and Conditions.  Subject to the
terms of the Plan and any applicable Award Agreement, the Committee shall
determine, at or after the grant of a SAR, the vesting criteria, term, methods
of exercise, methods and form of settlement and any other terms and conditions
of any SAR.  Any such determination by
the Committee may be changed by the Committee from time to time and may govern
the exercise of SARs granted or exercised thereafter.  The Committee may impose such

 

11

 

conditions or restrictions on the exercise of any SAR as it shall deem appropriate
or desirable.

 

(d)  Restricted
Shares and RSUs.  (i)  Grant. 
Subject to the provisions of the Plan, the Committee shall have sole and
plenary authority to determine the Participants to whom Restricted Shares and
RSUs shall be granted, the number of Restricted Shares and RSUs to be granted
to each Participant, the duration of the period during which, and the
conditions, if any, under which, the Restricted Shares and RSUs may vest or may
be forfeited to the Company and the other terms and conditions of such Awards.

 

(ii)  Transfer
Restrictions.  Restricted Shares and
RSUs may not be sold, assigned, transferred, pledged or otherwise encumbered
except as provided in the Plan or as may be provided in the applicable Award
Agreement; provided, however, that the Committee may in its discretion
determine that Restricted Shares and RSUs may be transferred by the Participant.  Certificates issued in respect of Restricted
Shares shall be registered in the name of the Participant and deposited by such
Participant, together with a stock power endorsed in blank, with the Company or
such other custodian as may be designated by the Committee or the Company, and
shall be held by the Company or other custodian, as applicable, until such time
as the restrictions applicable to such Restricted Shares lapse.  Upon the lapse of the restrictions applicable
to such Restricted Shares, the Company or other custodian, as applicable, shall
deliver such certificates to the Participant or the Participant’s legal
representative.

 

(iii)  Payment/Lapse
of Restrictions.  Each RSU shall be
granted with respect to one Share or shall have a value equal to the Fair
Market Value of one Share.  RSUs shall be
paid in cash, Shares, other securities, other Awards or other property, as
determined in the sole and plenary discretion of the Committee, upon the lapse
of restrictions applicable thereto, or otherwise in accordance with the
applicable Award Agreement.  If a
Restricted Share or an RSU is intended to qualify as “qualified performance-based
compensation” under Section 162(m) of the Code, all requirements set forth in
Section 6(i) must be satisfied in order for the restrictions applicable thereto
to lapse.

 

(e)  Performance
Units.  (i)  Grant. 
Subject to the provisions of the Plan, the Committee shall have sole and
plenary authority to determine the Participants to whom Performance Units shall
be granted and the terms and conditions thereof.

 

(ii)  Value of Performance Units.  Each Performance Unit shall have an initial
value that is established by the Committee at the time of grant.  The Committee shall set Performance Goals in
its discretion which, depending on the extent to which they are met during a
Performance Period, will determine the number and value of Performance Units
that will be paid out to the Participant.

 

(iii)  Earning
of Performance Units.  Subject to the
provisions of the Plan, after the applicable Performance Period has ended, the
holder of Performance Units shall be entitled to receive a payout of the number
and value of Performance Units earned

 

12

 

by the Participant over the Performance Period, to be determined by the
Committee, in its sole and plenary discretion, as a function of the extent to
which the corresponding Performance Goals have been achieved.

 

(iv)  Form and Timing of Payment of Performance
Units.  Subject to the
provisions of the Plan, the Committee, in its sole and plenary discretion, may
pay earned Performance Units in the form of cash or in Shares (or in a
combination thereof) that has an aggregate Fair Market Value equal to the value
of the earned Performance Units at the close of the applicable Performance
Period.  Such Shares may be granted
subject to any restrictions in the applicable Award Agreement deemed
appropriate by the Committee.  The
determination of the Committee with respect to the form and timing of payout of
such Awards shall be set forth in the applicable Award Agreement.  If a Performance Unit is intended to qualify
as “qualified performance-based compensation” under Section 162(m) of the Code,
all requirements set forth in Section 6(i) must be satisfied in order for a
Participant to be entitled to payment.

 

(f)  Cash
Incentive Awards.  Subject to the
provisions of the Plan, the Committee, in its sole and plenary discretion,
shall have the authority to grant Cash Incentive Awards.  The Committee shall establish Cash Incentive
Award levels to determine the amount of a Cash Incentive Award payable upon the
attainment of Performance Goals.  If a
Cash Incentive Award is intended to qualify as “qualified performance-based
compensation” under Section 162(m) of the Code, all requirements set forth in
Section 6(i) must be satisfied in order for a Participant to be entitled to
payment.

 

(g)  Other
Stock-Based Awards.  Subject to the
provisions of the Plan, the Committee shall have the sole and plenary authority
to grant to Participants other equity-based or equity-related Awards
(including, but not limited to, fully-vested Shares) in such amounts and
subject to such terms and conditions as the Committee shall determine.  If such an Award is intended to qualify as “qualified
performance-based compensation” under Section 162(m) of the Code, all requirements
set forth in Section 6(i) must be satisfied in order for a Participant to be
entitled to payment.

 

(h)  Dividend
Equivalents.  In the sole and plenary
discretion of the Committee, an Award, other than an Option, SAR or Cash
Incentive Award, may provide the Participant with dividends or dividend equivalents,
payable in cash, Shares, other securities, other Awards or other property, on a
current or deferred basis, on such terms and conditions as may be determined by
the Committee in its sole and plenary discretion, including, without
limitation, payment directly to the Participant, withholding of such amounts by
the Company subject to vesting of the Award or reinvestment in additional
Shares, Restricted Shares or other Awards.

 

(i)  Performance
Compensation Awards.  (i)   General.  The Committee shall have the authority, at
the time of grant of any Award, to designate such Award (other than Options and
SARs) as a Performance Compensation Award in order to qualify such Award as “qualified
performance-based compensation” under Section 162(m) of the Code.  Options and SARs granted under the Plan shall
not be

 

13

 

included among Awards that are designated as Performance Compensation
Awards under this Section 6(i).

 

(ii)  Eligibility.  The Committee shall, in its sole discretion,
designate within the first 90 days of a Performance Period (or, if
shorter, within the maximum period allowed under Section 162(m) of the
Code) which Participants will be eligible to receive Performance Compensation
Awards in respect of such Performance Period. 
However, designation of a Participant eligible to receive an Award
hereunder for a Performance Period shall not in any manner entitle the
Participant to receive payment in respect of any Performance Compensation Award
for such Performance Period.  The
determination as to whether or not such Participant becomes entitled to payment
in respect of any Performance Compensation Award shall be decided solely in
accordance with the provisions of this Section 6(i).  Moreover, designation of a Participant
eligible to receive an Award hereunder for a particular Performance Period
shall not require designation of such Participant eligible to receive an Award
hereunder in any subsequent Performance Period and designation of one person as
a Participant eligible to receive an Award hereunder shall not require
designation of any other person as a Participant eligible to receive an Award
hereunder in such period or in any other period.

 

(iii)  Discretion
of Committee with Respect to Performance Compensation Awards.  With regard to a particular Performance
Period, the Committee shall have full discretion to select the length of such
Performance Period, the types of Performance Compensation Awards to be issued,
the Performance Criteria that will be used to establish the Performance Goals,
the kinds and levels of the Performance Goals that are to apply to the Company
or any of its Subsidiaries, Affiliates, divisions or operational units, or any
combination of the foregoing, and the Performance Formula.  Within the first 90 days of a Performance
Period (or, if shorter, within the maximum period allowed under Section 162(m)
of the Code), the Committee shall, with regard to the Performance Compensation
Awards to be issued for such Performance Period, exercise its discretion with
respect to each of the matters enumerated in the immediately preceding sentence
and record the same in writing.

 

(iv)  Performance
Criteria.  Notwithstanding the
foregoing, the Performance Criteria that will be used to establish the Performance
Goals shall be based on the attainment of specific levels of performance of the
Company or any of its Subsidiaries, Affiliates, divisions or operational units,
or any combination of the foregoing, and shall be limited to the following:  (A) net income before or after taxes,
(B) earnings before or after taxes (including earnings before interest,
taxes, depreciation and amortization), (C) operating income,
(D) earnings per share, (E) return on stockholders’ equity,
(F) return on investment or capital, (G) return on assets,
(H) level or amount of acquisitions, (I) share price,
(J) profitability and profit margins, (K) market share,
(L) revenues or sales (based on units or dollars), (M) costs,
(N) cash flow, (O) working capital, (P) management of days sales
outstanding, (Q) management of indirect rates, (R) labor utilization, (S)
employee turnover and (T) quality and/or process improvements.  Such performance criteria may be applied on
an absolute basis and/or be relative to one or more peer companies of the
Company or indices or any combination thereof. 
To the extent required under Section 162(m) of the Code, the
Committee shall,

 

14

 

within the first 90 days of the applicable Performance Period (or, if
shorter, within the maximum period allowed under Section 162(m) of the Code),
define in an objective manner the method of calculating the Performance
Criteria it selects to use for such Performance Period.

 

(v)  Modification
of Performance Goals.  The Committee
is authorized at any time during the first 90 days of a Performance Period (or,
if shorter, within the maximum period allowed under Section 162(m) of the
Code), or any time thereafter (but only to the extent the exercise of such
authority after such 90-day period (or such shorter period, if applicable)
would not cause the Performance Compensation Awards granted to any Participant
for the Performance Period to fail to qualify as “qualified performance-based
compensation” under Section 162(m) of the Code), in its sole and plenary
discretion, to adjust or modify the calculation of a Performance Goal for such
Performance Period to the extent permitted under Section 162(m) of the Code (A)
in the event of, or in anticipation of, any unusual or extraordinary corporate
item, transaction, event or development affecting the Company or any of its
Affiliates, Subsidiaries, divisions or operating units (to the extent
applicable to such Performance Goal) or (B) in recognition of, or in
anticipation of, any other unusual or nonrecurring events affecting the Company
or any of its Affiliates, Subsidiaries, divisions or operating units (to the
extent applicable to such Performance Goal), or the financial statements of the
Company or any of its Affiliates, Subsidiaries, divisions or operating units
(to the extent applicable to such Performance Goal), or of changes in
applicable rules, rulings, regulations or other requirements of any
governmental body or securities exchange, accounting principles, law or
business conditions.

 

(vi)  Payment
of Performance Compensation Awards.  (A)  Condition to Receipt of Payment.  A Participant must be employed by the Company
on the last day of a Performance Period to be eligible for payment in respect
of a Performance Compensation Award for such Performance Period.  Notwithstanding the foregoing, in the
discretion of the Committee, Performance Compensation Awards may be paid to
Participants who have retired or whose employment has terminated prior to the last
day of a Performance Period for which a Performance Compensation Award is made
or to the designee or estate of a Participant who has died prior to the last
day of a Performance Period.

 

(B)  Limitation.  A Participant shall be eligible to receive
payments in respect of a Performance Compensation Award only to the extent that
(1) the Performance Goals for such period are achieved and certified by
the Committee in accordance with Section 6(i)(vi)(C) and (2) the
Performance Formula as applied against such Performance Goals determines that
all or some portion of such Participant’s Performance Compensation Award has
been earned for the Performance Period.

 

(C)  Certification.  Following the completion of a Performance
Period, the Committee shall meet to review and certify in writing whether, and
to what extent, the Performance Goals for the Performance Period have been
achieved and, if so, to calculate and certify in writing that amount of the
Performance Compensation Awards earned for the period based upon the
Performance Formula.  The Committee shall
then

 

15

 

determine the actual size of each Participant’s Performance
Compensation Award for the Performance Period and, in so doing, may apply
negative discretion as authorized by Section 6(i)(vi)(D).

 

(D)  Negative
Discretion.  In determining the
actual size of an individual Performance Compensation Award for a Performance
Period, the Committee may, in its sole and plenary discretion, reduce or
eliminate the amount of the Award earned in the Performance Period, even if
applicable Performance Goals have been attained.

 

(E)  Timing
of Award Payments.  The Performance
Compensation Awards granted for a Performance Period shall be paid to
Participants as soon as administratively possible following completion of the
certifications required by Section 6(i)(vi)(C), unless the Committee shall
determine that any Performance Compensation Award shall be deferred.

 

(F)  Discretion.  In
no event shall any discretionary authority granted to the Committee by the Plan
be used to (1) grant or provide payment in respect of Performance
Compensation Awards for a Performance Period if the Performance Goals for such
Performance Period have not been attained, (2) increase a Performance
Compensation Award for any Participant at any time after the first 90 days of
the Performance Period (or, if shorter, the maximum period allowed under
Section 162(m)) or (3) increase a Performance Compensation Award
above the maximum amount payable under Section 4(a) of the Plan.

 

SECTION 7. 
Amendment and Termination. 
(a)  Amendments to the Plan.  Subject to any applicable law or government regulation,
to any requirement that must be satisfied if the Plan is intended to be a stockholder
approved plan for purposes of Section 162(m) of the Code and to the rules of
the NYSE or any successor exchange or quotation system on which the Shares may
be listed or quoted, the Plan may be amended, modified or terminated by the
Board without the approval of the stockholders of the Company except that
stockholder approval shall be required for any amendment that would
(i) increase the maximum number of Shares for which Awards may be granted
under the Plan or increase the maximum number of Shares that may be delivered
pursuant to Incentive Stock Options granted under the Plan; provided, however, that
any adjustment under Section 4(b) shall not constitute an increase for purposes
of this Section 7(a) or (ii) change the class of employees or other
individuals eligible to participate in the Plan.  No modification, amendment or termination of
the Plan may, without the consent of the Participant to whom any Award shall
theretofor have been granted, materially and adversely affect the rights of
such Participant (or his or her transferee) under such Award, unless otherwise
provided by the Committee in the applicable Award Agreement.

 

(b)  Amendments
to Awards.  The Committee may waive
any conditions or rights under, amend any terms of, or alter, suspend, discontinue,
cancel or terminate any Award theretofor granted, prospectively or
retroactively; provided, however, that, except as set forth in the Plan, unless
otherwise provided by the Committee in the

 

16

 

applicable Award Agreement, any such waiver, amendment, alteration,
suspension, discontinuance, cancelation or termination that would materially
and adversely impair the rights of any Participant or any holder or beneficiary
of any Award theretofor granted shall not to that extent be effective without
the consent of the impaired Participant, holder or beneficiary.

 

(c)  Adjustment
of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.  The Committee is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4(b) or the occurrence of a
Change of Control) affecting the Company, any Affiliate, or the financial
statements of the Company or any Affiliate, or of changes in applicable rules,
rulings, regulations or other requirements of any governmental body or
securities exchange, accounting principles or law (i) whenever the
Committee, in its sole and plenary discretion, determines that such adjustments
are appropriate or desirable, including, without limitation, providing for a
substitution or assumption of Awards, accelerating the exercisability of, lapse
of restrictions on, or termination of, Awards or providing for a period of time
for exercise prior to the occurrence of such event, (ii) if deemed appropriate
or desirable by the Committee, in its sole and plenary discretion, by providing
for a cash payment to the holder of an Award in consideration for the cancelation
of such Award, including, in the case of an outstanding Option or SAR, a cash
payment to the holder of such Option or SAR in consideration for the
cancelation of such Option or SAR in an amount equal to the excess, if any, of
the Fair Market Value (as of a date specified by the Committee) of the Shares
subject to such Option or SAR over the aggregate Exercise Price of such Option
or SAR and (iii) if deemed appropriate or desirable by the Committee, in its
sole and plenary discretion, by canceling and terminating any Option or SAR
having a per Share Exercise Price equal to, or in excess of, the Fair Market
Value of a Share subject to such Option or SAR without any payment or
consideration therefor.

 

SECTION 8. 
Change of Control.  Unless
otherwise provided in the applicable Award Agreement, in the event of a Change
of Control after the date of the adoption of the Plan, unless provision is made
in connection with the Change of Control for (a) assumption of Awards
previously granted or (b) substitution for such Awards of new awards covering
stock of a successor corporation or its “parent corporation” (as defined in
Section 424(e) of the Code) or “subsidiary corporation” (as defined in
Section 424(f) of the Code) with appropriate adjustments as to the number
and kinds of shares and the Exercise Prices, if applicable, (i) any outstanding
Options or SARs then held by Participants that are unexercisable or otherwise
unvested shall automatically be deemed exercisable or otherwise vested, as the
case may be, as of immediately prior to such Change of Control, (ii) all
Performance Units and Cash Incentive Awards shall be paid out as if the date of
the Change of Control were the last day of the applicable Performance Period
and “target” performance levels had been attained and (iii) all other
outstanding Awards (i.e., other than Options, SARs, Performance Units and Cash
Incentive Awards) then held by Participants that are unexercisable, unvested or
still subject to restrictions or forfeiture, shall automatically be deemed
exercisable and vested

 

17

 

and all restrictions and forfeiture provisions related thereto shall
lapse as of immediately prior to such Change of Control.

 

SECTION 9. 
General Provisions.  (a)  Nontransferability.  Except as otherwise specified in the
applicable Award Agreement, during the Participant’s lifetime each Award (and
any rights and obligations thereunder) shall be exercisable only by the
Participant, or, if permissible under applicable law, by the Participant’s
legal guardian or representative, and no Award (or any rights and obligations
thereunder) may be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by a Participant otherwise than by will or by the
laws of descent and distribution, and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Affiliate; provided that (i) the
designation of a beneficiary shall not constitute an assignment, alienation,
pledge, attachment, sale, transfer or encumbrance and (ii) the Board or the Committee
may permit further transferability, on a general or specific basis, and may
impose conditions and limitations on any permitted transferability; provided,
however, that Incentive Stock Options granted under the Plan shall not be
transferable in any way that would violate Section 1.422-2(a)(2) of the
Treasury Regulations.  All terms and
conditions of the Plan and all Award Agreements shall be binding upon any
permitted successors and assigns.

 

(b)  No
Rights to Awards.  No Participant or
other Person shall have any claim to be granted any Award, and there is no
obligation for uniformity of treatment of Participants or holders or
beneficiaries of Awards.  The terms and
conditions of Awards and the Committee’s determinations and interpretations
with respect thereto need not be the same with respect to each Participant and
may be made selectively among Participants, whether or not such Participants
are similarly situated.

 

(c)  Share
Certificates.  All certificates for
Shares or other securities of the Company or any Affiliate delivered under the
Plan pursuant to any Award or the exercise thereof shall be subject to such
stop transfer orders and other restrictions as the Committee may deem advisable
under the Plan, the applicable Award Agreement or the rules, regulations and
other requirements of the SEC, the NYSE or any other stock exchange or
quotation system upon which such Shares or other securities are then listed or reported
and any applicable Federal or state laws, and the Committee may cause a legend
or legends to be put on any such certificates to make appropriate reference to
such restrictions.

 

(d)  Withholding.  A Participant may be required to pay to the
Company or any Affiliate, and the Company or any Affiliate shall have the right
and is hereby authorized to withhold from any Award, from any payment due or
transfer made under any Award or under the Plan or from any compensation or
other amount owing to a Participant, the amount (in cash, Shares, other
securities, other Awards or other property) of any applicable withholding taxes
in respect of an Award, its exercise or any payment or transfer under an Award
or under the Plan and to take such other action as may be necessary in the
opinion of the Committee or the Company to satisfy all obligations for the
payment of such taxes.

 

18

 

(e)  Award
Agreements.  Each Award hereunder
shall be evidenced by an Award Agreement, which shall be delivered to the
Participant and shall specify the terms and conditions of the Award and any
rules applicable thereto, including, but not limited to, the effect on such Award
of the death, disability or termination of employment or service of a
Participant and the effect, if any, of such other events as may be determined
by the Committee.

 

(f)  No
Limit on Other Compensation Arrangements. 
Nothing contained in the Plan shall prevent the Company or any Affiliate
from adopting or continuing in effect other compensation arrangements, which
may, but need not, provide for the grant of options, restricted stock, shares
and other types of equity-based awards (subject to stockholder approval if such
approval is required), and such arrangements may be either generally applicable
or applicable only in specific cases.

 

(g)  No
Right to Employment.  The grant of an
Award shall not be construed as giving a Participant the right to be retained as
a director, officer, employee or consultant of or to the Company or any Affiliate,
nor shall it be construed as giving a Participant any rights to continued
service on the Board.  Further, the
Company or an Affiliate may at any time dismiss a Participant from employment
or discontinue any consulting relationship, free from any liability or any
claim under the Plan, unless otherwise expressly provided in the Plan or in any
Award Agreement.

 

(h)  No
Rights as Stockholder.  No
Participant or holder or beneficiary of any Award shall have any rights as a stockholder
with respect to any Shares to be distributed under the Plan until he or she has
become the holder of such Shares.  In
connection with each grant of Restricted Shares, except as provided in the
applicable Award Agreement, the Participant shall not be entitled to the rights
of a stockholder in respect of such Restricted Shares.  Except as otherwise provided in Section 4(b),
Section 7(c) or the applicable Award Agreement, no adjustments shall be made
for dividends or distributions on (whether ordinary or extraordinary, and
whether in cash, Shares, other securities or other property), or other events
relating to, Shares subject to an Award for which the record date is prior to
the date such Shares are delivered.

 

(i)  Governing
Law.  The validity, construction and
effect of the Plan and any rules and regulations relating to the Plan and any
Award Agreement shall be determined in accordance with the laws of the State of
Delaware, without giving effect to the conflict of laws provisions thereof.

 

(j)  Severability.  If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision shall
be construed or deemed stricken as to such jurisdiction, Person or Award and
the remainder of the Plan and any such Award shall remain in full force and
effect.

 

19

 

(k)  Other
Laws.  The Committee may refuse to
issue or transfer any Shares or other consideration under an Award if, acting
in its sole and plenary discretion, it determines that the issuance or transfer
of such Shares or such other consideration might violate any applicable law or
regulation or entitle the Company to recover the same under Section 16(b)
of the Exchange Act, and any payment tendered to the Company by a Participant,
other holder or beneficiary in connection with the exercise of such Award shall
be promptly refunded to the relevant Participant, holder or beneficiary.  Without limiting the generality of the
foregoing, no Award granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and
until the Committee in its sole and plenary discretion has determined that any
such offer, if made, would be in compliance with all applicable requirements of
the U.S. Federal and any other applicable securities laws.

 

(l)  No
Trust or Fund Created.  Neither the
Plan nor any Award shall create or be construed to create a trust or separate
fund of any kind or a fiduciary relationship between the Company or any
Affiliate, on one hand, and a Participant or any other Person, on the other
hand.  To the extent that any Person
acquires a right to receive payments from the Company or any Affiliate pursuant
to an Award, such right shall be no greater than the right of any unsecured
general creditor of the Company or such Affiliate.

 

(m)  No
Fractional Shares.  No fractional
Shares shall be issued or delivered pursuant to the Plan or any Award, and the
Committee shall determine whether cash, other securities or other property
shall be paid or transferred in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.

 

(n)  Requirement
of Consent and Notification of Election Under Section 83(b) of the Code or
Similar Provision.  No election under
Section 83(b) of the Code (to include in gross income in the year of transfer
the amounts specified in Section 83(b) of the Code) or under a similar
provision of law may be made unless expressly permitted by the terms of the
applicable Award Agreement or by action of the Committee in writing prior to
the making of such election.  If an Award
recipient, in connection with the acquisition of Shares under the Plan or
otherwise, is expressly permitted under the terms of the applicable Award
Agreement or by such Committee action to make such an election and the
Participant makes the election, the Participant shall notify the Committee of
such election within ten days of filing notice of the election with the IRS or
other governmental authority, in addition to any filing and notification
required pursuant to regulations issued under Section 83(b) of the Code or
other applicable provision.

 

(o)  Requirement
of Notification Upon Disqualifying Disposition Under Section 421(b) of the
Code.  If any Participant shall make
any disposition of Shares delivered pursuant to the exercise of an Incentive
Stock Option under the circumstances described in Section 421(b) of the
Code (relating to certain disqualifying dispositions) or any successor
provision of the Code, such Participant shall notify the Company of such
disposition within ten days of such disposition.

 

20

 

(p)  Headings.  Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.

 

SECTION 10. 
Term of the Plan.  (a)  Effective Date.  The Plan shall be effective as of the date of
its adoption by the Board and approval by the Company’s stockholders; provided,
however, that no Incentive Stock Options may be granted under the Plan unless
it is approved by the Company’s stockholders within twelve (12) months before
or after the date the Plan is adopted by the Board.

 

(b)  Expiration
Date.  No Award shall be granted
under the Plan after the tenth anniversary of the date the Plan is approved
under Section 10(a).  Unless otherwise
expressly provided in the Plan or in an applicable Award Agreement, any Award
granted hereunder may, and the authority of the Board or the Committee to
amend, alter, adjust, suspend, discontinue or terminate any such Award or to
waive any conditions or rights under any such Award shall, nevertheless
continue thereafter.

 

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Exhibit 10.1  

 
 

DIVX, INC.    
    
    INDEMNITY AGREEMENT    
    

        THIS INDEMNITY AGREEMENT (this "Agreement") is made and entered
into this      day of            , 2006 by and between DIVX, INC., a Delaware corporation (the
"Company"), and                        ("Agent"). 

 
 

RECITALS    
    

        WHEREAS, Agent performs a valuable service to the Company in  his/her capacity
as                        of the Company; 

        WHEREAS, the Company's Amended and Restated Bylaws (the "Bylaws"), which were approved by
the stockholders of the Company, provide for the indemnification of the directors, officers, employees and other agents of the Company, including persons serving at the request of the Company in such
capacities with other corporations or enterprises, as authorized by the Delaware General Corporation Law (the "DGCL"); 

        WHEREAS, the Bylaws and the DGCL, by their non-exclusive nature, permit contracts between the Company and its agents,
officers, employees and other agents with respect to indemnification of such persons; and 

        WHEREAS, in order to induce Agent to continue to serve as                        of the Company,
the Company has determined and agreed to enter
into this Agreement with Agent. 

        NOW, THEREFORE, in consideration of Agent's continued service as                        of the
Company after the date hereof, the parties hereto
agree as follows: 

 
 

AGREEMENT    
    

        1.    Services to the Company.    Agent will serve, at the will of the Company or under separate contract, if any such
contract exists, as                        of the Company or as a director, executive officer or other fiduciary of an affiliate
of the Company (including any employee benefit plan of the Company) faithfully
and to the best of Agent's ability so long as Agent is duly elected and qualified in accordance with the provisions of the Bylaws or other applicable charter documents of the Company or such
affiliate; provided, however, that Agent may at any time and for any reason resign from such position (subject to any contractual obligation that Agent
may have assumed apart from this Agreement) and that the Company or any affiliate shall have no obligation under this Agreement to continue Agent in any such position. 

        2.    Indemnity of Agent.    The Company hereby agrees to hold harmless and indemnify Agent to the fullest extent
authorized or permitted by the provisions of the Bylaws and the DGCL, as the same may be amended from time to time (but only to the extent that such amendment permits the Company to provide broader
indemnification rights than the Bylaws or the DGCL permitted prior to adoption of such amendment). 

        3.    Additional Indemnity.    In addition to and not in limitation of the indemnification otherwise provided for
herein, and subject only to the exclusions set forth in Section 4 hereof, the Company hereby further agrees to hold harmless and indemnify Agent: 

        (a)   against any and all expenses (including attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay because of any claim or claims made against or by Agent in connection with any threatened, 

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pending
or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative (including an action by or in the right of the Company) to which Agent is, was
or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Agent is, was or at any time becomes a director, officer, employee or other agent of the Company, or is
or was serving or at any time serves at the request of the Company as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise; and 

        (b)   otherwise to the fullest extent as may be provided to Agent by the Company under the non-exclusivity
provisions of the DGCL and Section 43 of the Bylaws. 

        4.    Limitations on Additional Indemnity.    No indemnity pursuant to Section 3 hereof shall be paid by the
Company: 

        (a)   on account of any claim against Agent solely for an accounting of profits made from the purchase or sale by Agent of
securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any federal, state or local statutory law; 

        (b)   on account of Agent's conduct that is established by a final judgment as knowingly fraudulent or deliberately dishonest
or that constituted willful misconduct; 

        (c)   on account of Agent's conduct that is established by a final judgment as constituting a breach of Agent's duty of loyalty
to the Company or resulting in any personal profit or advantage to which Agent was not legally entitled; 

        (d)   for which payment is actually made to Agent under a valid and collectible insurance policy or under a valid and
enforceable indemnity clause, bylaw or agreement, except in respect of any excess beyond payment under such insurance, clause, bylaw or agreement; 

        (e)   if indemnification is not lawful (and, in this respect, both the Company and Agent have been advised that the Securities
and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for adjudication); or 

        (f)    in connection with any proceeding (or part thereof) initiated by Agent, or any proceeding by Agent against the Company or
its directors, officers, employees or other agents, unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors
of the Company, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under the DGCL or any other applicable law, or
(iv) the proceeding is initiated pursuant to Section 9 hereof. 

        5.    Continuation of Indemnity.    All agreements and obligations of the Company contained herein shall continue
during the period Agent is a director, officer, employee or other agent of the Company (or is or was serving at the request of the Company as a director, officer, employee or other agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other enterprise) and shall continue thereafter so long as Agent shall be subject to any possible claim or threatened, pending
or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative, by reason of the fact that Agent was serving in the capacity referred to herein. 

        6.    Partial Indemnification.    Agent shall be entitled under this Agreement to indemnification by the Company for a
portion of the expenses (including attorneys' fees), witness fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof even 

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if
not entitled hereunder to indemnification for the total amount thereof, and the Company shall indemnify Agent for the portion thereof to which Agent is entitled. 

        7.    Notification and Defense of Claim.    Not later than 30 days after receipt by Agent of notice of the
commencement of any action, suit or proceeding, Agent will, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof; but
the omission so to notify the Company will not relieve it from any liability which it may have to Agent otherwise than under this Agreement. With respect to any such action, suit or proceeding as to
which Agent notifies the Company of the commencement thereof: 

        (a)   the Company will be entitled to participate therein at its own expense; 

        (b)   except as otherwise provided below, the Company may, at its option and jointly with any other indemnifying party
similarly notified and electing to assume such defense, assume the defense thereof, with counsel reasonably satisfactory to Agent. After notice from the Company to Agent of its election to assume the
defense thereof, the Company will not be liable to Agent under this Agreement for any legal or other expenses subsequently incurred by Agent in connection with the defense thereof except for
reasonable costs of investigation or otherwise as provided below. Agent shall have the right to
employ separate counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the
expense of Agent unless (i) the employment of counsel by Agent has been authorized by the Company, (ii) Agent shall have reasonably concluded, and so notified the Company, that there is
an actual conflict of interest between the Company and Agent in the conduct of the defense of such action or (iii) the Company shall not in fact have employed counsel to assume the defense of
such action, in each of which cases the fees and expenses of Agent's separate counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any action,
suit or proceeding brought by or on behalf of the Company or as to which Agent shall have made the conclusion provided for in clause (ii) above; and 

        (c)   the Company shall not be liable to indemnify Agent under this Agreement for any amounts paid in settlement of any action
or claim effected without its written consent, which shall not be unreasonably withheld. The Company shall be permitted to settle any action except that it shall not settle any action or claim in any
manner which would impose any penalty or limitation on Agent without Agent's written consent, which may be given or withheld in Agent's sole discretion. 

        8.    Expenses.    The Company shall advance, prior to the final disposition of any proceeding, promptly following
request therefor, all expenses incurred by Agent in connection with such proceeding upon receipt of an undertaking by or on behalf of Agent to repay said amounts if it shall be determined ultimately
that Agent is not entitled to be indemnified under the provisions of this Agreement, the Bylaws, the DGCL or otherwise. 

        9.    Enforcement.    Any right to indemnification or advances granted by this Agreement to Agent shall be enforceable
by or on behalf of Agent in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within 90 days of request therefor. Agent, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting Agent's claim. It
shall be a defense to any action for which a claim for indemnification is made under Section 3 hereof (other than an action brought to enforce a claim for expenses pursuant to Section 8
hereof, provided that the required undertaking has been tendered to the Company) that Agent is not entitled to indemnification because of the
limitations set forth in Section 4 hereof. Neither the failure of the Company (including its Board of Directors or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the circumstances, nor an actual determination by the Company (including its Board of Directors or its stockholders) that such 

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indemnification
is improper shall be a defense to the action or create a presumption that Agent is not entitled to indemnification under this Agreement or otherwise. 

        10.    Subrogation.    In the event of payment under this Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of Agent, who shall execute all documents
required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights. 

        11.    Non-Exclusivity of Rights.    The rights conferred on Agent by this Agreement shall not be
exclusive of any other right which Agent may have or hereafter acquire under any statute, provision of the Company's Amended and Restated Certificate of Incorporation or Bylaws, each as may be amended
from time to time, agreement, vote of stockholders or directors, or otherwise, both as to action in Agent's official capacity and as to action in another capacity while holding office. 

        12.    Survival of Rights.    

        (a)   The rights conferred on Agent by this Agreement shall continue after Agent has ceased to be a director, officer, employee
or other agent of the Company or to serve at the request of the Company as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise and shall inure to the benefit of Agent's heirs, executors and administrators. 

        (b)   The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required
to perform if no such succession had taken place. 

        13.    Separability.    Each of the provisions of this Agreement is a separate and distinct agreement and independent
of the others, so that if any provision hereof shall be held to be invalid for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions
hereof. Furthermore, if this Agreement shall be invalidated in its entirety on any ground, then the Company shall nevertheless indemnify Agent to the fullest extent provided by the Bylaws, the DGCL or
any other applicable law. 

        14.    Governing Law.    This Agreement shall be interpreted and enforced in accordance with the laws of the State of
Delaware. 

        15.    Amendment and Termination.    No amendment, modification, termination or cancellation of this Agreement shall
be effective unless in writing signed by both parties hereto. 

        16.    Identical Counterparts; Facsimile.    This Agreement may be executed in one or more counterparts, each of which
shall for all purposes be deemed to be an original but all of which together shall
constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement. Facsimile signatures shall be as effective as original signatures. 

        17.    Headings.    The headings of the sections of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction hereof. 

        18.    Notices.    All notices, requests, demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given (i) upon delivery if delivered by hand to the party to whom such communication was directed, (ii) when sent by confirmed electronic mail, with verification
of receipt, or by facsimile, in either case, if sent during regular business hours; if not, then on the next business day; or (iii) upon the third business day after the date on which such 

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communication
was mailed if mailed by certified or registered mail, return receipt requested, with postage prepaid. 

        (a)   All communications shall be delivered to Agent at the address indicated on the signature page hereof, or at such other
address as Agent shall designate by ten days' advance written notice to the Company. 

        (b)   All communications shall be delivered to the Company at 4780 Eastgate Mall, San Diego, California 92121, or such other
address as may have been furnished to Agent by the Company. 

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        IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written. 

	 	 	DIVX, INC.
	

 	
 	

By:	

    

	

 	
 	

Title:	

    

	    	 	 	 
	

 	
 	
AGENT
	

 	
 	

    

	

 	
 	

Address:
	

 	
 	

    

	

 	
 	

    

   

   

   

   

   

   

   

   

   

   

SIGNATURE PAGE TO INDEMNITY AGREEMENT 

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