Document:

Exhibit
10.2

 

FIRST
AMENDMENT TO

RECEIVABLES SALE AGREEMENT

 

THIS FIRST AMENDMENT
TO RECEIVABLES SALE AGREEMENT, dated as of November 12,
2004 (this “Amendment”), is entered into
by and among GEORGIA GULF CORPORATION, as a seller (“Georgia
Gulf”), GEORGIA GULF CHEMICALS AND VINYLS, LLC, as a seller (“GGCV”), GEORGIA GULF LAKE CHARLES,
LLC, as a seller (“GGLC” and
together with Georgia Gulf and GGCV, the “Sellers”),
GGRC Corp. (the “Company”)
and Wachovia Bank, National Association, as the administrative agent (the “Administrative Agent”).  Capitalized terms used and not otherwise
defined herein are used as defined in the Agreement (as defined below and
amended hereby).

 

WHEREAS,
the Sellers and the Company have entered into that certain Receivables Sale
Agreement, dated as of November 15, 2002 (as amended, restated,
supplemented or otherwise modified to the date hereof, the “Agreement”);

 

WHEREAS, the
Sellers, the Company and the Administrative Agent desire to amend the Agreement
in certain respects as hereinafter set forth;

 

NOW THEREFORE,
in consideration of the premises and the other mutual covenants contained
herein, the Sellers, the Company and the Administrative Agent agree as follows:

 

SECTION 1.                                Amendments.

 

The Agreement is hereby amended as follows:

 

(a)                                  All
references in the Agreement to “Purchaser” shall be changed to refer to “Purchasers.”

 

(b)                                 The
first paragraph under “DEFINITIONS” is hereby amended and restated in its
entirety as follows:

 

“Unless otherwise
indicated, certain terms that are capitalized and used throughout this
Agreement are defined in Appendix A to the Amended and Restated Receivables
Purchase Agreement, dated as of November 12, 2004 (as amended,
supplemented or otherwise modified from time to time, the “Receivables Purchase Agreement”),
among the Company, Georgia Gulf, GGCV, Blue Ridge Asset Funding Corporation,
Victory Receivables Corporation, Wachovia Bank, National Association and The
Bank of Tokyo-Mitsubishi, Ltd., New York Branch.”

 

(c)                                  Section 4.1(i)
is hereby amended and restated in its entirety as follows:

 

 

“(i)                               A
certificate from an officer of each of the Sellers to the effect that Servicers
and each Seller have placed on the most recent, and have taken all steps
reasonably necessary to ensure that there shall be placed on subsequent,
summary master control data processing reports the following legend (or the
substantive equivalent thereof):  ‘THE
RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO GGRC CORP. PURSUANT TO A
RECEIVABLES SALE AGREEMENT, DATED AS OF NOVEMBER 15, 2002, AS AMENDED FROM
TIME TO TIME, AMONG GEORGIA GULF CORPORATION, GEORGIA GULF CHEMICALS AND
VINYLS, LLC, GEORGIA GULF LAKE CHARLES, LLC AND GGRC CORP.; AND AN OWNERSHIP
AND SECURITY INTEREST IN THE RECEIVABLES DESCRIBED HEREIN HAS BEEN GRANTED AND
ASSIGNED TO WACHOVIA BANK, NATIONAL ASSOCIATION AS AGENT ON BEHALF OF CERTAIN
SECURED PARTIES, PURSUANT TO AN AMENDED AND RESTATED RECEIVABLES PURCHASE
AGREEMENT, DATED AS OF NOVEMBER 12, 2004, AMONG GGRC CORP., GEORGIA GULF
CORPORATION, GEORGIA GULF CHEMICALS AND VINYLS, LLC, BLUE RIDGE ASSET FUNDING
CORPORATION, VICTORY RECEIVABLES CORPORATION, WACHOVIA BANK, NATIONAL
ASSOCIATION AND THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YOUR BRANCH.’”

 

(d)                                 In
Section 6.3(b), the reference to “Purchase” shall be changed to refer to “Purchasers.”

 

SECTION 2.                                Effectiveness and Effect.

 

This Amendment shall become effective as of
the date (the “Effective Date”)
on which this Amendment shall have been executed and delivered by a duly
authorized officer of each party thereto.

 

SECTION 3.                                Reference to and Effect on the Agreement and the
Related Documents.

 

Upon the effectiveness of this Amendment, (i) each of the Sellers
hereby reaffirms all representations and warranties made by it in the Agreement
(as amended hereby) and agrees that all such covenants, representations and
warranties shall be deemed to have been restated as of the Effective Date of
this Amendment and (ii) each reference in the Agreement to “this Agreement”, “hereunder”,
“hereof”, “herein” or words of like import shall mean and be, and any
references to the Agreement in any other document, instrument or agreement
executed and/or delivered in connection with the Agreement shall mean and be, a
reference to the Agreement as amended hereby.

 

SECTION 4.                                Governing Law.

 

THIS AMENDMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO,
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW
(OTHER THAN SECTION 5-1401 OF THE NEW YORK OBLIGATIONS LAW).

 

2

 

SECTION 5.                                Severability.

 

Each provision of this Amendment shall be severable from every other
provision of this Amendment for the purpose of determining the legal
enforceability of any provision hereof, and the unenforceability of one or more
provisions of this Amendment in one jurisdiction shall not have the effect of
rendering such provision or provisions unenforceable in any other jurisdiction.

 

SECTION 6.                                Counterparts.

 

This Amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument. 
Delivery of an executed counterpart of a signature page by facsimile
shall be effective as delivery of a manually executed counterpart of this
Amendment.

 

 

[remainder of page
intentionally left blank]

 

3

 

IN WITNESS
WHEREOF, each of the parties hereto have caused this Amendment to be executed
by their respective officers thereunto duly authorized as of the day and year
first above written.

 

	
  THE SELLERS:

  	
  GEORGIA GULF CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ JOEL I. BEERMAN

  	
   

  
	
   

  	
  Name:

  	
   Joel I. Beerman

  	
   

  
	
   

  	
  Title: 

  	
   Vice President, General Counsel and Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GEORGIA GULF CHEMICALS AND VINYLS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ JOEL I. BEERMAN

  	
   

  
	
   

  	
  Name: 

  	
   Joel I. Beerman

  	
   

  
	
   

  	
  Title: 

  	
   Vice President, General Counsel and
  Secretary

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GEORGIA GULF LAKE CHARLES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ JOEL I. BEERMAN

  	
   

  
	
   

  	
  Name: 

  	
   Joel I. Beerman

  	
   

  
	
   

  	
  Title: 

  	
   Vice President, General Counsel and
  Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  THE COMPANY:

  	
  GGRC CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ JOEL I. BEERMAN

  	
   

  
	
   

  	
  Name:

  	
   Joel I. Beerman

  	
   

  
	
   

  	
  Title:

  	
   Vice President, General Counsel and
  Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  THE ADMINISTRATIVE

  AGENT:

  	
  WACHOVIA BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/

  	
   JOHN A. FOXGROVER

  	
   

  
	
   

  	
  Name:

  	
   John A. Foxgrover

  	
   

  
	
   

  	
  Title:

  	
   

  	
   Director

  	
   

  
							

 

 

[Signature Page to First
Amendment to Receivables Sale Agreement]EXHIBIT 10.1

 

 

OVERLAND STORAGE, INC.

 

2003 EQUITY INCENTIVE PLAN

 

(AS ADOPTED EFFECTIVE NOVEMBER 17, 2003 AND

AMENDED EFFECTIVE NOVEMBER 15, 2004)

 

 

TABLE OF CONTENTS

 

	
  ARTICLE
  1

  	
   

  	
  INTRODUCTION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
   

  	
  ADMINISTRATION

  	
   

  
	
  2.1

  	
   

  	
  Committee Composition

  	
   

  
	
  2.2

  	
   

  	
  Committee Responsibilities

  	
   

  
	
  2.3

  	
   

  	
  Committee for
  Non-Officer Grants

  	
   

  
	
  2.4

  	
   

  	
  Scope of Discretion

  	
   

  
	
  2.5

  	
   

  	
  Rules of Interpretation

  	
   

  
	
  2.6

  	
   

  	
  Unfunded Plan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
   

  	
  SHARES
  AVAILABLE FOR GRANTS

  	
   

  
	
  3.1

  	
   

  	
  Basic Limitation

  	
   

  
	
  3.2

  	
   

  	
  Dividend Equivalents

  	
   

  
	
  3.3

  	
   

  	
  Additional Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  4

  	
   

  	
  ELIGIBILITY

  	
   

  
	
  4.1

  	
   

  	
  Incentive Stock Options

  	
   

  
	
  4.2

  	
   

  	
  Other Grants

  	
   

  
	
  4.3

  	
   

  	
  Section 162(m) Limitation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
   

  	
  OPTIONS

  	
   

  
	
  5.1

  	
   

  	
  Stock Option Agreement

  	
   

  
	
  5.2

  	
   

  	
  Number of Shares

  	
   

  
	
  5.3

  	
   

  	
  Exercise Price

  	
   

  
	
  5.4

  	
   

  	
  Exercisability and Term

  	
   

  
	
  5.5

  	
   

  	
  Effect of Change in Control

  	
   

  
	
  5.6

  	
   

  	
  Nonassignability of Options

  	
   

  
	
  5.7

  	
   

  	
  Substitute Options

  	
   

  
	
  5.8

  	
   

  	
  Limitation on ISOs

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
   

  	
  PAYMENT FOR
  OPTION SHARES

  	
   

  
	
  6.1

  	
   

  	
  General Rule

  	
   

  
	
  6.2

  	
   

  	
  Exercise/Sale

  	
   

  
	
  6.3

  	
   

  	
  Other Forms of Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  7

  	
   

  	
  AUTOMATIC
  OPTION GRANTS TO OUTSIDE DIRECTORS

  	
   

  
	
  7.1

  	
   

  	
  Annual Grants

  	
   

  
	
  7.2

  	
   

  	
  Initial Grants

  	
   

  
	
  7.3

  	
   

  	
  Replenishment Grants

  	
   

  
	
  7.4

  	
   

  	
  Accelerated Exercisability

  	
   

  
	
  7.5

  	
   

  	
  Exercise
  Price

  	
   

  
	
  7.6

  	
   

  	
  Term

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
   

  	
  STOCK
  APPRECIATION RIGHTS

  	
   

  
	
  8.1

  	
   

  	
  SAR Agreement

  	
   

  
	
  8.2

  	
   

  	
  Number of Shares

  	
   

  
	
  8.3

  	
   

  	
  Exercise Price

  	
   

  
	
  8.4

  	
   

  	
  Exercisability and Term

  	
   

  
	
  8.5

  	
   

  	
  Effect of Change in Control

  	
   

  
	
  8.6

  	
   

  	
  Exercise of SARs

  	
   

  

 

i

 

	
  8.7

  	
   

  	
  Nonassignability of SARs

  	
   

  
	
  8.8

  	
   

  	
  Substitute SARs

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
   

  	
  RESTRICTED SHARES

  	
   

  
	
  9.1

  	
   

  	
  Restricted Stock Agreement

  	
   

  
	
  9.2

  	
   

  	
  Payment for Awards

  	
   

  
	
  9.3

  	
   

  	
  Vesting Conditions

  	
   

  
	
  9.4

  	
   

  	
  Voting and Dividend Rights

  	
   

  
	
  9.5

  	
   

  	
  Nonassignability
  of Restricted Shares

  	
   

  
	
  9.6

  	
   

  	
  Substitute Restricted
  Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  10

  	
   

  	
  STOCK UNITS

  	
   

  
	
  10.1

  	
   

  	
  Stock Unit Agreement

  	
   

  
	
  10.2

  	
   

  	
  Payment for Awards

  	
   

  
	
  10.3

  	
   

  	
  Vesting
  Conditions

  	
   

  
	
  10.4

  	
   

  	
  Voting and Dividend Rights

  	
   

  
	
  10.5

  	
   

  	
  Form and
  Time of Settlement of Stock Units

  	
   

  
	
  10.6

  	
   

  	
  Death of Recipient

  	
   

  
	
  10.7

  	
   

  	
  Creditors’ Rights

  	
   

  
	
  10.8

  	
   

  	
  Nonassignability of
  Stock Units

  	
   

  
	
  10.9

  	
   

  	
  Substitute Stock Unit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
   

  	
  PROTECTION
  AGAINST DILUTION

  	
   

  
	
  11.1

  	
   

  	
  Adjustments

  	
   

  
	
  11.2

  	
   

  	
  Dissolution or Liquidation

  	
   

  
	
  11.3

  	
   

  	
  Reorganizations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
   

  	
  DEFERRAL OF AWARDS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 13

  	
   

  	
  AWARDS UNDER
  OTHER PLANS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  14

  	
   

  	
  PAYMENT
  OF DIRECTORS’ FEES IN SECURITIES

  	
   

  
	
  14.1

  	
   

  	
  Effective Date

  	
   

  
	
  14.2

  	
   

  	
  Elections to Receive NSOs,
  Restricted Shares or Stock Units

  	
   

  
	
  14.3

  	
   

  	
  Number and Terms of NSOs,
  Restricted Shares or Stock Units

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 15

  	
   

  	
  LIMITATION ON RIGHTS

  	
   

  
	
  15.1

  	
   

  	
  Retention Rights

  	
   

  
	
  15.2

  	
   

  	
  Shareholders’ Rights

  	
   

  
	
  15.3

  	
   

  	
  Regulatory Requirements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 16

  	
   

  	
  WITHHOLDING TAXES

  	
   

  
	
  16.1

  	
   

  	
  General

  	
   

  
	
  16.2

  	
   

  	
  Share Withholding

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 17

  	
   

  	
  FUTURE OF THE PLAN

  	
   

  
	
  17.1

  	
   

  	
  Term of the Plan

  	
   

  
	
  17.2

  	
   

  	
  Amendment or Termination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 18

  	
   

  	
  LIMITATION ON
  PAYMENTS

  	
   

  
	
  18.1

  	
   

  	
  Scope of Limitation

  	
   

  
	
  18.2

  	
   

  	
  Basic
  Rule

  	
   

  
	
  18.3

  	
   

  	
  Reduction of Payments

  	
   

  
	
  18.4

  	
   

  	
  Overpayments and
  Underpayments

  	
   

  
	
  18.5

  	
   

  	
  Related Corporations

  	
   

  

 

ii

 

 

	
  ARTICLE
  19

  	
   

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  20

  	
   

  	
  EXECUTION

  	
   

  

 

iii

 

 

Overland Storage, Inc.

 

2003 Equity Incentive Plan

 

 

ARTICLE 1.                    INTRODUCTION.

 

The
Board adopted the Plan effective as of the Effective Date.  The purpose of the Plan is to promote the
long-term success of the Company and the creation of shareholder value by (a)
encouraging Employees, Outside Directors and Consultants to focus on critical
long-range objectives, (b) encouraging the attraction and retention of
Employees, Outside Directors and Consultants with exceptional qualifications
and (c) linking Employees, Outside Directors and Consultants directly to
shareholder interests through increased stock ownership.  The Plan seeks to achieve this purpose by
providing for Awards in the form of Restricted Shares, Stock Units, Options
(which may constitute incentive stock options or nonstatutory stock options) or
stock appreciation rights.

 

The
Plan shall be governed by, and construed in accordance with, the laws of the
State of California (except its choice-of-law provisions).

 

ARTICLE 2.                    ADMINISTRATION.

 

2.1                                 Committee
Composition. 
The Committee shall administer the Plan. 
The Committee shall consist exclusively of two or more directors of the
Company, who shall be appointed by the Board. 
In addition, the composition of the Committee shall satisfy:

 

(a)                                  Such requirements as the Securities and
Exchange Commission may establish for administrators acting under plans
intended to qualify for exemption under Rule 16b-3 (or its successor) under the
Exchange Act; and

 

(b)                                 Such requirements as the Internal Revenue
Service may establish for outside directors acting under plans intended to
qualify for exemption under section 162(m)(4)(C) of the Code.

 

2.2                                 Committee Responsibilities. 
The Committee shall (a) select the Employees, Outside Directors and
Consultants who are to receive Awards under the Plan, (b) determine the type,
number, vesting requirements and other features and conditions of such Awards,
(c) interpret the Plan and (d) make all other decisions relating to the
operation of the Plan.  The Committee may
adopt such rules or guidelines as it deems appropriate to implement the Plan.

 

2.3                                 Committee for Non-Officer Grants.  The Board may
also appoint a secondary committee of the Board, which shall be composed of two
or more directors of the Company who need not satisfy the requirements of
Section 2.1.  Such secondary committee
may administer the Plan with respect to Employees and Consultants
who are not Officers or Directors of the Company, may grant Awards under the
Plan to such Employees and Consultants and may determine all features and
conditions of such Awards.  Within the
limitations of this Section 2.3, any reference in the Plan to the Committee
shall include such secondary committee.

 

2.4                                 Scope of
Discretion. 
On all matters for which the Plan confers the authority, right or power
on the Board, the Committee, or a secondary committee to make decisions, that
body may make those decisions in its sole and absolute discretion.  Those decisions will be final, binding and
conclusive.  In making its decisions, the
Board, Committee or secondary committee need not treat all persons eligible to
receive Awards, all Participants, or all Awards the same way.  Notwithstanding anything herein to the
contrary, and except as provided in Section 17.2, the discretion of the Board,
Committee or secondary committee is subject to the specific provisions and
specific limitations of the Plan, as well as all rights conferred on specific
Participants by Award agreements and other agreements entered into pursuant to
the Plan.

 

1

 

2.5                                 Rules of Interpretation.  Any reference to a “Section” or “Article,”
without more, is to a Section or Article of the Plan.  Captions and titles are used for convenience
in the Plan and shall not, by themselves, determine the meaning of the
Plan.  Except when
otherwise indicated by the context, the singular includes the plural and vice
versa.  Any reference to a statute
is also a reference to the applicable rules and regulations adopted under that
statute.  Any reference to a statute,
rule or regulation, or to a section of a statute, rule or regulation, is a
reference to that statute, rule, regulation, or section as amended from time to
time, both before and after the Effective Date and including any successor
provisions.

 

2.6                                 Unfunded
Plan. 
The Plan shall be unfunded. 
Although bookkeeping accounts may be established with respect to
Participants, any such accounts will be used merely as a convenience.  The Company shall not be required to
segregate any assets on account of the Plan, the grant of Awards, or the
issuance of Common Shares.  The Company
and the Committee shall not be deemed to be a trustee of stock or cash to be
awarded under the Plan.  Any obligations
of the Company to any Participant shall be based solely upon contracts entered
into under the Plan.  No such obligations
shall be deemed to be secured by any pledge or other encumbrance on any assets
of the Company.  Neither the Company nor
the Committee shall be required to give any security or bond for the
performance of any such obligations.

 

ARTICLE 3.                    SHARES AVAILABLE FOR GRANTS.

 

3.1                                 Basic
Limitation.  Common Shares issued pursuant to the Plan
shall be authorized but unissued shares. 
The number of Common Shares initially reserved for issuance over the
term of the Plan shall not exceed 4,727,827 Common Shares.  Such reserve shall consist of (i) the number
of Common Shares available for issuance, as of the Effective Date, under the
Prior Plans, plus (ii) those Common Shares issued under the Prior Plans that
are forfeited or repurchased at original cost by the Company after the
Effective Date, or that are issuable upon exercise of options granted pursuant
to the Prior Plans that expire or become unexercisable for any reason without
having been exercised in full after the Effective Date, plus (iii) an
additional increase of 400,000 Common Shares approved by the Company’s
shareholders on the Effective Date, plus (iv) an additional increase of
1,000,000 Common Shares approved by the Company’s shareholders on or about
November 15, 2004.  Subject to Section
3.3, any Common Shares to which Options or SARs pertain shall be counted
against the reserve as one (1) Common Share for every one (1) Common Share
subject to such Awards.  Subject to
Section 3.3 and Article 13, any Common Shares to which Restricted Shares or
Stock Units pertain shall be counted against the reserve as two (2) Common
Shares for every one (1) Common Share subject to such Awards.  The maximum aggregate number of Common Shares
that may be issued under the Plan through ISOs is 4,727,827.  The limitations of this Section 3.1 shall be
subject to adjustment pursuant to Article 11. 
The number of Common Shares that are subject to Awards outstanding at
any time under the Plan shall not exceed the number of Common Shares which then
remain available for issuance under the Plan. 
The Company, during the term of the Plan, shall at all times reserve and
keep available sufficient shares to satisfy the requirements of the Plan.

 

3.2                                 Dividend
Equivalents.  Any dividend equivalents paid or credited
under the Plan shall not be applied against the number of Common Shares
available for Awards.

 

3.3                                 Additional
Shares.   If
Common Shares issued upon the exercise of Options are forfeited, then such
Common Shares shall again become available for Awards under the Plan.  If Restricted Shares are forfeited, then such
Common Shares (multiplied by 2) shall again become available for Awards under
the Plan.  If Options or SARs are
forfeited or terminate for any other reason before being exercised, then the
corresponding Common Shares shall again become available for Awards under the
Plan.  Subject to Article 13, if Stock
Units are forfeited or terminate for any other reason before being exercised,
then the corresponding Common Shares (multiplied by 2 to the extent the reserve
under Section 3.1 was depleted on a 2-for-1 basis with respect to such Stock
Units) shall again become available for Awards under the Plan.  Subject to Article 13, if Stock Units are
settled, then only the number of Common Shares (if any) actually issued in
settlement of such Stock Units (multiplied by 2 to the extent the reserve under
Section 3.1 was depleted on a 2-for-1 basis with respect to such Stock Units)
shall reduce the number available under Section 3.1 and the balance shall again
become available for Awards under the Plan. 
If SARs are exercised, then only the number of Common Shares (if any)
actually issued in settlement of such SARs shall reduce the number available
under Section 3.1 and the balance shall again become available for Awards under
the Plan.  The foregoing notwithstanding,
the aggregate number of Common Shares that may be issued under the Plan upon
the exercise of ISOs shall not be increased when Restricted Shares or other 

 

2

 

Common Shares are forfeited.  The provisions of this Section 3.3 shall be
subject to adjustment pursuant to Article 11.

 

ARTICLE 4.                    ELIGIBILITY.

 

4.1                                 Incentive
Stock Options. 
Only Employees who are common-law employees of the Company, a Parent or
a Subsidiary shall be eligible for the grant of ISOs.

 

4.2                                 Other
Grants. 
Employees, Outside Directors and Consultants, including prospective
Employees, Directors and Consultants conditioned on the beginning of their
Service, shall be eligible for the grant of Restricted Shares, Stock Units,
NSOs or SARs.

 

4.3                                 Section
162(m) Limitation.

 

(a)                                  Options And
SARs.  Subject to the provisions of this section
4.3, for so long as the Company is a “publicly held corporation” within the
meaning of Section 162(m) of the Code: 
(i) no Employee may be granted one or more SARs and Options within any
fiscal year of the Company under the Plan to purchase more than 400,000 Common
Shares under Options or to receive compensation calculated with reference to
more than that number of Common Shares under SARs, subject to adjustment
pursuant to Article 11.  If an Option or
SAR is cancelled without being exercised, that cancelled Option or SAR shall
continue to be counted against the limit on Awards that may be granted to any
individual under this Section 4.3.

 

(b)                                 Cash Awards And
Stock Awards.  Any Award intended as “qualified
performance-based compensation” within the meaning of section 162(m) of the
Code must vest or become exercisable contingent on the achievement of one or
more Objectively Determinable Performance Conditions.  The Committee shall have the discretion to
determine the time and manner of compliance with section 162(m) of the Code.

 

ARTICLE 5.                    OPTIONS.

 

5.1                                 Stock
Option Agreement. 
Each grant of an Option under the Plan shall be evidenced by a Stock
Option Agreement between the Optionee and the Company.  Such Option shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan.  The Stock
Option Agreement shall specify whether the Option is an ISO or an NSO.  The provisions of the various Stock Option
Agreements entered into under the Plan need not be identical.  Options may be granted in consideration of a
reduction in the Optionee’s other compensation.

 

5.2                                 Number of
Shares. 
Each Stock Option Agreement shall specify the number of Common Shares
subject to the Option and shall provide for the adjustment of such number in
accordance with Article 11.

 

5.3                                 Exercise
Price. 
Each Stock Option Agreement shall specify the Exercise Price; provided
that the Exercise Price under an Option shall in no event be less than 100% of
the Fair Market Value of a Common Share on the date of grant (and shall not be
less than 110% of the Fair Market Value for an ISO granted to a Ten Percent
Shareholder).

 

5.4                                 Exercisability
and Term. 
Each Stock Option Agreement shall specify the date or event when all or
any installment of the Option is to become exercisable.  The Stock Option Agreement shall also specify
the term of the Option; provided that the term of an ISO shall in no event
exceed 10 years from the date of grant (and shall not exceed 5 years from the
date of grant for a Ten Percent Shareholder). 
If an Optionee changes status from an Employee to a Consultant or
Outside Director, that Optionee’s ISOs become NSOs if not exercised within the
three-month period beginning with the Optionee’s termination of Service as an
Employee for any reason other than the Optionee’s death or disability (as
defined in Section 22(e) of the Code). 
An ISO shall be treated as an NSO if it remains exercisable after, and
is not exercised within, the three-month period described above.  If an Optionee’s Service terminates due to
disability, any ISO held by such Optionee shall be treated as an NSO if it
remains exercisable after, and is not exercised within, one year after
termination of the Optionee’s Service.  A
Stock Option

 

3

 

Agreement may provide for
accelerated exercisability in the event of the Optionee’s death, disability or
retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee’s Service.  Options may be awarded in combination with
SARs, and such an Award may provide that the Options will not be exercisable
unless the related SARs are forfeited. 
No Option granted to an individual who is subject to the overtime pay
provisions of the Fair Labor Standards Act may be exercised before the expiration
of six months after the Grant Date.

 

5.5                                 Effect of Change in Control.  The Committee
may determine, at the time of granting an Option or thereafter, that such
Option shall become exercisable as to all or part of the Common Shares subject
to such Option in the event that a Change in Control occurs with respect to the
Company or in the event that the Optionee is subject to an Involuntary
Termination after a Change in Control. 
However, in the case of an ISO, the acceleration of exercisability shall
not occur without the Optionee’s written consent.  In addition, acceleration of exercisability
may be required under Section 11.3.

 

5.6                                 Nonassignability of Options.  Except as determined by the Committee, no Option shall be
assignable or otherwise transferable by the Participant except by will or by
the laws of descent and distribution. 
However, Options may be transferred and exercised in accordance with a
Domestic Relations Order and may be exercised by a guardian or conservator
appointed to act for the Participant.  No
rights under an ISO may be transferred by the Participant, other than to a
trust where under section 671 of the Code and other Applicable Law the
Participant is considered the sole beneficial owner of the option while it is
held in trust, or by will or the laws of descent and distribution.  The Company’s compliance with a Domestic
Relations Order, or the exercise of an ISO by a guardian or conservator
appointed to act for the Participant, shall not violate this Section 5.6.

 

5.7                                 Substitute
Options. 
The Board may cause the Company to grant Substitute Options in
connection with the acquisition by the Company or a Parent, Subsidiary or
Affiliate of equity securities of any entity (including by merger, tender
offer, or other similar transaction) or of all or a portion of the assets of any
entity.  Any such substitution shall be
effective on the effective date of the acquisition.  Substitute Options may be NSOs or ISOs.  Unless and to the extent specified otherwise
by the Board, Substitute Options shall have the same terms and conditions as
the options they replace, except that (subject to the provisions of Article 11)
Substitute Options shall be Options to purchase Common Shares rather than
equity securities of the granting entity and shall have an Exercise Price
adjusted appropriately, as determined by the Board.

 

5.8                                 Limitation
on ISOs. 
Options intended to be ISOs that are granted to any single Optionee
under all incentive stock option plans of the Company and its Parents or
Subsidiaries, including ISOs granted under the Plan, may not vest at a rate of
more than $100,000 in Fair Market Value of stock (measured on the grant dates
of the options) during any calendar year. 
For this purpose, an Option vests with respect to a given Common Share
the first time its holder may purchase that Common Share, notwithstanding any
right of the Company to repurchase that Common Share.  Unless the administrator of that option plan
specifies otherwise in the related agreement governing the option, this vesting
limitation shall be applied by, to the extent necessary to satisfy this
$100,000 rule, treating certain stock options that were intended to be ISOs as
NSOs.  The stock options or portions of
stock options to be reclassified as NSOs are those with the highest option
prices, whether granted under the Plan or any other equity compensation plan of
the Company or any Parent, Subsidiary or Affiliate that permits that
treatment.  This Section 5.8 shall not
cause an ISO to vest before its original vesting date or cause an ISO that has
already vested to cease to be vested.

 

ARTICLE 6.                    PAYMENT FOR OPTION SHARES.

 

6.1                                 General
Rule. 
The entire Exercise Price of Common Shares issued upon exercise of
Options shall be payable in cash or cash equivalents denominated in U.S.
dollars (except as specified by the Committee for non-U.S. Employees or
non-U.S. sub-plans) at the time when such Common Shares are purchased, except
as follows:

 

(a)                                  In the case of an ISO granted under the
Plan, payment shall be made only pursuant to the express provisions of the
applicable Stock Option Agreement.  The
Stock Option Agreement may specify that payment may be made in any form(s)
described in this Article 6.

 

4

 

(b)                                 In the case of an NSO, the Committee may
at any time accept payment in any form(s) described in this Article 6.

 

6.2                                 Exercise/Sale.  To the extent that this
Section 6.2 is applicable, all or any part of the Exercise Price and any
withholding taxes may be paid by delivering (on a form prescribed by the
Company) an irrevocable direction to a securities broker approved by the
Company to sell all or part of the Common Shares being purchased under the Plan
and to deliver all or part of the sales proceeds to the Company; provided that
to the extent the Company would be deemed to extend or arrange for the
extension of credit in the form of a personal loan to an Optionee under the
foregoing procedure, no Officer or Director may use the foregoing procedure to
pay the Exercise Price.

 

6.3                                 Other
Forms of Payment. 
To the extent that this Section 6.3 is applicable, all or any part of
the Exercise Price and any withholding taxes may be paid in any other form that
is consistent with applicable laws, regulations and rules.

 

ARTICLE 7.                    AUTOMATIC OPTION GRANTS TO OUTSIDE DIRECTORS.

 

7.1                                 Annual
Grants. 
Upon the conclusion of each regular annual meeting of the Company’s
shareholders held in the year 2003 or thereafter, each Outside Director who
will continue serving as a member of the Board thereafter shall receive an NSO
covering 18,000 Common Shares, except that such NSO shall not be granted in a
calendar year in which the same Outside Director holds a nonqualified stock
option issued with respect to Board Service under a Prior Plan which is not
fully vested upon the date of such annual meeting.  NSOs granted under this Section 7.1 shall
become exercisable in twelve (12) equal monthly installments over the
twelve-month period commencing on the first monthly anniversary of the date of
grant, with the last vesting date being the first annual anniversary of the
date of grant, subject to continuing Service. 
An Outside Director who previously was an Employee shall be eligible to
receive grants under this Section 7.1.

 

7.2                                 Initial
Grants. 
Each Outside Director who first becomes a member of the Board after the
Effective Date shall receive a one-time grant of an NSO covering the number of
Common Shares determined by multiplying 1,500 by the whole number of months
remaining until the next regular annual meeting of the Company’s shareholders,
giving credit for any partial month. 
Such NSO shall be granted on the date when such Outside Director first
joins the Board and shall become exercisable in equal monthly installments
commencing on the first monthly anniversary of the date of grant and ending on
the date of such next annual meeting, with the last vesting date being the date
of such next annual meeting, subject to continuing Service.  An Outside Director who previously was an
Employee shall be eligible to receive a grant under this Section 7.2.

 

7.3                                 Replenishment Grants.  Each Outside Director who currently holds any
nonqualified stock option issued with respect to Board Service under a Prior
Plan which was not fully vested upon the date of a regular annual meeting of
the Company’s shareholders held in the year 2003 or thereafter, shall upon the
date that all such nonqualified options become fully vested, receive a one-time
grant of an NSO covering the number of Common Shares determined by multiplying
1,500 by the whole number of months remaining until the next regular annual
meeting of the Company’s shareholders, giving credit for any partial
month.  Such NSO shall become exercisable
in equal monthly installments commencing on the first monthly anniversary of
the date of grant and ending on the date of such next annual meeting, with the
last vesting date being the date of such next annual meeting, subject to
continuing Service.  An Outside Director
who previously was an Employee shall be eligible to receive a grant under this
Section 7.3.

 

7.4                                 Accelerated Exercisability.  All NSOs
granted to an Outside Director under this Article 7 shall also become
exercisable in full in the event that:

 

(a)                                  Such Outside Director’s Service
terminates because of death or total and permanent disability; or

 

(b)                                 The Company is subject to a Change in
Control before such Outside Director’s Service terminates.

 

5

 

Acceleration
of exercisability may also be required by Section 11.3.

 

7.5                                 Exercise Price. 
The Exercise Price under all NSOs granted to an Outside Director under
this Article 7 shall be equal to 100% of the Fair Market Value of a Common
Share on the date of grant, payable in one of the forms described in Sections
6.1, 6.2 and 6.3.

 

7.6                                 Term.  All NSOs granted to an Outside Director under
this Article 7 shall terminate on the earliest of (a) the 10th anniversary of
the date of grant, (b) the date three (3) months after the termination of such
Outside Director’s Service for any reason other than death or total and
permanent disability or (c) the date twelve (12) months after the termination
of such Outside Director’s Service because of death or total and permanent
disability.

 

ARTICLE 8.                    STOCK APPRECIATION RIGHTS.

 

8.1                                 SAR
Agreement.  Each grant of
an SAR under the Plan shall be evidenced by an SAR Agreement between the
Optionee and the Company.  Such SAR shall
be subject to all applicable terms of the Plan and may be subject to any other
terms that are not inconsistent with the Plan. 
The provisions of the various SAR Agreements entered into under the Plan
need not be identical.  SARs may be
granted in consideration of a reduction in the Optionee’s other compensation.

 

8.2                                 Number of
Shares. 
Each SAR Agreement shall specify the number of Common Shares to which
the SAR pertains and shall provide for the adjustment of such number in
accordance with Article 11.

 

8.3                                 Exercise
Price. 
Each SAR Agreement shall specify the Exercise Price.  An SAR Agreement may specify an Exercise
Price that varies in accordance with a predetermined formula while the SAR is
outstanding.

 

8.4                                 Exercisability and Term.  Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable.  The SAR Agreement shall also specify the term
of the SAR.  The grant or vesting of an
SAR may be made contingent on the achievement of performance conditions.  An SAR Agreement may provide for accelerated
exercisability in the event of the Optionee’s death, disability or retirement
or other events and may provide for expiration prior to the end of its term in
the event of the termination of the Optionee’s Service.  SARs may be awarded in combination with
Options, and such an Award may provide that the SARs will not be exercisable
unless the related Options are forfeited. 
An SAR may be included in an ISO only at the time of grant but may be
included in an NSO at the time of grant or thereafter.  An SAR granted under the Plan may provide
that it will be exercisable only in the event of a Change in Control.

 

8.5                                 Effect of
Change in Control.  The Committee may determine, at the time of
granting an SAR or thereafter, that such SAR shall become fully exercisable as
to all Common Shares subject to such SAR in the event that the Company is
subject to a Change in Control or in the event that the Optionee is subject to
an Involuntary Termination after a Change in Control.  In addition, acceleration of exercisability
may be required under Section 11.3.

 

8.6                                 Exercise
of SARs. 
Upon exercise of an SAR, the Optionee (or any person having the right to
exercise the SAR after his or her death) shall receive from the Company (a)
Common Shares, (b) cash or (c) a combination of Common Shares and cash, as the
Committee shall determine, over the period or periods set forth in the SAR
Agreement.  An SAR Agreement may place
limits on the amount that may be paid over any specified period or periods upon
the exercise of an SAR, on an aggregate basis or as to any Participant.  The amount of cash and/or the Fair Market
Value of Common Shares received upon exercise of SARs shall, in the aggregate,
be equal to the amount by which the Fair Market Value (on the date of
surrender) of the Common Shares subject to the SARs exceeds the Exercise
Price.  If, on the date when an SAR
expires, the Exercise Price under such SAR is less than the Fair Market Value
on such date but any portion of such SAR has not been exercised or surrendered,
then such SAR shall automatically be deemed to be exercised as of such date
with respect to such portion.

 

6

 

8.7                                 Nonassignability of SARs.  Except as determined by the
Committee, no SAR shall be assignable or otherwise transferable by the
Participant except by will or by the laws of descent and distribution.  However, SARs may be transferred and
exercised in accordance with a Domestic Relations Order and may be exercised by
a guardian or conservator appointed to act for the Participant.

 

8.8                                 Substitute
SARs. 
The Board may cause the Company to grant Substitute SARs in connection
with the acquisition by the Company or a Parent, Subsidiary or Affiliate of
equity securities of any entity (including by merger, tender offer, or other
similar transaction) or of all or a portion of the assets of any entity.  Any such substitution shall be effective on
the effective date of the acquisition. 
Unless and to the extent specified otherwise by the Board, Substitute
SARs shall have the same terms and conditions as the SARs they replace, except
that (subject to the provisions of Article 11) Substitute SARs shall be
exercisable with respect to the Fair Market Value of Common Shares rather than
equity securities of the granting entity and shall be on terms that, as
determined by the Board in its sole and absolute discretion, properly reflect
that substitution.

 

ARTICLE 9.                    RESTRICTED SHARES.

 

9.1                                 Restricted Stock Agreement.   Each grant of Restricted Shares under the Plan
shall be evidenced by a Restricted Stock Agreement between the recipient and
the Company.  Such Restricted Shares
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan.  The provisions of the various Restricted
Stock Agreements entered into under the Plan need not be identical.

 

9.2                                 Payment
for Awards. 
Subject to the following sentence, Restricted Shares may be sold or
awarded under the Plan for such consideration as the Committee may determine,
including (without limitation) cash, cash equivalents, labor done, services
actually rendered to the Company or for its benefit or in its reorganization,
debts or securities cancelled, tangible or intangible property actually
received either by the Company or a wholly-owned subsidiary, and promissory
notes (provided the recipient is an Employee who is not a Director or Officer
at the time of grant).  All cash and cash
equivalents shall be dominated in U.S. dollars except as specified by the
Committee for non-U.S. Employees or non-U.S. sub-plans.

 

9.3                                 Vesting
Conditions. 
Each Award of Restricted Shares may or may not be subject to
vesting.  Vesting shall occur, in full or
in installments, upon satisfaction of the conditions specified in the
Restricted Stock Agreement.  The
Committee may include among such conditions the achievement of Objectively
Determinable Performance Conditions.  In
no event shall the number of Restricted Shares which are subject to
performance-based vesting conditions and which are granted to any one
Participant in any single fiscal year of the Company exceed 100,000, subject to
adjustment in accordance with Article 11. 
A Restricted Stock Agreement may provide for accelerated vesting in the
event of the Participant’s death, disability or retirement or other
events.  The Committee may determine, at
the time of granting Restricted Shares or thereafter, that all or part of such
Restricted Shares shall become vested in the event that a Change in Control
occurs with respect to the Company or in the event that the Participant is
subject to an Involuntary Termination after a Change in Control.

 

9.4                                 Voting and Dividend Rights.  The holders of
Restricted Shares awarded under the Plan shall have the same voting, dividend
and other rights as the Company’s other shareholders.  A Restricted Stock Agreement, however, may
require that the holders of Restricted Shares invest any cash dividends received
in additional Restricted Shares.  Such
additional Restricted Shares shall be subject to the same conditions and
restrictions as the Award with respect to which the dividends were paid.

 

9.5                                 Nonassignability of Restricted Shares.  Except as
determined by the Committee, no Restricted Shares shall be assignable or
otherwise transferable by the Participant except by will or by the laws of
descent and distribution until such time as the Restricted Shares have
vested.  Notwithstanding anything to the
contrary herein, Restricted Shares may be transferred and exercised in
accordance with a Domestic Relations Order.

 

9.6                                 Substitute Restricted Shares.  The Board may
cause the Company to grant Substitute Restricted Shares in connection with the
acquisition by the Company or a Parent, Subsidiary or Affiliate of equity
securities of any entity (including by merger) or all or a portion of the
assets of any entity.  Unless and to the
extent specified otherwise by the Board, Substitute Restricted Shares shall
have the same terms and conditions as the restricted shares they replace,
except that (subject to the provisions of Article 11) Substitute Restricted
Shares shall

 

7

 

be
Common Shares rather than equity securities of the granting entity and shall be
on terms that, as determined by the Board in its sole and absolute discretion,
properly reflect the substitution.  Any
such Substituted Restricted Shares shall be granted effective on the effective
date of the acquisition.

 

ARTICLE
10.             STOCK
UNITS.

 

10.1                           Stock
Unit Agreement. 
Each grant of Stock Units under the Plan shall be evidenced by a Stock
Unit Agreement between the recipient and the Company.  Such Stock Units shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan.  The
provisions of the various Stock Unit Agreements entered into under the Plan
need not be identical.  Stock Units may
be granted in consideration of a reduction in the recipient’s other
compensation.

 

10.2                           Payment
for Awards. 
To the extent that an Award is granted in the form of Stock Units, no
cash consideration shall be required of the Award recipients.

 

10.3                           Vesting
Conditions. 
Each Award of Stock Units may or may not be subject to vesting.  Vesting shall occur, in full or in
installments, upon satisfaction of the conditions specified in the Stock Unit
Agreement.  The Committee may include
among such conditions the achievement of Objectively Determinable Performance
Conditions.  In no event shall the number
of Stock Units which are subject to performance-based vesting conditions and
which are granted to any one Participant in any single fiscal year of the
Company exceed 100,000, subject to adjustment in accordance with Article 11.  A Stock Unit Agreement may provide for
accelerated vesting in the event of the Participant’s death, disability or
retirement or other events.  The
Committee may determine, at the time of granting Stock Units or thereafter,
that all or part of such Stock Units shall become vested in the event that the
Company is subject to a Change in Control or in the event that the Participant
is subject to an Involuntary Termination after a Change in Control.  In addition, acceleration of vesting may be
required under Section 11.3.

 

10.4                           Voting
and Dividend Rights.  The holders of Stock Units shall have no
voting rights.  Prior to settlement or
forfeiture, any Stock Unit awarded under the Plan may, at the Committee’s
discretion, carry with it a right to dividend equivalents.  Such right entitles the holder to be credited
with an amount equal to all cash dividends paid on one Common Share while the
Stock Unit is outstanding.  Dividend
equivalents may be converted into additional Stock Units.  Settlement of dividend equivalents may be
made in the form of cash, in the form of Common Shares, or in a combination of
both, as determined by the Committee. 
Prior to distribution, any dividend equivalents that are not paid shall
be subject to the same conditions and restrictions as the Stock Units to which
they attach.

 

10.5                           Form and Time of Settlement of Stock Units.  Settlement of
vested Stock Units may be made in the form of (a) cash, (b) Common Shares or
(c) any combination of both, as determined by the Committee, over the period or
periods established by the Committee.  A
Stock Unit Award may place limits on the amount that may be paid over any
specified period or periods, on an aggregate basis or as to any Participant.  The actual number of Stock Units eligible for
settlement may be larger or smaller than the number included in the original
Award, based on performance criteria. 
Methods of converting Stock Units into cash may include (without
limitation) a method based on the average Fair Market Value of Common Shares
over a series of trading days. 
Distribution on settlement may occur or commence when all vesting
conditions applicable to the Stock Units have been satisfied or have lapsed, or
it may be deferred to any later date. 
The amount of a deferred distribution may be increased by an interest
factor or by dividend equivalents.  Until
an Award of Stock Units is settled, the number of such Stock Units shall be
subject to adjustment pursuant to Article 11.

 

10.6                           Death of
Recipient. 
Any Stock Units Award that becomes payable after the recipient’s death
shall be distributed to the recipient’s beneficiary or beneficiaries.  Each recipient of a Stock Units Award under
the Plan shall designate one or more beneficiaries for this purpose by filing
the prescribed form with the Company.  A
beneficiary designation may be changed by filing the prescribed form with the
Company at any time before the Award recipient’s death.  If no beneficiary was designated or if no
designated beneficiary survives the Award recipient, then any Stock Units Award
that becomes payable after the recipient’s death shall be distributed to the
recipient’s estate.

 

8

 

10.7                           Creditors’ Rights. 
A holder of Stock Units shall have no rights other than those of a
general creditor of the Company.  Stock
Units represent an unfunded and unsecured obligation of the Company, subject to
the terms and conditions of the applicable Stock Unit Agreement.

 

10.8                           Nonassignability of Stock Units.  Except as determined by the Committee, no Stock Unit Award shall be
assignable or otherwise transferable by the Participant except by will or by
the laws of descent and distribution. 
Notwithstanding anything to the contrary herein, Stock Unit Awards may
be transferred and exercised in accordance with a Domestic Relations Order.

 

10.9                           Substitute Stock Unit.  The Board may cause the Company to grant
Substitute Stock Units in connection with the acquisition by the Company or a
Parent, Subsidiary or Affiliate of equity securities of any entity (including
by merger) or all or a portion of the assets of any entity.  Unless and to the extent specified otherwise
by the Board, Substitute Stock Units shall have the same terms and conditions
as the stock units they replace, except that (subject to the provisions of
Article 11) Substitute Stock Units shall be settled with respect to the Fair
Market Value of the Common Shares rather than equity securities of the granting
entity and shall be on terms that, as determined by the Board in its sole and
absolute discretion, properly reflect the substitution.

 

ARTICLE 11.             PROTECTION AGAINST DILUTION.

 

11.1                           Adjustments.  In the event of a subdivision
of the outstanding Common Shares, a declaration of a dividend payable in Common
Shares or a combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise) into a lesser number of Common Shares,
corresponding adjustments shall automatically be made in each of the following:

 

(a)                                  The number of Options, SARs, Restricted
Shares and Stock Units available for future Awards under Article 3;

 

(b)                                 The number of Common Shares covered by
automatic grants pursuant to Sections 7.1, 7.2 and 7.3;

 

(c)                                  The limitations set forth in Sections
4.3(a), 9.3 and 10.3;

 

(d)                                 The number of Common Shares covered by each
outstanding Option and SAR;

 

(e)                                  The Exercise Price under each outstanding
Option and SAR; or

 

(f)                                    The number of Stock Units included in any
prior Award that has not yet been                   settled.

 

In the
event of a declaration of an extraordinary dividend payable in a form other
than Common Shares in an amount that has a material effect on the price of
Common Shares, a recapitalization, a spin-off or a similar occurrence, the
Committee shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of the foregoing. 
Except as provided in this Article 11, a Participant shall have no
rights by reason of any issuance by the Company of stock of any class or
securities convertible into stock of any class, any subdivision or
consolidation of shares of stock of any class, the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class.

 

11.2                           Dissolution or Liquidation.  To the extent not previously exercised or
settled, Options, SARs and Stock Units shall terminate immediately prior to the
dissolution or liquidation of the Company.

 

11.3                           Reorganizations.  In the event
that the Company is a party to a merger or other reorganization, outstanding
Awards shall be subject to the agreement of merger or reorganization.  Such agreement shall provide for (a) the
continuation of the outstanding Awards by the Company, if the Company is a
surviving corporation, (b) the assumption of the outstanding Awards by the
surviving corporation or its parent or subsidiary, (c) the substitution by the
surviving corporation or its parent or subsidiary of its own awards for the
outstanding 

 

9

 

Awards, (d) full exercisability
or vesting and accelerated expiration of the outstanding Awards or (e)
settlement of the full value of the outstanding Awards in cash or cash
equivalents followed by cancellation of such Awards.  In the event of a Divestiture, the Board may,
but need not, direct that one or more of the foregoing actions be taken with
respect to Awards held by, for example, Employees, Outside Directors or
Consultants for whom the transaction or event resulted in a termination of
Service.  The Board need not adopt the
same rules for each Award or Participant.

 

ARTICLE 12.             DEFERRAL OF AWARDS.

 

The
Committee (in its sole discretion) may permit or require a Participant to:

 

(a)                                  Have cash that otherwise would be paid to
such Participant as a result of the exercise of an SAR or the settlement of
Stock Units credited to a deferred compensation account established for such
Participant by the Committee as an entry on the Company’s books;

 

(b)                                 Have Common Shares that otherwise would
be delivered to such Participant as a result of the exercise of an Option or
SAR converted into an equal number of Stock Units; or

 

(c)                                  Have Common Shares that otherwise would
be delivered to such Participant as a result of the exercise of an Option or
SAR or the settlement of Stock Units converted into amounts credited to a
deferred compensation account established for such Participant by the Committee
as an entry on the Company’s books.  Such
amounts shall be determined by reference to the Fair Market Value of such
Common Shares as of the date when they otherwise would have been delivered to
such Participant.

 

A
deferred compensation account established under this Article 12 may be credited
with interest or other forms of investment return, as determined by the
Committee.  A Participant for whom such
an account is established shall have no rights other than those of a general
creditor of the Company.  Such an account
shall represent an unfunded and unsecured obligation of the Company and shall
be subject to the terms and conditions of the applicable agreement between such
Participant and the Company.  If the deferral
or conversion of Awards is permitted or required, the Committee (in its sole
discretion) may establish rules, procedures and forms pertaining to such
Awards, including (without limitation) the settlement of deferred compensation
accounts established under this Article 12.

 

ARTICLE 13.             AWARDS UNDER OTHER PLANS.

 

The
Company may grant awards under other plans or programs.  Such awards may be settled in the form of
Common Shares issued under the Plan. 
Such Common Shares shall be treated for all purposes under the Plan like
Common Shares issued in settlement of Stock Units and shall, when issued,
reduce the number of Common Shares available under Article 3.  Notwithstanding the foregoing, Common Shares
issued pursuant to this Article 13 shall be counted against the Plan reserve as
one (1) Common Share to the extent such shares are issued in respect of awards
under other plans or programs that have substantially similar terms and
conditions to Options or SARs granted under the Plan, including, with respect
to stock options or equivalent securities, an exercise price at least equal to
the fair market value of the securities for which the stock option or
equivalent security is exercisable, measured at the date of grant.

 

ARTICLE 14.             PAYMENT OF DIRECTORS’ FEES IN SECURITIES.

 

14.1                           Effective
Date. 
No provision of this Article 14 shall be effective unless and until the
Board has determined to implement such provision.

 

14.2                           Elections to Receive NSOs, Restricted Shares or Stock Units.  An Outside
Director may elect to receive his or her annual retainer payments and/or
meeting fees from the Company in the form of cash, NSOs, Restricted Shares or
Stock Units, or a combination thereof, as determined by the Board.  Such NSOs, Restricted Shares and Stock Units
shall be issued under the Plan.  An
election under this Article 14 shall be filed with the Company on the
prescribed form.

 

10

 

14.3                           Number
and Terms of NSOs, Restricted Shares or Stock Units.  The number of
NSOs, Restricted Shares or Stock Units to be granted to Outside Directors in
lieu of annual retainers and meeting fees that would otherwise be paid in cash
shall be calculated in a manner determined by the Board.  The Board shall also determine the terms of
such NSOs, Restricted Shares or Stock Units.

 

ARTICLE 15.             LIMITATION ON RIGHTS.

 

15.1                           Retention
Rights. 
Neither the Plan nor any Award granted under the Plan shall be deemed to
give any individual a right to remain an Employee, Outside Director or
Consultant.  The Company and its Parents,
Subsidiaries and Affiliates reserve the right to terminate the Service of any
Employee, Outside Director or Consultant at any time, with or without cause,
subject to applicable laws, the Company’s articles of incorporation and by-laws
and a written employment agreement (if any).

 

15.2                           Shareholders’
Rights. 
A Participant shall have no dividend rights, voting rights or other
rights as a shareholder with respect to any Common Shares covered by his or her
Award prior to the time when a stock certificate for such Common Shares is
issued or, if applicable, the time when he or she becomes entitled to receive
such Common Shares by filing any required notice of exercise and paying any
required Exercise Price.  No adjustment
shall be made for cash dividends or other rights for which the record date is
prior to such time, except as expressly provided in the Plan.

 

15.3                           Regulatory Requirements.  Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all Applicable Law. 
The Company reserves the right to restrict, in whole or in part, the
delivery of Common Shares pursuant to any Award prior to the satisfaction of
all Applicable Law relating to the issuance of such Common Shares, to their
registration, qualification or listing or to an exemption from registration,
qualification or listing.

 

ARTICLE 16.             WITHHOLDING TAXES.

 

16.1                           General.  To the extent required by Applicable Law, a
Participant or his or her successor shall make arrangements satisfactory to the
Company for the satisfaction of any withholding tax obligations that arise in
connection with the Plan.  The Company
shall not be required to issue any Common Shares or make any cash payment under
the Plan until such obligations are satisfied.

 

16.2                           Share
Withholding. 
To the extent that applicable law subjects a Participant to tax
withholding obligations, the Committee may permit such Participant to satisfy
all or part of such obligations by having the Company withhold all or a portion
of any Common Shares that otherwise would be issued to him or her or by
surrendering all or a portion of any Common Shares that he or she previously
acquired.  Such Common Shares shall be valued
at their Fair Market Value on the date when they are withheld or surrendered.

 

ARTICLE
17.             FUTURE
OF THE PLAN.

 

17.1                           Term of
the Plan. 
The Plan, as set forth herein, shall become effective on the Effective
Date.  The Plan shall remain in effect
until it is terminated under Section 17.2, except that no ISOs shall be granted
on or after the 10th anniversary of the later of (a) the date when the Board
adopted the Plan or (b) the date when the Board adopted the most recent
increase in the number of Common Shares available under Article 3 that was
approved by the Company’s shareholders.

 

17.2                           Amendment or Termination.  The Board may, at any time and for any
reason, amend or terminate the Plan.  An
amendment of the Plan shall be subject to the approval of the Company’s
shareholders only to the extent required by Applicable Law.  No Awards shall be granted under the Plan
after the termination thereof.  The
termination of the Plan, or any amendment thereof, shall not impair the rights
of any Participant under any Award previously granted under the Plan unless the
Participant consents to such amendment. 
The Board or the Committee may amend the terms of any existing Award,
prospectively or retroactively, but no such amendment shall impair the rights
of any Participant unless the Participant consents to such amendment.  The Board or the Committee may not amend the
terms of any Option to reduce the Exercise Price (except pursuant to Article
11), or 

 

11

 

cancel any Option and grant a new Opinion with a lower
Exercise Price such that the effect would be the same as reducing the Exercise
Price, without the approval of the Company’s shareholders.  Notwithstanding anything herein to the
contrary, no consent of a Participant shall be required if the Board determines,
in its sole and absolute discretion, that the amendment, suspension,
termination, or modification:  (a) is
required or advisable in order for the Company, the Plan or the Award to
satisfy Applicable Law, to meet the requirements of any accounting standard or
to avoid any adverse accounting treatment, or (b) in connection with any
transaction or event described in Article 11, is in the best interests of the
Company or its shareholders.  The Board
may, but need not, take the tax or accounting consequences to affected
Participants into consideration in acting under the preceding sentence.  Those decisions shall be final, binding and
conclusive.  Termination of the Plan
shall not affect the Committee’s ability to exercise the powers granted to it
under the Plan with respect to Awards granted before the termination
notwithstanding that Awards become exercisable or are to be settled after the
termination.

 

ARTICLE 18.             LIMITATION ON PAYMENTS.

 

18.1                           Scope of
Limitation. 
This Article 18 shall apply to an Award only if:

 

(a)                                  The after-tax value of such Award to the
Participant, taking into account the effect of all federal, state and local
income taxes, employment taxes and excise taxes applicable to the Participant
(including the excise tax under section 4999 of the Code), will be greater
after the application of this Article 18 than it was before the application of
this Article 18; or

 

(b)                                 The Committee, at the time of making an
Award under the Plan or at any time thereafter, specifies in writing that such
Award shall be subject to this Article 18 (regardless of the after-tax value of
such Award to the Participant).

 

If
this Article 18 applies to an Award, it shall supersede any contrary provision
of the Plan or of any Award granted under the Plan.

 

18.2                           Basic Rule.  In the event that any payment or transfer by
the Company under the Plan to or for the benefit of a Participant (a “Payment”)
would be nondeductible by the Company for federal income tax purposes because
of the provisions concerning “excess parachute payments” in section 280G of the
Code, then the aggregate present value of all Payments shall be reduced (but
not below zero) to the Reduced Amount. 
For purposes of this Article 18, the “Reduced Amount” shall be the
amount, expressed as a present value, which maximizes the aggregate present
value of the Payments without causing any Payment to be nondeductible by the
Company because of section 280G of the Code.

 

18.3                           Reduction
of Payments. 
If any Payment would be nondeductible by the Company because of section
280G of the Code, then the Company shall promptly give the Participant notice
to that effect and a copy of the detailed calculation thereof and of the
Reduced Amount, and the Participant may then elect, in his or her sole
discretion, which and how much of the Payments shall be eliminated or reduced
(as long as after such election the aggregate present value of the Payments
equals the Reduced Amount) and shall advise the Company in writing of his or
her election within 10 days of receipt of notice.  If no such election is made by the
Participant within such 10-day period, then the Company may elect which and how
much of the Payments shall be eliminated or reduced (as long as after such
election the aggregate present value of the Payments equals the Reduced Amount)
and shall notify the Participant promptly of such election.  For purposes of this Article 18, present
value shall be determined in accordance with section 280G(d)(4)
of the Code.  All determinations made by
the Company under this Article 18 shall be made within 60 days of the date when
a Payment becomes payable or transferable. 
As promptly as practicable following such determination and the
elections hereunder, the Company shall pay or transfer to or for the benefit of
the Participant such amounts as are then due to him or her under the Plan and
shall promptly pay or transfer to or for the benefit of the Participant in the
future such amounts as become due to him or her under the Plan.

 

18.4                           Overpayments and Underpayments.  As a result
of uncertainty in the application of section 280G of the Code at the time of an
initial determination by the Company hereunder, it is possible that Payments
will have been made by the Company which should not have been made (an “Overpayment”)
or that additional Payments which will not have been made by the Company could
have been made (an “Underpayment”), 

 

12

 

consistent
in each case with the calculation of the Reduced Amount hereunder.  In the event that the Company, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company
or the Participant that the Company believes in good faith has a high
probability of success, determine that an Overpayment has been made, the
Participant shall repay the amount of the Overpayment to the Company, together
with interest at the applicable federal rate provided in section 7872(f)(2) of
the Code; provided, however, that no amount shall be payable by the Participant
to the Company if and to the extent that such payment would not reduce the
amount that is subject to taxation under section 4999 of the Code and further
provided that no amount shall be payable by an Officer or Director if such
obligation would be a violation of Applicable Law.  In the event that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the
Company to or for the benefit of the Participant, together with interest at the
applicable federal rate provided in section 7872(f)(2) of the Code.

 

18.5                           Related
Corporations. 
For purposes of this Article 18, the term “Company” shall include
affiliated corporations in accordance with section 280G(d)(5) of the Code.

 

ARTICLE
19.             DEFINITIONS.

 

19.1                           “Affiliate”
means any entity other than a Subsidiary, if the Company and/or one or more
Subsidiaries own not less than 50% of such entity.

 

19.2                           “Applicable Law” means any and all laws of whatever
jurisdiction, within or without the United States, and the rules of any stock
exchange or quotation system on which Common Shares are listed or quoted,
applicable to the taking or refraining from taking of any action under the
Plan, including the administration of the Plan and the issuance or transfer of
Awards.

 

19.3                           “Award”
means any award of an Option, an SAR, a Restricted Share or a Stock Unit under
the Plan.

 

19.4                           “Board”
means the Company’s Board of Directors, as constituted from time to time.

 

19.5                           “Cause”
means (a) acts or omissions constituting gross negligence, recklessness or
willful misconduct with respect to the Participant’s obligations or otherwise
relating to the business of the Company; (b) the Participant’s material breach
of a written agreement between the Participant and the Company (or a Parent,
Subsidiary or Affiliate); (c) conviction or entry of a plea of nolo contendere
for fraud, misappropriation or embezzlement, or any felony or crime of moral
turpitude; (d) dishonesty or involvement in any conduct that adversely affects
the Company’s name or public image or is otherwise detrimental to the Company’s
business interests; (e) willful neglect of duties; or (f) unauthorized use or
disclosure of the confidential information or trade secrets of the Company,
which use or disclosure causes material harm to the Company.  The foregoing, however, shall not be deemed
an exclusive list of all acts or omissions that the Company (or the Parent,
Subsidiary or Affiliate employing the Participant) may consider as grounds for
the discharge of the Participant without Cause. 
The Committee shall be entitled to determine “Cause” based on the
Committee’s good faith belief.

 

19.6                           “Change in Control” means:

 

(a)                                  The consummation of a merger or
consolidation of the Company with or into another entity or any other corporate
reorganization, if persons who were not shareholders of the Company immediately
prior to such merger, consolidation or other reorganization own immediately
after such merger, consolidation or other reorganization 50% or more of the
voting power of the outstanding securities of each of (i) the continuing or
surviving entity and (ii) any direct or indirect parent corporation of such
continuing or surviving entity;

 

(b)                                 The sale, transfer or other disposition
of all or substantially all of the Company’s assets;

 

13

 

(c)                                  A change in the composition of the Board
over a period of thirty-six (36) months or less such that a majority of the
Board members (rounded up to the next whole number) ceases, by reason of one or
more contested elections for Board membership, to be comprised of individuals
who are Continuing Directors;

 

(d)                                 Any transaction as a result of which the
direct or indirect acquisition by any person or related group of persons (other
than an acquisition from or by the Company or by a Company-sponsored employee
benefit plan or by a person that directly or indirectly controls, is controlled
by, or is under common control with, the Company) of beneficial ownership
(within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of the Company’s
outstanding securities pursuant to a tender or exchange offer made directly to
the Company’s shareholders which a majority of the Continuing Directors who are
not affiliated with the offeror do not recommend such shareholders accept; or

 

(e)                                  A Divestiture; provided that a
Divestiture shall be a Change in Control only to the extent that the Board
determines that such Divestiture constitutes a Change in Control, and then only
for those Participants for whom the Board has expressly resolved that such
Divestiture constitutes a Change in Control for such Participants.  In making such determination, the Board need
not adopt the same rules for each Award or Participant.

 

A
transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company’s incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who
held the Company’s securities immediately before such transaction.  The Committee shall determine whether an
event shall be treated as a Change of Control.

 

19.7                           “Code”
means the Internal Revenue Code of 1986, as amended.

 

19.8                           “Committee”
means a committee of the Board, as described in Article 2.

 

19.9                           “Common Share”
means one share of the common stock of the Company.

 

19.10                     “Company”
means Overland Storage, Inc., a California corporation.

 

19.11                     “Consultant”
means a consultant or adviser who provides bona fide services to the Company, a
Parent, a Subsidiary or an Affiliate as an independent contractor.

 

19.12                     “Continuing
Directors” means members of the Board who either (i) have been
Board members continuously for a period of at least thirty-six (36) months or
(ii) have been Board members for less than thirty-six (36) months and were
elected or nominated for election as Board members by at least a majority of
the Board members described in clause (i) who were still in office at the time
such election or nomination was approved by the Board.

 

19.13                     “Divestiture”
means a transaction or event where the Company or a Parent, Subsidiary or
Affiliate sells or otherwise transfers its equity securities to a person or
entity other than the Company or a Parent, Subsidiary or Affiliate, or leases,
exchanges or transfers all or any portion of its assets to such a person or
entity, where the Board specifies that such transaction or event constitutes a “Divestiture.”

 

19.14                     “Domestic
Relations Order” means a “domestic relations order” as defined
in, and otherwise meeting the requirements of, section 414(p) of the Code,
except that reference to a “plan” in that definition shall be to the Plan.

 

19.15                     “Director”
means a member of the Board of Directors of the Company.

 

19.16                     “Effective Date”
means the earliest date on which the Plan has been adopted by the Board and
approved by the Company’s shareholders.

 

14

 

19.17                     “Employee”
means a common law employee of the Company, a Parent, a Subsidiary or an
Affiliate.  Notwithstanding the
foregoing, individuals who are classified by the Company or a Parent,
Subsidiary or Affiliate as (i) leased from or otherwise employed by a third
party, (ii) independent contractors, or (iii) intermittent or temporary
workers, shall not be deemed Employees. 
The Company’s or a Parent’s, Subsidiary’s or Affiliate’s classification
of an individual as an “Employee” (or as not an “Employee”) for purposes of the
Plan shall not be altered retroactively even if that classification is changed
retroactively for another purpose as a result of an audit, litigation or
otherwise.  A Participant shall not cease
to be an Employee due to transfers between locations of the Company, or among
the Company and a Parent, Subsidiary or Affiliate, or to any successor to the
Company or a Parent, Subsidiary or Affiliate that assumes an Optionee’s Options
under Section 11.3.  Neither service as a
Director nor receipt of a director’s fee shall be sufficient to make a Director
an “Employee.”

 

19.18                     “Exchange Act”
means the Securities Exchange Act of 1934, as amended.

 

19.19                     “Exercise Price,” in the case of an Option, means the amount
for which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement.  “Exercise Price,” in the case of an SAR,
means an amount, as specified in the applicable SAR Agreement, which is
subtracted from the Fair Market Value of one Common Share in determining the
amount payable upon exercise of such SAR.

 

19.20                     “Fair Market
Value” means the market price of Common Shares, determined by
the Committee in good faith on such basis as it deems appropriate.  Whenever possible, the determination of Fair
Market Value by the Committee shall be based on the prices reported in The Wall
Street Journal.  Such determination shall
be conclusive and binding on all persons.

 

19.21                     “Involuntary
Termination” means the termination of the Participant’s Service
by reason of:

 

(a)                                  The involuntary discharge of the
Participant by the Company (or the Parent, Subsidiary or Affiliate employing
him or her) for reasons other than Cause; or

 

(b)                                 The voluntary resignation of the
Participant following (i) a material adverse change in his or her title,
stature, authority or responsibilities with the Company (or the Parent,
Subsidiary or Affiliate employing him or her), (ii) a material reduction in his
or her base salary or (iii) receipt of notice that his or her principal
workplace will be relocated by more than 90 miles.

 

19.22                     “ISO” means
an incentive stock option described in section 422(b) of the Code.

 

19.23                     “NSO” means
a stock option not described in sections 422 or 423 of the Code.

 

19.24                     “Objectively Determinable Performance Condition” shall
mean a performance condition (i) that is established (A) at the time an Award
is granted or (B) no later than the earlier of (1) 90 days after the beginning
of the period of Service to which it relates, or (2) before the elapse of 25%
of the period of Service to which it relates, (ii) that is uncertain of
achievement at the time it is established, and (iii) the achievement of which
is determinable by a third party with knowledge of the relevant facts.  Examples of measures that may be used in
Objectively Determinable Performance Conditions include net order dollars, net
profit dollars, net profit growth, net revenue dollars, revenue growth,
individual performance, earnings per share, return on assets, return on equity,
and other financial objectives, objective customer satisfaction indicators and
efficiency measures, each with respect to the Company and/or a Parent,
Subsidiary or Affiliate, and/or an individual business unit.

 

19.25                     “Officer”
means an officer of the Company as defined in Rule 16D-1 adopted under the
Exchange Act.

 

19.26                     “Option” means an ISO or NSO granted under the Plan
and entitling the holder to purchase Common Shares.

 

15

 

19.27                     “Optionee” means
an individual or estate who holds an Option or SAR.

 

19.28                     “Outside
Director” means a member of the Board who is not an Employee.

 

19.29                     “Parent”
means any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than
the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.  A corporation that attains the
status of a Parent on a date after the adoption of the Plan shall be considered
a Parent commencing as of such date.

 

19.30                     “Participant”
means (i) a person to whom an Award has been granted, including a holder of a
Substitute Award; or (ii) a person to whom an Award has been transferred in
accordance with the applicable requirements of Sections 5.6, 8.7, 9.5, or 10.8

 

19.31                     “Plan” means
this Overland Storage, Inc. 2003 Equity Incentive Plan, as amended from time to
time.

 

19.32                     “Prior Plans”
means the Company’s 1995 Stock Option Plan, 1997 Executive Stock Option Plan,
2000 Stock Option Plan, and 2001 Supplemental Stock Option Plan, each as in
effect on the Effective Date.

 

19.33                     “Restricted Share”
means a Common Share awarded pursuant to Article 9 of the Plan.

 

19.34                     “Restricted Stock Agreement” means the agreement
between the Company and the recipient of a Restricted Share that contains the
terms, conditions and restrictions pertaining to such Restricted Share.

 

19.35                     “SAR” means
a stock appreciation right granted under the Plan.

 

19.36                     “SAR
Agreement” means the agreement between the Company and an
Optionee that contains the terms, conditions and restrictions pertaining to his
or her SAR.

 

19.37                     “Service”
means service as an Employee, Outside Director or Consultant.  Unless otherwise determined by the Committee
or otherwise provided in the Plan or Award agreement, Service shall continue
notwithstanding a change in status from an Employee, Consultant or Outside
Director to another such status.  An
event that causes a Parent, Subsidiary or Affiliate to cease having status as a
Parent, Subsidiary or Affiliate shall be deemed to discontinue the Service of
that entity’s Employees, Outside Directors and Consultants unless such persons
retain the status of Employee, Outside Director or Consultant of the Company or
a remaining Parent, Subsidiary or Affiliate.

 

19.38                     “Stock Option Agreement” means the agreement between the Company and an
Optionee that contains the terms, conditions and restrictions pertaining to his
or her Option.

 

19.39                     “Stock Unit”
means a bookkeeping entry representing the equivalent of one Common Share, as
awarded under the Plan.

 

19.40                     “Stock Unit Agreement”
means the agreement between the Company and the recipient of a Stock Unit that
contains the terms, conditions and restrictions pertaining to such Stock Unit.

 

19.41                     “Subsidiary”
means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.  A
corporation that attains the status of a Subsidiary on a date after the
adoption of the Plan shall be considered a Subsidiary commencing as of such
date.

 

16

 

19.42                     “Substitute
Award” means a Substitute Option, Substitute SAR, Substitute
Restricted Share or Substitute Stock Unit granted in accordance with the terms
of the Plan.

 

19.43                     “Substitute
Option” means an Option granted in substitution for, or upon the
conversion of, an option granted by another entity to purchase equity securities
in the granting entity.

 

19.44                     “Substitute
SAR” means a SAR granted in substitution for, or upon the
conversion of, a stock appreciation right granted by another entity with
respect to equity securities in the granting entity.

 

19.45                     “Substitute Restricted Share” means a Restricted Share
granted in substitution for a restricted share granted by another entity with
respect to equity securities in the granting entity.

 

19.46                     “Substitute
Stock Unit” means a Stock Unit granted in substitution for, or upon
the conversion of, a stock unit granted by another entity with respect to
equity securities in the granting entity.

 

19.47                     “Ten Percent Shareholder”
means any person who, directly or by attribution under Section 424(d) of the
Code, owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any Parent or
Subsidiary on the date of Option grant.

 

ARTICLE
20.             EXECUTION.

 

To
record the adoption of the Plan by the Board, approval by the Company’s
shareholders of Plan effective on November 17, 2003, approval of amendments
adopted by the Board on September 29, 2004 and approval by the Company’s
shareholders of such amendments on November 15, 2004, the Company has caused
its duly authorized officer to execute this document in the name of the
Company.

 

	
   

  	
  OVERLAND
  STORAGE, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

17

 

Overland Storage, Inc.

 

2003 Equity Incentive Plan

 

PLAN HISTORY

 

	
  Date

  	
   

  	
  Action

  
	
  September
  6, 2003

  	
   

  	
  Adopted
  by Board of Directors, subject to shareholder approval.

  
	
   

  	
   

  	
   

  
	
  November
  17, 2003

  	
   

  	
  Approved
  by Shareholders. Effective Date of Plan.

  
	
   

  	
   

  	
   

  
	
  September
  29, 2004

  	
   

  	
  Amendments
  approved by Board of Directors, subject to shareholder approval: (i) increase
  in Common Shares reserved for issuance over the term of the Plan by 1,000,000
  shares; (ii) addition of a requirement that any Common Shares to which
  Restricted Shares or Stock Units pertain shall be counted against the reserve
  as two (2) Common Shares for every one (1) Common Share subject to such
  Awards; and (iii) deletion of the limitation formerly set forth in Section
  3.3 limiting the number of Restricted Shares and Stock Units.

  
	
   

  	
   

  	
   

  
	
  November 15, 2004

  	
   

  	
  Amendments approved by
  shareholders. Effective date of amendments.

  

 

18

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