Document:

Exhibit 10.1

PROTECTION ONE, INC.

SENIOR MANAGEMENT

SHORT-TERM INCENTIVE PLAN

Effective
January 1, 2007

The Protection One, Inc.
Senior Management Short-Term Incentive Plan (“Plan”) is intended to motivate
officers and other members of senior management of the Company and certain of
its designated subsidiaries to achieve the highest level of performance and to
further the achievement of Protection One’s goals, objectives, and strategies.
The Plan is designed to reward exceptional performance using financial
incentives to supplement base compensation. Also, the Plan is intended to
enhance Protection One’s ability to attract and retain talented employees.
Finally, the Plan is intended to benefit Protection One in the pursuit of its
goals and objectives by stimulating and motivating the participants, which will
in turn enhance productivity.

1.           Definitions.  As used herein, the following words and phrases shall have
the following meanings unless the context clearly indicates otherwise:

(a)    Award:  The
total incentive award made to a Participant under the terms of the Plan.

(b)           Award Criteria:  The Financial and Discretionary
criteria described in Section 4, and as approved by the Board from time to
time, and as same may be amended from time to time in accordance with the terms
hereof.

(c)            Base Compensation:  Annualized salary during the
last half-month pay period of 2007 paid to an employee, excluding overtime,
bonuses, commissions, or any pay element other than the base rate of
compensation. Base Compensation will be pro rated based on months of employment
as a Participant, e.g., Base Compensation for an eligible employee whose
employment with Protection One as a Participant commenced on July 1, 2007 will
be calculated as the product of (i) annualized salary in the last half-month
pay period and (ii) 50%.

(d)           Board:  The Board of Directors of the Company.

(e)            CMS:  Any of Security Monitoring Services, Inc., a Florida
corporation (d/b/a Computerized Monitoring Services, Inc., or CMS), the
wholesale segment operation acquired in the merger with Integrated Alarm
Services Group, Inc., including Criticom International Corporation, which is or
shall be operationally combined with CMS to form Criticom Monitoring Services,
and their respective successors and assigns.

(f)              CMS Senior Management:  The individual employed by CMS
who holds the title of President and those individuals who are: (i) employed by
CMS in pay grades A, B or C of the wage and salary administration plan, and
(ii) employed by CMS not in pay grades A, B or C but designated as a member of
Senior Management by the CEO.

(g)           Company:  Protection One, Inc., a Delaware corporation, and its
successors and assigns.

(h)           Company Senior Management:  Those individuals who are: (i)
employed by the Company in pay grades A, B or C of the wage and salary
administration plan, and (ii) employed by the Company not in pay grades A, B or
C but designated as a member of Senior Management by the CEO.

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(i)               Designated Subsidiaries:  CMS, POAMI and NMF.

(j)               Discretionary Criteria:  Criteria which are based on
financial or non-financial criteria or both, applied in the discretion of the
appropriate managerial decision-maker to evaluate the performance of
Participants, in accordance with pay grade and management level as set forth in
Section 2.

(k)            Executive Officers:  Those individuals who hold the
following officer positions: (i) President/Chief Executive Officer (“CEO”) of
the Company or POAMI; (ii) any Executive Vice President (“EVP”) of the Company
or POAMI, including without limitation the Executive Vice President and Chief
Financial Officer (“CFO”), the Executive Vice President and Chief Operating
Officer (“COO”), and the Executive Vice President and Chief Marketing Officer (“CMO”).

(l)               Incentive Period:  The twelve month period measured
in the final publication of the year-end consolidated Financial Statements of
the Company.

(m)         NMF:  Network Multi-Family Security Corporation, a Delaware
corporation, and its successors and assigns.

(n)           NMF Senior Management:  Those individuals who are: (i)
employed by NMF in pay grades A, B or C of the wage and salary administration
plan, and (ii) employed by NMF not in pay grades A, B or C but designated as a
member of Senior Management by the CEO.

(o)           Officers:  Those individuals employed by the Company or POAMI who
hold the following officer positions: (i) Vice President and Treasurer, (ii)
Vice President, General Counsel and Secretary, and (iii) Senior Vice President
of Customer Operations.

(p)           Participant:  Each (i) Executive Officer, Officer and member of Senior
Management, other than those Executive Officers, Officers and members of Senior
Management who are participants in a separate non-equity incentive plan (other
than retention programs), (ii) Senior Vice President Alliances (who is a participant
in a separate non-equity incentive plan), and (iii) employee who is designated
for participation in the Plan by the Board or the CEO pursuant to Section 3,
regardless of their participation in a separate non-equity incentive plan.

(q)           Plan:  The Plan herein set forth, and as from time to time
amended.

(r)              POAMI:  Protection One Alarm Monitoring, Inc., a Delaware
corporation, and its successors and assigns and the retail segment acquired in
the Integrated Alarm Services Group, Inc. merger.

(s)            POAMI Senior Management:  Those individuals who are: (i)
employed by POAMI in pay grades A, B or C of the wage and salary administration
plan, and (ii) employed by POAMI not in pay grades A, B or C but designated as
a member of Senior Management by the CEO.

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(t)              Senior Management:  The Company Senior Management,
POAMI Senior Management, NMF Senior Management and CMS Senior Management.

(u)           Target Award Percentage:  That percentage of a Participant’s
Base Compensation which the Board (or the CEO pursuant to Section 3) shall from
time to time determine to be available to a Participant under the Plan, or
which is specified in any employment agreement with Participant, which
employment agreement is approved by the Board. As an example, a member of
Senior Management may be targeted to earn up to 25% of his/her Base
Compensation as an Award if all applicable criteria are achieved. The Target
Award may apply to a class of employees or to individual employees, at the
discretion of the Board (or the CEO pursuant to Section 3).

2.           Administration.  The Board shall have authority
for establishing the overall Plan, administering the Plan, determining whether
actual individual compensation awards will be paid, and approving the amount of
the actual individual compensation awards. The Board may delegate any or all of
such authority with respect to the Plan to a committee of the Board or, with
respect to decisions or determinations affecting Plan Participants other than the
CEO or CFO, to the CEO or CFO of the Company.

The members of the Board and all agents, officer, fiduciaries, and
employees of the Company shall not be liable for any act, omission,
interpretation, construction, or determination made in good faith in connection
with their responsibilities with respect to the Plan; and the Company hereby
agrees to indemnify the members of the Board and all agents, officers,
fiduciaries, and employees of the Company in respect to any claim, loss, damage,
or expense (including counsel fees) arising from any such act, omission, interpretation,
construction, or determination to the full extent permitted by law.

The day-to-day administration of the Plan with regard to specific
classes of Participants shall be as follows:

(a)            Executive Officers:  The Board has authority for the
day-to-day supervision of the Plan, including designation of the Executive
Officers’ goals, determination of the achievement of such goals, determination
of the award size relating to the goals, and the determination of the amount of
the discretionary award.

(b)           Officers:  The Board has authority for the day-to-day supervision of
the Plan including the designation of the Officers’ goals, determination of the
achievement of such goals, determination of the award size relating to the
goals, and the determination of the amount of the discretionary award.

(c)            Senior Management:  The Executive Officers have
authority for the day-to-day supervision of the Plan, including the designation
of goals, determination of the achievement of such goals, determination of the
award size relating to the goals, and the determination of the amount of the
discretionary award.

3.           Eligibility to Participate.  Only those employees who are
Participants, as that term is defined in Section 1(p) above, are Participants
in the Plan. The CEO shall determine, from time-to-time, whether the Plan
should be extended to other individuals or groups of employees of the Company
or its Designated Subsidiaries; provided, however, that the CEO shall not have
authority to extend the Plan to additional executive officers.

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4.           Award Criteria.  Awards under the Plan shall be
calculated utilizing the following three criteria for each Participant: (i) the
Steady State Net Operating Cash Flow (“SSNOCF”) Criterion, from which 50% of
the Award is derived, (ii) the Recurring Monthly Revenue (“RMR”) Criterion,
from which 20% of the Award is derived and (iii) the Discretionary Criterion,
from which 30% of the Award is derived. These criteria are further described below.

(a)            SSNOCF Criterion and RMR Criterion:  The purposes of these measures
are to foster a team orientation and to directly tie a Participant’s incentive
to the SSNOCF and RMR of the Company and the Designated Subsidiaries, which the
Company believes are key operating metrics and directly affect shareholder
value. 

SSNOCF and RMR shall be calculated in a manner
consistent with the method used in the Company’s annual financial plan and
approved by the Board. SSNOCF and RMR shall be calculated both on a
consolidated basis for the Company and also calculated separately for each
Designated Subsidiary. The RMR Criterion is based on RMR in force at the end of
the fiscal year. Each of the SSNOCF and RMR Criterion shall be applied to
Participants as follows:

·                            For Executive Officers,
Officers and certain other key corporate employees (as designated by the CEO),
the applicable SSNOCF Criterion and RMR Criterion shall be based one hundred
percent (100%) on the consolidated SSNOCF or RMR of the Company. 

·                            For CMS Senior Management, the applicable
SSNOCF Criterion and RMR Criterion shall be based eighty percent (80%) on the
SSNOCF or RMR of CMS and twenty percent (20%) on the consolidated SSNOCF or RMR
of the Company.

·                            For NMF Senior Management, the applicable
SSNOCF and RMR Criterion shall be based eighty percent (80%) on the SSNOCF or
RMR of NMF and twenty percent (20%) on the consolidated SSNOCF or RMR of the
Company.

·                            For Company Senior Management and POAMI
Senior Management, the applicable SSNOCF Criterion and RMR Criterion shall be
based eighty percent (80%) on the SSNOCF or RMR of POAMI and twenty percent (20%)
on the consolidated SSNOCF or RMR of the Company.

The foregoing calculations shall be adjusted to exclude the impact of
the following:

·                            Unbudgeted expenses related to (i) legal
costs and settlements, with respect to the Company, arising from matters that
preceded the tenure of current management (i.e., prior to April 2001); (ii)
legal costs and settlements, with respect to Integrated Alarm Services Group (“IASG”),
arising from matters that preceded Protection One’s merger with IASG (i.e.,
prior to April 2007); (iii) non-cash stock-based compensation; (iv) costs
arising from the AMPS conversion; (v) costs arising from rebranding required by
the agreement with BellSouth; (vi) the initial marketed offering (and any
unbudgeted benefits of the IMO); and (vii) changes in working capital;

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·                            Unbudgeted increases or reductions in RMR
that results from (i) a billing system conversion; (ii) a change in estimate;
(iii) acquisitions of RMR (whether by purchasing assets or companies); (iv)
dispositions of RMR (whether by selling assets or subsidiaries); (v) the AMPS
conversion program; and (vi) cancellation of or material reduction of
Westminster Alarm’s, Protect America’s, and Apx’s wholesale monitoring RMR; and

·                            The creation cost associated with the IASG
merger. 

The calculation of Participants’ financial component will include a
multiplier of 0% to 200% (the “Financial Multiplier”) that will depend on
performance against plan.

The outcome desired from the Financial Multiplier for SSNOCF
performance is to yield a Financial Multiplier within a range of 0.0 if Actual
SSNOCF is less than Budgeted SSNOCF by 10% or more up to maximum of 2.0 if
Actual SSNOCF is greater than Budgeted SSNOCF by 10% or more.

The formula for calculating the Financial Multiplier for SSNOCF
performance is as follows:

(Actual SSNOCF — (90%) (Budgeted SSNOCF)) divided by
((10%) (Budgeted SSNOCF)) = SSNOCF Financial Multiplier

The calculation for determining the SSNOCF Criterion component of the
Award under the plan is as follows:

SSNOCF Financial Multiplier X Target Award Percentage
X SSNOCF Criterion Percentage (50%).

The outcome desired from the Financial Multiplier for Actual RMR
performance is to yield (i) a Financial Multiplier of 1.0 if Actual RMR is
within a range defined as 1% less than Budgeted RMR to 1% greater than Budgeted
RMR; (b) a Financial Multiplier in the range of 0.0 to 1.0 if the ratio of
Budgeted RMR to Actual RMR is in the range of 98% to 99% of Budgeted RMR; and
(iii) a Financial Multiplier in the range of 1.0 to 2.0 if the ratio of
Budgeted RMR to Actual RMR is in the range of 101% to 102% of Budgeted RMR.

The formula for calculating the Financial Multiplier for RMR
performance is as follows:

If the ratio of Actual RMR to
Budgeted RMR is 102% or greater, the Financial 

Multiplier = 2.00

If the ratio of Actual RMR to
Budgeted RMR is 98% or less, the Financial 

Multiplier = 0.00

If the ratio of Actual RMR to
Budgeted RMR is between 99% and 101%, the 

Financial Multiplier = 1.00

For each 0.1% above 101% up to 102%,
the Financial Multiplier increases by 0.10

For
each 0.1% below 99% down to 98%, the Financial Multiplier decreases by 0.10

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The calculation for determining the RMR Criterion component of the
Award under the plan is as follows:

RMR Financial Multiplier X Target Award Percentage X
RMR Criterion Percentage (20%).

For example, for an Executive Officer with the maximum Multiplier for
each of the SSNOCF Criterion and the RMR Criterion, the calculation would be
the sum of:

(a) 200% (Multiplier) x 60% (Target Award Percentage) x 50% (SSNOCF Criterion
Percentage) = 60% of Base Compensation for the SSNOCF Criterion award, and

(b) 200% (Multiplier) x 60% (Target Award Percentage) x 20% (RMR
Criterion Percentage) = 24% of Base Compensation for the RMR Criterion award.

In this example, the total of (a) and (b) equals 84% of Base
Compensation.

For all Participants, the portion of Awards derived from the SSNOCF and
RMR Criteria is capped at 200% of 70% of Target Award Percentage of Base Compensation
(e.g., 84% of base salary for CEO, 56% of Base Compensation for Officer, etc.).

(b)            Discretionary
Criterion:  This
criterion is based on individual achievement and is intended (i) to provide a
judgmental rating of a Participant’s managerial effectiveness, and (ii) to
recognize the importance of intangible qualities of corporate performance. The
rating (determined in accordance with Section 2 above) is based on an
assessment of qualitative issues such as:

(i)          providing
strategic direction

(ii)         providing
leadership

(iii)        proactively
managing change

(iv)       organizing
developing, and utilizing the management team

(v)        creating
an appropriate organizational environment

(vi)       providing
effective external representation

(vii)      monitoring
and evaluating performance and taking corrective actions.

Depending on individual achievement of these factors, the discretionary
component of Participants’ Awards may range from 0% to 30% (“Discretionary
Criterion Percentage”) of the Target Award Percentage. For example, for an
Executive Officer awarded a Discretionary Criterion Percentage of 30%, the
calculation would be: 60% (Target Award Percentage) x 30% (Discretionary
Criterion Percentage) = 18% of Base Compensation.

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5.           Payment of Awards.

(a)            Generally:  Awards under the Plan are payable annually. Payment of
Awards shall be made within two and one-half months of the end of the fiscal
year for which such Awards are attributable; provided, however, that if all or
any portion of Awards are paid prior to completion of the Company’s audited financial
statements for the Incentive Period, Participants will be required to repay the
Company the amount received in excess of what would have been paid based on the
Company’s audited results.

(b)           Termination of Employment:  Except as may be provided in a
written employment agreement between a Participant and the Company or a
Designated Subsidiary, a Participant who ceases to be continually employed by
the Company or a Designated Subsidiary during the Incentive Period shall not be
eligible for and shall forfeit all rights to an Award for such Incentive
Period.

6.           Withholding for Taxes.  Awards under the Plan are
subject the withholding for applicable taxes and other charges.

7.           No Rights to Corporate Assets.  Nothing contained herein create
any equity, property, lien, security or other interest of any kind in any
assets of the Company or its subsidiaries, or create a trust or fiduciary
relationship of any kind between the Company and its subsidiaries, or the Board
or any member thereof, and any Plan Participant. Any claims for unpaid amounts
under the Plan, are and shall be unsecured.

8.           No Right to Acceleration or Deferral of
Awards.  It is the
intent of the Board that the Plan meet the requirements of Section 409A of the
Internal Revenue Code, be operated in accordance with such requirements, and
that amounts payable pursuant to the Plan not be included in the wages or
income of a Participant until such time as the Award is actually paid to the
Participant. Accordingly, Participants have no right to elect to accelerate or
to defer, nor shall any amounts payable pursuant to the Plan be accelerated or
deferred, except as permitted under Section 409A of the Internal Revenue Code.

9.           Non-Assignability.  Participants’ rights and
interests under the Plan may not be transferred, assigned, mortgaged, or
otherwise encumbered (an “assignment”); nor shall such rights and interests be
subject to seizure for the payment of a Participant’s debts, judgments,
alimony, or separate maintenance or be transferable by operation of law in the
event of a Participant’s bankruptcy or insolvency. Any purported assignment by
Participant of Participant’s rights and interests under the Plan shall be void.

10.     Amendment and Termination.  Other than with respect to the 2007 Plan year, the Board may
from time to time and at any time alter, amend, suspend, discontinue, or
terminate the Plan. Amendments to the Plan will not operate retroactively
unless the amendment expressly so provides and is expressly agreed to by the
CEO.

11.     No Right of Employment.  Nothing
contained in the Plan shall be construed as conferring upon a Participant the
right to continued employment with the Company.

12.     Governing Law.  All
rights and obligations under the Plan shall be governed by, and the Plan shall
be construed in accordance with the laws of the State of Delaware.

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13.     Titles and Headings.  Titles
and headings to sections herein are for purposes of reference only and shall in
no way limit, define, or otherwise affect the meaning or interpretation of any provisions
of the Plan.

14.     Effective Date.  This
Plan is made effective as of January 1, 2007 and supersedes all other existing
short-term incentive plans of the Company and its Designated Subsidiaries.

 

 8Exhibit 10.1

 

FARMER BROS. CO.

2007
OMNIBUS PLAN

ARTICLE 1

PURPOSE

The purpose of the Farmer
Bros. Co. 2007 Omnibus Plan (the “Plan”) is to promote the success and enhance
the stockholder value of Farmer Bros. Co., a Delaware corporation (the “Company”), by linking
the personal interests of the members of the Board, Employees, and Consultants
to those of Company stockholders and by providing such individuals with an
incentive for performance to generate returns to Company stockholders. The Plan
is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of members of the Board, Employees,
and Consultants upon whose judgment, interest, and special effort the
successful conduct of the Company’s operation is largely dependent.

ARTICLE 2

DEFINITIONS
AND CONSTRUCTION

Wherever the following terms
are used in the Plan they shall have the meanings specified below, unless the
context clearly indicates otherwise. The singular pronoun shall include the
plural where the context so indicates.

2.1           “Administrator”
means the entity that conducts the general administration of the Plan as
provided herein. With reference to the administration of the Plan with respect
to Awards granted to Independent Directors, the term “Administrator” shall
refer to the Board. With reference to the administration of the Plan with
respect to any other Award, the term “Administrator” shall refer to the Committee
unless the Board has assumed the authority for administration of the Plan generally
as provided in Section 13.1. With reference to the duties of the Committee
under the Plan which have been delegated to one or more persons pursuant to
Section 13.5, the term “Administrator”
shall refer to such person(s) unless the Committee or the Board has revoked
such delegation.

2.2           “Award”
means an Option, a Restricted Stock award, a Stock Appreciation Right award, a
Dividend Equivalents award, a Stock Payment award, a Restricted Stock Unit
award, a Performance-Based Award, a Dividend Equivalent award, a cash-based
award or other incentive payable in cash or in shares of Stock granted to a
Participant pursuant to the Plan.

2.3           “Award Agreement”
means any written or electronic agreement, contract, or other instrument or
document evidencing an Award.

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

2.5           “Cause,”
unless otherwise defined in an employment or services agreement between the
Participant and the Company or any Parent or Subsidiary, means a Participant’s
dishonesty, fraud, gross or willful misconduct against the Company or any
Parent or Subsidiary, unauthorized use or disclosure of confidential
information or trade secrets of the Company or any Parent or Subsidiary, or
conviction of, or plea of nolo contendre
to, a crime punishable by law (except misdemeanor violations), in each case as
determined by the Administrator, and its determination shall be conclusive and
binding.

2.6           “Change in
Control” means and includes each of the following:

(a)           an acquisition by any Person (as such term is defined in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a “group” as defined in Section 13(d) thereof) of “beneficial
ownership” (as determined pursuant to Rule 13d-3 promulgated under the Exchange
Act) of the shares of Stock then outstanding (the “Company
Shares Outstanding”) or the voting securities of the Company
then outstanding entitled to vote generally in the election of directors (the “Company Voting Securities Outstanding”),
if such acquisition of beneficial ownership results in the Person beneficially
owning (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
fifty percent (50%) or more of the Company Shares Outstanding or fifty percent
(50%) or more of the combined voting power of the Company Voting Securities
Outstanding; excluding, however, any such acquisition by a trustee or other
fiduciary holding such shares under one or more employee benefit plans
maintained by the Company or any of its Subsidiaries; or

(b)           the approval of the stockholders of the Company of a reorganization,
merger, consolidation, complete liquidation, or dissolution of the Company, the
sale or disposition of all or substantially all of the assets of the Company or
any similar corporate transaction (in each case referred to in this Section 2.6
as a “Corporate Transaction”),
other than a Corporate Transaction that would result in the outstanding common
stock of the Company immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into common stock of the
surviving entity or a parent or affiliate thereof) at least fifty percent (50%)
of the outstanding common stock of the Company or such surviving entity or
parent or affiliate thereof (“Successor Entity”)
immediately after such Corporate Transaction; provided, however, if the
consummation of such Corporate Transaction is subject, at the time of such
approval by stockholders, to the consent of any government or governmental
agency, the Change in Control shall not occur until the obtaining of such
consent (either explicitly or implicitly); or

(c)           a change in the composition of the Board such that the individuals who,
as of the Effective Date, constitute the Board (such Board shall be hereinafter
referred to as the “Incumbent Board”) cease for any reason to constitute at least a majority of
the Board; provided, however, for purposes of this Section 2.6 that any
individual who becomes a member of the Board subsequent to the Effective Date
whose election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of those individuals who are members
of the Board and who were also members of the Incumbent Board (or deemed to be
such pursuant to this proviso) shall be considered as though such individual
were a member of the Incumbent Board; but, provided, further, that any such
individual whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act, including any successor to
such Rule), or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board, shall not be so considered as
a member of the Incumbent Board.

The Administrator shall have
full and final authority, which shall be exercised in its discretion, to
determine conclusively whether a Change in Control of the Company has occurred
pursuant to the above definition, and the date of the occurrence of such Change
in Control and any incidental matters relating thereto.

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

2.8           “Committee”
means the committee of the Board described in Article 13.

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2.9           “Consultant”
means any consultant or adviser if:

(a)           The consultant or adviser renders bona fide services to the Company or
any Parent or Subsidiary;

(b)           The services rendered by the consultant or adviser are not in
connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market for
the Company’s securities; and

(c)           The consultant or adviser is a person who has contracted directly with
the Company or any Parent or Subsidiary to render such services.

2.10         “Covered
Employee” means an Employee who is, or is likely to become, a “covered
employee” within the meaning of Section 162(m)(3) of the Code.

2.11         “Disability”
means a permanent and total disability within the meaning of Section 22(e)(3)
of the Code, as it may be amended from time to time.

2.12         “Dividend
Equivalents” means a right granted to a Participant pursuant to
Article 8 to receive the equivalent value (in cash or Stock) of dividends paid
on Stock.

2.13         “Effective Date”
shall mean August 23, 2007.

2.14          “Eligible
Individual” means any person who is a member of the Board, a
Consultant or an Employee, as determined by the Administrator.

2.15         “Employee”
means any officer or other employee (as defined in accordance with Section
3401(c) of the Code) of the Company or any Parent or Subsidiary.

2.16         “Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time.

2.17         “Expiration Date”
has the meaning set forth in Section 14.3.

2.18         “Fair Market
Value” means, as of any date, the value of Stock determined as
follows:

(a)           If the Stock is listed on any established stock exchange or a national
market system, including without limitation the Nasdaq National Market or The
Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall
be the closing sales price for such stock as quoted on such exchange or system
on the date of determination, as reported in The
Wall Street Journal or such other source as the Administrator deems
reliable;

(b)           If the Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, its Fair Market Value shall be the mean of the
closing bid and asked prices for the Stock on the date of determination as
reported in The Wall Street Journal
or such other source as the Administrator deems reliable; or

(c)           In the absence of an established market for the Stock, the Fair Market
Value thereof shall be determined in good faith by the Administrator.

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2.19         “Incentive Stock
Option” means an Option that is intended to be an incentive
stock option and meets the requirements of Section 422 of the Code or any
successor provision thereto.

2.20         “Independent
Director” means a member of the Board who is not an Employee.

2.21         “Non-Employee
Director” means a member of the Board who qualifies as a “Non-Employee
Director” as defined in Rule 16b-3(b)(3) of the Exchange Act, or any successor
rule.

2.22         “Non-Qualified
Stock Option” means an Option that is not intended to be or
otherwise does not qualify as an Incentive Stock Option.

2.23         “Option”
means a right granted to a Participant pursuant to Article 5 of the Plan to
purchase a specified number of shares of Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock Option or a
Non-Qualified Stock Option.

2.24         “Parent”
means any “parent corporation” as defined in Section 424(e) of the Code and any
applicable regulations promulgated thereunder of the Company or any other
entity which beneficially owns, directly or indirectly, a majority of the
outstanding voting stock or voting power of the Company.

2.25         “Participant”
means any Eligible Individual who, as a member of the Board, a Consultant or an
Employee, has been granted an Award pursuant to the Plan.

2.26          “Performance-Based
Award” means an Award granted to selected Covered Employees
pursuant to Articles 6 and 8, but which is subject to the terms and conditions
set forth in Article 9.

2.27         “Performance
Criteria” means the criteria, either individually, alternatively
or in any combination, that the Administrator selects for purposes of
establishing the Performance Goal or Performance Goals for a Participant for a
Performance Period. The Performance Criteria that will be used to establish
Performance Goals are limited to the following: net earnings (either before or
after interest, taxes, depreciation and amortization), sales or revenue, income
or net income (either before or after taxes), operating income or net operating
income, operating profit or net operating profit, cash flow (including, but not
limited to, operating cash flow and free cash flow), economic profit (including
economic profit margin), return on assets, return on capital, return on
investment, return on operating revenue, return on equity or average stockholders’
equity, total stockholder return, growth in sales or return on sales, gross,
operating or net profit margin, working capital, earnings per share, growth in
earnings or earnings per share, price per share of Stock, market share,
overhead or other expense reduction, growth in stockholder value relative to
various indices, and strategic plan development and implementation, any of
which may be used to measure the performance of the Company as a whole or with
respect to any business unit, Subsidiary or business segment of the Company,
either individually, alternatively or in any combination, and may be measured
either annually or cumulatively over a period of years, on an absolute basis or
relative to a pre-established target, to previous period results or to a
designated comparison group, in each case as specified by the Administrator in
the Award. The Administrator shall, within the time prescribed by Section
162(m) of the Code, define in an objective fashion the manner of calculating
the Performance Criteria it selects to use for such Performance Period for such
Participant.

2.28         “Performance
Goals” means, for a Performance Period, the goals established in
writing by the Administrator for the Performance Period based upon the
Performance Criteria. Depending on the Performance Criteria used to establish
such Performance Goals, the Performance Goals may be expressed in terms of
overall Company performance or the performance of a Subsidiary, division or
other operational unit, or an individual. The Administrator, in its discretion,
may, within the time prescribed by

 4
 

Section 162(m) of the Code,
adjust or modify the calculation of Performance Goals for such Performance
Period in order to prevent the dilution or enlargement of the rights of
Participants (i) in the event of, or in anticipation of, any unusual or
extraordinary corporate item, transaction, event, or development, or (ii) in
recognition of, or in anticipation of, any other unusual or nonrecurring events
affecting the Company, or the financial statements of the Company, or in
response to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions.

2.29         “Performance
Period” means the one or more periods of time, which may be of
varying and overlapping durations, as the Administrator 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-Based Award.

2.30         “Plan”
means this Farmer Bros. Co. 2007 Omnibus Plan, as it may be amended from time
to time.

2.31         “Qualified
Performance-Based Compensation” means any compensation that is
intended to qualify as “qualified performance-based compensation” as described
in Section 162(m)(4)(C) of the Code.

2.32         “Restricted
Stock” means Stock awarded to a Participant pursuant to Article
6 that is subject to certain restrictions and may be subject to risk of
forfeiture or repurchase.

2.33         “Restricted
Stock Unit” means a right to receive a share of Stock during
specified time periods granted pursuant to Section 8.3.

2.34         “Securities Act”
means the Securities Act of 1933, as amended from time to time.

2.35         “Section 409A
Award” has the meaning set forth in Section 10.1.

2.36         “Stock”
means the common stock of the Company and such other securities of the Company
that may be substituted for Stock pursuant to Article 12.

2.37         “Stock
Appreciation Right” or “SAR” means a right granted pursuant to
Article 7 to receive a payment equal to the excess of the Fair Market Value of
a specified number of shares of Stock on the date the SAR is exercised over the
Fair Market Value of such number of shares of Stock on the date the SAR was
granted as set forth in the applicable Award Agreement.

2.38         “Stock Payment”
means (a) a payment in the form of shares of Stock, or (b) an option or other
right to purchase shares of Stock, as part of any bonus, deferred compensation
or other arrangement, made in lieu of all or any portion of the compensation,
granted pursuant to Section 8.2.

2.39         “Subsidiary”
means any “subsidiary corporation” as defined in Section 424(f) of the Code and
any applicable regulations promulgated thereunder of the Company or any other
entity of which a majority of the outstanding voting stock or voting power is beneficially
owned directly or indirectly by the Company.

2.40         “Successor
Entity” has the meaning set forth in Section 2.6.

2.41         “Termination of
Consultancy” means the time when the engagement of a Participant
as a Consultant to the Company or a Parent or Subsidiary is terminated for any
reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement, but excluding

 5
 

terminations where there is
a simultaneous commencement of employment with the Company or any Parent or
Subsidiary. The Administrator, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Consultancy,
including, but not by way of limitation, the question of whether a Termination
of Consultancy resulted from a discharge for good cause, and all questions of
whether a particular leave of absence constitutes a Termination of Consultancy.
Notwithstanding any other provision of the Plan, the Company or any Parent or
Subsidiary has an absolute and unrestricted right to terminate a Consultant’s
service at any time for any reason whatsoever, with or without cause, except to
the extent expressly provided otherwise in writing.

2.42         “Termination of
Directorship” shall mean the time when a Participant who is an
Independent Director ceases to be a member of the Board for any reason,
including, but not by way of limitation, a termination by resignation, failure
to be elected, death or retirement. The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Directorship with respect to Independent Directors.

2.43         “Termination of
Employment” shall mean the time when the employee-employer
relationship between a Participant and the Company or any Parent or Subsidiary
is terminated for any reason, with or without cause, including, but not by way
of limitation, a termination by resignation, discharge, death, disability or
retirement; but excluding: (a) terminations where there is a simultaneous
reemployment or continuing employment of a Participant by the Company or any
Parent or Subsidiary, (b) at the discretion of the Administrator, terminations
which result in a temporary severance of the employee-employer relationship,
and (c) at the discretion of the Administrator, terminations which are followed
by the simultaneous establishment of a consulting relationship by the Company
or a Parent or Subsidiary with the former employee. The Administrator, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Employment; provided,
however, that, with respect to
Incentive Stock Options, unless otherwise determined by the Administrator in
its discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for
the purposes of Section 422(a)(2) of the Code and the then applicable
regulations and revenue rulings under said Section.

ARTICLE 3

SHARES
SUBJECT TO THE PLAN

3.1           Number of Shares

(a)           Subject to Article 12 and Section 3.1(b), the aggregate number of
shares of Stock which may be issued or transferred pursuant to Awards under the
Plan shall be 1,000,000 shares.

(b)           Shares of Stock covered by an Award shall be counted as used at the
time the Award is granted to a Participant. 
If any Award lapses, expires, terminates or is canceled prior to the
issuance of shares thereunder or if shares of Stock are issued under the Plan
to a Participant and are thereafter reacquired by the Company, the shares
subject to such Awards and the reacquired shares shall again be available for
issuance under the Plan. In addition to the shares of Stock that are actually
issued to a Participant, the following items shall be counted against the total
number of shares available for issuance under the Plan: (i) shares of
Stock subject to an Award that are not delivered to a Participant because the
Award is exercised through a reduction of shares of Stock subject to the Award
(i.e., “net exercised”) (including an appreciation distribution in respect of a
Stock Appreciation Right that is paid in

 6
 

shares of Stock);
(ii) shares of Stock subject to an Award that are not delivered to a
Participant because such shares are withheld in satisfaction of the withholding
of taxes incurred in connection with the exercise of an Option or Stock
Appreciation Right, or the issuance of shares under a Restricted Stock Award or
Restricted Stock Unit Award or other Award; and (iii) shares that are
tendered to the Company (either by actual delivery or attestation) to pay the
exercise price of any stock Award. The following items shall not be counted
against the total number of shares available for issuance under the Plan:
(A) the payment in cash of dividends or Dividend Equivalents; and
(B) any Award that is settled in cash rather than by issuance of Stock.
All shares issued under the Plan may be either authorized and unissued shares
or issued shares reacquired by the Company or shares held in trust for issuance
under the Plan.

(c)           The Administrator shall have the authority to grant Awards as an
alternative to or as the form of payment for grants or rights earned or due
under other compensation plans or arrangements of the Company.

(d)           Notwithstanding the provisions of this Section 3.1, (i) no shares of
Stock may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an Incentive Stock Option under
Section 422 of the Code; and (ii) the maximum number of shares that may be
issued upon the exercise of Incentive Stock Options shall equal the aggregate
share number stated in Section 3.1(a), subject to adjustment as provided in
Article 12; and provided, further, that for purposes of Section 3.3, any such
shares shall be counted in accordance with the requirements of Section 162(m)
of the Code.

3.2           Stock Distributed. Any Stock distributed pursuant to an Award
may consist, in whole or in part, of authorized and unissued Stock, treasury
stock or Stock purchased on the open market.

3.3           Limitation on Number of Shares Subject to
Awards. Notwithstanding any
provision in the Plan to the contrary, and subject to Article 12, the maximum
number of shares of Stock with respect to one or more Awards that may be
granted to any one Participant during any calendar year shall be 250,000.

ARTICLE 4

ELIGIBILITY
AND PARTICIPATION

4.1           Eligibility. Persons eligible to participate in this Plan include Employees,
Consultants and members of the Board, as determined by the Administrator.

4.2           Participation. Subject to the provisions of the Plan, the
Administrator may, from time to time, select from among all Eligible Individuals
those to whom Awards shall be granted and shall determine the nature and amount
of each Award. No individual shall have any right to be granted an Award
pursuant to this Plan.

4.3           Foreign Participants. Notwithstanding any provision of the Plan
to the contrary, in order to comply with the laws in other countries in which
the Company and its Parents or Subsidiaries operate or have Eligible
Individuals, the Administrator, in its sole discretion, shall have the power
and authority to: (i) determine which Parents or Subsidiaries shall be covered
by the Plan; (ii) determine which Eligible Individuals outside the United
States are eligible to participate in the Plan; (iii) modify the terms and
conditions of any Award granted to Eligible Individuals outside the United
States to comply with applicable foreign laws; (iv) establish subplans and
modify exercise procedures and other terms and procedures, to the extent such
actions may be necessary or advisable (any such subplans and/or modifications
shall be attached to this Plan as appendices); provided,
however, that no such subplans and/or modifications shall increase
the share limitations contained in Sections 3.1 and 3.3 of the Plan; and

 7
 

(v) take any action, before
or after an Award is made, that it deems advisable to obtain approval or comply
with any necessary local governmental regulatory exemptions or approvals.
Notwithstanding the foregoing, the Administrator may not take any actions
hereunder, and no Awards shall be granted, that would violate the Exchange Act,
the Code, any securities law or governing statute or any other applicable law.

ARTICLE 5

STOCK
OPTIONS

5.1           General. The Administrator is authorized to grant Options to Eligible
Individuals on the following terms and conditions:

(a)           Exercise Price. The exercise price per share of Stock
subject to an Option shall be determined by the Administrator and set forth in
the Award Agreement; provided
that the exercise price per share for any Option shall not be less than 100% of
the Fair Market Value per share of the Stock on the date of grant.

(b)           Time and Conditions of Exercise. The Administrator shall determine the time
or times at which an Option may be exercised in whole or in part; provided that the term of any Option
granted under the Plan shall not exceed ten years. The Administrator shall also
determine the performance or other conditions, if any, that must be satisfied
before all or part of an Option may be exercised; provided
that in no event shall Options vest and be fully exercisable at any time
earlier than one year from the grant date except as may be specifically
provided as a result of an acceleration upon a Change in Control, Termination
of Employment, Termination of Directorship, Termination of Consultancy or other
event providing for accelerated vesting. The Administrator may extend the term
of any outstanding Option in connection with any Termination of Employment,
Termination of Directorship or Termination of Consultancy of the Participant
holding such Option, or amend any other term or condition of such Option
relating to such a Termination of Employment, Termination of Directorship or
Termination of Consultancy.

(c)           Payment. The Administrator shall determine the methods, terms and conditions
by which the exercise price of an Option may be paid, and the form and manner
of payment, including, without limitation, payment in the form of cash, a
promissory note bearing interest at no less than such rate as shall then
preclude the imputation of interest under the Code, shares of Stock, or other
property acceptable to the Administrator and payment through the delivery of a
notice that the Participant has placed a market sell order with a broker with
respect to shares of Stock then issuable upon exercise of the Option, and that
the broker has been directed to pay a sufficient portion of the net proceeds of
the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is
then made to the Company upon settlement of such sale, and the methods by which
shares of Stock shall be delivered or deemed to be delivered to Participants.
Notwithstanding any other provision of the Plan to the contrary, no Participant
who is a member of the Board or an “executive officer” of the Company within
the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the
exercise price of an Option, or continue any extension of credit with respect
to the exercise price of an Option with a loan from the Company or a loan
arranged by the Company, in any method which would violate Section 13(k) of the
Exchange Act.

(d)           Evidence of Grant. All Options shall be evidenced by an Award
Agreement between the Company and the Participant. The Award Agreement shall
include such additional provisions as may be specified by the Administrator.

 8
 

5.2           Incentive Stock Options. Incentive Stock Options may be granted only
to employees (as defined in accordance with Section 3401(c) of the Code) of the
Company or a Subsidiary which constitutes a “subsidiary corporation” of the
Company within Section 424(f) of the Code or a Parent which constitutes a “parent
corporation” of the Company within the meaning of Section 424(e) of the Code,
and the terms of any Incentive Stock Options granted pursuant to the Plan must
comply with the following additional provisions of this Section 5.2 in addition
to the requirements of Section 5.1:

(a)           Ten Percent Owners. An Incentive Stock Option shall be granted
to any individual who, at the date of grant, owns stock possessing more than
ten percent of the total combined voting power of all classes of Stock of the
Company or any “subsidiary corporation” of the Company or “parent corporation”
of the Company (each within the meaning of Section 424 of the Code) only if
such Option is granted at an exercise price per share that is not less than
110% of the Fair Market Value per share of the Stock on the date of the grant
and the Option is exercisable for no more than five years from the date of
grant.

(b)           Transfer Restriction. An Incentive Stock Option shall not be
transferable by the Participant other than by will or by the laws of descent or
distribution.

(c)           Right to Exercise. During a Participant’s lifetime, an
Incentive Stock Option may be exercised only by the Participant.

(d)           Failure to Meet Requirements. Any Option (or portion thereof) purported
to be an Incentive Stock Option which, for any reason, fails to meet the
requirements of Section 422 of the Code shall be considered a Non-Qualified
Stock Option.

5.3           Substitution of Stock Appreciation Rights. The Administrator may provide in the Award
Agreement evidencing the grant of an Option that the Administrator, in its sole
discretion, shall have to right to substitute a Stock Appreciation Right for
such Option at any time prior to or upon exercise of such Option; provided that such Stock Appreciation
Right shall be exercisable with respect to the same number of shares of Stock
for which such substituted Option would have been exercisable.

ARTICLE 6

RESTRICTED
STOCK AWARDS

6.1           Grant of Restricted Stock. The Administrator is authorized to make
Awards of Restricted Stock to any Eligible Individual selected by the
Administrator in such amounts and subject to such terms and conditions as
determined by the Administrator. All Awards of Restricted Stock shall be
evidenced by an Award Agreement.  In no
event shall an Award of Restricted Stock payable in shares vest sooner than one
year after the date of grant. 
Notwithstanding the foregoing, the Administrator may accelerate vesting
of any Award in the event of a Participant’s Termination of Employment,
Termination of Directorship or Termination of Consultancy or a Change in
Control.

6.2           Issuance and Restrictions. Restricted Stock shall be subject to such
repurchase restrictions, forfeiture restrictions, restrictions on
transferability and other restrictions as the Administrator may impose
(including, without limitation, limitations on the right to vote Restricted
Stock or the right to receive dividends on the Restricted Stock). These
restrictions may lapse separately or in combination at such times, pursuant to
such circumstances or installments or otherwise as the Administrator determines
at the time of the grant of the Award or thereafter. Alternatively, these
restrictions may lapse pursuant to the satisfaction of one or more Performance
Goals or other specific performance goals as the Administrator determines to be
appropriate at the time of the grant of the Award

 9
 

or thereafter, in each case
on a specified date or dates or over any period or periods determined by the
Administrator.

6.3           Repurchase or Forfeiture. Except as otherwise determined by the
Administrator at the time of the grant of the Award or thereafter, upon a
Participant’s Termination of Employment, Termination of Directorship or
Termination of Consultancy during the applicable restriction period, Restricted
Stock that is at that time subject to restrictions shall be forfeited or
subject to repurchase by the Company (or its assignee) under such terms as the
Administrator shall determine; provided,
however, that the Administrator may (a) provide in any Restricted
Stock Award Agreement that restrictions or forfeiture conditions relating to
Restricted Stock will be waived in whole or in part in the event of a
Participant’s Termination of Employment, Termination of Directorship or Termination
of Consultancy under certain circumstances, and (b) in other cases waive in
whole or in part restrictions or forfeiture conditions relating to Restricted
Stock.

6.4           Certificates for Restricted Stock. Restricted Stock granted pursuant to the
Plan may be evidenced in such manner as the Administrator shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock,
and the Company may, at its discretion, retain physical possession of the
certificate until such time as all applicable restrictions lapse or the Award
Agreement may provide that the shares shall be held in escrow by an escrow
agent designated by the Company.

ARTICLE 7

STOCK
APPRECIATION RIGHTS

7.1           Grant of Stock Appreciation Rights. A Stock Appreciation Right may be granted
to any Eligible Individual selected by the Administrator. A Stock Appreciation
Right shall be subject to such terms and conditions not inconsistent with the
Plan as the Administrator shall impose and shall be evidenced by an Award
Agreement.

7.2           Terms of Stock Appreciation Rights

(a)           A Stock Appreciation Right shall have a term set by the Administrator.
A Stock Appreciation Right shall be exercisable in such installments as the
Administrator may determine. A Stock Appreciation Right shall cover such number
of shares of Stock as the Administrator may determine. The exercise price per
share of Stock subject to each Stock Appreciation Right shall be set by the
Administrator.

(b)           A Stock Appreciation Right shall entitle the Participant (or other
person entitled to exercise the Stock Appreciation Right pursuant to the Plan)
to exercise all or a specified portion of the Stock Appreciation Right (to the
extent then exercisable pursuant to its terms) and to receive from the Company
an amount determined by multiplying (i) the amount (if any) by which the Fair
Market Value of a share of Stock on the date of exercise of the Stock
Appreciation Right exceeds the exercise price per share of the Stock
Appreciation Right, by (ii) the number of shares of Stock with respect to which
the Stock Appreciation Right shall have been exercised, subject to any limitations
the Administrator may impose.

 10
 

7.3           Payment and Limitations on Exercise

(a)           Subject to Sections 7.3(b) and (c), payment of the amounts determined
under Sections 7.2(b) above shall be in cash, in Stock (based on its Fair
Market Value as of the date the Stock Appreciation Right is exercised) or a
combination of both, as determined by the Administrator.

(b)           To the extent payment for a Stock Appreciation Right is to be made in
cash, the Award Agreement shall, to the extent necessary to comply with the
requirements of Section 409A of the Code, specify the date of payment, which
may be different than the date of exercise of the Stock Appreciation Right. If
the date of payment for a Stock Appreciation Right is later than the date of
exercise, the Award Agreement may specify that the Participant be entitled to
earnings on such amount until paid.

(c)            To the extent any payment under Section 7.2(b) is effected in Stock,
it shall be made subject to satisfaction of all provisions of Article 5 above
pertaining to Options.

ARTICLE 8

OTHER TYPES
OF AWARDS

8.1           Dividend Equivalents

(a)           Any Eligible Individual selected by the Administrator may be granted
Dividend Equivalents based on the dividends on the shares of Stock that are
subject to any Award, to be credited as of dividend payment dates, during the
period between the date the Award is granted and the date the Award is
exercised, vests or expires, as determined by the Administrator. Such Dividend
Equivalents shall be converted to cash or additional shares of Stock by such
formula and at such time and subject to such limitations as may be determined
by the Administrator.

(b)           Dividend Equivalents granted with respect to Options or SARs that are
intended to be Qualified Performance-Based Compensation shall be payable, with
respect to pre-exercise periods, regardless of whether such Option or SAR is
subsequently exercised.

8.2           Stock Payments. Any Eligible Individual selected by the
Administrator may receive Stock Payments in the manner determined from time to
time by the Administrator; provided,
that unless otherwise determined by the Administrator such Stock Payments shall
be made in lieu of base salary, bonus, or other cash compensation otherwise
payable to such Eligible Individual. The number of shares shall be determined
by the Administrator and may be based upon the Performance Goals or other
specific performance goals determined appropriate by the Administrator.

8.3           Restricted Stock Units.  The
Administrator is authorized to make Awards of Restricted Stock Units to any Eligible
Individual selected by the Administrator in such amounts and subject to such
terms and conditions as determined by the Administrator. At the time of grant,
the Administrator shall specify the date or dates on which the Restricted Stock
Units shall become fully vested and nonforfeitable, and may specify such
conditions to vesting as it deems appropriate. Alternatively, Restricted Stock
Units may become fully vested and nonforfeitable pursuant to the satisfaction
of one or more Performance Goals or other specific performance goals as the
Administrator determines to be appropriate at the time of the grant of the
Restricted Stock Units or thereafter, in each case on a specified date or dates
or over any period or periods determined by the Administrator. At the time of
grant, the Administrator shall specify the maturity date applicable to each
grant of Restricted Stock Units which shall be no earlier than the vesting date
or dates of the Award and may be determined at the election of the Eligible
Individual to whom the Award is granted. On the maturity date, the Company
shall transfer to

 11

the Participant one
unrestricted, fully transferable share of Stock for each Restricted Stock Unit
that is vested and scheduled to be distributed on such date and not previously
forfeited. The Administrator shall specify the purchase price, if any, to be paid
by the Participant to the Company for such shares of Stock. In no event shall
an Award of Restricted Stock Units payable in shares vest sooner than one year
after the date of grant.  Notwithstanding
the foregoing, the Administrator may accelerate vesting of any Award in the
event of a Participant’s Termination of Employment, Termination of Directorship
or Termination of Consultancy or a Change in Control.

8.4           Term. Except as otherwise provided herein, the term of any Award of
Dividend Equivalents, Stock Payments or Restricted Stock Units shall be set by
the Administrator in its discretion.

8.5           Exercise or Purchase Price. The Administrator may establish the
exercise or purchase price, if any, of any Award of Stock Payments or
Restricted Stock Units; provided, however,
that such price shall not be less than the par value of a share of Stock on the
date of grant, unless otherwise permitted by applicable state law.

8.6           Form of Payment. Payments with respect to any Awards granted
under Sections 8.1, 8.2 or 8.3 shall be made in cash, in Stock or a combination
of both, as determined by the Administrator.

8.7           Award Agreement. All Awards under this Article 8 shall be
subject to such additional terms and conditions as determined by the
Administrator and shall be evidenced by a written Award Agreement.

8.8           Other Stock or Cash-Based Awards. 
Subject to the terms of the Plan, the Administrator may grant other
incentives payable in cash or in shares of Stock under the Plan as it
determines to be in the best interests of the Company and subject to such other
terms and conditions as it deems appropriate. The Administrator may grant such
other Awards and designate the Participants to whom such Awards are to be
awarded and determine the number of shares of Stock or the amount of cash
payment subject to such Awards and the terms and conditions of each such Award.
Such other Awards may, subject to the provisions of the Plan, entitle the
Participant to a payment in cash or Stock only upon the attainment of
performance goals and other terms and conditions specified by the
Administrator. Notwithstanding the satisfaction of any performance goals, the
amount to be paid under such other Award may be adjusted on the basis of such
further consideration as the Administrator shall determine, in its sole
discretion. However, the Administrator may not, in any event, increase the
amount earned under such other Awards upon satisfaction of any performance goal
by any Covered Employee.

ARTICLE 9

PERFORMANCE-BASED
AWARDS

9.1           Purpose. The purpose of this Article 9 is to provide the Administrator the
ability to qualify Awards other than Options and SARs and that are granted
pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If
the Administrator, in its discretion, decides to grant a Performance-Based
Award to a Covered Employee, the provisions of this Article 9 shall control
over any contrary provision contained in Articles 6 or 8; provided, however, that the Administrator
may in its discretion grant Awards to Covered Employees that are based on
Performance Criteria or Performance Goals but that do not satisfy the
requirements of this Article 9.

 12
 

9.2           Applicability. This Article 9 shall apply only to those
Covered Employees selected by the Administrator to receive Performance-Based
Awards. The designation of a Covered Employee as a Participant for a
Performance Period shall not in any manner entitle the Participant to receive
an Award for the period. Moreover, designation of a Covered Employee as a
Participant for a particular Performance Period shall not require designation
of such Covered Employee as a Participant in any subsequent Performance Period
and designation of one Covered Employee as a Participant shall not require
designation of any other Covered Employees as a Participant in such period or
in any other period.

9.3           Procedures with Respect to Performance-Based
Awards. To the extent
necessary to comply with the Qualified Performance-Based Compensation
requirements of Section 162(m)(4)(C) of the Code, with respect to any Award
granted under Articles 6 and 8 which may be granted to one or more Covered
Employees, no later than ninety (90) days following the commencement of any
fiscal year in question or any other designated fiscal period or period of
service (or such other time as may be required or permitted by Section 162(m)
of the Code), the Administrator shall, in writing, (a) designate one or more
Covered Employees, (b) select the Performance Criteria applicable to the
Performance Period, (c) establish the Performance Goals, and amounts of such
Awards, as applicable, which may be earned for such Performance Period, and (d)
specify the relationship between Performance Criteria and the Performance Goals
and the amounts of such Awards, as applicable, to be earned by each Covered
Employee for such Performance Period. Following the completion of each
Performance Period, the Administrator shall certify in writing whether the
applicable Performance Goals have been achieved for such Performance Period. In
determining the amount earned by a Covered Employee, the Administrator shall
have the right to reduce or eliminate (but not to increase) the amount payable
at a given level of performance to take into account additional factors that
the Administrator may deem relevant to the assessment of individual or
corporate performance for the Performance Period.

9.4           Payment of Performance-Based Awards. Unless otherwise provided in the applicable
Award Agreement, a Participant must be employed by the Company or a Parent or
Subsidiary on the day a Performance-Based Award for such Performance Period is
paid to the Participant. Furthermore, a Participant shall be eligible to
receive payment pursuant to a Performance-Based Award for a Performance Period
only if the Performance Goals for such period are achieved.

9.5           Additional Limitations. Notwithstanding any other provision of the
Plan, any Award which is granted to a Covered Employee and is intended to
constitute Qualified Performance-Based Compensation shall be subject to any
additional limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings issued
thereunder  that are requirements for qualification as qualified
performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and the Plan shall be deemed amended to the extent necessary to conform
to such requirements.

ARTICLE 10

COMPLIANCE
WITH SECTION 409A OF THE CODE

10.1         Awards subject to Code Section 409A. Any Award that constitutes, or provides
for, a deferral of compensation subject to Section 409A of the Code (a “Section 409A Award”)
shall satisfy the requirements of Section 409A of the Code and this Article 10,
to the extent applicable. The Award Agreement with respect to a Section 409A
Award shall incorporate the terms and conditions required by Section 409A of
the Code and this Article 10.

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10.2         Distributions under a Section 409A Award.

(a)           Subject to subsection (b), any shares of Stock or other property or
amounts to be paid or distributed upon the grant, issuance, vesting, exercise
or payment of a Section 409A Award shall be distributed in accordance with the
requirements of Section 409A(a)(2) of the Code, and shall not be distributed
earlier than:

(i)            the Participant’s separation from service, as
determined by the Secretary of the Treasury;

(ii)           the date the Participant becomes disabled;

(iii)          the Participant’s death;

(iv)          a specified time (or pursuant to a fixed schedule) specified under the
Award Agreement at the date of the deferral of such compensation;

(v)           to the extent provided by the Secretary of the Treasury, a change in
the ownership or effective control of the Company or a Parent or Subsidiary, or
in the ownership of a substantial portion of the assets of the Company or a
Parent or Subsidiary; or

(vi)          the occurrence of an unforeseeable emergency with respect to the
Participant.

(b)           In the case of a Participant who is a “specified employee,” the
requirement of paragraph (a)(i) shall be met only if the distributions with
respect to the Section 409A Award may not be made before the date which is six
months after the Participant’s separation from service (or, if earlier, the
date of the Participant’s death). For purposes of this subsection (b), a
Participant shall be a “specified employee” if such Participant is a key
employee (as defined in Section 416(i) of the Code without regard to paragraph
(5) thereof) of a corporation any stock of which is publicly traded on an
established securities market or otherwise, as determined under Section 409A(a)(2)(B)(i)
of the Code and the Treasury Regulations thereunder.

(c)           The requirement of paragraph (a)(vi) shall be met only if, as
determined under Treasury Regulations under Section 409A(a)(2)(B)(ii) of the
Code, the amounts distributed with respect to the unforeseeable emergency do
not exceed the amounts necessary to satisfy such unforeseeable emergency plus
amounts necessary to pay taxes reasonably anticipated as a result of the
distribution, after taking into account the extent to which such unforeseeable
emergency is or may be relieved through reimbursement or compensation by
insurance or otherwise or by liquidation of the Participant’s assets (to the
extent the liquidation of such assets would not itself cause severe financial
hardship).

(d)           For purposes of this Section, the terms specified therein shall have
the respective meanings ascribed thereto under Section 409A of the Code and the
Treasury Regulations thereunder.

10.3         Prohibition on Acceleration of Benefits. The time or schedule of any distribution or
payment of any shares of Stock or other property or amounts under a Section
409A Award shall not be accelerated, except as otherwise permitted under
Section 409A(a)(3) of the Code and the Treasury Regulations thereunder.

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10.4         Elections under Section 409A Awards

(a)           Any deferral election provided under or with respect to an Award to any
Eligible Individual, or to the Participant holding a Section 409A Award, shall
satisfy the requirements of Section 409A(a)(4)(B) of the Code, to the extent
applicable, and, except as otherwise permitted under paragraph (i) or (ii)
below, any such deferral election with respect to compensation for services
performed during a taxable year shall be made not later than the close of the
preceding taxable year, or at such other time as provided in the Treasury
Regulations.

(i)             In the case of the first year in which an
Eligible Individual or a Participant holding a Section 409A Award, becomes
eligible to participate in the Plan, any such deferral election may be made
with respect to services to be performed subsequent to the election with thirty
days after the date the Eligible Individual, or the Participant holding a
Section 409A Award, becomes eligible to participate in the Plan, as provided
under Section 409A(a)(4)(B)(ii) of the Code.

(ii)            In the case of any performance-based
compensation based on services performed by an Eligible Individual, or the
Participant holding a Section 409A Award, over a period of at least twelve
months, any such deferral election may be made no later than six months before
the end of the period, as provided under Section 409A(a)(4)(B)(iii) of the
Code.

(b)           In the event that a Section 409A Award permits, under a subsequent
election by the Participant holding such Section 409A Award, a delay in a distribution
or payment of any shares of Stock or other property or amounts under such
Section 409A Award, or a change in the form of distribution or payment, such
subsequent election shall satisfy the requirements of Section 409A(a)(4)(C) of
the Code, and:

(i)             such subsequent election may not take effect
until at least twelve months after the date on which the election is made,

(ii)            in the case such subsequent election relates
to a distribution or payment not described in Section 10.2(a)(ii), (iii) or
(vi), the first payment with respect to such election may be deferred for a
period of not less than five years from the date such distribution or payment
otherwise would have been made, and

(iii)           in the case such subsequent election relates to a distribution or payment
described in Section 10.2(a)(iv), such election may not be made less than
twelve months prior to the date of the first scheduled distribution or payment
under Section 10.2(a)(iv).

10.5         Compliance in Form and Operation. A Section 409A Award, and any election
under or with respect to such Section 409A Award, shall comply in form and
operation with the requirements of Section 409A of the Code and the Treasury
Regulations thereunder.

ARTICLE 11

PROVISIONS
APPLICABLE TO AWARDS

11.1         Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in
the discretion of the Administrator, be granted either alone, in addition to,
or in tandem with, any other Award granted pursuant to the Plan. Awards granted
in addition to or in tandem with other Awards may be granted either at the same
time as or at a different time from the grant of such other Awards.

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11.2         Award Agreement. Awards under the Plan shall be evidenced by
Award Agreements that set forth the terms, conditions and limitations for each
Award which may include the term of an Award, the provisions applicable in the
event of the Participant’s Termination of Employment, Termination of
Directorship or Termination of Consultancy, and the Company’s authority to
unilaterally or bilaterally amend, modify, suspend, cancel or rescind an
Award.  The provisions governing Awards
need not be the same with respect to each recipient.

11.3         Limits on Transfer

(a)           Except as otherwise provided by the Administrator pursuant to Section
11.3(b), no right or interest of a Participant in any Award may be pledged,
encumbered, or hypothecated to or in favor of any party other than the Company
or a Parent or Subsidiary, or shall be subject to any lien, obligation, or
liability of such Participant to any other party other than the Company or a
Parent or Subsidiary. Except as otherwise provided by the Administrator
pursuant to Section 11.3(b), no Award shall be assigned, transferred, or
otherwise disposed of by a Participant other than by will or the laws of
descent and distribution, unless and until such Award has been exercised, or
the shares underlying such Award have been issued, and all restrictions
applicable to such shares have lapsed.

(b)           Notwithstanding Section 11.3(a), the Administrator, in its sole
discretion, may permit an Award (other than an Incentive Stock Option) to be
transferred to, exercised by and paid to any one or more Permitted Transferees
(as defined below), subject to the following terms and conditions: (i) an Award
transferred to a Permitted Transferee shall not be assignable or transferable
by the Permitted Transferee other than by will or the laws of descent and
distribution; (ii) any Award which is transferred to a Permitted Transferee
shall continue to be subject to all the terms and conditions of the Award as
applicable to the original Participant (other than the ability to further
transfer the Award); and (iii) the Participant and the Permitted Transferee
shall execute any and all documents requested by the Administrator, including,
without limitation documents to (A) confirm the status of the transferee as a
Permitted Transferee, (B) satisfy any requirements for an exemption for the
transfer under applicable federal and state securities laws and (C) evidence
the transfer. For purposes of this Section 11.3(b), “Permitted Transferee”
shall mean, with respect to a Participant, any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Participant’s household (other than a tenant or employee), a trust in which
these persons (or the Participant) control the management of assets, and any
other entity in which these persons (or the Participant) own more than fifty
percent of the voting interests, or any other transferee specifically approved
by the Administrator.

11.4         Beneficiaries. Notwithstanding Section 11.3, a Participant
may, in the manner determined by the Administrator, designate a beneficiary to
exercise the rights of the Participant and to receive any distribution with
respect to any Award upon the Participant’s death. A beneficiary, legal
guardian, legal representative, or other person claiming any rights pursuant to
the Plan is subject to all terms and conditions of the Plan and any Award
Agreement applicable to the Participant, except to the extent the Plan and
Award Agreement otherwise provide, and to any additional restrictions deemed
necessary or appropriate by the Administrator. If the Participant is married
and resides in a community property state, a designation of a person other than
the Participant’s spouse as his or her beneficiary with respect to more than
50% of the Participant’s interest in the Award shall not be effective without
the prior written consent of the Participant’s spouse. If no beneficiary has
been designated or survives the Participant, payment shall be made to the
person entitled thereto pursuant to the Participant’s will or the laws of
descent and distribution. Subject to the foregoing, a beneficiary designation
may be changed or revoked by a Participant at any time provided the change or
revocation is filed with the Administrator.

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11.5         Stock Certificates; Book-Entry Procedures

(a)           Notwithstanding anything herein to the contrary, the Company shall not
be required to issue or deliver any certificates evidencing shares of Stock
pursuant to the exercise of any Award, unless and until the Board has
determined, with advice of counsel, that the issuance and delivery of such
certificates is in compliance with all applicable laws, regulations of
governmental authorities and, if applicable, the requirements of any exchange
on which the shares of Stock are listed or traded. All Stock certificates
delivered pursuant to the Plan are subject to any stop-transfer orders and
other restrictions as the Administrator deems necessary or advisable to comply
with federal, state, or foreign jurisdiction, securities or other laws, rules
and regulations and the rules of any national securities exchange or automated
quotation system on which the Stock is listed, quoted, or traded. The
Administrator may place legends on any Stock certificate to reference
restrictions applicable to the Stock. In addition to the terms and conditions
provided herein, the Administrator may require that a Participant make such
reasonable covenants, agreements, and representations as the Administrator, in
its discretion, deems advisable in order to comply with any such laws, regulations,
or requirements. The Administrator shall have the right to require any
Participant to comply with any timing or other restrictions with respect to the
settlement or exercise of any Award, including a window-period limitation, as
may be imposed in the discretion of the Administrator.

(b)           Notwithstanding any other provision of the Plan, unless otherwise
determined by the Administrator or required by applicable law, rule or
regulation, the Company shall not deliver to any Participant certificates evidencing
shares of Stock issued in connection with any Award and instead such shares of
Stock shall be recorded in the books of the Company (or, as applicable, its
transfer agent or stock plan administrator).

11.6         Paperless Exercise. In the event that the Company establishes,
for itself or using the services of a third party, an automated system for the
exercise of Awards, such as a system using an internet website or interactive
voice response, then the paperless exercise of Awards by a Participant may be permitted
through the use of such an automated system.

ARTICLE 12

CHANGES IN
CAPITAL STRUCTURE

12.1         Adjustments

(a)           In the event of any stock dividend, stock split, combination or
exchange of shares, merger, consolidation, spin-off, recapitalization, distribution
of Company assets to stockholders (other than normal cash dividends), or any
other corporate event affecting the Stock or the share price of the Stock, the
Administrator shall make such proportionate adjustments, if any, as the
Administrator in its discretion may deem appropriate to reflect such change
with respect to (i) the aggregate number and type of shares that may be issued
under the Plan (including, but not limited to, adjustments of the limitations
in Sections 3.1 and 3.3, provided that any adjustment of the limitations in
Section 3.1 shall be subject to the fourth sentence of Section 3.1); (ii) the
terms and conditions of any outstanding Awards (including, without limitation,
any applicable performance targets or criteria with respect thereto); and (iii)
the grant, exercise or purchase price per share for any outstanding Awards
under the Plan. Any adjustment affecting an Award intended as Qualified
Performance-Based Compensation shall be made consistent with the requirements
of Section 162(m) of the Code.

(b)           In the event of any transaction or event described in Section 12.1(a)
or any unusual or nonrecurring transactions or events affecting the Company,
any affiliate of the Company, or the financial statements of the Company or any
affiliate (including without limitation any Change in

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Control), or of changes in
applicable laws, regulations or accounting principles, and whenever the
Administrator determines that such action is appropriate in order to prevent
the dilution or enlargement of the benefits or potential benefits intended to
be made available under the Plan or with respect to any Award under the Plan,
to facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles, the Administrator, in its sole discretion and
on such terms and conditions as it deems appropriate, either by the terms of
the Award or by action taken prior to the occurrence of such transaction or
event and either automatically or upon the Participant’s request, is hereby
authorized to take any one or more of the following actions:

(i)            To provide for either (A) termination of any
such Award in exchange for an amount of cash, if any, equal to the amount that
would have been received upon the exercise of such Award or realization of the
Participant’s rights (and, for the avoidance of doubt, if as of the date of the
occurrence of the transaction or event described in this Section 12.1(b) the
Administrator determines in good faith that no amount would have been attained
upon the exercise of such Award or realization of the Participant’s rights,
then such Award may be terminated by the Company without payment) or (B) the
replacement of such Award with other rights or property selected by the
Administrator in its sole discretion;

(ii)           To provide that such Award be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be substituted for by
similar options, rights or awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices; and

(iii)          To make adjustments in the number and type of shares of Stock (or other
securities or property) subject to outstanding Awards, and in the number and
kind of outstanding Restricted Stock and/or in the terms and conditions of
(including the grant or exercise price), and the criteria included in,
outstanding options, rights and awards and options, rights and awards which may
be granted in the future;

(iv)          To provide that such Award shall be exercisable or payable or fully
vested with respect to all shares covered thereby, notwithstanding anything to
the contrary in the Plan or the applicable Award Agreement; and

(v)           To provide that the Award cannot vest, be exercised or become payable
after such event.

12.2         Acceleration Upon a Change in Control. Notwithstanding Section 12.1(b), and except
as may otherwise be provided in any applicable Award Agreement or other written
agreement entered into between the Company and a Participant, if a Change in
Control occurs and a Participant’s Awards are not continued, converted,
assumed, or replaced by (i) the Company or a Parent or Subsidiary of the
Company, or (ii) a Successor Entity, such Awards shall become fully exercisable
and/or payable, as applicable, and all forfeiture, repurchase and other
restrictions on such Awards shall lapse immediately prior to such Change in
Control. Subject to the foregoing, the Administrator shall have the discretion,
exercisable at any time before a sale, merger, consolidation, reorganization,
liquidation, dissolution or change in control of the Company, as defined by the
Administrator, to take such further action as it determines to be necessary or
advisable with respect to Awards. Such authorized action may include (but shall
not be limited to) establishing, amending or waiving the type, terms,
conditions or duration of, or restrictions on, Awards so as to provide for
earlier, later, extended or additional time for exercise, lifting restrictions
and other modifications, and the Administrator may take such actions with
respect to all Participants, to certain categories of Participants or only to
individual Participants. The Administrator may take such action before or after
granting Awards to which the action relates and before or after any public

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announcement with respect to
such sale, merger, consolidation, reorganization, liquidation, dissolution or
change in control that is the reason for such action.

12.3         No Other Rights. Except as expressly provided in the Plan,
no Participant shall have any rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend, any
increase or decrease in the number of shares of stock of any class or any
dissolution, liquidation, merger, or consolidation of the Company or any other
corporation. Except as expressly provided in the Plan or pursuant to action of
the Administrator under the Plan, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect
to, the number of shares of Stock subject to an Award or the grant or exercise
price of any Award.

ARTICLE 13

ADMINISTRATION

13.1         Administrator. The Administrator of the Plan shall be the
Compensation Committee of the Board (or another committee or a subcommittee of
the Board to which the Board delegates administration of the Plan) (such
committee, the “Committee”),
which Committee shall consist solely of two or more members of the Board each
of whom is both an “outside director,” within the meaning of Section 162(m) of
the Code, a Non-Employee Director and an “independent director” under the rules
of the Nasdaq Stock Market. Notwithstanding the foregoing: (a) the full Board,
acting by a majority of its members in office, shall conduct the general
administration of the Plan with respect to all Awards granted to Independent
Directors, and for purposes of such Awards the term “Administrator” as
used in this Plan shall be deemed to refer to the Board, and (b) the Committee
may delegate its authority hereunder to the extent permitted by Section 13.5.
Appointment of Committee members shall be effective upon acceptance of
appointment. In its sole discretion, the Board may at any time and from time to
time exercise any and all rights and duties of the Administrator under the Plan
except with respect to matters which under Rule 16b-3 under the Exchange Act or
Section 162(m) of the Code, or any regulations or rules issued thereunder, are
required to be determined in the sole discretion of the Committee. Committee
members may resign at any time by delivering written notice to the Board.
Vacancies in the Committee may only be filled by the Board.

13.2         Action by the Administrator. A majority of the Administrator shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present, and, subject to applicable law, acts
approved in writing by a majority of the Administrator in lieu of a meeting,
shall be deemed the acts of the Administrator. Each member of the Administrator
is entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Company or any
Parent or Subsidiary, the Company’s independent certified public accountants,
or any executive compensation consultant or other professional retained by the
Company to assist in the administration of the Plan.

13.3         Authority of Administrator. Subject to any specific designation in the
Plan, the Administrator has the exclusive power, authority and discretion to:

(a)           Designate Participants to receive Awards;

(b)           Determine the type or types of Awards to be granted to each
Participant;

(c)           Determine the number of Awards to be granted and the number of shares
of Stock to which an Award will relate;

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(d)           Determine the terms and conditions of any Award granted pursuant to the
Plan, including, but not limited to, the exercise price, grant price, or
purchase price, any reload provision, any restrictions or limitations on the
Award, any schedule for lapse of forfeiture restrictions or restrictions on the
exercisability of an Award, and accelerations or waivers thereof, any
provisions related to non-competition and recapture of gain on an Award, based
in each case on such considerations as the Administrator in its sole discretion
determines; provided, however,
that the Administrator shall not have the authority to accelerate the vesting
or waive the forfeiture of any Performance-Based Awards;

(e)           Determine whether, to what extent, and pursuant to what circumstances
an Award may be settled in, or the exercise price of an Award may be paid in,
cash, Stock, other Awards, or other property, or an Award may be canceled,
forfeited, or surrendered;

(f)            Prescribe the form of each Award Agreement,
which need not be identical for each Participant;

(g)           Decide all other matters that must be determined in connection with an
Award;

(h)           Establish, adopt, or revise any rules and regulations as it may deem
necessary or advisable to administer the Plan;

(i)            Interpret the terms of, and any matter
arising pursuant to, the Plan or any Award Agreement;

(j)            determine whether, to what extent and under
what circumstances cash, shares of Stock, other property and other amounts
payable with respect to an Award shall be deferred either automatically or at
the election of the Participant; and

(k)           Make all other decisions and determinations that may be required
pursuant to the Plan or as the Administrator deems necessary or advisable to
administer the Plan.

13.4         Decisions Binding. The Administrator’s interpretation of the
Plan, any Awards granted pursuant to the Plan, any Award Agreement and all
decisions and determinations by the Administrator with respect to the Plan are
final, binding, and conclusive on all parties.

13.5         Delegation of Authority. To the extent permitted by applicable law,
the Committee may from time to time delegate to a committee of one or more
members of the Board or one or more officers of the Company the authority to
grant or amend Awards to Participants other than (a) senior executives of the
Company who are subject to Section 16 of the Exchange Act, (b) Covered
Employees, or (c) officers of the Company (or members of the Board) to whom
authority to grant or amend Awards has been delegated hereunder. Any delegation
hereunder shall be subject to the restrictions and limits that the Committee
specifies at the time of such delegation, and the Committee may at any time
rescind the authority so delegated or appoint a new delegatee. At all times,
the delegatee appointed under this Section 13.5 shall serve in such capacity at
the pleasure of the Committee.

ARTICLE 14

EFFECTIVE
AND EXPIRATION DATES

14.1         Effective Date. The Plan will be effective as of the
Effective Date.

14.2         Approval of Plan by Stockholders. The Plan will be submitted for the approval
of the Company’s stockholders within twelve (12) months after the date of the
Board’s initial adoption of the

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Plan. Awards may be granted
or awarded prior to such stockholder approval, provided,
that such Awards shall not be exercisable nor shall such Awards vest prior to
the time when the Plan is approved by the stockholders, and provided further, that if such approval has
not been obtained at the end of said twelve-month period, all Awards previously
granted or awarded under the Plan shall thereupon be canceled and become null
and void. In addition, if the Board determines that Awards other than Options
or Stock Appreciation Rights which may be granted to Section 162(m)
Participants should continue to be eligible to qualify as performance-based
compensation under Section 162(m)(4)(C) of the Code, the Performance Criteria
must be disclosed to and approved by the Company’s stockholders no later than
the first stockholder meeting that occurs in the fifth year following the year
in which the Company’s stockholders previously approved the Plan, as amended
and restated to include the Performance Criteria.

14.3         Expiration Date. The Plan will expire on, and no Award may
be granted pursuant to the Plan after, the earlier of the tenth anniversary of
(i) the date this Plan is approved by the Board or (ii) the date this Plan is
approved by the Company’s stockholders (the “Expiration Date”). Any Awards that are
outstanding on the tenth anniversary of the Effective Date shall remain in
force according to the terms of the Plan and the applicable Award Agreement.

ARTICLE 15

AMENDMENT,
MODIFICATION, AND TERMINATION

15.1         Amendment, Modification, And Termination. The Board may terminate, amend or modify
the Plan at any time and from time to time; provided,
however, that (a) to the extent necessary to comply with any
applicable law, regulation, or stock exchange rule, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a
degree as required, and (b) stockholder approval is required for any amendment
to the Plan that increases the number of shares available under the Plan (other
than any adjustment as provided by Article 12). Notwithstanding any provision
in this Plan to the contrary, absent approval of the stockholders of the
Company, no Option may be amended to reduce the per share exercise price of the
shares subject to such Option below the per share exercise price as of the date
the Option is granted and, except as permitted by Article 12, no Option may be
granted in exchange for, or in connection with, the cancellation or surrender
of an Option having a higher per share exercise price.

15.2         Awards Previously Granted. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted pursuant to the Plan without the prior written consent of the
Participant.

ARTICLE 16

GENERAL
PROVISIONS

16.1         No Rights to Awards. No Participant, Employee, or other person
shall have any claim to be granted any Award pursuant to the Plan, and neither
the Company nor the Administrator is obligated to treat Participants,
Employees, and other persons uniformly.

16.2         No Stockholders Rights. Except as otherwise provided herein, a
Participant shall have none of the rights of a stockholder with respect to
shares of Stock covered by any Award until the Participant becomes the record
owner of such shares of Stock.

16.3         Withholding. The Company or any Parent or Subsidiary shall have the authority and
the right to deduct or withhold, or require a Participant to remit to the
Company an amount sufficient to satisfy federal, state, local and foreign taxes
(including the Participant’s employment tax obligations) required by law to be
withheld with respect to any taxable event concerning a Participant arising as
a

 21
 

result of this Plan. The
Administrator may in its discretion and in satisfaction of the foregoing
requirement allow a Participant to elect to have the Company or a Parent or
Subsidiary, as applicable, withhold shares of Stock otherwise issuable under an
Award (or allow the return of shares of Stock) having a Fair Market Value equal
to the sums required to be withheld. Notwithstanding any other provision of the
Plan, the number of shares of Stock which may be withheld with respect to the
issuance, vesting, exercise or payment of any Award (or which may be
repurchased from the Participant of such Award within six months (or such other
period as may be determined by the Administrator) after such shares of Stock
were acquired by the Participant from the Company) in order to satisfy the
Participant’s federal, state, local and foreign income and payroll tax
liabilities with respect to the issuance, vesting, exercise or payment of the
Award shall be limited to the number of shares which have a Fair Market Value
on the date of withholding or repurchase equal to the aggregate amount of such
liabilities based on the minimum statutory withholding rates for federal,
state, local and foreign income tax and payroll tax purposes that are
applicable to such supplemental taxable income.

16.4         No Right to Employment or Services. Nothing in the Plan or any Award Agreement
shall interfere with or limit in any way the right of the Company or any Parent
or Subsidiary to terminate any Participant’s employment or services at any
time, nor confer upon any Participant any right to continue in the employ or
service of the Company or any Parent or Subsidiary.

16.5         Unfunded Status of Awards. The Plan is intended to be an unfunded plan
for incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Award
Agreement shall give the Participant any rights that are greater than those of
a general creditor of the Company or any Parent or Subsidiary.

16.6         Indemnification. To the extent allowable pursuant to
applicable law, the Administrator (and each member thereof) shall be
indemnified and held harmless by the Company from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by such member in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action or failure to act pursuant to the Plan and against and from any
and all amounts paid by him or her in satisfaction of judgment in such action,
suit, or proceeding against him or her; provided
he or she gives the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify them
or hold them harmless.

16.7         Relationship
to Other Benefits. No
payment pursuant to the Plan shall be taken into account in determining any
benefits pursuant to any pension, retirement, savings, profit sharing, group
insurance, welfare or other benefit plan of the Company or any Parent or
Subsidiary except to the extent otherwise expressly provided in writing in such
other plan or an agreement thereunder.

16.8         Expenses. The expenses of administering the Plan shall be borne by the Company
and its Subsidiaries.

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

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16.10       Fractional Shares.
No fractional shares of Stock shall be issued and the Administrator shall
determine, in its discretion, whether cash shall be given in lieu of fractional
shares or whether such fractional shares shall be eliminated by rounding up or
down as appropriate.

16.11       Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the
Plan, the Plan, and any Award granted or awarded to any Participant who is then
subject to Section 16 of the Exchange Act, shall be subject to any additional
limitations set forth in any applicable exemptive rule under Section 16 of the
Exchange Act (including any amendment to Rule 16b-3 under the Exchange Act)
that are requirements for the application of such exemptive rule. To the extent
permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such applicable
exemptive rule.

16.12       Government and Other Regulations. The obligation of the Company to make payment of awards in Stock or
otherwise shall be subject to all applicable laws, rules, and regulations, and
to such approvals by government agencies as may be required. The Company shall
be under no obligation to register pursuant to the Securities Act, any of the
shares of Stock paid pursuant to the Plan. If the shares paid pursuant to the Plan
may in certain circumstances be exempt from registration pursuant to the
Securities Act, the Company may restrict the transfer of such shares in such
manner as it deems advisable to ensure the availability of any such exemption.

16.13       Governing Law. The
Plan and all Award Agreements shall be construed in accordance with and
governed by the laws of the State of Delaware, without regard to the conflicts
of law principles thereof.

 23

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