Document:

EX-10.6

 

Exhibit 10.6

PVF CAPITAL CORP.

MANAGEMENT INCENTIVE COMPENSATION PLAN

JULY 1, 1996

 

MANAGEMENT INCENTIVE COMPENSATION PLAN

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	1.	 	Introduction	 	 	3	 
	 
	 	 	 	 	 	 	 	 
	 
	 	A.	 	Purpose	 	 	3	 
	 
	 	B.	 	General Description	 	 	3	 
	 
	 	C.	 	Administration	 	 	4	 
	 
	 	 	 	 	 	 	 	 
	2.	 	Participants	 	 	4	 
	 
	 	 	 	 	 	 	 	 
	3.	 	Annual Goal Setting	 	 	4	 
	 
	 	 	 	 	 	 	 	 
	4.	 	Operating Rules	 	 	5	 
	 
	 	 	 	 	 	 	 	 
	5.	 	Plan Communications	 	 	5	 
	 
	 	 	 	 	 	 	 	 
	6.	 	Change of Control	 	 	5	 
	 
	 	 	 	 	 	 	 	 
	7.	 	Termination of Employment, New Participants	 	 	6	 
	 
	 	 	 	 	 	 	 	 
	8.	 	General Limitations and Provisions	 	 	6	 
	 
	 	 	 	 	 	 	 	 
	 
	 	A	 	Regulatory Capital and Safety and Soundness Tests	 	 	6	 
	 
	 	B.	 	Amendment and Termination of Plan	 	 	7	 
	 
	 	C.	 	Not an Employment Agreement	 	 	7	 
	 
	 	D.	 	Prohibition Against Assignment	 	 	7	 
	 
	 	E.	 	Absence of Trust	 	 	8	 
	 
	 	F.	 	Governing Law	 	 	8	 

2

 

	1.	 	INTRODUCTION

	 	A.	 	PURPOSE

     The primary purpose of the Management Incentive Compensation Plan (“Plan”)
is to promote shareholder interests through the maximization of the profitability of
PVF Capital Corp. and its subsidiaries (“Park View” or the “Company”) consistent with
the Company’s policies, including those designed to manage interest rate risk and
credit risk. The Plan provides cash incentives for those members of management who
most directly affect the success and profitability of the Company and who cause the
Company to attain and sustain high levels of performance based on safe and sound
operating strategies. The Plan is effective July 1, 1997.

     In addition to its primary purpose, the Plan is designed to accomplish other
important objectives of the Company including:

	 	Ø	 	 fostering teamwork and cooperation among management personnel;
	 
	 	Ø	 	helping to retain, and encourage commitment on the part of management and key
employees;
	 
	 	Ø	 	 compliance with established Company policies and procedures and regulatory
requirements.

	 	B.	 	GENERAL DESCRIPTION

     The Plan provides for the selection of participants, procedures for setting
annual performance goals and the determination of incentive awards. The Plan also
provides for minimum levels of performance before any incentive award can be made,
maximum total incentive awards relative to the Company’s earnings and requires that
the Company’s capital at all times meet or exceed all capital requirements to maintain
the Company as a “well capitalized association”. Incentive awards are to be
supplemental compensation in the form of cash, stock options or restricted stock
granted on an annual basis following the determination of the Company’s audited
year-end results.

3

 

	 	C.	 	ADMINISTRATION

     The Board of Directors of the Company, acting through its Compensation
Committee (Committee), has final authority on the disposition of all Plan matters.
The actions of the Board as to the interpretation and construction of the Plan shall
be final and binding on all parties. The responsibility for administering the Plan,
determining Plan participants and establishing rules governing the operation of the
Plan is delegated to the Committee. The Committee is composed exclusively of three
(3) outside, independent directors. Executive Management shall not be entitled to
vote on matters relating to the eligibility and determination of their own incentive
compensation awards. Computation of incentive awards will be made by the Chief
Financial Officer and verified by the independent auditors employed by the Company
before submitting to the Committee.

	2.	 	PARTICIPANTS

     The Committee shall determine those individuals or classes of individuals
who will be participants in the Plan for each fiscal Plan year. Participation in a
given year shall not guarantee participation in a succeeding year. Participants may
be added or deleted during the Plan year as approved by the Board of Directors.

	3.	 	ANNUAL GOAL SETTING

     Each Plan year the Committee will establish overall Company performance
goals which will be the basis for determining incentive compensation awards under the
Plan for that year, limited however, to an amount not exceeding the Company’s
after-tax earnings for the year, as adjusted for nonrecurring items and extraordinary
gains or losses not related to operations. The Committee will also establish a
minimum “threshold” level of overall Company performance each year below which no
incentive awards will be payable. Awards to individual participants

4

 

will be determined by reference to the overall Company performance goals as may
be established by the Committee and Executive Management for that year.

	4.	 	OPERATING RULES

     The Committee will promulgate operating rules governing the determination of
incentive awards pursuant to the provisions of this Plan and to the performance goals
established thereunder for each Plan year.

	5.	 	PLAN COMMUNICATIONS

     To ensure the effectiveness of the Plan as an incentive for improved
performance, copies of this Plan together with the Operating Rules thereunder may be
furnished to and reviewed with each participant. In addition, the Chief Financial
Officer may formally communicate annual Company performance results and potential
incentive award amounts to the participants during each Plan year.

	6.	 	CHANGE OF CONTROL

     In the event of a change of control, participants will be paid pro rata
awards for the number of full months completed in the Plan year preceding the change
of control. Such pro rata awards shall be determined by the Committee based on the
performance goals previously established for the Plan year; provided that the Company
has recorded positive net earnings for the year-to-date preceding the change of
control.

     The following events shall be deemed a “change of control”:

	 	(a)	 	any third person or group, as defined in Title 12,
Code of Federal Regulations, Section 574.4, shall become the beneficial
owner of 25% or more of the total number of shares of the Company;
	 
	 	(b)	 	any change in the majority of persons serving on the
Board of Directors of the Company resulting from or in connection with any
cash tender offer, merger or other

5

 

	 	 	 	business combination, sale of assets or contested election of directors, or
any combination of the foregoing or;
	 
	 	(c)	 	a sale of substantially all of the assets of the
Company or a transaction causing the Company to cease to be an independent
publicly owned entity; unless, prior to such events, a resolution
specifically approving such occurrence shall have been adopted by at least
a majority of the Board of Directors of the Company.

	7.	 	TERMINATION OF EMPLOYMENT, NEW PARTICIPANTS

     In the event of death or termination of employment due to retirement (including
early and disability retirement) during a Plan year, a participant’s potential award will be
prorated based upon the number of full months as a participant. Incentive awards will be
paid in one lump sum after the year-end results have been calculated for the Plan year. In
the case of death, any such unpaid incentive awards shall be paid to the participant’s estate
or designated beneficiary. In all other cases of termination of employment during a Plan
year, the participant forfeits any potential award and no payment shall be made to him or her
in respect of that year. If an individual becomes a new participant during a Plan year, the
potential incentive compensation award will be determined based upon the number of full
months as a participant.

	8.	 	GENERAL LIMITATIONS AND PROVISIONS

	 	A.	 	Regulatory Capital and Safety and Soundness Tests

     Notwithstanding any other provision of this Plan, no incentive awards shall be paid or
payable in respect of any Plan year in which the Company (i) fails to meet any applicable
capital requirements at the Plan year end after giving effect to potential incentive awards
hereunder or (ii) receives a safety and soundness MACRO or CAMEL rating of 4 or 5 from a
federal financial institution regulatory agency In addition, a MACRO or CAMEL rating of 3 in
safety and soundness or compliance exams, or less than “satisfactory” in a CRA exam, may
reduce the incentive awards of this Plan.

6

 

	 	B.	 	 Amendment and Termination of Plan

     The Committee reserves the right to amend or terminate the Plan at any time without
affecting the rights of the participants to unpaid amounts accrued, if any, in respect of a
prior or current Plan year. No participant shall have a vested interest in any amount
accrued during a Plan year until individual awards are determined and approved by the Board
of Directors following the completion of that year.

	 	C.	 	Not an Employment Agreement

     Nothing contained in the Plan shall give any Employee the right to be retained in the
employment of the Company or affect the right of the Company to dismiss any Employees. The
adoption of the Plan shall not constitute a contract between the Company and any Employee.
No Employee shall receive any right to be granted an award hereunder nor shall any such award
be considered as compensation under any employee benefit plan of the Company except as
otherwise determined by the Board of Directors or by the provisions of any such benefit plan.

	 	D.	 	Prohibition Against Assignment

     Except insofar as may otherwise be required by law, no amount payable at any time under
the Plan shall be subject in any manner to alienation by anticipation, sale, transfer,
assignment, bankruptcy, pledge, attachment, charge, or encumbrance of any kind nor in any
manner be subject to the debts or liabilities of any person and any attempt to so alienate or
subject any such amount, whether presently or thereafter payable, shall be void. If any
person shall attempt to, or shall, alienate, sell, transfer, assign, pledge, attach, charge,
or otherwise encumber any amount payable under the Plan, or any part thereof, or if by reason
of his bankruptcy or other event happening at any such time such amount would be made subject
to his debts or liabilities or would otherwise not be enjoyed by him, then the Board of
Directors, if it so elects, may direct that such amount be withheld and that the same or any
part thereof be paid or

7

 

applied to or for the benefit of such person, his spouse, children or the dependents, or
any of them, in such manner and proportion as the Board of Directors may deem proper.

	 	E.	 	Absence of Trust

     Nothing contained in the Plan and no action taken pursuant to its provision, shall
create or be construed to create a trust of any kind, or a fiduciary relationship between the
Company and the Employee or any other person. To the extent that any person acquires a right
to receive payments from the Company under this Plan, such right shall be no greater than the
right of an unsecured general creditor of the Company. All payments to be made hereunder
shall be paid in cash from the general funds of the Company and no special or separate funds
shall be established and no segregation of assets shall be made to assure payments of such
amounts.

	 	F.	 	Governing Law

     The Plan shall be governed by and construed in accordance with the laws of the State
of Ohio.

8exv10w6

 

EXHIBIT 10.6

SYNTAX-BRILLIAN CORPORATION

2003 INCENTIVE COMPENSATION PLAN

As amended on March 1, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 
	 	 	 	 	 	 	 	 
	1.	 	Purpose	 	 	1	 
	2.	 	Administration	 	 	1	 
	 
	 	(a)	 	Authority of the Committee	 	 	1	 
	 
	 	(b)	 	Manner of Exercise of Committee Authority	 	 	1	 
	 
	 	(c)	 	Limitation of Liability	 	 	1	 
	3.	 	Stock Subject to Plan	 	 	2	 
	 
	 	(a)	 	Limitation on Overall Number of Shares Subject to Awards	 	 	2	 
	 
	 	(b)	 	Application of Limitations	 	 	2	 
	4.	 	Eligibility; Per-Person Award Limitations	 	 	2	 
	5.	 	Specific Terms of Awards	 	 	2	 
	 
	 	(a)	 	General	 	 	2	 
	 
	 	(b)	 	Options	 	 	2	 
	 
	 	(c)	 	Stock Appreciation Rights	 	 	3	 
	 
	 	(d)	 	Restricted Stock	 	 	4	 
	 
	 	(e)	 	Bonus Stock and Awards in Lieu of Obligations	 	 	5	 
	 
	 	(f)	 	Other Stock-Based Awards	 	 	5	 
	6.	 	Certain Provisions Applicable to Awards	 	 	5	 
	 
	 	(a)	 	Stand-Alone, Additional, Tandem, and Substitute Awards	 	 	5	 
	 
	 	(b)	 	Term of Awards	 	 	5	 
	 
	 	(c)	 	Form and Timing of Payment Under Awards; Deferrals	 	 	5	 
	 
	 	(d)	 	Exemptions from Section 16(b) Liability	 	 	6	 
	7.	 	Change in Control	 	 	6	 
	 
	 	(a)	 	Effect of “Change in Control”	 	 	6	 
	 
	 	(b)	 	Definition of “Change in Control	 	 	6	 
	 
	 	(c)	 	Definition of “Change in Control Price”	 	 	7	 
	8.	 	Automatic Grant Program 	 	 	7	 
	 
	 	(a)	 	Amount and Date of Grant	 	 	7	 
	 
	 	(b)	 	Exercise Price	 	 	8	 
	 
	 	(c)	 	Vesting	 	 	8	 
	 
	 	(d)	 	Term of Automatic Options	 	 	8	 
	 
	 	(e)	 	Other Terms	 	 	8	 
	9.	 	General Provisions	 	 	9	 
	 
	 	(a)	 	Compliance With Legal and Other Requirements	 	 	9	 
	 
	 	(b)	 	Limits on Transferability; Beneficiaries	 	 	9	 
	 
	 	(c)	 	Adjustments	 	 	9	 
	 
	 	(d)	 	Taxes	 	 	10	 
	 
	 	(e)	 	Changes to the Plan and Awards	 	 	10	 
	 
	 	(f)	 	Limitation on Rights Conferred Under Plan	 	 	10	 
	 
	 	(g)	 	Unfunded Status of Awards; Creation of Trusts	 	 	11	 
	 
	 	(h)	 	Nonexclusivity of the Plan	 	 	11	 
	 
	 	(i)	 	Payments in the Event of Forfeitures; Fractional Shares	 	 	11	 
	 
	 	(j)	 	Governing Law	 	 	11	 
	 
	 	(k)	 	Plan Effective Date and Stockholder Approval; Termination of Plan	 	 	11	 
	10.	 	Definitions	 	 	11	 
	 
	 	(a)	 	“Automatic Options”	 	 	11	 
	 
	 	(b)	 	“Award”	 	 	11	 
	 
	 	(c)	 	“Beneficiary”	 	 	12	 
	 
	 	(d)	 	“Beneficial Owner”, “Beneficially Owning” and “Beneficial Ownership”	 	 	12	 
	 
	 	(e)	 	“Board”	 	 	12	 
	 
	 	(f)	 	“Change in Control”	 	 	12	 
	 
	 	(g)	 	“Change in Control Price”	 	 	12	 
	 
	 	(h)	 	“Code”	 	 	12	 
	 
	 	(i)	 	“Committee”	 	 	12	 
	 
	 	(j)	 	“Consultant”	 	 	12	 
	 
	 	(k)	 	“Continuous Service”	 	 	12	 
	 
	 	(l)	 	“Corporate Transaction”	 	 	12	 
	 
	 	(m)	 	“Director”	 	 	12	 
	 
	 	(n)	 	“Effective Date”	 	 	12	 
	 
	 	(o)	 	“Eligible Person”	 	 	12	 

i

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 
	 	 	 	 	 	 	 	 
	 
	 	(p)	 	“Employee”	 	 	13	 
	 
	 	(q)	 	“Exchange Act”	 	 	13	 
	 
	 	(r)	 	“Executive Officer”	 	 	13	 
	 
	 	(s)	 	“Fair Market Value”	 	 	13	 
	 
	 	(t)	 	“Incentive Stock Option”	 	 	13	 
	 
	 	(u)	 	“Incumbent Board”	 	 	13	 
	 
	 	(v)	 	“Limited Stock Appreciation Right”	 	 	13	 
	 
	 	(w)	 	“Option”	 	 	13	 
	 
	 	(x)	 	“Optionee”	 	 	13	 
	 
	 	(y)	 	“Other Stock-Based Awards”	 	 	13	 
	 
	 	(z)	 	“Parent”	 	 	13	 
	 
	 	(aa)	 	“Participant”	 	 	13	 
	 
	 	(bb)	 	“Person”	 	 	13	 
	 
	 	(cc)	 	“Related Entity”	 	 	13	 
	 
	 	(dd)	 	“Restricted Stock”	 	 	13	 
	 
	 	(ee)	 	“Rule 16b-3” and “Rule 16a-1(c)(3)”	 	 	14	 
	 
	 	(ff)	 	“Stock”	 	 	14	 
	 
	 	(gg)	 	“Stock Appreciation Right”	 	 	14	 
	 
	 	(hh)	 	“Subsidiary”	 	 	14	 

ii

 

SYNTAX-BRILLIAN CORPORATION

2003 INCENTIVE COMPENSATION PLAN

     1. Purpose. The purpose of this 2003 Incentive Compensation Plan (the “Plan”) is to assist
Syntax-Brillian Corporation, a Delaware corporation (the “Company”) and its Related Entities in
attracting, motivating, retaining, and rewarding high-quality executives and other Employees,
officers, Directors, and Consultants by enabling such persons to acquire or increase a proprietary
interest in the Company in order to strengthen the mutuality of interests between such persons and
the Company’s stockholders, and providing such persons with annual and long-term performance
incentives to expend their maximum efforts in the creation of stockholder value. The Plan is
intended to qualify certain compensation awarded under the Plan for tax deductibility under Section
162(m) of the Code to the extent deemed appropriate by the applicable Committee (or any successor
committee) of the Board of Directors of the Company.

     2. Administration.

          (a) Authority of the Committee. The Plan shall be administered by the Committee; provided,
however, that except as otherwise expressly provided in this Plan or, during the period that the
Company is a Publicly Held Corporation, in order to comply with Code Section 162(m) or Rule 16b-3
under the Exchange Act, the Board may exercise any power or authority granted to the Committee
under this Plan. The Committee or the Board shall have full and final authority, in each case
subject to and consistent with the provisions of the Plan, to select Eligible Persons to become
Participants, grant Awards, determine the type, number and other terms and conditions of, and all
other matters relating to, Awards, prescribe Award agreements (which need not be identical for each
Participant) and rules and regulations for the administration of the Plan, construe and interpret
the Plan and Award agreements and correct defects, supply omissions or reconcile inconsistencies
therein, and to make all other decisions and determinations as the Committee or the Board may deem
necessary or advisable for the administration of the Plan. In exercising any discretion granted to
the Committee or the Board under the Plan or pursuant to any Award, the Committee or the Board
shall not be required to follow past practices, act in a manner consistent with past practices, or
treat any Eligible Person in a manner consistent with the treatment of other Eligible Persons.

          (b) Manner of Exercise of Committee Authority. The Committee, and not the Board, shall
exercise sole and exclusive discretion on any matter relating to a Participant then subject to
Section 16 of the Exchange Act with respect to the Company to the extent necessary in order that
transactions by such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee or the Board shall be final, conclusive, and binding on all persons,
including the Company, its Related Entities, Participants, Beneficiaries, transferees under Section
9(b) hereof, or other persons claiming rights from or through a Participant, and stockholders. The
express grant of any specific power to the Committee or the Board, and the taking of any action by
the Committee or the Board, shall not be construed as limiting any power or authority of the
Committee or the Board. The Committee or the Board may delegate to officers or managers of the
Company or any Related Entity, or committees thereof, the authority, subject to such terms as the
Committee or the Board shall determine, (i) to perform administrative functions, (ii) with respect
to Participants not subject to Section 16 of the Exchange Act, to perform such other functions as
the Committee or the Board may determine, and (iii) with respect to Participants subject to Section
16, to perform such other functions of the Committee or the Board as the Committee or the Board may
determine to the extent performance of such functions will not result in the loss of an exemption
under Rule 16b-3 otherwise available for transactions by such persons, in each case to the extent
permitted under applicable law. The Committee or the Board may appoint agents to assist it in
administering the Plan.

          (c) Limitation of Liability. The Committee and the Board, and each member thereof, shall be
entitled to, in good faith, rely or act upon any report or other information furnished to him or
her by any Executive Officer, other officer or Employee, the Company’s independent auditors,
Consultants or any other agents assisting in the administration of the Plan. Members of the
Committee and the Board, and any officer or Employee
acting at the direction or on behalf of the Committee or the Board, shall not be personally
liable for any action or determination taken or made in good faith with respect to the Plan, and
shall, to the extent permitted by law, be fully indemnified and protected by the Company with
respect to any such action or determination.

1

 

     3. Stock Subject to Plan

          (a) Limitation on Overall Number of Shares Subject to Awards. Subject to adjustment as
provided in Section 9(c) hereof, the total number of shares of Stock reserved and available for
delivery in connection with Awards under the Plan shall be the sum of (i) 1,650,000 shares plus
(ii) the number of shares of Stock with respect to which any Awards previously granted under the
Plan terminated without being exercised, expire, are forfeited or canceled, do not vest, or are
surrendered in payment of any Awards or any tax withholding with regard thereto. The overall
number of the shares of Stock shall be further increased on the first day of the Company’s fiscal
year by 4% of the total number of shares of Stock outstanding on that date, provided that the
maximum number of shares of Stock available under the Plan shall not exceed 2,750,000 shares. Any
shares of Stock delivered under the Plan may consist, in whole or in part, of authorized and
unissued shares or treasury shares. Subject to adjustment as provided in Section 9(c) hereof, the
number of shares of Stock that may be issued pursuant to Incentive Stock Options shall not exceed
1,650,000 shares.

          (b) Application of Limitations. The limitation contained in Section 3(a) shall apply not only
to Awards that are settleable by the delivery of shares of Stock but also to Awards relating to
shares of Stock but settleable only in cash (such as cash-only Stock Appreciation Rights). The
Committee or the Board may adopt reasonable counting procedures to ensure appropriate counting,
avoid double counting (as, for example, in the case of tandem or substitute awards), and make
adjustments if the number of shares of Stock actually delivered differs from the number of shares
previously counted in connection with an Award.

     4. Eligibility; Per-Person Award Limitations. Awards may be granted under the Plan only to
Eligible Persons. In each fiscal year during any part of which the Plan is in effect, an Eligible
Person may not be granted Awards relating to more than 300,000 shares of Stock, subject to
adjustment as provided in Section 9(c), under each of Sections 5(b), 5(c), 5(d), 5(e), and 5(f).
Directors, who are not Employees, proposed directors, proposed employees, and independent
contractors shall be eligible to receive awards other than Incentive Stock Options.

     5. Specific Terms of Awards.

          (a) General. Awards may be granted on the terms and conditions set forth in this Section 5.
In addition, the Committee or the Board may impose on any Award or the exercise thereof, at the
date of grant or thereafter (subject to Section 9(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee or the Board shall determine,
including terms requiring forfeiture of Awards in the event of termination of Continuous Service by
the Participant and terms permitting a Participant to make elections relating to his or her Award.
The Committee or the Board shall retain full power and discretion to accelerate, waive, or modify,
at any time, any term or condition of an Award that is not mandatory under the Plan.

          (b) Options. The Committee and the Board each is authorized to grant Options to Participants
on the following terms and conditions:

     (i) Exercise Price. The exercise price per share of Stock purchasable under an
Option shall be determined by the Committee or the Board, provided that such
exercise price shall not, in the case of Incentive Stock Options, be less than 100%
of the Fair Market Value of the Stock on the date of grant of the Option and shall
not, in any event, be less than the par value of a share of Stock on the date of
grant of such Option. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company or any Parent
Corporation or Subsidiary and an Incentive Stock Option is granted to such employee,
the option price of such Incentive Stock Option (to the extent required by the Code
at the time of grant) shall be no less
than 110% of the Fair Market Value of the Stock on the date such Incentive Stock
Option is granted.

     (ii) Time and Method of Exercise. The Committee or the Board shall determine the
time or times at which or the circumstances under which an Option may be exercised
in whole

2

 

or in part (including based on achievement of performance goals and/or
future service requirements), the time or times at which Options shall cease to be
or become exercisable following termination of Continuous Service or upon other
conditions, the methods by which such exercise price may be paid or deemed to be
paid (including in the discretion of the Committee or the Board a cashless exercise
procedure), the form of such payment, including, without limitation, cash, Stock,
other Awards, or awards granted under other plans of the Company or a Related
Entity, or other property (including notes or other contractual obligations of
Participants to make payment on a deferred basis), and the methods by or forms in
which Stock will be delivered or deemed to be delivered to Participants.

     (iii) Incentive Stock Options. The terms of any Incentive Stock Option granted
under the Plan shall comply in all respects with the provisions of Section 422 of
the Code. Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options (including any Stock Appreciation Right in
tandem therewith) shall be interpreted, amended or altered, nor shall any discretion
or authority granted under the Plan be exercised, so as to disqualify either the
Plan or any Incentive Stock Option under Section 422 of the Code, unless the
Participant has first requested the change that will result in such
disqualification. Thus, if and to the extent required to comply with Section 422 of
the Code, Options granted as Incentive Stock Options shall be subject to the
following special terms and conditions:

          (A) the Option shall not be exercisable more than ten years after the date such
Incentive Stock Option is granted; provided, however, that if a Participant owns or
is deemed to own (by reason of the attribution rules of Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the Company or
any Parent Corporation and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be (to the extent required
by the Code at the time of the grant) for no more than five years from the date of
grant; and

          (B) The aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of the shares of stock with respect to which Incentive
Stock Options granted under the Plan and all other option plans of the Company or
its Parent Corporation during any calendar year exercisable for the first time by
the Participant during any calendar year shall not (to the extent required by the
Code at the time of the grant) exceed $100,000.

     (iv) Repurchase Rights. The Committee and the Board shall have the discretion to
grant Options that are exercisable for unvested shares of Stock. Should the
Optionee’s Continuous Service cease while holding such unvested shares, the Company
shall have the right to repurchase, at the exercise price paid per share, any or all
of those unvested shares. The terms upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the Committee or
the Board and set forth in the document evidencing such repurchase right.

          (c) Stock Appreciation Rights. The Committee and the Board each is authorized to grant Stock
Appreciation Right’s to Participants on the following terms and conditions:

     (i) Right to Payment. A Stock Appreciation Right shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the excess of (A) the
Fair Market Value of one share of stock on the date of exercise (or, in the case of
a “Limited Stock Appreciation Right” that may be exercised only in the event of a
Change in Control, the Fair Market Value determined by reference to the Change in Control Price, as defined
under Section 7(c) hereof), over (B) the grant price of the Stock Appreciation Right
as determined by the Committee or the Board. The grant price of a Stock
Appreciation Right shall not be less than the Fair Market Value of a share of Stock
on the date of grant except as provided under Section 6(a) hereof.

3

 

     (ii) Other Terms. The Committee or the Board shall determine at the date of grant
or thereafter, the time or times at which and the circumstances under which a Stock
Appreciation Right may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the time or
times at which Stock Appreciation Rights shall cease to be or become exercisable
following termination of Continuous Service or upon other conditions, the method of
exercise, method of settlement, form of consideration payable in settlement, method
by or forms in which Stock will be delivered or deemed to be delivered to
Participants, whether or not a Stock Appreciation Right shall be in tandem or in
combination with any other Award, and any other terms and conditions of any Stock
Appreciation Right. Limited Stock Appreciation Rights that may only be exercised in
connection with a Change in Control or other event as specified by the Committee or
the Board, may be granted on such terms, not inconsistent with this Section 5(c), as
the Committee or the Board may determine. Stock Appreciation Rights and Limited
Stock Appreciation Rights may be either freestanding or in tandem with other Awards.

          (d) Restricted Stock. The Committee and the Board each is authorized to grant Restricted
Stock to Participants on the following terms and conditions:

     (i) Grant and Restrictions. Restricted Stock shall be subject to such restrictions
on transferability, risk of forfeiture, and other restrictions, if any, as the
Committee or the Board may impose, or as otherwise provided in this Plan. The
restrictions may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals and/or future
service requirements), in such installments, or otherwise, as the Committee or the
Board may determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any Award agreement relating to the
Restricted Stock, a Participant granted Restricted Stock shall have all of the
rights of a stockholder, including the right to vote the Restricted Stock and the
right to receive dividends thereon (subject to any mandatory reinvestment or other
requirement imposed by the Committee or the Board). During the restricted period
applicable to the Restricted Stock, subject to Section 9(b) below, the Restricted
Stock may not be sold, transferred, pledged, hypothecated, margined, or otherwise
encumbered by the Participant.

     (ii) Forfeiture. Except as otherwise determined by the Committee or the Board at
the time of the Award, upon termination of a Participant’s Continuous Service during
the applicable restriction period, the Participant’s Restricted Stock that is at
that time subject to restrictions shall be forfeited and reacquired by the Company;
provided that the Committee or the Board may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that restrictions or
forfeiture conditions relating to Restricted Stock shall be waived in whole or in
part in the event of terminations resulting from specified causes, and the Committee
or the Board may in other cases waive in whole or in part the forfeiture of
Restricted Stock.

     (iii) Certificates for Stock. Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee or the Board shall determine. If
certificates representing Restricted Stock are registered in the name of the
Participant, the Committee or the Board may require that such certificates bear an
appropriate legend referring to the terms, conditions, and restrictions applicable
to such Restricted Stock, that the Company retain physical possession of the
certificates, and that the Participant deliver a stock power to the Company,
endorsed in blank, relating to the Restricted Stock.

     (iv) Dividends and Splits. As a condition to the grant of an Award of Restricted
Stock, the Committee or the Board may require that any cash dividends paid on a
share of Restricted Stock be automatically reinvested in additional shares of
Restricted Stock or applied to the purchase of additional Awards under the Plan.
Unless otherwise determined by the Committee or the Board, Stock distributed in
connection with a Stock split or Stock dividend, and other

4

 

property distributed as a
dividend, shall be subject to restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which such Stock or other property
has been distributed.

          (e) Bonus Stock and Awards in Lieu of Obligations. The Committee and the Board each is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of Company
obligations to pay cash or deliver other property under the Plan or under other plans or
compensatory arrangements, provided that, in the case of Participants subject to Section 16 of the
Exchange Act, the amount of such grants remains within the discretion of the Committee to the
extent necessary to ensure that acquisitions of Stock or other Awards are exempt from liability
under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall be subject to
such other terms as shall be determined by the Committee or the Board.

          (f) Other Stock-Based Awards. The Committee and the Board each is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards that may be
denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or
related to, Stock, as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment
contingent upon performance of the Company or any other factors designated by the Committee or the
Board, and Awards valued by reference to the book value of Stock or the value of securities of or
the performance of specified Related Entities or business units. The Committee or the Board shall
determine the terms and conditions of such Awards. Stock delivered pursuant to an Award in the
nature of a purchase right granted under this Section 5(f) shall be purchased for such
consideration (including without limitation loans from the Company or a Related Entity), paid for
at such times, by such methods, and in such forms, including, without limitation, cash, Stock,
other Awards, or other property, as the Committee or the Board shall determine. The Committee and
the Board shall have the discretion to grant such other Awards that are exercisable for unvested
shares of Stock. Should the Optionee’s Continuous Service cease while holding such unvested
shares, the Company shall have the right to repurchase, at the exercise price paid per share, any
or all of those unvested shares. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Committee or the Board and set forth in the document
evidencing such repurchase right. Cash awards, as an element of or supplement to any other Award
under the Plan, may also be granted pursuant to this Section 5(f).

     6. Certain Provisions Applicable to Awards.

          (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan
may, in the discretion of the Committee or the Board, be granted either alone or in addition to, in
tandem with, or in substitution or exchange for, any other Award or any award granted under another
plan of the Company, any Related Entity, or any business entity to be acquired by the Company or a
Related Entity, or any other right of a Participant to receive payment from the Company or any
Related Entity. Such additional, tandem, and substitute or exchange Awards may be granted at any
time. If an Award is granted in substitution or exchange for another Award or award, the Committee
or the Board shall require the surrender of such other Award or award in consideration for the
grant of the new Award. In addition, Awards may be granted in lieu of cash compensation, including
in lieu of cash amounts payable under other plans of the Company or any Related Entity, in which
the value of Stock subject to the Award is equivalent in value to the cash compensation (for
example, Restricted Stock), or in which the exercise price, grant price or purchase price of the
Award in the nature of a right that may be exercised is equal to the Fair Market Value of the
underlying Stock minus the value of the cash compensation surrendered (for example, Options granted
with an exercise price “discounted” by the amount of the cash compensation surrendered).

          (b) Term of Awards. The term of each Award shall be for such period as may be determined by
the Committee or the Board; provided that in no event shall the term of any Option or Stock
Appreciation Right exceed a period of ten years (or such shorter term as may be required in
respect of an Incentive Stock Option under Section 422 of the Code).

          (c) Form and Timing of Payment Under Awards; Deferrals. Subject to the terms of the Plan and
any applicable Award agreement, payments to be made to the Company or a Related Entity upon the

5

 

exercise of an Option or other Award or settlement of an Award may be made in such forms as the
Committee or the Board shall determine, including, without limitation, cash, other Awards or other
property, and may be made in a single payment or transfer, in installments, or on a deferred basis.
The settlement of any Award may be accelerated, and cash paid in lieu of Stock in connection with
such settlement, in the discretion of the Committee or the Board or upon occurrence of one or more
specified events (in addition to a Change in Control). Installment or deferred payments may be
required by the Committee or the Board (subject to Section 9(e) of the Plan) or permitted at the
election of the Participant on terms and conditions established by the Committee or the Board.
Payments may include, without limitation, provisions for the payment or crediting of a reasonable
interest rate on installment or deferred payments or the grant or crediting of other amounts in
respect of installment or deferred payments denominated in Stock.

          (d) Exemptions from Section 16(b) Liability. It is the intent of the Company that this Plan
comply in all respects with applicable provisions of Rule 16b-3 or Rule 16a-1(c)(3) to the extent
necessary to ensure that neither the grant of any Awards to nor other transaction by a Participant
who is subject to Section 16 of the Exchange Act is subject to liability under Section 16(b)
thereof (except for transactions acknowledged in writing to be non-exempt by such Participant).
Accordingly, if any provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any such transaction, such
provision will be construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall avoid liability under
Section 16(b). In addition, the purchase price of any Award conferring a right to purchase Stock
shall be not less than any specified percentage of the Fair Market Value of Stock at the date of
grant of the Award then required in order to comply with Rule 16b-3.

     7. Change in Control.

          (a) Effect of “Change in Control.” If and to the extent provided in the Award, in the event
of a “Change in Control,” as defined in Section 7(b):

     (i) The Committee may, within its discretion, accelerate the vesting and
exercisability of any Award carrying a right to exercise that was not previously
vested and exercisable as of the time of the Change in Control, subject to
applicable restrictions set forth in Section 8(a) hereof;

     (ii) The Committee may, within its discretion, accelerate the exercisability of
any limited Stock Appreciation Rights (and other Stock Appreciation Rights if so
provided by their terms) and provide for the settlement of such Stock Appreciation
Rights for amounts, in cash, determined by reference to the Change in Control Price;
and

     (iii) The Committee may, within its discretion, lapse the restrictions,
deferral of settlement, and forfeiture conditions applicable to any other Award
granted under the Plan and such Awards may be deemed fully vested as of the time of
the Change in Control, except to the extent of any waiver by the Participant and
subject to applicable restrictions set forth in Section 9(a) hereof.

          (b) Definition of “Change in Control. A “Change in Control” shall be deemed to have occurred
upon:

     (i) Approval by the stockholders of the Company of a reorganization, merger,
consolidation, or other form of corporate transaction or series of transactions, in
each case, with respect to which persons who were the stockholders of the Company
immediately prior to such reorganization, merger, consolidation, or other
transaction do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged, or consolidated company’s then
outstanding voting securities, or a liquidation or dissolution of the Company or the
sale of all or substantially all of the assets of the Company (unless such
reorganization, merger, consolidation or other corporate transaction,

6

 

liquidation,
dissolution or sale (any such event being referred to as a “Corporate Transaction”)
is subsequently abandoned);

     (ii) Individuals who, as of the date on which the Award is granted, constitute
the Board (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent to
the date on which the Award was granted whose election, or nomination for election
by the Company’s shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office is in connection with an actual
or threatened election contest relating to the election of the Directors of the
Company) shall be, for purposes of this Agreement, considered as though such person
were a member of the Incumbent Board; or

     (iii) the acquisition (other than from the Company) by any person, entity, or
“group”, within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act, of more than 50% of either the then outstanding shares of the
Company’s Stock or the combined voting power of the Company’s then outstanding
voting securities entitled to vote generally in the election of directors
(hereinafter referred to as the ownership of a “Controlling Interest”) excluding,
for this purpose, any acquisitions by (1) the Company or a Related Entity, (2) any
person, entity, or “group” that as of the date on which the Award is granted owns
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act) of a Controlling Interest or (3) any employee benefit plan
of the Company a Related Entity.

          (c) Definition of “Change in Control Price.” The “Change in Control Price” means an amount in
cash equal to the higher of (i) the amount of cash and fair market value of property that is the
highest price per share paid (including extraordinary dividends) in any Corporate Transaction
triggering the Change in Control under Section 7(b)(i) hereof or any liquidation of shares
following a sale of substantially all of the assets of the Company, or (ii) the highest Fair Market
Value per share at any time during the 60-day period preceding and the 60-day period following the
Change in Control.

     8. Automatic Grant Program

          (a) Amount and Date of Grant. During the term of the Plan, the Company shall make automatic
grants of Options (“Automatic Options”) to each Director (or proposed Director pursuant to Section
8(a)(iii)) who is not employed by the Company, whether or not such person is a Non-Employee
Director as referred to in Section 2.2 as follows:

     (i) Annual Grants. Each year on the Annual Grant Date, an Automatic Option to
acquire 10,000 shares of Stock shall be granted to each Director for as long as
shares of Stock are available under Section 3(a) hereof. The “Annual Grant Date”
shall be the date of the Company’s annual stockholders meeting commencing as of the
first annual meeting occurring after the Effective Date. Any Director that was
granted an Automatic Option under Section 8(a)(ii) or (iii) within 90 days of an
Annual Grant Date shall be ineligible to receive an Automatic Option pursuant to
this Section 8(a)(i) on such Annual Grant Date.

     (ii) Initial New Director Grants. On the Initial Grant Date, every new member
of the Board, who is an Director and has not previously received an Automatic Option
under this Section 8(a)(ii) shall be granted an Automatic Option to acquire 15,000
shares of Stock for as long as shares of Stock are available under Section 3(a)
hereof. The “Initial Grant Date” shall be the date that a Director is first
appointed or elected to the Board. Any Director who previously
received an Automatic Option pursuant to Section 8(a)(iii) shall be ineligible
to receive an Automatic Option pursuant to this Section 8(a)(ii).

     (iii) Initial Proposed Director Grants. On the date that shares of Stock first
become registered under Section 12 of the 1934 Act, the Company shall grant an
Automatic

7

 

Option to acquire 10,000 shares of Stock to each non-employee whose
election to the Board is proposed as of such date .

          (b) Exercise Price. The exercise price per share of Stock subject to each Automatic Option
granted under Section 8(a)(i) or (ii) shall be equal to 100 percent of the Fair Market Value per
share of the Stock on the date such Automatic Option was granted. The exercise price per share of
Stock subject to each Automatic Option granted under Section 8(a)(iii) shall be equal to the
average price per share of Stock on the last day of “when issued trading” prior to the
distribution of the Stock.

          (c) Vesting. Each Automatic Option granted pursuant to Section 8(a)(i) shall vest and become
exercisable 12 months after the date of grant. Each Automatic Option granted pursuant to Section
8(a)(ii) shall vest and become exercisable in a series of three equal and successive installments
with the first installment vested on the date of grant and the next two installments 12 months and
24 months after the date of grant. Each Automatic Option granted pursuant to Section 8(a)(iii)
shall vest and become exercisable in a series of three equal and successive installments with the
first installment vested on the date of the recipient’s election to the Board and the next two
installments 12 months and 24 months after the date of grant. Each Automatic Option shall vest and
become exercisable only if the optionholder has not ceased serving as a Board member as of such
vesting date.

          (d) Term of Automatic Options. Each Automatic Option shall expire on the tenth anniversary
(the “Expiration Date”) of the date on which such Automatic Option was granted. Except as
determined by the Plan Administrator, should a Director’s service as a Board member cease prior to
the Expiration Date for any reason while an Automatic Option remains outstanding and unexercised,
the Automatic Option term shall immediately be modified and the Automatic Option shall terminate
and cease to be outstanding in accordance with the following provisions:

     (i) The Automatic Option shall immediately terminate and cease to be
outstanding with respect to any shares that were not vested at the time of the
optionholder’s cessation of Board service; provided, however, that a proposed
director who receives a grant pursuant to Section 8(a)(iii) shall not be treated as
ceasing to serve as a Board member for purposes of this Section 7 prior to such
individual’s election to the Board.

     (ii) Should an optionholder cease, for any reason other than death, to serve as
a member of the Board, then the optionholder shall have 90 days measured from the
date of such cessation of Board service in which to exercise his or her Automatic
Options that vested prior to the time of such cessation of Board service. In no
event, however, may any Automatic Option be exercised after the Expiration Date of
such Automatic Option.

     (iii) Should an optionholder die while serving as a Board member or within 90
days after cessation of Board service, then the personal representative of the
optionholder’s estate (or the person or persons to whom the Automatic Option is
transferred pursuant to the optionholder’s will or in accordance with the laws of
the descent and distribution) shall have a 90-day period measured from the date of
the optionholder’s cessation of Board service in which to exercise the Automatic
Options that vested prior to the time of such cessation of Board service. In no
event, however, may any Automatic Option be exercised after the Expiration Date of
such Automatic Option.

          (e) Other Terms. Except as expressly provided otherwise in this Section 8, an
Automatic Option shall be subject to all of the terms and conditions of the Plan. Directors shall
be entitled to receive other awards under the Plan or other plans of the Company in accordance with
the terms and conditions thereof.

8

 

     9. General Provisions.

          (a) Compliance With Legal and Other Requirements. The Company may, to the extent deemed
necessary or advisable by the Committee or the Board, postpone the issuance or delivery of Stock or
payment of other benefits under any Award until completion of such registration or qualification of
such Stock or other required action under any federal or state law, rule, or regulation, listing,
or other required action with respect to any stock exchange or automated quotation system upon
which the Stock or other Company securities are listed or quoted, or compliance with any other
obligation of the Company, as the Committee or the Board, may consider appropriate, and may require
any Participant to make such representations, furnish such information and comply with or be
subject to such other conditions as it may consider appropriate in connection with the issuance or
delivery of Stock or payment of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations.

          (b) Limits on Transferability; Beneficiaries. No Award or other right or interest of a
Participant under the Plan, including any Award or right that constitutes a derivative security as
generally defined in Rule 16a-1(c) under the Exchange Act, shall be pledged, hypothecated, or
otherwise encumbered or subject to any lien, obligation, or liability of such Participant to any
party (other than the Company or a Subsidiary), or assigned or transferred by such Participant
otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death
of a Participant, and such Awards or rights that may be exercisable shall be exercised during the
lifetime of the Participant only by the Participant or his or her guardian or legal representative,
except that Awards and other rights (other than Incentive Stock Options and Stock Appreciation
Rights in tandem therewith) may be transferred to one or more Beneficiaries or other transferees
during the lifetime of the Participant, and may be exercised by such transferees in accordance with
the terms of such Award, but only if and to the extent such transfers and exercises are permitted
by the Committee or the Board pursuant to the express terms of an Award agreement (subject to any
terms and conditions which the Committee or the Board may impose thereon, and further subject to
any prohibitions or restrictions on such transfers pursuant to Rule 16b-3). A Beneficiary,
transferee, or other person claiming any rights under the Plan from or through any Participant
shall be subject to all terms and conditions of the Plan and any Award agreement applicable to such
Participant, except as otherwise determined by the Committee or the Board, and to any additional
terms and conditions deemed necessary or appropriate by the Committee or the Board.

          (c) Adjustments.

     (i) Adjustments to Awards. In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization, forward
or reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange, liquidation, dissolution, or other similar corporate
transaction or event affects the Stock and/or such other securities of the Company
or any other issuer such that a substitution, exchange, or adjustment is determined
by the Committee or the Board to be appropriate, then the Committee or the Board
shall, in such manner as it may deem equitable, substitute, exchange, or adjust any
or all of (A) the number and kind of shares of Stock that may be delivered in
connection with Awards granted thereafter, (B) the number and kind of shares of
Stock by which annual per-person Award limitations are measured under Section 4
hereof, (C) the number and kind of shares of Stock subject to or deliverable in
respect of outstanding Awards, (D) the exercise price, grant price, or purchase
price relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award, and (E) any other aspect of any Award
that the Committee or Board determines to be appropriate.

     (ii) Adjustments in Case of Certain Corporate Transactions. In the event of a
proposed sale of all or substantially all of the Company’s assets or any
reorganization, merger, consolidation, or other form of corporate transaction in
which the Company does not survive, or in which the shares of Stock are exchanged
for or converted into securities issued by another entity, then the successor or
acquiring entity or an affiliate thereof may, with the consent of the Committee or
the Board, assume each outstanding Option or substitute an equivalent option or
right. If the successor or acquiring entity or an affiliate thereof, does not cause
such an

9

 

assumption or substitution, then each Option shall terminate upon the consummation
of sale, merger, consolidation, or other corporate transaction. The Committee or
the Board shall give written notice of any proposed transaction referred to in this
Section 8(c)(ii) a reasonable period of time prior to the closing date for such
transaction (which notice may be given either before or after the approval of such
transaction), in order that Optionees may have a reasonable period of time prior to
the closing date of such transaction within which to exercise any Options that are
then exercisable (including any Options that may become exercisable upon the closing
date of such transaction). An Optionee may condition his exercise of any Option
upon the consummation of the transaction.

     (iii) Other Adjustments. In addition, the Committee (and the Board if and only to
the extent such authority is not required to be exercised by the Committee to comply
with Code Section 162(m)) is 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, acquisitions and dispositions of
businesses and assets) affecting the Company, any Related Entity, or any business
unit, or the financial statements of the Company or any Related Entity, or in
response to changes in applicable laws, regulations, accounting principles, tax
rates and regulations, or business conditions or in view of the Committee’s
assessment of the business strategy of the Company, any Related Entity or business
unit thereof, performance of comparable organizations, economic and business
conditions, personal performance of a Participant, and any other circumstances
deemed relevant; provided that no such adjustment shall be authorized or made if and
to the extent that such authority or the making of such adjustment would cause
Options, or Stock Appreciation Rights hereof to Participants designated by the
Committee as Covered Employees and intended to qualify as “performance-based
compensation” under Code Section 162(m) and the regulations thereunder to otherwise
fail to qualify as “performance-based compensation” under Code Section 162(m) and
regulations thereunder.

          (d) Taxes. The Company and any Related Entity are authorized to withhold from any Award
granted, any payment relating to an Award under the Plan, including from a distribution of Stock,
or any payroll or other payment to a Participant, amounts of withholding and other taxes due or
potentially payable in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company and Participants to
satisfy obligations for the payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or receive Stock or other property and
to make cash payments in respect thereof in satisfaction of a Participant’s tax obligations, either
on a mandatory or elective basis in the discretion of the Committee.

          (e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue, or
terminate the Plan, or the Committee’s authority to grant Awards under the Plan, without the
consent of stockholders or Participants, except that any amendment or alteration to the Plan shall
be subject to the approval of the Company’s stockholders not later than the annual meeting next
following such Board action if such stockholder approval is required by any federal or state law or
regulation (including, without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any
stock exchange or automated quotation system on which the Stock may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to
stockholders for approval; provided that, without the consent of an affected Participant, no such
Board action may materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee or the Board may waive any conditions or
rights under, or amend, alter, suspend, discontinue, or terminate any Award theretofore granted and
any Award agreement relating thereto, except as otherwise provided in the Plan; provided that,
without the consent of an affected Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant under such Award.

          (f) Limitation on Rights Conferred Under Plan. Neither the Plan nor any action taken
hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue
as an Eligible Person or Participant or in the employ of the Company or a Related Entity; (ii)
interfering in any way with the right of the Company or a Related Entity to terminate any Eligible
Person’s or Participant’s Continuous Service at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated

10

 

uniformly with other Participants and Employees, or (iv) conferring on a Participant any of
the rights of a stockholder of the Company unless and until the Participant is duly issued or
transferred shares of Stock in accordance with the terms of an Award.

          (g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an
“unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made
to a Participant or obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may authorize the creation of trusts and
deposit therein cash, Stock, other Awards, or other property, or make other arrangements to meet
the Company’s obligations under the Plan. Such trusts or other arrangements shall be consistent
with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent
of each affected Participant. The trustee of such trusts may be authorized to dispose of trust
assets and reinvest the proceeds in alternative investments, subject to such terms and conditions
as the Committee or the Board may specify and in accordance with applicable law.

          (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its
submission to the stockholders of the Company for approval shall be construed as creating any
limitations on the power of the Board or a committee thereof to adopt such other incentive
arrangements as it may deem desirable including incentive arrangements and awards which do not
qualify under Code Section 162(m).

          (i) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by
the Committee or the Board, in the event of a forfeiture of an Award with respect to which a
Participant paid cash or other consideration, the Participant shall be repaid the amount of such
cash or other consideration. No fractional shares of Stock shall be issued or delivered pursuant
to the Plan or any Award. The Committee or the Board shall determine whether cash, other Awards or
other property shall be issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.

          (j) Governing Law. The validity, construction and effect of the Plan, any rules and
regulations under the Plan, and any Award agreement shall be determined in accordance with the laws
of the state of Delaware without giving effect to principles of conflicts of laws, and applicable
federal law.

          (k) Plan Effective Date and Stockholder Approval; Termination of Plan. The Plan shall become
effective on the Effective Date, subject to subsequent approval within 12 months of its adoption by
the Board by stockholders of the Company eligible to vote in the election of directors, by a vote
sufficient to meet the requirements of Code Sections 162(m) (if applicable) and 422, Rule 16b-3
under the Exchange Act (if applicable), applicable Nasdaq requirements, and other laws,
regulations, and obligations of the Company applicable to the Plan. Awards may be granted subject
to stockholder approval, but may not be exercised or otherwise settled in the event stockholder
approval is not obtained except with respect to Awards granted by the Company prior to the
Company’s first shareholder meeting and that are otherwise in compliance with Treasury Regulations
Section 1.162-27(f)(4)(iii). The Plan shall terminate on the earlier of (i) ten (10) years from
the later of (x) the date this Plan was originally approved by the Board or the shareholders of the
Company, whichever is earlier and (y) the date an increase in the number of shares reserved for
issuance under the Plan is approved by the Board (so long as such increase is also approved by the
shareholders) or (ii) at such time as no shares of Stock remain available for issuance under the
Plan and the Company has no further rights or obligations with respect to outstanding Awards under
the Plan.

     10. Definitions. For purposes of the Plan, the following terms shall be defined as set forth
below, in addition to such terms defined in Section 1 hereof.

          (a) “Automatic Options” means as defined in Section 8(a).

          (b) “Award” means any Option, Stock Appreciation Right (including Limited Stock Appreciation
Right), Restricted Stock, Stock granted as a bonus or in lieu of another award, or Other
Stock-Based Award, together with any other right or interest, granted to a Participant under the
Plan.

11

 

          (c) “Beneficiary” means the person, persons, trust, or trusts that have been designated by a
Participant in his or her most recent written beneficiary designation filed with the Committee to
receive the benefits specified under the Plan upon such Participant’s death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b) hereof. If, upon a
Participant’s death, there is no designated Beneficiary or surviving designated Beneficiary, then
the term Beneficiary means the person, persons, trust, or trusts entitled by will or the laws of
descent and distribution to receive such benefits.

          (d) “Beneficial Owner”, “Beneficially Owning” and “Beneficial Ownership” shall have the
meanings ascribed to such terms in Rule 13d-3 under the Exchange Act and any successor to such
Rule.

          (e) “Board” means the Company’s Board of Directors.

          (f) “Change in Control” means a Change in Control as defined with related terms in Section 8
of the Plan.

          (g) “Change in Control Price” means the amount calculated in accordance with Section 7(c) of
the Plan.

          (h) “Code” means the Internal Revenue Code of 1986, as amended from time to time, including
regulations thereunder and successor provisions and regulations thereto.

          (i) “Committee” means a committee designated by the Board to administer the Plan. The Board
may designate more than one committee to administer the Plan as to various categories of Eligible
Persons. The Committee shall consist of at least two directors, and each member of which shall be
(i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, unless
administration of the Plan by “non-employee directors” is not then required in order for exemptions
under Rule 16b-3 to apply to transactions under the Plan, and (ii) an “outside director” within the
meaning of Section 162(m) of the Code, unless administration of the Plan by “outside directors” is
not then required in order to qualify for tax deductibility under Section 162(m) of the Code,
provided, when appropriate, a Committee shall satisfy the then requirements of any stock exchange
or automated quotation system upon which the Stock or other Company securities are listed or
quoted.

          (j) “Consultant” means any person (other than an Employee or a Director, solely with respect
to rendering services in such person’s capacity as a director) who is engaged by the Company or any
Related Entity to render consulting or advisory services to the Company or such Related Entity.

          (k) “Continuous Service” means uninterrupted provision of services to the Company in any
capacity of Employee, Director, or Consultant. Continuous Service shall not be considered to be
interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any
Related Entities, or any successor entities, in any capacity of Employee Director, or Consultant,
or (iii) any change in status as long as the individual remains in the service of the Company or a
Related Entity in any capacity of Employee, Director, or Consultant (except as otherwise provided
in the Option Agreement). An approved leave of absence shall include sick leave, military leave,
or any other authorized personal leave.

          (l) “Corporate Transaction” means a Corporate Transaction as defined in Section 7(b)(i) of the
Plan.

          (m) “Director” means a member of the Board or the board of directors of any Related Entity.

          (n) “Effective Date” means the effective date of the Plan, which shall be August 26, 2003.

          (o) “Eligible Person” means each Executive Officer of the Company (as defined under the
Exchange Act) and other officers, Directors, and Employees of the Company or of any Related Entity,
and Consultants with the Company or any Related Entity. The foregoing notwithstanding, only
employees of the Company, the Parent, or any Subsidiary shall be Eligible Persons for purposes of
receiving any Incentive Stock

12

 

Options. An Employee on leave of absence may be considered as still in the employ of the
Company or a Related Entity for purposes of eligibility for participation in the Plan.

          (p) “Employee” means any person, including an officer or Director, who is an employee of the
Company or any Related Entity. The Payment of a director’s fee by the Company or a Related Entity
shall not be sufficient to constitute “employment” by the Company.

          (q) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time,
including rules thereunder and successor provisions and rules thereto.

          (r) “Executive Officer” means an executive officer of the Company as defined under the
Exchange Act.

          (s) “Fair Market Value” means the fair market value of Stock, Awards, or other property as
determined by the Committee or the Board, or under procedures established by the Committee or the
Board. Unless otherwise determined by the Committee or the Board, the Fair Market Value of Stock
as of any given date after which the Company is a Publicly Held Corporation shall be the closing
sale price per share reported on a consolidated basis for stock listed on the principal stock
exchange or market on which Stock is traded on the date as of which such value is being determined
or, if there is no sale on that date, then on the last previous day on which a sale was reported.

          (t) “Incentive Stock Option” means any Option intended to be designated as an incentive stock
option within the meaning of Section 422 of the Code or any successor provision thereto.

          (u) “Incumbent Board” means the Incumbent Board as defined in Section 7(b)(ii) of the Plan.

          (v) “Limited Stock Appreciation Right” means a right granted to a Participant under Section
6(c) hereof.

          (w) “Option” means a right granted to a Participant under Section 5(b) hereof, to purchase
Stock or other Awards at a specified price during specified time periods.

          (x) “Optionee” means a person to whom an Option or Incentive Stock Option is granted under
this Plan or any person who succeeds to the rights of such person under this Plan.

          (y) “Other Stock-Based Awards” means Awards granted to a Participant under Section 5(f)
hereof.

          (z) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code.

          (aa) “Participant” means a person who has been granted an Award under the Plan which remains
outstanding, including a person who is no longer an Eligible Person.

          (bb) “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange
Act and used in Sections 13(d) and 14(d) thereof, and shall include a “group” as defined in Section
13(d) thereof.

          (cc) “Related Entity” means any entity that is directly or indirectly controlled by the
Company or any entity in which the Company has a significant equity interest, as determined by the
Board or the Committee.

          (dd) “Restricted Stock” means Stock granted to a Participant under Section 5(d) hereof, that
is subject to certain restrictions and to a risk of forfeiture.

13

 

          (ee) “Rule 16b-3” and “Rule 16a-1(c)(3)” means Rule 16b-3 and Rule 16a-1(c)(3), as from time
to time in effect and applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.

          (ff) “Stock” means the Company’s Common Stock, and such other securities as may be substituted
(or resubstituted) for Stock pursuant to Section 10(c) hereof.

          (gg) “Stock Appreciation Right” means a right granted to a Participant under Section 6(c)
hereof.

          (hh) “Subsidiary” means a “subsidiary corporation” whether now or hereafter existing, as
defined in Section 424(f) of the Code.

14

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]