Document:

Exhibit
4.3

 

CastleRock Security Holdings, Inc.

2101 Arlington Heights Road,
Suite 150

Arlington
Heights, IL 60005

 

September 24, 2010

 

Robin Rodriguez

SA Systems LLC

3333 Poinciana Ave

Coconut Grove, FL  33133

 

Re:                             Contractual Rights - CastleRock Security Holdings, Inc.

 

Dear Robin:

 

Pursuant to that certain
Contribution Agreement dated September 24, 2010, SA Systems LLC (“SAS”) has acquired 138,000 shares of common stock in
CastleRock Security Holdings, Inc. (the “Company”).  In connection with such stock ownership, SAS
will be entitled to the following contractual rights with respect to the
Company:

 

1.               Information and
Board Observer Rights.  As
long as SAS owns any shares of common stock in the Company, the Company shall: (a) provide
SAS with copies of the quarterly and annual financial statements of the Company
within ten (10) days after such financial statements are available in
final form, but in no event later than sixty (60) days after such each fiscal
quarter and ninety (90) days after each fiscal year, (b) furnish SAS with
all budget-related documents, including all projections and proposals, notices
of all meetings of any committees of the Board of Directors, notices of any
material litigation and all other information that SAS may reasonably request,
and (c) invite a representative of SAS to attend all meetings of its Board
of Directors (and all committees thereof) in a nonvoting observer capacity and,
in this respect, shall give such representative copies of all notices, minutes,
consents, and other materials that it provides to its directors; provided
that SAS hereby agrees and such SAS representative shall agree in writing to
hold in confidence and trust all information so provided (the “Proprietary Information”);
and, provided  further, that the Company reserves the right to
withhold any information, and to exclude such SAS representative from any
meeting or portion thereof, if the Board of Directors reasonably believes in
good faith that (a) access to such information or attendance at such
meeting would materially and adversely affect the attorney-client privilege
between the Company and its counsel, or (b) would result in the violation
of any law, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Company is subject.  Proprietary
Information shall not include (i) information that is legally in the
possession of SAS without any confidentiality restrictions or is publicly
available to SAS prior to the disclosure thereof, (ii) information that,
subsequent to its disclosure, becomes publicly available to SAS without any
violation of this letter agreement by SAS, (iii) information that becomes
legally available to SAS from any third party 

 

 

without
any confidentiality restrictions, (iv) information that is independently
acquired without any confidentiality restrictions or developed by SAS, (v) information
that is required to be disclosed by SAS pursuant to law or regulation or by
order of a court of competent jurisdiction, or pursuant to the requirements of
a governmental or regulatory body, or (vi) information that is explicitly
approved for release by prior written authorization of the Company.  This paragraph 1 shall terminate and be of no
further force or effect upon the earlier to occur of: (1) the liquidation,
dissolution or winding up of the Company, or the deemed occurrence of such
event, in each case as set forth in the Company’s Certificate of Incorporation,
as amended from time to time, or (2) an initial underwritten public
offering of the Company’s securities; provided, however, that the
confidentiality obligations of SAS and the SAS representative set forth above
shall survive any such termination.

 

2.               Registration
Right.  If the Company grants to Alarm
Funding, LLC or any individual or entity of any kind, including but not limited
to a partnership, a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof) that directly, or indirectly through one or more intermediaries,
controls, is controlled by or under common control with Alarm Funding
(collectively, “Alarm Funding”) any right to
register any of its securities under the Securities Act of 1933, as amended,
the Company shall grant the same rights to SAS. 
This paragraph 2 shall survive an initial underwritten public offering
of the Company’s securities and shall continue in effect for so long as SAS or
Cordell Funding, LLLP own individually or collectively one percent (1%) or more
of the Company’s outstanding common stock.

 

3.               Co-Sale Right.

 

a.               Capitalized
Terms.  For purposes of this paragraph
3, all capitalized terms used but not defined herein shall have the meanings
provided in that certain Right of First Refusal Agreement between Alarm
Funding, LLC, SAS and the Company of even date herewith (the “ROFR”).

 

b.              Exercise of
Right.  If Alarm Funding proposes to
Transfer any of its Equity Securities and such Offered Shares are not purchased
pursuant to Section 2.1 of the ROFR, and thereafter are to be sold to the
third-party transferee(s) identified in the Transfer Notice, SAS may elect
to participate on a pro rata basis in the proposed transfer as set forth in
this paragraph 3 and otherwise on the same terms and conditions specified in
the Proposed Transfer Notice.  If SAS
desires to exercise such right of co-sale, SAS must give Alarm Funding written
notice to that effect within fifteen (15) days after the deadline for delivery
of the Participating Holder Notice or Participating Holders Overallotment
Notice described in Section 2.1 of the ROFR, as applicable, and upon
giving such notice SAS shall be deemed to have effectively exercised its right
of co-sale hereunder.

 

2

 

c.               Includable
Shares.  If SAS delivers the written
notice described in paragraph 3(b) above, SAS may include in the proposed
Transfer by Alarm Funding all or any part of SAS’ Equity Securities equal to
the product obtained by multiplying (i) the aggregate number of Offered
Shares (excluding shares purchased by the Company or the Holders pursuant to Section 2.1
of the ROFR) by (ii) a fraction, the numerator of which is the number of shares
of Equity Securities owned by SAS immediately before consummation of the
proposed Transfer (including any shares that SAS has agreed to purchase
pursuant to Section 2.1 of the ROFR) and the denominator of which is the
total number of shares of Equity Securities owned, in the aggregate, by all
Holders immediately prior to the consummation of the proposed Transfer
(including any shares that all Holders have collectively agreed to purchase
pursuant to Section 2.1 of the ROFR).

 

d.              Delivery of
Certificates.  SAS shall
effect its participation in the proposed Transfer by delivering to Alarm
Funding, no later than fifteen (15) days after such SAS’ exercise of its
co-sale right, one or more stock certificates, properly endorsed for transfer
to the prospective transferee, representing the number of shares of Equity
Securities that SAS elects to include in the Transfer.

 

e.               Purchase
Agreement.  The parties
hereby agree that the terms and conditions of any sale pursuant to this
paragraph 3 will be memorialized in, and governed by, a written purchase and
sale agreement with customary terms and provisions for such a transaction and
the parties further covenant and agree to enter into such an agreement as a
condition precedent to any sale or other transfer pursuant to this paragraph 3.

 

f.                 Deliveries.  Each stock certificate SAS delivers to Alarm
Funding pursuant to paragraph 3(d) above will be transferred to the
prospective transferee against payment therefor in consummation of the sale of
the Offered Shares pursuant to the terms and conditions specified in the
Proposed Transfer Notice and the purchase and sale agreement, and Alarm Funding
shall concurrently therewith remit or direct payment to SAS the portion of the
sale proceeds to which SAS is entitled by reason of its participation in such
sale.  If any prospective transferee or
transferees refuse(s) to purchase Equity Securities from SAS, Alarm
Funding may not sell any Offered Shares to such prospective transferee or
transferees unless and until, simultaneously with such sale, Alarm Funding
purchases all Equity Securities subject to the right of co-sale from SAS on the
same terms and conditions (including the proposed purchase price) as set forth
in the Proposed Transfer Notice.

 

g.              Additional
Compliance.  If any proposed
Transfer is not consummated within forty-five (45) days after receipt of the
Proposed Transfer Notice by the Company, Alarm Funding may not sell any Offered
Shares unless they first comply in full with each provision of this paragraph
3.  The exercise or election 

 

3

 

not
to exercise any right by SAS shall not adversely affect its right to
participate in any other sales of Offered Shares subject to this paragraph 3.

 

h.              Termination.  This paragraph 3 shall terminate and be of no
further force or effect upon the earlier to occur of: (1) the liquidation,
dissolution or winding up of the Company, or the deemed occurrence of such
event, in each case as set forth in the Company’s Certificate of Incorporation,
as amended from time to time, or (2) an initial underwritten public
offering of the Company’s securities

 

In the event that the
Company engages in a restructuring or similar transaction, any resulting entity
or entities shall be subject to this letter in the same manner and to the same
extent as the Company.

 

	
  Very
  truly yours,

  	
   

  
	
   

  	
   

  	
   

  
	
  CASTLEROCK
  SECURITY HOLDINGS, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  / s / Brian E. Johnson

  	
   

  
	
   

  	
  Brian E. Johnson

  	
   

  
	
   

  	
  President and Chief
  Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACKNOWLEDGED AND ACCEPTED:

  
	
   

  
	
  SA
  SYSTEMS LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  / s / Robin Rodriguez

  	
   

  
	
   

  	
  Robin Rodriguez

  	
   

  
	
   

  	
  Manager

  	
   

  

 

4Exhibit 10.1

 

CASTLEROCK SECURITY HOLDINGS, INC.

 

2010 EQUITY INCENTIVE PLAN

 

Adopted November 1, 2010

Approved By Shareholders November 1, 2010

Termination Date: October 31, 2020

 

1.                                      PURPOSES.

 

(a)           Eligible
Stock Award Recipients.  The
persons eligible to receive Stock Awards are Employees, Directors and
Consultants.  Only Non-Employee Directors
are eligible to receive Options under Section 8.

 

(b)           Available
Stock Awards.  The Plan
provides for the grant of the following Stock Awards: (i) Incentive Stock
Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation
Rights, (iv) Restricted Stock Purchase Awards, (v) Restricted Stock
Awards, and (vi) Restricted Stock Unit Awards.

 

(c)           General
Purpose.  The Company, by means of the
Plan, seeks to secure and retain the services of the group of persons eligible
to receive Stock Awards, to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates and to
provide a means by which eligible recipients of Stock Awards may be given an
opportunity to benefit from increases in the value of the Common Stock.  The Company intends that Stock Awards granted
under the Plan will be exempt from or comply with Section 409A of the Code
(including any amendment or replacements of such section), and the Plan will be
so construed.

 

2.                                      DEFINITIONS.

 

(a)           “Affiliate” means any
parent corporation or subsidiary corporation of the Company, whether now or
hereafter existing, as those terms are defined in Sections 424(e) and (f),
respectively, of the Code.

 

(b)           “Annual
Meeting” means the annual meeting of the stockholders of the
Company.

 

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

 

(d)           “Capitalization
Adjustment” has the meaning ascribed to that term in Section 12(a).

 

(e)           “Cause” means, with
respect to a Participant, the occurrence of any of the following: (i) such
Participant’s commission of any felony or any crime involving fraud, dishonesty
or moral turpitude under the laws of the United States or any state thereof; (ii) such
Participant’s attempted commission of, or participation in, a fraud or act of
dishonesty against the Company; (iii) such Participant’s intentional and
material violation of any contract or agreement 

 

1

 

between the Participant and the Company or any
statutory duty owed to the Company; (iv) such Participant’s unauthorized
use or disclosure of the Company’s confidential information or trade secrets or
(v) such Participant’s gross misconduct. 
The determination that a termination is for Cause shall be made by the
Company in its discretion.  Any
determination by the Company that the Continuous Service of a Participant was
terminated by reason of dismissal without Cause for the purposes of outstanding
Stock Awards held by such Participant shall have no impact upon any
determination of the rights or obligations of the Company or such Participant
for any other purpose.

 

(f)            “Change
in Control”  means the occurrence, in a
single transaction or in a series of related transactions, of any one or more
of the following events:

 

(i)            any Exchange Act Person
becomes the Owner, directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power of the
Company’s then outstanding securities other than by virtue of a merger,
consolidation or similar transaction. 
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur (A) on account of the acquisition of securities of the Company by
an investor, any affiliate thereof or any other Exchange Act Person from the
Company in a transaction or series of related transactions the primary purpose
of which is to obtain financing for the Company through the issuance of equity
securities or (B) solely because the level of Ownership held by any
Exchange Act Person (the “Subject Person”)
exceeds the designated percentage threshold of the outstanding voting
securities as a result of a repurchase or other acquisition of voting
securities by the Company reducing the number of shares outstanding, provided
that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of voting securities by the Company,
and after such share acquisition, the Subject Person becomes the Owner of any
additional voting securities that, assuming the repurchase or other acquisition
had not occurred, increases the percentage of the then outstanding voting
securities Owned by the Subject Person over the designated percentage
threshold, then a Change in Control shall be deemed to occur;

 

(ii)           there is consummated a
merger, consolidation or similar transaction involving (directly or indirectly)
the Company and, immediately after the consummation of such merger,
consolidation or similar transaction, the shareholders of the Company
immediately prior thereto do not Own, directly or indirectly, either (A) outstanding
voting securities representing more than fifty percent (50%) of the combined
outstanding voting power of the surviving Entity in such merger, consolidation
or similar transaction or (B) more than fifty percent (50%) of the
combined outstanding voting power of the parent of the surviving Entity in such
merger, consolidation or similar transaction;

 

(iii)         there is consummated a sale,
lease, license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries, other than a sale,
lease, license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries to an Entity, more than
fifty percent (50%) of the combined voting power of the voting securities of
which are Owned by shareholders of the Company in substantially the same
proportions as their Ownership of the outstanding voting securities of the Company
immediately prior to such sale, lease, license or other disposition; or

 

2

 

(iv)          individuals who, on the date
this Plan is adopted by the Board, are members of the Board (the “Incumbent Board”) cease for any
reason to constitute at least a majority of the members of the Board; provided, however, that
if the appointment or election (or nomination for election) of any new Board
member was approved or recommended by a majority vote of the members of the
Incumbent Board then still in office, such new member shall, for purposes of
this Plan, be considered as a member of the Incumbent Board.

 

Notwithstanding
the foregoing or any other provision of this Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the
Company or any Affiliate and the Participant shall supersede the foregoing
definition with respect to Stock Awards subject to such agreement (it being
understood, however, that if no definition of Change in Control or any
analogous term is set forth in such an individual written agreement, the
foregoing definition shall apply).

 

(g)           “Code” means the
Internal Revenue Code of 1986, as amended.

 

(h)           “Committee” means a
committee of one (1) or more members of the Board appointed by the Board
in accordance with Section 3(c).

 

(i)            “Common
Stock” means the common stock of the Company.

 

(j)            “Company”
means CastleRock Security Holdings, Inc., a Delaware corporation.

 

(k)           “Consultant” means any
person, including an advisor, who (i) is engaged by the Company or an
Affiliate to render consulting or advisory services and is compensated for such
services or (ii) is serving as a member of the Board of Directors of an
Affiliate and is compensated for such services. 
However, service solely as a Director, or payment of a fee for such
services, shall not cause a Director to be considered a “Consultant” for
purposes of the Plan.

 

(l)            “Continuous
Service” means that the Participant’s service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated.  A change in
the capacity in which the Participant renders service to the Company or an
Affiliate as an Employee, Consultant or Director or a change in the entity for
which the Participant renders such service, provided that there is no
interruption or termination of the Participant’s service with the Company or an
Affiliate, shall not terminate a Participant’s Continuous Service.  For example, a change in status from an Employee
of the Company to a Consultant of an Affiliate or to a Director shall not
constitute an interruption of Continuous Service.  The Board or the chief executive officer of
the Company, in that party’s discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave of absence
approved by that party, including sick leave, military leave or any other
personal leave.  Notwithstanding the
foregoing, a leave of absence shall be treated as Continuous Service for purposes
of vesting in a Stock Award only to such extent as may be provided in the
Company’s leave of absence policy or in the written terms of the Participant’s
leave of absence.

 

(m)          “Corporate Transaction” means the
occurrence, in a single transaction or in a series of related transactions, of
any one or more of the following events:

 

3

 

(i)            a sale or other disposition
of all or substantially all, as determined by the Board in its discretion, of
the consolidated assets of the Company and its Subsidiaries;

 

(ii)           a sale or other disposition
of at least ninety percent (90%) of the outstanding securities of the Company;

 

(iii)         a merger, consolidation or
similar transaction following which the Company is not the surviving
corporation; or

 

(iv)          a merger, consolidation or
similar transaction following which the Company is the surviving corporation
but the shares of Common Stock outstanding immediately preceding the merger,
consolidation or similar transaction are converted or exchanged by virtue of
the merger, consolidation or similar transaction into other property, whether
in the form of securities, cash or otherwise.

 

(n)           “Covered
Employee” means the chief executive officer and the four (4) other
highest compensated officers of the Company (other than the chief financial
officer) for whom total compensation is required to be reported to shareholders
under the Exchange Act, as determined for purposes of Section 162(m) of
the Code.

 

(o)           “Director” means a member
of the Board.

 

(p)           “Disability” means the
permanent and total disability of a person within the meaning of Section 22(e)(3) of
the Code.

 

(q)           “Employee” means any
person employed by the Company or an Affiliate. 
However, service solely as a Director, or payment of a fee for such
services, shall not cause a Director to be considered an “Employee” for
purposes of the Plan.

 

(r)           “Entity” means a
corporation, partnership or other entity.

 

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

 

(t)            “Exchange
Act Person” means any natural person, Entity or “group” (within
the meaning of Section 13(d) or 14(d) of the Exchange Act),
except that “Exchange Act Person” shall not include (i) the Company or any
Subsidiary of the Company, (ii) any employee benefit plan of the Company
or any Subsidiary of the Company or any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any Subsidiary of
the Company, (iii) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (iv) an Entity Owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their Ownership of stock of the Company.

 

(u)           “Fair Market Value”  means, as of any date, the
value of the Common Stock determined as follows:

 

(i)            If the Common Stock is
listed on any established stock exchange or traded on the New York Stock
Exchange, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on 

 

4

 

such exchange or market (or the exchange or market
with the greatest volume of trading in the Common Stock) on the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable.

 

(ii)           In the absence of such
markets for the Common Stock, the Fair Market Value will be determined by the
Board in good faith.

 

In
addition, all common stock will be valued in a manner consistent with section
409A of the Code.

 

(v)           “Incentive
Stock Option” means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

 

(w)          “IPO Date” means the
effective date of the initial public offering of the Common Stock.

 

(x)           “Non-Employee
Director”  means a Director who either (i) is
not a current Employee or Officer of the Company or an Affiliate, does not
receive compensation, either directly or indirectly, from the Company or an
Affiliate for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act (“Regulation S-K”)), does not
possess an interest in any other transaction for which disclosure would be
required under Item 404(a) of Regulation S-K, and is not engaged in a
business relationship for which disclosure would be required pursuant to Item
404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee
director” for purposes of Rule 16b-3.

 

(y)           “Nonstatutory
Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

 

(z)           “Officer” means a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.

 

(aa)         “Option” means an
option to purchase shares of Common Stock granted pursuant to the Plan.

 

(bb)         “Option Agreement” means a
written agreement between the Company and an Optionholder evidencing the terms
and conditions of an Option grant.  Each
Option Agreement shall be subject to the terms and conditions of the Plan.

 

(cc)         “Optionholder”
means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.

 

(dd)         “Outside Director” means a
Director who either (i) is not a current employee of the Company or an “affiliated
corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an “affiliated
corporation” who receives compensation for prior services (other than benefits
under a tax-qualified retirement plan) during the taxable year, has not been an
officer of the Company or 

 

5

 

an “affiliated corporation”, and does not receive
remuneration from the Company or an “affiliated corporation,” either directly
or indirectly, in any capacity other than as a Director or (ii) is
otherwise considered an “outside director” for purposes of Section 162(m) of
the Code.

 

(ee)         “Own,” “Owned,” “Owner,” “Ownership” A person or
Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to
have acquired “Ownership” of securities if such person or Entity, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to
direct the voting, with respect to such securities.

 

(ff)          “Participant” means a person
to whom a Stock Award is granted pursuant to the Plan or, if applicable, such
other person who holds an outstanding Stock Award.

 

(gg)         “Plan” means this
CastleRock Security Holdings Inc. Equity Incentive Plan.

 

(hh)         “Restricted Stock Award” means an award
of shares of Common Stock which is granted pursuant to the terms and conditions
of Section 7(c).

 

(ii)           “Restricted
Stock Award Agreement” means a written agreement
between the Company and a holder of a Restricted Stock Award evidencing the
terms and conditions of a Restricted Stock Award grant.  Each Restricted Stock Award Agreement shall
be subject to the terms and conditions of the Plan.

 

(jj)           “Restricted
Stock Purchase Award” means an award of shares of Common Stock
which is granted pursuant to the terms and conditions of Section 7(b).

 

(kk)         “Restricted Stock Purchase
Award Agreement” means a written agreement between the Company and a
holder of a Restricted Stock Purchase Award evidencing the terms and conditions
of a Restricted Stock Purchase Award grant. 
Each Restricted Stock Purchase Award Agreement shall be subject to the
terms and conditions of the Plan.

 

(ll)           “Restricted
Stock Unit Award” means a right to receive shares of Common
Stock which is granted pursuant to the terms and conditions of Section 7(d).

 

(mm)      “Restricted Stock Unit
Award Agreement” means a written agreement between the Company and a
holder of a Restricted Stock Unit Award evidencing the terms and conditions of
a Restricted Stock Unit Award grant. 
Each Restricted Stock Unit Award Agreement shall be subject to the terms
and conditions of the Plan.

 

(nn)         “Rule 16b-3” means Rule 16b-3
promulgated under the Exchange Act or any successor to Rule 16b-3, as in
effect from time to time.

 

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

 

(pp)         “Stock
Appreciation Right” means a right to receive the appreciation of
Common Stock that is granted pursuant to the terms and conditions of Section 7(a).

 

6

 

(qq)         “Stock Appreciation Right
Agreement” means a written agreement between the Company and a
holder of a Stock Appreciation Right evidencing the terms and conditions of a
Stock Appreciation Right grant.  Each
Stock Appreciation Right Agreement shall be subject to the terms and conditions
of the Plan.

 

(rr)         “Stock Award” means any
right granted under the Plan, including an Option, a Stock Appreciation Right,
a Restricted Stock Purchase Award, a Restricted Stock Award, or a Restricted
Stock Unit Award.

 

(ss)          “Stock Award Agreement” means a
written agreement between the Company and a Participant evidencing the terms
and conditions of a Stock Award grant. 
Each Stock Award Agreement shall be subject to the terms and conditions
of the Plan.

 

(tt)           “Subsidiary” means, with
respect to the Company, (i) any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any
partnership in which the Company has a direct or indirect interest (whether in
the form of voting or participation in profits or capital contribution) of more
than fifty percent (50%).

 

(uu)         “Ten Percent Shareholder” means a person
who Owns (or is deemed to Own pursuant to Section 424(d) of the Code)
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any of its Affiliates.

 

3.                                      ADMINISTRATION.

 

(a)           Administration
by Board.  The Board
shall administer the Plan unless and until the Board delegates administration
of the Plan to a Committee, as provided in Section 3(c).

 

(b)           Powers
of Board.  The Board
shall have the power, subject to, and within the limitations of, the express
provisions of the Plan:

 

(i)            To determine from time to
time which of the persons eligible under the Plan shall be granted Stock
Awards; when and how each Stock Award shall be granted; what type or
combination of types of Stock Award shall be granted; the provisions of each
Stock Award granted (which need not be identical), including the time or times
when a person shall be permitted to receive Common Stock pursuant to a Stock
Award; and the number of shares of Common Stock with respect to which a Stock
Award shall be granted to each such person.

 

(ii)           To construe and interpret
the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration.  The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective.

 

7

 

(iii)         To effect, at any time and
from time to time, with the consent of any adversely affected Optionholder, (1) the
reduction of the exercise price of any outstanding Option under the Plan, (2) the
cancellation of any outstanding Option under the Plan and the grant in
substitution therefor of (A) a new Option under the Plan or another equity
plan of the Company covering the same or a different number of shares of Common
Stock, (B) a Stock Appreciation Right, (C) a Restricted Stock Purchase
Award, (D) a Restricted Stock Award, (E) a Restricted Stock Unit
Award, (F) cash and/or (G) other valuable consideration (as
determined by the Board, in its discretion), or (3) any other action that
is treated as a repricing under generally accepted accounting principles.

 

(iv)          To amend the Plan or a Stock
Award as provided in Section 13.

 

(v)           To terminate or suspend the
Plan as provided in Section 14.

 

(vi)          Generally, to exercise such
powers and to perform such acts as the Board deems necessary or expedient to
promote the best interests of the Company and that are not in conflict with the
provisions of the Plan.

 

(vii)        To adopt such procedures and
sub-plans as are necessary or appropriate to permit participation in the Plan
by Employees who are foreign nationals or employed outside the United States.

 

(c)           Delegation
to Committee.

 

(i)            General.  The Board may delegate some or all of the
administration of the Plan to a Committee or Committees of one (1) or more
members of the Board, and the term “Committee”
shall apply to any person or persons to whom such authority has been
delegated.  If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board that have
been delegated to the Committee, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board.  The Board may retain
the authority to concurrently administer the Plan with the Committee and may,
at any time, revest in the Board some or all of the powers previously
delegated.

 

(ii)           Section 162(m) and
Rule 16b-3 Compliance.  In the discretion of the Board, the Committee
may consist solely of two or more Outside Directors, in accordance with Section 162(m) of
the Code, and/or solely of two or more Non-Employee Directors, in accordance
with Rule 16b-3.  In addition, the
Board or the Committee, in its discretion, may (1) delegate to a committee
of one or more members of the Board who need not be Outside Directors the authority
to grant Stock Awards to eligible persons who are either (a) not then
Covered Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award, or (b) not persons
with respect to whom the Company wishes to comply with Section 162(m) of
the Code, and/or (2) delegate to a committee of one or 

 

8

 

more members of the Board who need not be
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.

 

(d)           Delegation
to an Officer.  The Board
may delegate to one or more Officers of the Company the authority to do one or
both of the following: (i) designate Officers and Employees of the Company
or any of its Subsidiaries to be recipients of Stock Awards and (ii) determine
the number of shares of Common Stock to be subject to such Stock Awards granted
to such Officers and Employees of the Company; provided,
however, that the Board resolutions
regarding such delegation shall specify the total number of shares of Common
Stock that may be subject to the Stock Awards granted by such Officer and that
such Officer may not grant a Stock Award to himself or herself.  Notwithstanding anything to the contrary in
this Section 3(d), the Board may not delegate to an Officer authority to
determine the Fair Market Value of the Common Stock pursuant to Section 2(u)(ii) above.

 

(e)           Effect
of Board’s Decision.  All
determinations, interpretations and constructions made by the Board in good
faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.

 

4.                                      SHARES
SUBJECT TO THE PLAN.

 

(a)           Share
Reserve.  Subject to the provisions of Section 12(a) relating
to Capitalization Adjustments, the shares of Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate six hundred thousand
(600,000) shares of Common Stock plus an automatic annual increase to be added
on the first day of the fiscal year of the Company for a period beginning on
the first day of the fiscal year that begins on January 1, 2011, and
ending on (and including) the first day of the fiscal year that begins on January 1,
2015, equal to the least of the following amounts: (i) three percent (3%)
of the Company’s outstanding shares of Common Stock on the day preceding the
first day of the applicable Company fiscal year (rounded to the nearest whole
share), (ii) seventy two thousand (72,000) shares of Common Stock, or (iii) such
smaller number of shares as may be determined by the Board.

 

(b)           Reversion
of Shares to the Share Reserve.  If any Stock Award shall for any reason
expire or otherwise terminate, in whole or in part, without having been
exercised in full, or if any shares of Common Stock issued to a Participant
pursuant to a Stock Award are forfeited to or repurchased by the Company,
including, but not limited to, any repurchase or forfeiture caused by the
failure to meet a contingency or condition required for the vesting of such
shares, then the shares of Common Stock not issued under such Stock Award, or
forfeited to or repurchased by the Company, shall revert to and again become
available for issuance under the Plan. 
If any shares subject to a Stock Award are not delivered to a
Participant because such shares are withheld for the payment of taxes or the
Stock Award is exercised through a reduction of shares subject to the Stock
Award (i.e., “net exercised”), the number of shares that are not delivered to
the Participant shall remain available for issuance under the Plan.  If the exercise price of any Stock Award is
satisfied by tendering shares of Common Stock held by the Participant (either
by actual delivery or attestation), then the number of shares so tendered shall
remain available for issuance under the Plan. 
The aggregate maximum number of shares of Common Stock that may be
issued as Restricted Stock Awards shall be ten percent (10%) of the 

 

9

 

total of the Company’s outstanding shares of Common
Stock, as determined with respect to each Restricted Stock Award at the time
such award is granted.

 

(c)           Source
of Shares.  The shares
of Common Stock subject to the Plan may be unissued shares or reacquired shares,
bought on the market or otherwise.

 

5.                                      ELIGIBILITY.

 

(a)           Eligibility
for Specific Stock Awards. 
Incentive Stock Options may be granted only to Employees.  Stock Awards other than Incentive Stock
Options may be granted to Employees, Directors and Consultants.

 

(b)           Ten
Percent Shareholders.  A Ten
Percent Shareholder shall not be granted an Incentive Stock Option unless the
exercise price of such Option is at least one hundred ten percent (110%) of the
Fair Market Value of the Common Stock on the date of grant and the Option is
not exercisable after the expiration of five (5) years from the date of
grant.

 

(c)           Section 162(m) Limitation
on Annual Grants.  Subject to
the provisions of Section 12(a) relating to Capitalization
Adjustments, at such time as the Company may be subject to the applicable
provisions of Section 162(m) of the Code, no Employee shall be
eligible to be granted Options or Stock Appreciation Rights covering more than
150,000 shares of Common Stock during any calendar year.

 

(d)           Consultants.  A Consultant shall not be eligible for the
grant of a Stock Award if, at the time of grant, a Form S-8 Registration
Statement under the Securities Act (“Form S-8”)
is not available to register either the offer or the sale of the Company’s
securities to such Consultant because of the nature of the services that the
Consultant is providing to the Company, because the Consultant is not a natural
person, or because of any other rule governing the use of Form S-8.

 

6.                                      OPTION
PROVISIONS.

 

Each
Option shall be in such form and shall contain such terms and conditions as the
Board shall deem appropriate.  All
Options shall be separately designated Incentive Stock Options or Nonstatutory
Stock Options at the time of grant, and, if certificates are issued, a separate
certificate or certificates shall be issued for shares of Common Stock on
exercise of each type of Option.  The
provisions of separate Options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference in the Option
or otherwise) the substance of each of the following provisions:

 

(a)           Term.  The Board shall determine the term of an
Option; provided however that, subject to the
provisions of Section 5(b) regarding Ten Percent Shareholders, no
Incentive Stock Option shall be exercisable after the expiration of ten (10) years
from the date on which it was granted.

 

(b)           Exercise
Price of an Option.  Subject to
the provisions of Section 5(b) regarding Ten Percent Shareholders,
the exercise price of each Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on
the date

 

10

 

the Option is granted.  Notwithstanding the foregoing, an Incentive
Stock Option may be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section 424(a) of
the Code.

 

(c)           Consideration.  The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable law,
either (i) in cash at the time the Option is exercised or (ii) at the
discretion of the Board at the time of the grant of the Option (or subsequently
in the case of a Nonstatutory Stock Option) (1) by delivery to the Company
(either by actual delivery or attestation) of other Common Stock at the time
the Option is exercised, (2) by a “net exercise” of the Option (as further
described below), (3) pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board that, prior to the issuance of
Common Stock, results in either the receipt of cash (or check) by the Company
or the receipt of irrevocable instructions to pay the aggregate exercise price
to the Company from the sales proceeds or (4) in any other form of legal
consideration that may be acceptable to the Board.  Unless otherwise specifically provided in the
Option, the purchase price of Common Stock acquired pursuant to an Option that
is paid by delivery to the Company of other Common Stock acquired, directly or
indirectly from the Company, shall be paid only by shares of the Common Stock
of the Company that have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).  At any
time that the Company is incorporated in Delaware, payment of the Common Stock’s
“par value,” as defined in the Delaware General Corporation Law, shall not be
made by deferred payment.

 

In
the case of a “net exercise” of an Option, the Company will not require a
payment of the exercise price of the Option from the Participant but will
reduce the number of shares of Common Stock issued upon the exercise by the
largest number of whole shares that has a Fair Market Value that does not
exceed the aggregate exercise price. 
With respect to any remaining balance of the aggregate exercise price,
the Company shall accept a cash payment from the Participant.  Shares of Common Stock will no longer be
outstanding under an Option (and will therefore not thereafter be exercisable)
following the exercise of such Option to the extent of (i) shares used to
pay the exercise price of an Option under the “net exercise”, (ii) shares
actually delivered to the Participant as a result of such exercise and (iii) shares
withheld for purposes of tax withholding.

 

(d)           Transferability
of an Incentive Stock Option.  An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Optionholder only by the
Optionholder.  Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company,
in a form provided by or otherwise satisfactory to the Company, designate a
third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.

 

(e)           Transferability
of a Nonstatutory Stock Option.  A Nonstatutory Stock Option shall be
transferable to the extent provided in the Option Agreement.  If the Nonstatutory Stock Option does not
provide for transferability, then the Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Optionholder only by the
Optionholder.  Notwithstanding the 

 

11

 

foregoing, the Optionholder may, by delivering
written notice to the Company, in a form provided by or otherwise satisfactory
to the Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.

 

(f)            Vesting
Generally.  The total
number of shares of Common Stock subject to an Option may vest and therefore
become exercisable in periodic installments that may be equal.  The Option may be subject to such other terms
and conditions on the time or times when it may be exercised (which may be
based on performance or other criteria)  as the Board
may deem appropriate.  The vesting
provisions of individual Options may vary. 
The provisions of this Section 6(f) are subject to any Option
provisions governing the minimum number of shares of Common Stock as to which
an Option may be exercised.

 

(g)           Termination
of Continuous Service.  In
the event that an Optionholder’s Continuous Service terminates (for reasons
other than Cause or upon the Optionholder’s death or Disability), the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of termination
of Continuous Service) but only within such period of time ending on the
earlier of (i) the expiration of the term of the Option as set forth in
the Option Agreement or (ii) the date three (3) months following the
termination of the Optionholder’s Continuous Service (or such longer or shorter
period specified in the Option Agreement). 
If, after termination of Continuous Service, the Optionholder does not
exercise his or her Option within the time specified herein or in the Option
Agreement (as applicable), the Option shall terminate.

 

(h)           Extension
of Termination Date.  An
Optionholder’s Option Agreement may provide that if the exercise of the Option
following the termination of the Optionholder’s Continuous Service (for reasons
other than Cause or upon the Optionholder’s death or Disability) would be
prohibited at any time solely because the issuance of shares of Common Stock
would violate the registration requirements under the Securities Act, then the
Option shall terminate on the earlier of (i) the expiration of the term of
the Option set forth in the Option Agreement or (ii) the expiration of a
period of three (3) months after the termination of the Optionholder’s
Continuous Service during which the exercise of the Option would not be in
violation of such registration requirements.

 

(i)            Disability
of Optionholder.  In the
event that an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s Disability, the Optionholder may exercise his or her Option (to
the extent that the Optionholder was entitled to exercise such Option as of the
date of termination of Continuous Service), but only within such period of time
ending on the earlier of (i) the expiration of the term of the Option as
set forth in the Option Agreement or (ii) the date twelve (12) months
following such termination of Continuous Service (or such longer or shorter
period specified in the Option Agreement). 
If, after termination of Continuous Service, the Optionholder does not
exercise his or her Option within the time specified herein or in the Option
Agreement (as applicable), the Option shall terminate.

 

(j)            Death
of Optionholder.  In the
event that (i) an Optionholder’s Continuous Service terminates as a result
of the Optionholder’s death or (ii) the Optionholder dies within the
period (if any) specified in the Option Agreement after the termination of the
Optionholder’s Continuous Service for a reason other than death, then the
Option may be exercised (to the extent 

 

12

 

the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder’s estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionholder’s death pursuant
to Section 6(d) or 6(e), but only within the period ending on the
earlier of (i) the expiration of the term of such Option as set forth in
the Option Agreement or (ii) the date eighteen (18) months following the
date of death (or such longer or shorter period specified in the Option Agreement).  If, after the Optionholder’s death, the
Option is not exercised within the time specified herein or in the Option
Agreement (as applicable), the Option shall terminate.

 

(k)           Termination
for Cause.  In the
event that an Optionholder’s Continuous Service is terminated for Cause, the
Option shall terminate upon the termination date of such Optionholder’s
Continuous Service, and the Optionholder shall be prohibited from exercising
his or her Option from and after the time of such termination of Continuous
Service.

 

(l)            Early
Exercise.  The Option
may include a provision whereby the Optionholder may elect at any time before
the Optionholder’s Continuous Service terminates to exercise the Option as to
any part or all of the shares of Common Stock subject to the Option prior to
the full vesting of the Option.  Any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.  The Company shall not
be required to exercise its repurchase option until at least six (6) months
(or such longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes) have elapsed following exercise of
the Option unless the Board otherwise specifically provides in the Option.

 

7.                                      PROVISIONS
OF STOCK AWARDS OTHER THAN OPTIONS.

 

(a)           Stock
Appreciation Rights.  Each Stock
Appreciation Right Agreement shall be in such form and shall contain such terms
and conditions as the Board shall deem appropriate.  The terms and conditions of Stock
Appreciation Right Agreements may change from time to time, and the terms and
conditions of separate Stock Appreciation Right Agreements need not be
identical, provided, however,
that each Stock Appreciation Right Agreement shall include (through
incorporation of the provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

 

(i)            Strike
Price and Calculation of Appreciation.  Each Stock Appreciation Right will be
denominated in shares of Common Stock equivalents.  The appreciation payable on the exercise of a
Stock Appreciation Right will be not greater than an amount equal to the excess
of:

 

(aa)         the aggregate Fair Market
Value (on the date of the exercise of the Stock Appreciation Right) of a number
of shares of Common Stock equal to the number of shares of Common Stock
equivalents in which the Participant is vested under such Stock Appreciation
Right, and with respect to which the Participant is exercising the Stock
Appreciation Right on such date, over

 

(bb)         an amount (the strike price)
that will be determined by the Board at the time of grant of the Stock
Appreciation Right, which amount shall be not less than one 

 

13

 

hundred percent (100%) of the Fair Market Value of
the Common Stock subject to the Stock Appreciation Right on the date the Stock
Appreciation Right is granted.

 

(ii)           Vesting.  At the time of the grant of a Stock
Appreciation Right, the Board may impose such restrictions or conditions to the
vesting of such Stock Appreciation Right as it, in its discretion, deems
appropriate.

 

(iii)         Exercise.  To exercise any outstanding Stock
Appreciation Right, the Participant must provide written notice of exercise to
the Company in compliance with the provisions of the Stock Appreciation Right
Agreement evidencing such Stock Appreciation Right.

 

(iv)          Payment.  The appreciation payable in respect of a
Stock Appreciation Right may be paid only in the form of Common Stock.  In addition, neither the Company nor any
Affiliate may enter into any agreement or arrangement providing for its
purchase of Common Stock delivered on exercise of a Stock Appreciation Right.

 

(v)            Term.  The Board shall determine the term of a Stock
Appreciation Right; provided, however,
that no Stock Appreciation Right shall be exercisable after the expiration of
ten (10) years from the date on which it was granted.

 

(vi)          Deferral of Compensation.  A Stock Appreciation Right may not include
any feature for the deferral of compensation other than the deferral of
recognition of income until the Participant’s exercise of such Stock
Appreciation Right.

 

(vii)         Termination of Continuous Service.  In the event that a Participant’s Continuous
Service terminates, the Participant may exercise his or her Stock Appreciation
Right (to the extent that the Participant was entitled to exercise such Stock
Appreciation Right as of the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months
following the termination of the Participant’s Continuous Service (or such
longer or shorter period specified in the Stock Appreciation Right Agreement)
or (ii) the expiration of the term of the Stock Appreciation Right as set
forth in the Stock Appreciation Right Agreement.  If, after termination, the Participant does
not exercise his or her Stock Appreciation Right within the time specified
herein or in the Stock Appreciation Right Agreement (as applicable), the Stock
Appreciation Right shall terminate.

 

(b)           Restricted
Stock Purchase Awards.  Each
Restricted Stock Purchase Award Agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate.  At the Board’s election, shares of Common
Stock may be (i) held in book entry form subject to the Company’s
instructions until any restrictions relating to the Restricted Stock Purchase
Award lapse; or (ii) evidenced by a certificate, which certificate shall
be held in such form and manner as determined by the Board.  The terms and conditions of Restricted Stock
Purchase Award Agreements may change from time to time, and the terms and
conditions of separate Restricted Stock Purchase Award Agreements need not be
identical, provided, however, that each Restricted
Stock Purchase Award Agreement shall include (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

 

14

 

(i)            Purchase
Price.  At the time of the grant of
a Restricted Stock Purchase Award, the Board will determine the price to be
paid by the Participant for each share subject to the Restricted Stock Purchase
Award.  To the extent required by
applicable law, the price to be paid by the Participant for each share of the
Restricted Stock Purchase Award will not be less than the par value of a share
of Common Stock.

 

(ii)           Consideration.  At the time of the grant of
a Restricted Stock Purchase Award, the Board will determine the consideration
permissible for the payment of the purchase price of the Restricted Stock
Purchase Award.  The purchase price of
Common Stock acquired pursuant to the Restricted Stock Purchase Award shall be
paid either: (i) in cash at the time of purchase or (ii) in any other
form of legal consideration that may be acceptable to the Board and permissible
under the Delaware General Corporation Law.

 

(iii)         Vesting.  Shares of Common Stock
acquired under a Restricted Stock Purchase Award may be subject to a share
repurchase right or option in favor of the Company in accordance with a vesting
schedule to be determined by the Board.

 

(iv)          Termination of Participant’s
Continuous Service.  In the event
that a Participant’s Continuous Service terminates, the Company shall have the
right, but not the obligation, to repurchase or otherwise reacquire, any or all
of the shares of Common Stock held by the Participant that have not vested as
of the date of termination under the terms of the Restricted Stock Purchase
Award Agreement.  At the Board’s
election, the repurchase right may be at the least of: (i) the Fair Market
Value on the relevant date or (ii) the Participant’s original cost.  The Company shall not be required to exercise
its repurchase option until at least six (6) months (or such longer or
shorter period of time required to avoid a charge to earnings for financial
accounting purposes) have elapsed following the purchase of the restricted
stock unless otherwise determined by the Board or provided in the Restricted
Stock Purchase Award Agreement.

 

(v)            Transferability.  Rights to purchase or
receive shares of Common Stock granted under a Restricted Stock Purchase Award
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the Restricted Stock Purchase Award Agreement, as the Board
shall determine in its discretion, and so long as Common Stock awarded under
the Restricted Stock Purchase Award remains subject to the terms of the
Restricted Stock Purchase Award Agreement.

 

(c)           Restricted
Stock Awards.  Each
Restricted Stock Award Agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate.  At the Board’s election, shares of Common
Stock may be (i) held in book entry form subject to the Company’s
instructions until any restrictions relating to the Restricted Stock Award
lapse; or (ii) evidenced by a certificate, which certificate shall be held
in such form and manner as determined by the Board.  The terms and conditions of Restricted Stock
Award Agreements may change from time to time, and the terms and conditions of
separate Restricted Stock Award Agreements need not be identical, but each
Restricted Stock Award Agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

 

15

 

(i)            Consideration.  A Restricted Stock Award may
be awarded in consideration for past services actually rendered to the Company
or an Affiliate.

 

(ii)           Vesting.  Shares of Common Stock
awarded under the Restricted Stock Award Agreement may be subject to forfeiture
to the Company in accordance with a vesting schedule to be determined by the
Board.

 

(iii)         Termination of Participant’s
Continuous Service.  In the event a
Participant’s Continuous Service terminates, any or all of the shares of Common
Stock held by the Participant which have not vested as of the date of
termination of Continuous Service shall be forfeited under the terms of the
Restricted Stock Award Agreement.

 

(iv)          Transferability.  Rights to acquire shares of
Common Stock under the Restricted Stock Award Agreement shall be transferable
by the Participant only upon such terms and conditions as are set forth in the
Restricted Stock Award Agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the Restricted Stock Award
Agreement remains subject to the terms of the Restricted Stock Award Agreement.

 

(d)           Restricted
Stock Unit Awards.  A Restricted
Stock Unit Award shall be denominated in units equivalent to a number of shares
of Common Stock and shall represent a promise to pay the value of such units
upon vesting.  Each Restricted Stock Unit
Award Agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. 
The terms and conditions of Restricted Stock Unit Award Agreements may
change from time to time, and the terms and conditions of separate Restricted
Stock Unit Award Agreements need not be identical, provided,
however, that each Restricted Stock Unit Award Agreement shall
include (through incorporation of the provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:

 

(i)            Vesting.  At the time of the grant of
a Restricted Stock Unit Award, the Board shall impose such restrictions or
conditions to the vesting of the Restricted Stock Unit Award as it, in its
discretion, deems appropriate.

 

(ii)           Payment.  A Restricted Stock Unit
Award, net of any withholding obligations, may, to the extent vested, be
settled by the delivery of shares of Common Stock, their cash equivalent, any
combination thereof or in any other form of consideration as determined by the
Board and contained in the Restricted Stock Unit Award Agreement.

 

(iii)         Additional Restrictions.  At the time of the grant of
a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose
such restrictions or conditions that delay the delivery of the shares of Common
Stock (or their cash equivalent) subject to a Restricted Stock Unit Award after
the vesting of such Restricted Stock Unit Award.

 

(iv)          Dividend Equivalents.  Dividend equivalents may be
credited in respect of shares of Common Stock covered by a Restricted Stock
Unit Award, as determined by the Board and contained in the Restricted Stock
Unit Award Agreement.  At the discretion
of the Board, such dividend equivalents may be converted into additional shares
of Common Stock covered by the Restricted Stock Unit Award in such manner as
determined by the Board.  Any additional
shares covered by the Restricted Stock Unit Award credited by reason of such 

 

16

 

dividend equivalents will be subject to all the
terms and conditions of the underlying Restricted Stock Unit Award Agreement to
which they relate.

 

8.                                      NON-EMPLOYEE
DIRECTORS’ NONSTATUTORY STOCK OPTION PROGRAM.

 

Without
any further action by the Board, automatic Option grants shall be made under
the Plan in accordance with this Section 8 to Non-Employee Directors who
meet the criteria specified in Section 8(a).  Stock Awards granted under this Section 8
may be in such form (except an Incentive Stock Option) as may be approved by
the Board, subject to the provisions of the Plan and this Section 8.

 

(a)           Non-Discretionary
Grants.  Without any further action of
the Board, on the date of each Annual Meeting, commencing with the first Annual
Meeting on or after the IPO Date, each person who is then a Non-Employee
Director shall be automatically granted a Nonstatutory Stock Option having a
value (on the date of grant) equal to $40,000 of the annual cash compensation
(excluding Committee fees) then payable by the Company to such Non-Employee
Director, for his or her service as Non-Employee Director since the later of: (i) the
last preceding Annual Meeting, or (ii) the date on which such person is
elected or appointed for the first time to be a Non-Employee Director.  For this purpose, the value of a Stock Award,
and thus the number of shares of Common Stock granted under such Stock Award,
shall be determined under the Black-Scholes option pricing formula, and any
fractional shares shall be rounded to the nearest whole number of shares.

 

(b)           Stock
Award Provisions.  Each Stock
Award granted under this Section 8 shall include (through incorporation by
reference in the Stock Award or otherwise) the substance of each of the
provisions of Section 6 and 7 (as applicable), except that Stock Awards
granted under this Section 8 shall be exercisable after the expiration of
ten (10) years after the date on which it was granted and the exercise
price of each Option granted under this Section 8 shall be one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted.

 

9.                                      COVENANTS
OF THE COMPANY.

 

(a)           Availability
of Shares.  During the
terms of the Stock Awards, the Company shall keep available at all times the
number of shares of Common Stock required to satisfy such Stock Awards.

 

(b)           Securities
Law Compliance.  The Company
shall seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to grant Stock
Awards and to issue and sell shares of Common Stock upon exercise of the Stock
Awards; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Stock Award or any Common Stock issued or issuable
pursuant to any such Stock Award.  If,
after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of Common Stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell Common Stock upon exercise of such Stock Awards unless and until such
authority is obtained.

 

17

 

10.                               USE OF
PROCEEDS FROM STOCK.

 

Proceeds
from the sale of Common Stock pursuant to Stock Awards shall constitute general
funds of the Company.

 

11.                               MISCELLANEOUS.

 

(a)           Acceleration
of Exercisability and Vesting.  The Board shall have the power to accelerate
the time at which a Stock Award may first be exercised or the time during which
a Stock Award or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Stock Award stating the time at which it
may first be exercised or the time during which it will vest.

 

(b)           Shareholder
Rights.  No Participant shall be deemed
to be the holder of, or to have any of the rights of a holder with respect to,
any shares of Common Stock subject to such Stock Award unless and until such
Participant has satisfied all requirements for exercise of the Stock Award
pursuant to its terms.

 

(c)           No
Employment or other Service Rights.  Nothing in the Plan, any Stock Award
Agreement or other instrument executed thereunder or any Stock Award granted
pursuant thereto shall confer upon any Participant any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or shall affect the right of the Company or an
Affiliate to terminate (i) the employment of an Employee with or without
notice and with or without cause, (ii) the service of a Consultant
pursuant to the terms of such Consultant’s agreement with the Company or an
Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case
may be.

 

(d)           Incentive
Stock Option $100,000 Limitation.  To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any Optionholder
during any calendar year (under all plans of the Company and its Affiliates)
exceeds one hundred thousand dollars ($100,000), the Options or portions
thereof that exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options, notwithstanding any
contrary provision of the applicable Option Agreement(s).

 

(e)           Investment
Assurances.  The Company
may require a Participant, as a condition of exercising or acquiring Common
Stock under any Stock Award, (i) to give written assurances satisfactory
to the Company as to the Participant’s knowledge and experience in financial
and business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising
the Stock Award; and (ii) to give written assurances satisfactory to the
Company stating that the Participant is acquiring Common Stock subject to the
Stock Award for the Participant’s own account and not with any present
intention of selling or otherwise distributing the Common Stock.  The foregoing requirements, and any
assurances given pursuant 

 

18

 

to such requirements, shall be inoperative if (1) the
issuance of the shares of Common Stock upon the exercise or acquisition of
Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws.  The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Common Stock.

 

(f)            Withholding
Obligations.  To the
extent provided by the terms of a Stock Award Agreement, the Company may in its
discretion, satisfy any federal, state or local tax withholding obligation
relating to a Stock Award by any of the following means (in addition to the
Company’s right to withhold from any compensation paid to the Participant by
the Company) or by a combination of such means: (i) causing the
Participant to tender a cash payment; (ii) withholding shares of Common
Stock from the shares of Common Stock issued or otherwise issuable to the
Participant in connection with the Stock Award; or (iii) by such other
method as may be set forth in the Stock Award Agreement.

 

12.                               ADJUSTMENTS
UPON CHANGES IN STOCK.

 

(a)           Capitalization
Adjustments.  If any
change is made in, or other event occurs with respect to, the Common Stock
subject to the Plan or subject to any Stock Award without the receipt of
consideration by the Company through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company (each a “Capitalization
Adjustment”), then (i) the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to Sections 4(a) and 4(b) and the maximum number of
securities subject to award to any person pursuant to Section 5(c), and (ii) the
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of securities and price per share of Common Stock subject to such
outstanding Stock Awards.  The Board
shall make such adjustments, and its determination shall be final, binding and
conclusive.  (Notwithstanding the
foregoing, the conversion of any convertible securities of the Company shall
not be treated as a transaction “without receipt of consideration” by the
Company.)

 

(b)           Dissolution
or Liquidation.  In the
event of a dissolution or liquidation of the Company, all outstanding Stock
Awards (other than Stock Awards consisting of vested Common Stock not subject
to the Company’s right of repurchase) shall terminate immediately prior to the
completion of such dissolution or liquidation, and Common Stock subject to the
Company’s repurchase option may be repurchased by the Company notwithstanding
the fact that the holder of such stock is still in Continuous Service; provided however that, the Board may, in its discretion,
cause some or all Stock Awards to be fully vested, exercisable and/or no longer
subject to repurchase (to the extent such Stock Awards have not previously
expired or terminated) before the dissolution or liquidation is completed but
contingent on its completion.

 

19

 

(c)           Corporate
Transaction.  In the
event of a Corporate Transaction, any surviving corporation or acquiring
corporation may assume or continue any or all Stock Awards outstanding under
the Plan or may substitute similar stock awards for Stock Awards outstanding
under the Plan (including but not limited to, awards to acquire the same
consideration paid to the shareholders of the Company, as the case may be,
pursuant to the Corporate Transaction), and any reacquisition or repurchase
rights held by the Company in respect of Common Stock issued pursuant to Stock
Awards may be assigned by the Company to the successor of the Company (or the
successor’s parent company), if any, in connection with such Corporate
Transaction.  In the event that any surviving
corporation or acquiring corporation does not assume or continue all such
outstanding Stock Awards or substitute similar stock awards for all such
outstanding Stock Awards, then with respect to Stock Awards that have not been
assumed, continued or substituted and that are held by Participants whose
Continuous Service has not terminated prior to the effective time of the
Corporate Transaction, the vesting of such Stock Awards (and, if applicable,
the time at which such Stock Awards may be exercised) shall (contingent upon
the effectiveness of the Corporate Transaction) be accelerated in full to a
date prior to the effective time of such Corporate Transaction as the Board
shall determine (or, if the Board shall not determine such a date, to the date
that is five (5) days prior to the effective time of the Corporate
Transaction), and such Stock Awards shall terminate if not exercised (if
applicable) at or prior to such effective time and any reacquisition or
repurchase rights held by the Company with respect to such Stock Awards shall
(contingent upon the effectiveness of the Corporate Transaction) lapse.  With respect to any other Stock Awards
outstanding under the Plan that have not been assumed, continued or substituted,
the vesting of such Stock Awards (and, if applicable, the time at which such
Stock Award may be exercised) shall not be accelerated, unless otherwise
provided in a written agreement between the Company or any Affiliate and the
holder of such Stock Award, and such Stock Awards shall terminate if not
exercised (if applicable) prior to the effective time of the Corporate
Transaction.

 

(d)           Change
in Control.  A Stock
Award may be subject to additional acceleration of vesting and exercisability
upon or after a Change in Control as may be provided in the Stock Award
Agreement for such Stock Award or as may be provided in any other written
agreement between the Company or any Affiliate and the Participant, but in the
absence of such provision, no such acceleration shall occur.

 

13.                               AMENDMENT
OF THE PLAN AND STOCK AWARDS.

 

(a)           Amendment
of Plan.  Subject to the limitations, if
any, of applicable law, the Board at any time, and from time to time, may amend
the Plan.  However, except as provided in
Section 12(a) relating to Capitalization Adjustments, no amendment
shall be effective unless approved by the shareholders of the Company to the
extent shareholder approval is necessary to satisfy applicable law.

 

(b)           Shareholder
Approval.  The Board,
in its discretion, may submit any other amendment to the Plan for shareholder
approval, including, but not limited to, amendments to the Plan intended to
satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
Covered Employees.

 

20

 

(c)           Contemplated
Amendments.  It is
expressly contemplated that the Board may amend the Plan in any respect the
Board deems necessary or advisable to provide eligible Employees with the
maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.

 

(d)           No
Impairment of Rights.  Rights
under any Stock Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (i) the Company requests the
consent of the Participant and (ii) the Participant consents in writing.

 

(e)           Amendment
of Stock Awards.  The Board
at any time, and from time to time, may amend the terms of any one or more
Stock Awards, including, but not limited to, amendments to provide terms more
favorable than previously provided in the agreement evidencing a Stock Award,
subject to any specified limits in the Plan that are not subject to Board
discretion; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant
and (ii) the Participant consents in writing.

 

14.                               TERMINATION
OR SUSPENSION OF THE PLAN.

 

(a)           Plan
Term.  The Board may suspend or
terminate the Plan at any time.  Unless
sooner terminated, the Plan shall terminate on the day before the tenth (10th)
anniversary of the date the Plan is adopted by the Board or approved by the
shareholders of the Company, whichever is earlier.  No Stock Awards may be granted under the Plan
while the Plan is suspended or after it is terminated.

 

(b)           No
Impairment of Rights.  Suspension
or termination of the Plan shall not impair rights and obligations under any
Stock Award granted while the Plan is in effect except with the written consent
of the Participant.

 

15.                               EFFECTIVE
DATE OF PLAN.

 

The
Plan shall become effective immediately upon IPO Date, but no Stock Award shall
be exercised (or, in the case of Restricted Stock Purchase Awards, Restricted
Stock Awards, or Restricted Stock Unit Awards, shall be granted) unless and
until the Plan has been approved by the shareholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan
is adopted by the Board.

 

16.                               CHOICE
OF LAW.

 

The
law of the State of Delaware shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state’s conflict of laws rules.

 

21

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