Document:

PG&E Corporation 2006 Long-Term Incentive Plan, effective as of January 1, 2006

    

      

      

      

      Exhibit
        10.35

      

      PG&E
        Corporation

      

      2006
        Long-Term Incentive Plan

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      

      
        	
              	
                TABLE
                  OF CONTENTS

              	
                 Page

              
	 	 	 
	
                1.

                 

              	
                Establishment,
                  Purpose and Term of Plan

                 

              	
                1

                 

              
	 	
                1.1

              	
                Establishment

              	
                1

              
	 	
                1.2

              	
                Purpose

              	
                1

              
	 	
                1.3

                 

              	
                Term
                  of Plan

                 

              	
                1

                 

              
	
                 

                2.

                 

              	
                 

                Definitions
                  and Construction

                 

              	
                 

                1

                 

              
	 	
                2.1

              	
                Definitions

              	
                1

              
	 	
                2.2

                 

              	
                Construction

                 

              	
                7

                 

              
	
                 

                3.

                 

              	 	
                 

                Administration

                 

              	
                 

                7

                 

              
	 	
                3.1

              	
                Administration
                  by the Committee

              	
                7

              
	 	
                3.2

              	
                Authority
                  of Officers

              	
                7

              
	 	
                3.3

              	
                Administration
                  with Respect to Insiders

              	
                8

              
	 	
                3.4

              	
                Committee
                  Complying with Section 162(m)

              	
                8

              
	 	
                3.5

              	
                Powers
                  of the Committee

              	
                8

              
	 	
                3.6

              	
                Option
                  or SAR Repricing

              	
                9

              
	 	
                3.7

                 

              	
                Indemnification

                 

              	
                9

                 

              
	
                 

                4.

                 

              	 	
                 

                Shares
                  Subject to Plan

                 

              	
                 

                10

                 

              
	 	
                4.1

              	
                Maximum
                  Number of Shares Issuable

              	
                10

              
	 	
                4.2

                 

              	
                Adjustments
                  for Changes in Capital Structure

                 

              	
                10

                 

              
	
                 

                5.

                 

              	 	
                 

                Eligibility
                  and Award Limitations

                 

              	
                 

                11

                 

              
	 	
                5.1

              	
                Persons
                  Eligible for Awards

              	
                11

              
	 	
                5.2

              	
                Participation

              	
                11

              
	 	
                5.3

              	
                Incentive
                  Stock Option Limitations

              	
                11

              
	 	
                5.4

                 

              	
                Award
                  Limits

                 

              	
                12

                 

              
	
                 

                6.

                 

              	 	
                 

                Terms
                  and Conditions of Options

                 

              	
                 

                13

                 

              
	 	
                6.1

              	
                Exercise
                  Price

              	
                13

              
	 	
                6.2

              	
                Exercisability
                  and Term of Options

              	
                13

              
	 	
                6.3

              	
                Payment
                  of Exercise Price

              	
                13

              
	 	
                6.4

              	
                Effect
                  of Termination of Service

              	
                14

              
	 	
                6.5

                 

              	
                Transferability
                  of Options

                 

              	
                14

                 

              
	
                 

                7.

                 

              	 	
                 

                Terms
                  and Conditions of Nonemployee Director Awards

                 

              	
                 

                15

                 

              
	 	
                7.1

              	
                Automatic
                  Grant of Restricted Stock

              	
                15

              
	 	
                7.2

              	
                Annual
                  Election to Receive Nonstatutory Stock Option and Restricted Stock
                  Units

              	
                15

              
	 	
                7.3

              	
                Grant
                  of Nonstatutory Stock Option

              	
                15

              

      

       

      
         

        
          
            
            

          

          
            i

            
              

            

          

          
            
            

          

        

         

      

      
        	 	 	
                TABLE
                  OF CONTENTS

                (continued)

              	
                 

                Page 

              
	 	 	 	 
	 	
                7.4

              	
                Grant
                  of Restricted Stock Unit

              	
                16

              
	 	
                7.5

              	
                Effect
                  of Termination of Service as a Nonemployee Director

              	
                17

              
	 	
                7.6

              	
                Effect
                  of Change in Control on Nonemployee Director Awards

              	
                18

              
	 	
                7.7

                 

              	
                Right
                  to Decline Nonemployee Director Awards

                 

              	
                18

                 

              
	
                 

                8.

                 

              	 	
                 

                Terms
                  and Conditions of Stock Appreciation Rights

                 

              	
                 

                19

                 

              
	 	
                8.1

              	
                Types
                  of SARs Authorized

              	
                19

              
	 	
                8.2

              	
                Exercise
                  Price

              	
                19

              
	 	
                8.3

              	
                Exercisability
                  and Term of SARs

              	
                19

              
	 	
                8.4

              	
                Deemed
                  Exercise of SARs

              	
                19

              
	 	
                8.5

              	
                Effect
                  of Termination of Service

              	
                20

              
	 	
                8.6

                 

              	
                Nontransferability
                  of SARs

                 

              	
                20

                 

              
	
                 

                9.

                 

              	 	
                 

                Terms
                  and Conditions of Restricted Stock Awards

                 

              	
                 

                20

                 

              
	 	
                9.1

              	
                Types
                  of Restricted Stock Awards Authorized

              	
                20

              
	 	
                9.2

              	
                Purchase
                  Price

              	
                20

              
	 	
                9.3

              	
                Purchase
                  Period

              	
                20

              
	 	
                9.4

              	
                Vesting
                  and Restrictions on Transfer

              	
                20

              
	 	
                9.5

              	
                Voting
                  Rights, Dividends and Distributions

              	
                21

              
	 	
                9.6

              	
                Effect
                  of Termination of Service

              	
                21

              
	 	
                9.7

                 

              	
                Nontransferability
                  of Restricted Stock Award Rights

                 

              	
                21

                 

              
	
                 

                10.

                 

              	 	
                 

                Terms
                  and Conditions of Performance Awards

                 

              	
                 

                21

                 

              
	 	
                10.1

              	
                Types
                  of Performance Awards Authorized

              	
                22

              
	 	
                10.2

              	
                Initial
                  Value of Performance Shares and Performance Units

              	
                22

              
	 	
                10.3

              	
                Establishment
                  of Performance Period, Performance Goals and Performance Award
                  Formula

              	
                22

              
	 	
                10.4

              	
                Measurement
                  of Performance Goals

              	
                22

              
	 	
                10.5

              	
                Settlement
                  of Performance Awards

              	
                23

              
	 	
                10.6

              	
                Voting
                  Rights, Dividend Equivalent Rights and Distributions

              	
                24

              
	 	
                10.7

              	
                Effect
                  of Termination of Service

              	
                24

              
	 	
                10.8

                 

              	
                Nontransferability
                  of Performance Awards

                 

              	
                25

                 

              
	
                 

                11.

                 

              	 	
                 

                Terms
                  and Conditions of Restricted Stock Unit Awards

                 

              	
                 

                25

                 

              
	 	
                11.1

              	
                Grant
                  of Restricted Stock Unit Awards

              	
                25

              
	 	
                11.2

              	
                Vesting

              	
                25

              
	 	
                11.3

              	
                Voting
                  Rights, Dividend Equivalent Rights and Distributions

              	
                25

              
	 	
                11.4

              	
                Effect
                  of Termination of Service

              	
                26

              
	 	
                11.5

              	
                Settlement
                  of Restricted Stock Unit Awards

              	
                26

              
	 	
                11.6

                 

              	
                Nontransferability
                  of Restricted Stock Unit Awards

                 

              	
                26

                 

              

      

       

      
         

        
          ii

          
            

          

        

         

      

      
        	 	 	
                TABLE
                  OF CONTENTS 

                (continued)

              	
                 

                Page 

              
	 	 	 	 
	
                12.

                 

              	 	
                Deferred
                  Compensation Awards

                 

              	
                27

                 

              
	 	
                12.1

              	
                Establishment
                  of Deferred Compensation Award Programs

              	
                27

              
	 	
                12.2

                 

              	
                Terms
                  and Conditions of Deferred Compensation Awards

                 

              	
                27

                 

              
	
                 

                13.

              	 	
                 

                Other
                  Stock-Based Awards

              	
                 

                28

              
	
                 

                14.

                 

              	 	
                 

                Change
                  in Control

                 

              	
                 

                28

                 

              
	 	
                14.1

              	
                Effect
                  of Change in Control on Options and SARs

              	
                28

              
	 	
                14.2

              	
                Effect
                  of Change in Control on Restricted Stock and Other Awards

              	
                29

              
	 	
                14.3

                 

              	
                Nonemployee
                  Director Awards

                 

              	
                29

                 

              
	
                 

                15.

              	 	
                 

                Compliance
                  with Securities Law

              	
                 

                29

              
	
                 

                16.

                 

              	 	
                 

                Tax
                  Withholding

                 

              	
                 

                29

                 

              
	 	
                16.1

              	
                Tax
                  Withholding in General

              	
                29

              
	 	
                16.2

                 

              	
                Withholding
                  in Shares

                 

              	
                30

                 

              
	
                 

                17.

              	 	
                 

                Amendment
                  or Termination of Plan

              	
                 

                30

              
	
                 

                18.

                 

              	 	
                 

                Miscellaneous
                  Provisions

                 

              	
                 

                30

                 

              
	 	
                18.1

              	
                Repurchase
                  Rights

              	
                30

              
	 	
                18.2

              	
                Provision
                  of Information

              	
                30

              
	 	
                18.3

              	
                Rights
                  as Employee, Consultant or Director

              	
                30

              
	 	
                18.4

              	
                Rights
                  as a Shareholder

              	
                31

              
	 	
                18.5

              	
                Fractional
                  Shares

              	
                31

              
	 	
                18.6

              	
                Severability

              	
                31

              
	 	
                18.7

              	
                Beneficiary
                  Designation

              	
                31

              
	 	
                18.8

              	
                Unfunded
                  Obligation

              	
                31

              
	 	
                18.9

              	
                Choice
                  of Law

              	
                32

              
	 	 	 	 

      

      

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

      PG&E
        Corporation

      2006
        Long-Term Incentive Plan

      

      

      1.  Establishment,
        Purpose and Term of Plan.

       

      1.1  Establishment.
        The
        PG&E Corporation 2006 Long-Term Incentive Plan (the “Plan”)
        is
        hereby established effective as of January 1, 2006 (the “Effective
        Date”),
        provided it has been approved by the shareholders of the Company.

       

      1.2  Purpose.
        The
        purpose of the Plan is to advance the interests of the Participating Company
        Group and its shareholders by providing an incentive to attract and retain
        the
        best qualified personnel to perform services for the Participating Company
        Group, by motivating such persons to contribute to the growth and profitability
        of the Participating Company Group, by aligning their interests with interests
        of the Company’s shareholders, and by rewarding such persons for their services
        by tying a significant portion of their total compensation package to the
        success of the Company. The Plan seeks to achieve this purpose by providing
        for
        Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
        Awards, Performance Shares, Performance Units, Restricted Stock Units, Deferred
        Compensation Awards and other Stock-Based Awards as described
        below.

       

      1.3  Term
        of Plan.
        The Plan
        shall continue in effect until the earlier of its termination by the Board
        or
        the date on which all of the shares of Stock available for issuance under
        the
        Plan have been issued and all restrictions on such shares under the terms
        of the
        Plan and the agreements evidencing Awards granted under the Plan have lapsed.
        However, all Awards shall be granted, if at all, within ten (10) years from
        the
        Effective Date. Moreover, Incentive Stock Options shall not be granted later
        than ten (10) years from the date of shareholder approval of the
        Plan.

       

      2.  Definitions
        and Construction.

       

      2.1  Definitions.
        Whenever
        used herein, the following terms shall have their respective meanings set
        forth
        below:

       

      (a)  “Affiliate”
        means
        (i) an entity, other than a Parent Corporation, that directly, or
        indirectly through one or more intermediary entities, controls the Company
        or
        (ii) an entity, other than a Subsidiary Corporation, that is controlled by
        the Company directly, or indirectly through one or more intermediary entities.
        For this purpose, the term “control” (including the term “controlled by”) means
        the possession, direct or indirect, of the power to direct or cause the
        direction of the management and policies of the relevant entity, whether
        through
        the ownership of voting securities, by contract or otherwise; or shall have
        such
        other meaning assigned such term for the purposes of registration on
        Form S-8 under the Securities Act.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      (b)  “Award”
        means
        any Option, SAR, Restricted Stock Award, Performance Share, Performance Unit,
        Restricted Stock Unit or Deferred Compensation Award or other Stock-Based
        Award
        granted under the Plan.

       

      (c)  “Award
        Agreement”
        means a
        written agreement between the Company and a Participant setting forth the
        terms,
        conditions and restrictions of the Award granted to the
        Participant.

       

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

       

      (e)  “Change
        in Control”
        means,
        unless otherwise defined by the Participant’s Award Agreement or contract of
        employment or service, the occurrence of any of the following:

       

      (i)  any
        “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange
        Act, but excluding any benefit plan for Employees or any trustee, agent or
        other
        fiduciary for any such plan acting in such person’s capacity as such fiduciary),
        directly or indirectly, becomes the “beneficial owner” (as defined in
        Rule 13d-3 promulgated under the Exchange Act), of stock of the Company
        representing twenty percent (20%) or more of the combined voting power of
        the
        Company’s then outstanding voting stock; or

       

      (ii)  during
        any two consecutive years, individuals who at the beginning of such period
        constitute the Board cease for any reason to constitute at least a majority
        of
        the Board, unless the election, or the nomination for election by the
        shareholders of the Company, of each new Director was approved by a vote
        of at
        least two-thirds (2/3) of the Directors then still in office who were Directors
        at the beginning of the period; or

       

      (iii)  the
        consummation of any consolidation or merger of the Company other than a merger
        or consolidation which would result in the voting stock of the Company
        outstanding immediately prior thereto continuing to represent (either by
        remaining outstanding or by being converted into voting stock of the surviving
        entity or any parent of such surviving entity) at least seventy percent (70%)
        of
        the Combined Voting Power of the Company, such surviving entity or the parent
        of
        such surviving entity outstanding immediately after the merger or consolidation;
        or 

       

      (iv)  the
        approval of the Shareholders of the Company of any (1) sale, lease, exchange
        or
        other transfer (in one or a series of related transactions) of all or
        substantially all of the assets of the Company, or (2) any plan or proposal
        for
        the liquidation or dissolution of the Company. 

       

      For
        purposes of paragraph (iii), the term “Combined
        Voting Power”
        shall
        mean the combined voting power of the Company’s or other relevant entity’s then
        outstanding voting stock.

       

      (f)  “Code”
        means
        the Internal Revenue Code of 1986, as amended, and any applicable regulations
        promulgated thereunder.

       

      (g)  “Committee”
        means
        the Nominating, Compensation, and Governance Committee or other committee
        of the
        Board duly appointed to administer the Plan and having

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      such
        powers as shall be specified by the Board. If no committee of the Board has
        been
        appointed to administer the Plan, the Board shall exercise all of the powers
        of
        the Committee granted herein, and, in any event, the Board may in its discretion
        exercise any or all of such powers.

       

      (h)  “Company”
        means
        PG&E Corporation, a California corporation, or any successor corporation
        thereto.

       

      (i)  “Consultant”
        means a
        person engaged to provide consulting or advisory services (other than as
        an
        Employee or a member of the Board) to a Participating Company, provided that
        the
        identity of such person, the nature of such services or the entity to which
        such
        services are provided would not preclude the Company from offering or selling
        securities to such person pursuant to the Plan in reliance on registration
        on a
        Form S-8 Registration Statement under the Securities Act.

       

      (j)  “Deferred
        Compensation Award”
        means an
        award of Stock Units granted to a Participant pursuant to
        Section 12
        of the
        Plan.

       

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

       

      (l)  “Disability”
        means
        the permanent and total disability of the Participant, within the meaning
        of
        Section 22(e)(3) of the Code.

       

      (m)  “Dividend
        Equivalent”
        means a
        credit, made at the discretion of the Committee or as otherwise provided
        by the
        Plan, to the account of a Participant in an amount equal to the cash dividends
        paid on one share of Stock for each share of Stock represented by an Award
        held
        by such Participant.

       

      (n)  “Employee”
        means
        any person treated as an employee (including an Officer or a member of the
        Board
        who is also treated as an employee) in the records of a Participating Company
        and, with respect to any Incentive Stock Option granted to such person, who
        is
        an employee for purposes of Section 422 of the Code; provided, however,
        that neither service as a member of the Board nor payment of a director’s fee
        shall be sufficient to constitute employment for purposes of the Plan. The
        Company shall determine in good faith and in the exercise of its discretion
        whether an individual has become or has ceased to be an Employee and the
        effective date of such individual’s employment or termination of employment, as
        the case may be. For purposes of an individual’s rights, if any, under the Plan
        as of the time of the Company’s determination, all such determinations by the
        Company shall be final, binding and conclusive, notwithstanding that the
        Company
        or any court of law or governmental agency subsequently makes a contrary
        determination.

       

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

       

      (p)  “Fair
        Market Value”
        means,
        as of any date, the value of a share of Stock or other property as determined
        by
        the Committee, in its discretion, or by the Company, in its discretion, if
        such
        determination is expressly allocated to the Company herein, subject to the
        following:

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      (i)  Except
        as
        otherwise determined by the Committee, if, on such date, the Stock is listed
        on
        a national or regional securities exchange or market system, the Fair Market
        Value of a share of Stock shall be the closing price of a share of Stock
        as
        quoted on the New York Stock Exchange or such other national or regional
        securities exchange or market system constituting the primary market for
        the
        Stock, as reported in The
        Wall Street Journal
        or such
        other source as the Company deems reliable. If the relevant date does not
        fall
        on a day on which the Stock has traded on such securities exchange or market
        system, the date on which the Fair Market Value shall be established shall
        be
        the last day on which the Stock was so traded prior to the relevant date,
        or
        such other appropriate day as shall be determined by the Committee, in its
        discretion.

       

      (ii)  Notwithstanding
        the foregoing, the Committee may, in its discretion, determine the Fair Market
        Value on the basis of the opening, closing, high, low or average sale price
        of a
        share of Stock or the actual sale price of a share of Stock received by a
        Participant, on such date, the preceding trading day, the next succeeding
        trading day or an average determined over a period of trading days. The
        Committee may vary its method of determination of the Fair Market Value as
        provided in this Section for different purposes under the Plan.

       

      (iii)  If,
        on
        such date, the Stock is not listed on a national or regional securities exchange
        or market system, the Fair Market Value of a share of Stock shall be as
        determined by the Committee in good faith without regard to any restriction
        other than a restriction which, by its terms, will never lapse.

       

      (q)  “Incentive
        Stock Option”
        means an
        Option intended to be (as set forth in the Award Agreement) and which qualifies
        as an incentive stock option within the meaning of Section 422(b) of the
        Code.

       

      (r)  “Insider”
        means an
        Officer, a Director or any other person whose transactions in Stock are subject
        to Section 16 of the Exchange Act.

       

      (s)  “Mandatory
        Retirement”
        means
        retirement as a Director at age 70 or at such other age as may be specified
        in
        the retirement policy for the Board in effect at the time of a Nonemployee
        Director’s termination of Service as a Director.

       

      (t)  “Net-Exercise”
        means a
        procedure by which the Participant will be issued a number of shares of Stock
        determined in accordance with the following formula:

       

      X
        =
        Y(A-B)/A, where 

      X
        = the
        number of shares of Stock to be issued to the Participant upon exercise of
        the
        Option;

      Y
        = the
        total number of shares with respect to which the Participant has elected
        to
        exercise the Option;

      A
        = the
        Fair Market Value of one (1) share of Stock;

      B
        = the
        exercise price per share (as defined in the Participant’s Award
        Agreement).

      (u)  “Nonemployee
        Director”
        means a
        Director who is not an Employee.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      (v)  “Nonemployee
        Director Award”
        means an
        Award granted to a Nonemployee Director pursuant to Section 7
        of the
        Plan. 

       

      (w)  “Nonstatutory
        Stock Option”
        means an
        Option not intended to be (as set forth in the Award Agreement) an incentive
        stock option within the meaning of Section 422(b) of the Code.

       

      (x)  “Officer”
        means
        any person designated by the Board as an officer of the Company.

       

      (y)  “Option”
        means
        the right to purchase Stock at a stated price for a specified period of time
        granted to a Participant pursuant to Section 6
        or
        Section 7
        of the
        Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
        Stock
        Option.

       

      (z)  “Option
        Expiration Date”
        means
        the date of expiration of the Option’s term as set forth in the Award
        Agreement.

       

      (aa)  “Parent
        Corporation”
        means
        any present or future “parent corporation” of the Company, as defined in
        Section 424(e) of the Code.

       

      (bb)  “Participant”
        means
        any eligible person who has been granted one or more Awards.

       

      (cc)  “Participating
        Company”
        means
        the Company or any Parent Corporation, Subsidiary Corporation or
        Affiliate.

       

      (dd)  “Participating
        Company Group”
        means,
        at any point in time, all entities collectively which are then Participating
        Companies.

       

      (ee)  “Performance
        Award”
        means an
        Award of Performance Shares or Performance Units.

       

      (ff)  “Performance
        Award Formula”
        means,
        for any Performance Award, a formula or table established by the Committee
        pursuant to Section 10.3
        of the
        Plan which provides the basis for computing the value of a Performance Award
        at
        one or more threshold levels of attainment of the applicable Performance
        Goal(s)
        measured as of the end of the applicable Performance Period.

       

      (gg)  “Performance
        Goal”
        means a
        performance goal established by the Committee pursuant to
        Section 10.3
        of the
        Plan.

       

      (hh)  “Performance
        Period”
        means a
        period established by the Committee pursuant to Section 10.3
        of the
        Plan at the end of which one or more Performance Goals are to be
        measured.

       

      (ii)  “Performance
        Share”
        means a
        bookkeeping entry representing a right granted to a Participant pursuant
        to
        Section 10
        of the
        Plan to receive a payment equal to the value of a Performance Share, as
        determined by the Committee, based on performance.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      (jj)  “Performance
        Unit”
        means a
        bookkeeping entry representing a right granted to a Participant pursuant
        to
        Section 10
        of the
        Plan to receive a payment equal to the value of a Performance Unit, as
        determined by the Committee, based upon performance.

       

      (kk)  “Restricted
        Stock Award”
        means an
        Award of Restricted Stock.

       

      (ll)  “Restricted
        Stock Unit”
        or
“Stock
        Unit”
        means a
        bookkeeping entry representing a right granted to a Participant pursuant
        to
        Section 11
        or
        Section 12
        of the
        Plan, respectively, to receive a share of Stock on a date determined in
        accordance with the provisions of Section 11
        or
        Section 12,
        as
        applicable, and the Participant’s Award Agreement.

       

      (mm)  “Restriction
        Period”
        means
        the period established in accordance with Section 9.4
        of the
        Plan during which shares subject to a Restricted Stock Award are subject
        to
        Vesting Conditions.

       

      (nn)  “Retirement”
        means
        termination as an Employee of a Participating Company at age 55 or older,
        provided that the Participant was an Employee for at least five consecutive
        years prior to the date of such termination. 

       

      (oo)  “Rule
        16b-3”
        means
        Rule 16b-3 under the Exchange Act, as amended from time to time, or any
        successor rule or regulation.

       

      (pp)  “SAR”
        or
“Stock
        Appreciation Right”
        means a
        bookkeeping entry representing, for each share of Stock subject to such SAR,
        a
        right granted to a Participant pursuant to Section 8
        of the
        Plan to receive payment in any combination of shares of Stock or cash of
        an
        amount equal to the excess, if any, of the Fair Market Value of a share of
        Stock
        on the date of exercise of the SAR over the exercise price.

       

      (qq)  “Section 162(m)”
        means
        Section 162(m) of the Code.

       

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

       

      (ss)  “Service”
        means a
        Participant’s employment or service with the Participating Company Group,
        whether in the capacity of an Employee, a Director or a Consultant. A
        Participant’s Service shall not be deemed to have terminated merely because of a
        change in the capacity in which the Participant renders such Service or a
        change
        in the Participating Company for which the Participant renders such Service,
        provided that there is no interruption or termination of the Participant’s
        Service. Furthermore, a Participant’s Service shall not be deemed to have
        terminated if the Participant takes any military leave, sick leave, or other
        bona fide leave of absence approved by the Company. However, if any such
        leave
        taken by a Participant exceeds ninety (90) days, then on the one hundred
        eighty-first (181st) day following the commencement of such leave any Incentive
        Stock Option held by the Participant shall cease to be treated as an Incentive
        Stock Option and instead shall be treated thereafter as a Nonstatutory Stock
        Option, unless the Participant’s right to return to Service with the
        Participating Company Group is guaranteed by statute or contract.
        Notwithstanding the foregoing, unless otherwise designated by the Company
        or
        required by law, a leave of absence shall not be treated as Service for purposes
        of determining vesting under the Participant’s Award Agreement. A Participant’s
        Service shall be deemed to have terminated either upon an actual

       

      
        
          
          

        

        
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      termination
        of Service or upon the entity for which the Participant performs Service
        ceasing
        to be a Participating Company. Subject to the foregoing, the Company, in
        its
        discretion, shall determine whether the Participant’s Service has terminated and
        the effective date of such termination.

       

      (tt)  “Stock”
        means
        the common stock of the Company, as adjusted from time to time in accordance
        with Section 4.2
        of the
        Plan.

       

      (uu)  “Stock-Based
        Awards”
        means
        any award that is valued in whole or in part by reference to, or is otherwise
        based on, the Stock, including dividends on the Stock, but not limited to
        those
        Awards described in Sections 6 through 12 of the Plan.

       

      (vv)  “Subsidiary
        Corporation”
        means
        any present or future “subsidiary corporation” of the Company, as defined in
        Section 424(f) of the Code.

       

      (ww)  “Ten
        Percent Owner”
        means a
        Participant who, at the time an Option is granted to the Participant, owns
        stock
        possessing more than ten percent (10%) of the total combined voting power
        of all
        classes of stock of a Participating Company (other than an Affiliate) within
        the
        meaning of Section 422(b)(6) of the Code.

       

      (xx)  “Vesting
        Conditions”
        mean
        those conditions established in accordance with Section 9.4
        or
        Section 11.2
        of the
        Plan prior to the satisfaction of which shares subject to a Restricted Stock
        Award or Restricted Stock Unit Award, respectively, remain subject to forfeiture
        or a repurchase option in favor of the Company upon the Participant’s
        termination of Service.

       

      2.2  Construction.
        Captions
        and titles contained herein are for convenience only and shall not affect
        the
        meaning or interpretation of any provision of the Plan. Except when otherwise
        indicated by the context, the singular shall include the plural and the plural
        shall include the singular. Use of the term “or” is not intended to be
        exclusive, unless the context clearly requires otherwise.

       

      3.  Administration.

       

      3.1  Administration
        by the Committee.
        The Plan
        shall be administered by the Committee. All questions of interpretation of
        the
        Plan or of any Award shall be determined by the Committee, and such
        determinations shall be final and binding upon all persons having an interest
        in
        the Plan or such Award.

       

      3.2  Authority
        of Officers.
        Any
        Officer shall have the authority to act on behalf of the Company with respect
        to
        any matter, right, obligation, determination or election which is the
        responsibility of or which is allocated to the Company herein, provided the
        Officer has apparent authority with respect to such matter, right, obligation,
        determination or election. In addition, to the extent specified in a resolution
        adopted by the Board, the Chief Executive Officer of the Company shall have
        the
        authority to grant Awards to an Employee who is not an Insider and who is
        receiving a salary below the level which requires approval by the Committee;
        provided that the terms of such Awards conform to guidelines established
        by the
        Committee and provided further that at the time of making such Awards the
        Chief
        Executive Officer also is a Director.

       

      
        
          
          

        

        
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      3.3  Administration
        with Respect to Insiders.
        With
        respect to participation by Insiders in the Plan, at any time that any class
        of
        equity security of the Company is registered pursuant to Section 12 of the
        Exchange Act, the Plan shall be administered in compliance with the
        requirements, if any, of Rule 16b-3.

       

      3.4  Committee
        Complying with Section 162(m).
        While
        the Company is a “publicly held corporation” within the meaning of
        Section 162(m), the Board may establish a Committee of “outside directors”
within the meaning of Section 162(m) to approve the grant of any Award
        which might reasonably be anticipated to result in the payment of employee
        remuneration that would otherwise exceed the limit on employee remuneration
        deductible for income tax purposes pursuant to Section 162(m).

       

      3.5  Powers
        of the Committee.
        In
        addition to any other powers set forth in the Plan and subject to the provisions
        of the Plan, the Committee shall have the full and final power and authority,
        in
        its discretion:

       

      (a)  to
        determine the persons to whom, and the time or times at which, Awards shall
        be
        granted and the number of shares of Stock or units to be subject to each
        Award
        based on the recommendation of the Chief Executive Officer of the Company
        (except that Awards to the Chief Executive Officer shall be based on the
        recommendation of the independent members of the Board in compliance with
        applicable stock exchange rules and Awards to Nonemployee Directors shall
        be
        granted automatically pursuant to Section 7 of the Plan);

       

      (b)  to
        determine the type of Award granted and to designate Options as Incentive
        Stock
        Options or Nonstatutory Stock Options;

       

      (c)  to
        determine the Fair Market Value of shares of Stock or other
        property;

       

      (d)  to
        determine the terms, conditions and restrictions applicable to each Award
        (which
        need not be identical) and any shares acquired pursuant thereto, including,
        without limitation, (i) the exercise or purchase price of shares purchased
        pursuant to any Award, (ii) the method of payment for shares purchased
        pursuant to any Award, (iii) the method for satisfaction of any tax
        withholding obligation arising in connection with Award, including by the
        withholding or delivery of shares of Stock, (iv) the timing, terms and
        conditions of the exercisability or vesting of any Award or any shares acquired
        pursuant thereto, (v) the Performance Award Formula and Performance Goals
        applicable to any Award and the extent to which such Performance Goals have
        been
        attained, (vi) the time of the expiration of any Award, (vii) the
        effect of the Participant’s termination of Service on any of the foregoing, and
        (viii) all other terms, conditions and restrictions applicable to any Award
        or shares acquired pursuant thereto not inconsistent with the terms of the
        Plan;

       

      (e)  to
        determine whether an Award will be settled in shares of Stock, cash, or in
        any
        combination thereof;

       

      (f)  to
        approve one or more forms of Award Agreement;

       

      (g)  to
        amend,
        modify, extend, cancel or renew any Award or to waive any restrictions or
        conditions applicable to any Award or any shares acquired pursuant
        thereto;

       

      
        
          
          

        

        
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      (h)  to
        accelerate, continue, extend or defer the exercisability or vesting of any
        Award
        or any shares acquired pursuant thereto, including with respect to the period
        following a Participant’s termination of Service;

       

      (i)  without
        the consent of the affected Participant and notwithstanding the provisions
        of
        any Award Agreement to the contrary, to unilaterally substitute at any time
        a
        Stock Appreciation Right providing for settlement solely in shares of Stock
        in
        place of any outstanding Option, provided that such Stock Appreciation Right
        covers the same number of shares of Stock and provides for the same exercise
        price (subject in each case to adjustment in accordance with
        Section 4.2)
        as the
        replaced Option and otherwise provides substantially equivalent terms and
        conditions as the replaced Option, as determined by the Committee;

       

      (j)  to
        prescribe, amend or rescind rules, guidelines and policies relating to the
        Plan,
        or to adopt sub-plans or supplements to, or alternative versions of, the
        Plan,
        including, without limitation, as the Committee deems necessary or desirable
        to
        comply with the laws or regulations of or to accommodate the tax policy,
        accounting principles or custom of, foreign jurisdictions whose citizens
        may be
        granted Awards; 

       

      (k)  to
        correct any defect, supply any omission or reconcile any inconsistency in
        the
        Plan or any Award Agreement and to make all other determinations and take
        such
        other actions with respect to the Plan or any Award as the Committee may
        deem
        advisable to the extent not inconsistent with the provisions of the Plan
        or
        applicable law; and

       

      (l)  to
        delegate to the Chief Executive Officer or the Senior Vice President of Human
        Resources the authority with respect to ministerial matters regarding the
        Plan
        and Awards made under the Plan.

       

      3.6  Option
        or SAR Repricing. Without
        the affirmative vote of holders of a majority of the shares of Stock cast
        in
        person or by proxy at a meeting of the shareholders of the Company at which
        a
        quorum representing a majority of all outstanding shares of Stock is present
        or
        represented by proxy, the Board shall not approve a program providing for
        either
        (a) the cancellation of outstanding Options or SARs and the grant in
        substitution therefore of new Options or SARs having a lower exercise price
        or
        (b) the amendment of outstanding Options or SARs to reduce the exercise
        price thereof. This paragraph shall not be construed to apply to “issuing or
        assuming a stock option in a transaction to which section 424(a) applies,”
within the meaning of Section 424 of the Code.

       

      3.7  Indemnification.
        In
        addition to such other rights of indemnification as they may have as members
        of
        the Board or the Committee or as officers or employees of the Participating
        Company Group, members of the Board or the Committee and any officers or
        employees of the Participating Company Group to whom authority to act for
        the
        Board, the Committee or the Company is delegated shall be indemnified by
        the
        Company against all reasonable expenses, including attorneys’ fees, actually and
        necessarily incurred in connection with the defense of any action, suit or
        proceeding, or in connection with any appeal therein, to which they or any
        of
        them may be a party by reason of any action taken or failure to act under
        or in
        connection with the Plan, or any right granted hereunder, and against all
        amounts paid by them in settlement thereof (provided such settlement is approved
        by independent legal counsel selected by the Company) or

       

      
        
          
          

        

        
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      paid
        by
        them in satisfaction of a judgment in any such action, suit or proceeding,
        except in relation to matters as to which it shall be adjudged in such action,
        suit or proceeding that such person is liable for gross negligence, bad faith
        or
        intentional misconduct in duties; provided, however, that within sixty (60)
        days
        after the institution of such action, suit or proceeding, such person shall
        offer to the Company, in writing, the opportunity at its own expense to handle
        and defend the same.

       

      4.  Shares
        Subject to Plan.

       

      4.1  Maximum
        Number of Shares Issuable.
        Subject
        to adjustment as provided in Section 4.2, the maximum aggregate number of
        shares of Stock that may be issued under the Plan shall be twelve million
        (12,000,000) and shall consist of authorized but unissued or reacquired shares
        of Stock or any combination thereof. If an outstanding Award for any reason
        expires or is terminated or canceled without having been exercised or settled
        in
        full, or if shares of Stock acquired pursuant to an Award subject to forfeiture
        or repurchase are forfeited or repurchased by the Company, the shares of
        Stock
        allocable to the terminated portion of such Award or such forfeited or
        repurchased shares of Stock shall again be available for issuance under the
        Plan. Shares of Stock shall not be deemed to have been issued pursuant to
        the
        Plan (a) with respect to any portion of an Award that is settled in cash or
        (b) to the extent such shares are withheld or reacquired by the Company in
        satisfaction of tax withholding obligations pursuant to
        Section 16.2.
        Upon
        payment in shares of Stock pursuant to the exercise of an SAR, the number
        of
        shares available for issuance under the Plan shall be reduced only by the
        number
        of shares actually issued in such payment. If the exercise price of an Option
        is
        paid by tender to the Company, or attestation to the ownership, of shares
        of
        Stock owned by the Participant, or by means of a Net-Exercise, the number
        of
        shares available for issuance under the Plan shall be reduced only by the
        net
        number of shares for which the Option is exercised.

       

      4.2  Adjustments
        for Changes in Capital Structure.
        Subject
        to any required action by the shareholders of the Company, in the event of
        any
        change in the Stock effected without receipt of consideration by the Company,
        whether through merger, consolidation, reorganization, reincorporation,
        recapitalization, reclassification, stock dividend, stock split, reverse
        stock
        split, split-up, split-off, spin-off, combination of shares, exchange of
        shares,
        or similar change in the capital structure of the Company, or in the event
        of
        payment of a dividend or distribution to the shareholders of the Company
        in a
        form other than Stock (excepting normal cash dividends) that has a material
        effect on the Fair Market Value of shares of Stock, appropriate adjustments
        shall be made in the number and kind of shares subject to the Plan and to
        any
        outstanding Awards, in the Award limits set forth in Section 5.4,
        in the
        Nonemployee Director Awards to be granted automatically pursuant to Section
        7,
and
        in
        the exercise or purchase price per share under any outstanding Award in order
        to
        prevent dilution or enlargement of Participants’ rights under the Plan. For
        purposes of the foregoing, conversion of any convertible securities of the
        Company shall not be treated as “effected without receipt of consideration by
        the Company.” Any fractional share resulting from an adjustment pursuant to this
        Section 4.2
        shall be
        rounded down to the nearest whole number. The Committee in its sole discretion,
        may also make such adjustments in the terms of any Award to reflect, or related
        to, such changes in the capital structure of the Company or distributions
        as it
        deems appropriate, including modification of Performance Goals, Performance
        Award Formulas and Performance Periods. The adjustments determined by the
        Committee pursuant to this Section 4.2
        shall be
        final, binding and conclusive.

       

      
        
          
          

        

        
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      5.  Eligibility
        and Award Limitations.

       

      5.1  Persons
        Eligible for Awards.
        Awards
        may be granted only to Employees, Consultants and Directors. For purposes
        of the
        foregoing sentence, “Employees,” “Consultants”and “Directors” shall include
        prospective Employees, prospective Consultants and prospective Directors
        to whom
        Awards are granted in connection with written offers of an employment or
        other
        service relationship with the Participating Company Group; provided, however,
        that no Stock subject to any such Award shall vest, become exercisable or
        be
        issued prior to the date on which such person commences Service. A Nonemployee
        Director Award may be granted only to a person who, at the time of grant,
        is a
        Nonemployee Director.

       

      5.2  Participation.
        Awards
other
        than Nonemployee Director Awards are
        granted solely at the discretion of the Committee. Eligible persons may be
        granted more than one Award. However,
        excepting Nonemployee Director Awards,
        eligibility in accordance with this Section shall not entitle any person
        to be
        granted an Award, or, having been granted an Award, to be granted an additional
        Award.

       

      5.3  Incentive
        Stock Option Limitations.

       

      (a)  Persons
        Eligible.
        An
        Incentive Stock Option may be granted only to a person who, on the effective
        date of grant, is an Employee of the Company, a Parent Corporation or a
        Subsidiary Corporation (each being an “ISO-Qualifying
        Corporation”).
        Any
        person who is not an Employee of an ISO-Qualifying Corporation on the effective
        date of the grant of an Option to such person may be granted only a Nonstatutory
        Stock Option. An Incentive Stock Option granted to a prospective Employee
        upon
        the condition that such person become an Employee of an ISO-Qualifying
        Corporation shall be deemed granted effective on the date such person commences
        Service with an ISO-Qualifying Corporation, with an exercise price determined
        as
        of such date in accordance with Section 6.1.

       

      (b)  Fair
        Market Value Limitation.
        To the
        extent that options designated as Incentive Stock Options (granted under
        all
        stock option plans of the Participating Company Group, including the Plan)
        become exercisable by a Participant for the first time during any calendar
        year
        for stock having a Fair Market Value greater than One Hundred Thousand Dollars
        ($100,000), the portion of such options which exceeds such amount shall be
        treated as Nonstatutory Stock Options. For purposes of this Section, options
        designated as Incentive Stock Options shall be taken into account in the
        order
        in which they were granted, and the Fair Market Value of stock shall be
        determined as of the time the option with respect to such stock is granted.
        If
        the Code is amended to provide for a limitation different from that set forth
        in
        this Section, such different limitation shall be deemed incorporated herein
        effective as of the date and with respect to such Options as required or
        permitted by such amendment to the Code. If an Option is treated as an Incentive
        Stock Option in part and as a Nonstatutory Stock Option in part by reason
        of the
        limitation set forth in this Section, the Participant may designate which
        portion of such Option the Participant is exercising. In the absence of such
        designation, the Participant shall be deemed to have exercised the Incentive
        Stock Option portion of the Option first. Upon exercise, shares issued pursuant
        to each such portion shall be separately identified.

       

      5.4  Award
        Limits.

       

      
        
          
          

        

        
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      (a)  Maximum
        Number of Shares Issuable Pursuant to Incentive Stock
        Options.
        Subject
        to adjustment as provided in Section 4.2,
        the
        maximum aggregate number of shares of Stock that may be issued under the
        Plan
        pursuant to the exercise of Incentive Stock Options shall not exceed twelve
        million (12,000,000) shares. The maximum aggregate number of shares of Stock
        that may be issued under the Plan pursuant to all Awards other than Incentive
        Stock Options shall be the number of shares determined in accordance with
        Section 4.1,
        subject
        to adjustment as provided in Section 4.2
        and
        further subject to the limitation set forth in Section 5.4(b)
        below.

       

      (b)  Aggregate
        Limit on Full Value Awards.
        Subject
        to adjustment as provided in Section 4.2,
        in no
        event shall more than twelve million (12,000,000) shares in the aggregate
        be
        issued under the Plan pursuant to the exercise or settlement of Restricted
        Stock
        Awards, Restricted Stock Unit Awards and Performance Awards (“Full Value
        Awards”). Except with respect to a maximum of five percent (5%) of the shares of
        Stock authorized in this Section 5.4(b), any Full Value Awards which vest
        on the basis of the Participant’s continued Service shall not provide for
        vesting which is any more rapid than annual pro rata vesting over a three
        (3)
        year period and
        any
        Full Value Awards which vest upon the attainment of Performance Goals shall
        provide for a Performance Period of at least twelve (12) months.

       

      (c)  Section
        162(m) Award Limits.
        The
        following limits shall apply to the grant of any Award if, at the time of
        grant,
        the Company is a “publicly held corporation” within the meaning of
        Section 162(m).

       

      (i)  Options
        and SARs.
        Subject
        to adjustment as provided in Section 4.2,
        no
        Employee shall be granted within any fiscal year of the Company one or more
        Options or Freestanding SARs which in the aggregate are for more than 400,000
        shares of Stock reserved for issuance under the Plan.

       

      (ii)  Restricted
        Stock and Restricted Stock Unit Awards.
        Subject
        to adjustment as provided in Section 4.2,
        no
        Employee shall be granted within any fiscal year of the Company one or more
        Restricted Stock Awards or Restricted Stock Unit Awards, subject to Vesting
        Conditions based on the attainment of Performance Goals, for more than 400,000
        shares of Stock reserved for issuance under the Plan.

       

      (iii)  Performance
        Awards.
        Subject
        to adjustment as provided in Section 4.2,
        no
        Employee shall be granted (1) Performance Shares which could result in such
        Employee receiving more than 400,000 shares of Stock reserved for issuance
        under
        the Plan for each full fiscal year of the Company contained in the Performance
        Period for such Award, or (2) Performance Units which could result in such
        Employee receiving more than two million dollars ($2 million) for each full
        fiscal year of the Company contained in the Performance Period for such Award.
        No Participant may be granted more than one Performance Award for the same
        Performance Period.

       

      6.  Terms
        and Conditions of Options.

       

      Options
        shall be evidenced by Award Agreements specifying the number of shares of
        Stock
        covered thereby, in such form as the Committee shall from time to time
        establish. 

       

      
        
          
          

        

        
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      No
        Option
        or purported Option shall be a valid and binding obligation of the Company
        unless evidenced by a fully executed Award Agreement. Award Agreements
        evidencing Options may incorporate all or any of the terms of the Plan by
        reference and,
        except
        as otherwise set forth in Section 7
        with
        respect to Nonemployee Director Options,
        shall
        comply with and be subject to the following terms and conditions:

       

      6.1  Exercise
        Price.
        The
        exercise price for each Option shall be established in the discretion of
        the
        Committee; provided, however, that (a) the exercise price per share shall
        be not
        less than the Fair Market Value of a share of Stock on the effective date
        of
        grant of the Option and (b) no Incentive Stock Option granted to a Ten
        Percent Owner shall have an exercise price per share less than one hundred
        ten
        percent (110%) of the Fair Market Value of a share of Stock on the effective
        date of grant of the Option. Notwithstanding the foregoing, an Option (whether
        an Incentive Stock Option or a Nonstatutory Stock Option) may be granted
        with an
        exercise price lower than the minimum exercise price set forth above if such
        Option is granted pursuant to an assumption or substitution for another option
        in a manner qualifying under the provisions of Section 424(a) of the
        Code.

       

      6.2  Exercisability
        and Term of Options.
        Options
        shall be exercisable at such time or times, or upon such event or events,
        and
        subject to such terms, conditions, performance criteria and restrictions
        as
        shall be determined by the Committee and set forth in the Award Agreement
        evidencing such Option; provided, however, that (a) no Option shall be
        exercisable after the expiration of ten (10) years after the effective date
        of
        grant of such Option, (b) no Incentive Stock Option granted to a Ten
        Percent Owner shall be exercisable after the expiration of five (5) years
        after
        the effective date of grant of such Option, and (c) no Option granted to a
        prospective Employee, prospective Consultant or prospective Director may
        become
        exercisable prior to the date on which such person commences Service. Subject
        to
        the foregoing, unless otherwise specified by the Committee in the grant of
        an
        Option, any Option granted hereunder shall terminate ten (10) years after
        the
        effective date of grant of the Option, unless earlier terminated in accordance
        with its provisions.

       

      6.3  Payment
        of Exercise Price.

       

      (a)  Forms
        of Consideration Authorized.
        Except
        as otherwise provided below, payment of the exercise price for the number
        of
        shares of Stock being purchased pursuant to any Option shall be made (i) in
        cash, by check or in cash equivalent, (ii) by tender to the Company, or
        attestation to the ownership, of shares of Stock owned by the Participant
        having
        a Fair Market Value not less than the exercise price, (iii) by delivery of
        a properly executed notice of exercise together with irrevocable instructions
        to
        a broker providing for the assignment to the Company of the proceeds of a
        sale
        or loan with respect to some or all of the shares being acquired upon the
        exercise of the Option (including, without limitation, through an exercise
        complying with the provisions of Regulation T as promulgated from time to
        time by the Board of Governors of the Federal Reserve System) (a “Cashless
        Exercise”),
        (iv)
        by delivery of a properly executed notice of exercise electing a Net-Exercise,
        (v) by such other consideration as may be approved by the Committee from
        time to time to the extent permitted by applicable law, or (vi) by any
        combination thereof. The Committee may at any time or from time to time grant
        Options which do not permit all of the foregoing forms of consideration to
        be
        used in payment of the exercise price or which otherwise restrict one or
        more
        forms of consideration.

       

      
        
          
          

        

        
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      (b)  Limitations
        on Forms of Consideration.

       

      (i)  Tender
        of Stock.
        Notwithstanding the foregoing, an Option may not be exercised by tender to
        the
        Company, or attestation to the ownership, of shares of Stock to the extent
        such
        tender or attestation would constitute a violation of the provisions of any
        law,
        regulation or agreement restricting the redemption of the Company’s stock.

       

      (ii)  Cashless
        Exercise.
        The
        Company reserves, at any and all times, the right, in the Company’s sole and
        absolute discretion, to establish, decline to approve or terminate any program
        or procedures for the exercise of Options by means of a Cashless Exercise,
        including with respect to one or more Participants specified by the Company
        notwithstanding that such program or procedures may be available to other
        Participants.

       

      6.4  Effect
        of Termination of Service.

       

      (a)  Option
        Exercisability.
        Subject
        to earlier termination of the Option as otherwise provided herein and unless
        otherwise provided by the Committee, an Option shall be exercisable after
        a
        Participant’s termination of Service only during the applicable time periods
        provided in the Award Agreement.

       

      (b)  Extension
        if Exercise Prevented by Law.
        Notwithstanding the foregoing, unless the Committee provides otherwise in
        the
        Award Agreement, if the exercise of an Option within the applicable time
        periods
        is prevented by the provisions of Section 14.1
        below,
        the Option shall remain exercisable until three (3) months (or such longer
        period of time as determined by the Committee, in its discretion) after the
        date
        the Participant is notified by the Company that the Option is exercisable,
        but
        in any event no later than the Option Expiration Date.

       

      (c)  Extension
        if Participant Subject to Section 16(b).
        Notwithstanding the foregoing, if a sale within the applicable time periods
        of
        shares acquired upon the exercise of the Option would subject the Participant
        to
        suit under Section 16(b) of the Exchange Act, the Option shall remain
        exercisable until the earliest to occur of (i) the tenth (10th) day
        following the date on which a sale of such shares by the Participant would
        no
        longer be subject to such suit, (ii) the one hundred and ninetieth (190th)
        day after the Participant’s termination of Service, or (iii) the Option
        Expiration Date.

       

      6.5  Transferability
        of Options.
        During
        the lifetime of the Participant, an Option shall be exercisable only by the
        Participant or the Participant’s guardian or legal representative. Prior to the
        issuance of shares of Stock upon the exercise of an Option, the Option shall
        not
        be subject in any manner to anticipation, alienation, sale, exchange, transfer,
        assignment, pledge, encumbrance, or garnishment by creditors of the Participant
        or the Participant’s beneficiary, except transfer by will or by the laws of
        descent and distribution. Notwithstanding the foregoing, to the extent permitted
        by the Committee, in its discretion, and set forth in the Award Agreement
        evidencing such Option, a Nonstatutory Stock Option shall be assignable or
        transferable subject to the applicable limitations, if any, described in
        the
        General Instructions to Form S-8 Registration Statement under the
        Securities Act. 

       

      
        
          
          

        

        
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      7.  Terms
        and Conditions of Nonemployee Director Awards.

       

      Nonemployee
        Director Awards shall be evidenced by Award Agreements in such form as the
        Board
        shall from time to time establish. Such Award Agreements may incorporate
        all or
        any of the terms of the Plan by reference, shall be automatic and
        non-discretionary and shall comply with and be subject to the following terms
        and conditions:

       

      7.1  Automatic
        Grant of Restricted Stock.

       

      (a)  Timing
        and Amount of Grant.
        On the
        first business day of each calendar year beginning on January 1, 2006, and
        continuing for the term of the Plan, each person who is a Nonemployee Director
        on such date shall be granted a Restricted Stock Award to purchase a number
        of
        shares of Stock determined by dividing thirty thousand dollars ($30,000)
        by the
        Fair Market Value of the Stock on the first business day of the applicable
        calendar year, and rounding down to the nearest whole number. 

       

      (b)  Vesting
        The
        shares subject to the Restricted Stock Award granted pursuant to
        Section 7.1(a) shall vest in equal
        annual installments of twenty percent (20%) on each anniversary of the date
        of
        grant, with one hundred percent (100%) of the shares vested on the fifth
        anniversary of the date of grant. 

       

      7.2  Annual
        Election to Receive Nonstatutory Stock Option and Restricted Stock Units.
        On
        a date
        no later than December 31 of each calendar year during the term of the
        Plan, each person who is then a Nonemployee Director shall deliver to the
        Board
        a written election to receive either Nonstatutory Stock Options or Restricted
        Stock Units, or both, with an aggregate value of $30,000, on the first business
        day of the following calendar year, provided the person continues to be a
        Nonemployee Director on the date of grant. A Nonemployee Director may allocate
        between Nonstatutory Stock Options and Restricted Stock Units in minimum
        increments with a value equal to $5,000, as determined in accordance with
        Sections 7.3 and 7.4. All awards of Nonstatutory Stock Options and Restricted
        Stock Units made to Nonemployee Directors shall comply with the provisions
        of
        Sections 7.3 and 7.4, respectively. A Nonemployee Director who fails to make
        a
        timely election or who first becomes a Nonemployee Director after
        December 31 shall be awarded Nonstatutory Stock Options and Restricted
        Stock Units each with a value of $15,000, as determined in accordance with
        Sections 7.3 and 7.4, provided the Nonemployee Director continues to be a
        Nonemployee Director on the first business day of the following calendar
        year.

       

      7.3  Grant
        of Nonstatutory Stock Option.

       

      (a)  Timing
        and Amount of Grant.
        Unless
        a Nonemployee Director made an election to decline the award of a Nonstatutory
        Stock Option in accordance with Section 7.2 above, on the first business
        day of
        each calendar year beginning on January 1, 2006, and continuing for the term
        of
        the Plan, each person who is a Nonemployee Director on such date shall receive
        a
        grant of a Nonstatutory Stock Option with an aggregate value equal to $5,000,
        $10,000, $15,000, $20,000, $25,000 or $30,000, as previously elected by the
        Nonemployee Director (or $15,000 in the case of a Nonemployee Director who
        failed to make a timely election or who became a Nonemployee Director after
        December 31) (the “Elected
        Option Value”).
        The

       

      
        
          
          

        

        
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      number
        of
        shares subject to the Nonstatutory Stock Option shall be determined by dividing
        the Elected Option Value by the value of a Nonstatutory Stock Option to purchase
        a single share of Stock as of the first business day of the applicable calendar
        year. The per share option value shall be calculated in accordance with the
        Black-Scholes stock option valuation method using the average preceding November
        closing price of Stock and reducing the per option value by twenty percent
        (20%). The resulting number of shares subject to the Nonstatutory Stock Option
        shall be rounded down to the nearest whole share. No person shall receive
        more
        than one grant of Nonstatutory Stock Options pursuant to this
        Section 7.3(a) during any calendar year.

       

      (b)  Exercise
        Price and Payment.
        The
        exercise price of each Nonstatutory Stock Option granted pursuant to
        Section 7.3(a) shall be the Fair Market Value of the Stock on the date of
        grant. The payment of the exercise price for the number of share of Stock
        being
        purchased pursuant to the Nonstatutory Stock Option shall be made in accordance
        with the provisions of Section 6.3.

       

      (c)  Vesting
        and Exercisability.
        The
        Nonstatutory Stock Option granted in accordance with this Section shall become
        vested and exercisable as to one third (1/3) of the shares subject to the
        Nonstatutory Stock Option on the second, third and fourth anniversaries of
        the
        date of grant, respectively. The Nonstatutory Stock Option shall terminate
        ten
        (10) years after the date of grant, unless earlier terminated in accordance
        with
        its provisions. 

       

      7.4  Grant
        of Restricted Stock Unit.

       

      (a)  Timing
        and Amount of Grant.
        Unless
        a Nonemployee Director made an election to decline the award of a Restricted
        Stock Unit in accordance with Section 7.2 above, on the first business day
        of
        each calendar year beginning on January 1, 2006, and continuing for the term
        of
        the Plan, each person who is a Nonemployee Director on such date shall receive
        a
        grant of a Restricted Stock Unit Award with an aggregate value (as determined
        by
        the Fair Market Value of the Stock on the first business day of the applicable
        calendar year) equal to $5,000, $10,000, $15,000, $20,000, $25,000 or $30,000,
        as previously elected by the Nonemployee Director (or $15,000 in the case
        of a
        Nonemployee Director who failed to make a timely election or who became a
        Nonemployee Director after December 31) (the “Elected
        Stock Unit Value”).
        The
        number of shares subject to the Restricted Stock Unit Award shall be determined
        by dividing the Elected Stock Unit Value by the Fair Market Value of the
        Stock
        as of the first business day of the applicable calendar year (including
        fractions computed to three decimal places). The Restricted Stock Units awarded
        to a Nonemployee Director shall be credited to a newly established Restricted
        Stock Unit account. Each Restricted Stock Unit awarded to a Nonemployee Director
        in accordance with this Section 7.4(a) shall be deemed to be equal to one
        (1) (or fraction thereof) share of Stock on the date of grant, and shall
        thereafter fluctuate in value in accordance with the Fair Market Value of
        the
        Stock. No person shall receive more than one grant of Restricted Stock Units
        pursuant to this Section 7.4(a) during any calendar year. 

       

      (b)  Dividend
        Rights.
        Each
        Nonemployee Director’s Restricted Stock Unit account shall be credited quarterly
        on each dividend payment date with additional shares of Restricted Stock
        Units
        (including fractions computed to three decimal places) determined by dividing
        (1) the amount of cash dividends paid on such date with respect to the number
        of
        shares of Stock represented by the Restricted Stock Units previously credited
        to
        the account by (2) the 

       

      
        
          
          

        

        
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      Fair
        Market Value per share of Stock on such date. Such additional Restricted
        Stock
        Units shall be subject to the same terms and conditions and shall be settled
        in
        the same manner and at the same time as the Restricted Stock Units originally
        subject to the Restricted Stock Unit Award. 

       

      (c)  Settlement
        of Restricted Stock Unit Award.
        Settlement of the shares credited to a Nonemployee Director’s Restricted Stock
        Unit account shall only be made after the Nonemployee Director’s Retirement or
        Mandatory Retirement from the Board or as provided in Section 7.5 below.
        Settlement shall be made only in the form of shares of Stock equal to the
        number
        of Restricted Stock Units credited to the Nonemployee Director’s account on the
        date of distribution, rounded down to the nearest whole share. The Nonemployee
        Director may elect to receive the Stock in a lump sum distribution or in
        a
        series of ten or less approximately equal annual installments, provided that
        distribution shall commence no later than January of the year following the
        year
        in which the Nonemployee Director’s Retirement or Mandatory Retirement
        occurred.

       

      7.5  Effect
        of Termination of Service as a Nonemployee Director.

       

      (a)  Status
        of Award.
        Subject
        to earlier termination of the Nonemployee Director Award as otherwise provided
        herein, the status of a Nonemployee Director Award shall be determined as
        follows:

       

      (i)  Death
        or Disability.
        If the
        Nonemployee Director’s Service terminates due to death or Disability (1) all
        shares subject to the Restricted Stock Award shall become fully vested, and
        the
        Participant (or the Participant’s legal representative or other person who
        acquired the rights to the Restricted Stock by reason of the Participant’s
        death) shall have the right to resell or transfer such shares at any time;
        (2)
        all Nonstatutory Stock Options held by the Participant shall become fully
        vested
        and exercisable, and the Participant (or the Participant’s legal representative
        or other person who acquired the rights to the Nonstatutory Stock Option
        by
        reason of the Participant’s death) shall have the right to exercise the
        Nonstatutory Stock Options until the earlier of (a) the date that is twelve
        (12) months after the date on which the Participant’s Service terminated, or
        (b) the Option Expiration Date and (3) all Restricted Stock Units credited
        to the Nonemployee Director’s account shall immediately become payable to the
        Participant (or the Participant’s legal representative or other person who
        acquired the rights to the Restricted Stock Units by reason of the Participant’s
        death) in the form of a number of shares of Stock equal to the number of
        Restricted Stock Units credited to the Restricted Stock Unit account, rounded
        down to the nearest whole share.

       

      (ii)  Mandatory
        Retirement.
        If the
        Participant’s Service terminates because of the Mandatory Retirement of the
        Participant (1) all shares subject to the Restricted Stock Award shall become
        fully vested, and the Participant shall have the right to resell or transfer
        such shares at any time; (2) all Nonstatutory Stock Options held by the
        Participant shall become fully vested and exercisable and the Participant
        shall
        have the right to exercise the Nonstatutory Stock Options until the earlier
        of
        (a) the date that is five (5) years after the date on which the
        Participant’s Service terminated, or (b) the Option Expiration Date and (3)
        all Restricted Stock Units credited to the Nonemployee Director’s account shall
        immediately become payable to the Participant in accordance with Section
        7.4(c)
        above. 

       

      
        
          
          

        

        
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      (iii)  Other
        Termination of Service.
        If the
        Participant’s Service terminates for any reason other than those enumerated in
        Sections 7.5(a)(i) and 7.5(a)(ii), (1) any unvested shares of Restricted
        Stock
        shall be forfeited to the Company and from and after the date of such
        termination, the Participant shall cease to be a shareholder with respect
        to
        such forfeited shares and shall have no dividend, voting or other rights
        with
        respect thereto, (2) the unvested portion of any Nonstatutory Stock Option
        shall terminate, and any portion of the Nonstatutory Stock Option exercisable
        by
        the Participant on the date on which the Participant’s Service terminated may be
        exercised until the earlier of (a) the date that is three (3) months after
        the date on which the Participant’s Service terminated, or (b) the Option
        Expiration Date and (3) except as provided in Section 7.4(c), all
        Restricted Stock Units credited to the Participant’s account shall be forfeited
        on the date of termination.

       

      (iv)  Notwithstanding
        the provisions of Section 7.5(i) through 7.5(iii) above, the Board, in its
        sole
        discretion, may establish different terms and conditions pertaining to
        Nonemployee Director Awards.

       

      (b)  Extension
        if Exercise Prevented by Law.
        Notwithstanding the foregoing, if the exercise of a Nonstatutory Stock Option
        within the applicable time periods set forth in Section 7.5(a)
        is
        prevented by the provisions of Section 14.1
        below,
        the Nonstatutory Stock Option shall remain exercisable until three (3) months
        after the date the Participant is notified by the Company that the Nonstatutory
        Stock Option is exercisable, but in any event no later than the Option
        Expiration Date.

       

      (c)  Extension
        if Participant Subject to Section 16(b).
        Notwithstanding the foregoing, if a sale within the applicable time periods
        set
        forth in Section 7.5(a)
        of
        shares acquired upon the exercise of the Nonstatutory Stock Option would
        subject
        the Participant to suit under Section 16(b) of the Exchange Act, the
        Nonstatutory Stock Option shall remain exercisable until the earliest to
        occur
        of (i) the tenth (10th) day following the date on which a sale of such
        shares by the Participant would no longer be subject to such suit, (ii) the
        one hundred and ninetieth (190th) day after the Participant’s termination of
        Service, or (iii) the Option Expiration Date.

       

      7.6  Effect
        of Change in Control on Nonemployee Director Awards. Upon
        the
        occurrence of a Change in Control, (i) the vesting of all shares of
        Restricted Stock granted pursuant to Section 7.1(a) shall be accelerated so
        that all such shares become fully vested, (ii) the vesting of Nonstatutory
        Stock Options granted pursuant to Section 7.3(a) shall be accelerated and
        such Nonstatutory Stock Options shall remain fully exercisable until the
        Option
        Expiration Date, and (iii) all Restricted Stock Units shall be settled in
        accordance with Section 7.4(c) as if the Change of Control constituted
        Retirement. 

       

                    
        7.7     Right
        to Decline Nonemployee Director Awards. Notwithstanding
        the foregoing, any person may elect not to receive a Nonemployee Director
        Award
        by delivering written notice of such election to the Board no later than
        the day
        prior to the date such Nonemployee Director Award would otherwise be granted.
        A
        person so declining a Nonemployee Director Award shall receive no payment
        or
        other consideration in lieu of such declined Nonemployee Director Award.
        A
        person who has declined a Nonemployee Director 

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      Award
        may
        revoke such election by delivering written notice of such revocation to the
        Board no later than the day prior to the date such Nonemployee Director Award
        would be granted.

       

      8.  Terms
        and Conditions of Stock Appreciation Rights.

       

      Stock
        Appreciation Rights shall be evidenced by Award Agreements specifying the
        number
        of shares of Stock subject to the Award, in such form as the Committee shall
        from time to time establish. No SAR or purported SAR shall be a valid and
        binding obligation of the Company unless evidenced by a fully executed Award
        Agreement. Award Agreements evidencing SARs may incorporate all or any of
        the
        terms of the Plan by reference and shall comply with and be subject to the
        following terms and conditions:

       

      8.1  Types
        of SARs Authorized.
        SARs may
        be granted in tandem with all or any portion of a related Option (a “Tandem
        SAR”)
        or may
        be granted independently of any Option (a “Freestanding
        SAR”).
        A
        Tandem SAR may be granted either concurrently with the grant of the related
        Option or at any time thereafter prior to the complete exercise, termination,
        expiration or cancellation of such related Option.

       

      8.2  Exercise
        Price.
        The
        exercise price for each SAR shall be established in the discretion of the
        Committee; provided, however, that (a) the exercise price per share subject
        to a Tandem SAR shall be the exercise price per share under the related Option
        and (b) the exercise price per share subject to a Freestanding SAR shall be
        not less than the Fair Market Value of a share of Stock on the effective
        date of
        grant of the SAR.

       

      8.3  Exercisability
        and Term of SARs.

       

      (a)  Tandem
        SARs.
        Tandem
        SARs shall be exercisable only at the time and to the extent, and only to
        the
        extent, that the related Option is exercisable, subject to such provisions
        as
        the Committee may specify where the Tandem SAR is granted with respect to
        less
        than the full number of shares of Stock subject to the related
        Option.

       

      (b)  Freestanding
        SARs.
        Freestanding SARs shall be exercisable at such time or times, or upon such
        event
        or events, and subject to such terms, conditions, performance criteria and
        restrictions as shall be determined by the Committee and set forth in the
        Award
        Agreement evidencing such SAR; provided, however, that no Freestanding SAR
        shall
        be exercisable after the expiration of ten (10) years after the effective
        date
        of grant of such SAR.

       

      8.4  Deemed
        Exercise of SARs.
        If, on
        the date on which an SAR would otherwise terminate or expire, the SAR by
        its
        terms remains exercisable immediately prior to such termination or expiration
        and, if so exercised, would result in a payment to the holder of such SAR,
        then
        any portion of such SAR which has not previously been exercised shall
        automatically be deemed to be exercised as of such date with respect to such
        portion.

       

      8.5  Effect
        of Termination of Service.
        Subject
        to earlier termination of the SAR as otherwise provided herein and unless
        otherwise provided by the Committee in the grant of an SAR and set forth
        in the
        Award Agreement, an SAR shall be exercisable after a Participant’s termination
        of Service only as provided in the Award Agreement.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      8.6  Nontransferability
        of SARs.
        During
        the lifetime of the Participant, an SAR shall be exercisable only by the
        Participant or the Participant’s guardian or legal representative. Prior to the
        exercise of an SAR, the SAR shall not be subject in any manner to anticipation,
        alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
        garnishment by creditors of the Participant or the Participant’s beneficiary,
        except transfer by will or by the laws of descent and distribution.

       

      9.  Terms
        and Conditions of Restricted Stock Awards.

       

      Restricted
        Stock Awards shall be evidenced by Award Agreements specifying the number
        of
        shares of Stock subject to the Award, in such form as the Committee shall
        from
        time to time establish. No Restricted Stock Award or purported Restricted
        Stock
        Award shall be a valid and binding obligation of the Company unless evidenced
        by
        a fully executed Award Agreement. Award Agreements evidencing Restricted
        Stock
        Awards may incorporate all or any of the terms of the Plan by reference and
        shall comply with and be subject to the following terms and
        conditions:

       

      9.1  Types
        of Restricted Stock Awards Authorized.
        Restricted Stock Awards may or may not require the payment of cash compensation
        for the stock. Restricted Stock Awards may be granted upon such conditions
        as
        the Committee shall determine, including, without limitation, upon the
        attainment of one or more Performance Goals described in
        Section 10.4.
        If
        either the grant of a Restricted Stock Award or the lapsing of the Restriction
        Period is to be contingent upon the attainment of one or more Performance
        Goals,
        the Committee shall follow procedures substantially equivalent to those set
        forth in Sections 10.3
        through
10.5(a).

       

      9.2  Purchase
        Price.
        The
        purchase price, if any, for shares of Stock issuable under each Restricted
        Stock
        Award and the means of payment shall be established by the Committee in its
        discretion. 

       

      9.3  Purchase
        Period.
        A
        Restricted Stock Award requiring the payment of cash consideration shall
        be
        exercisable within a period established by the Committee; provided, however,
        that no Restricted Stock Award granted to a prospective Employee, prospective
        Consultant or prospective Director may become exercisable prior to the date
        on
        which such person commences Service.

       

      9.4  Vesting
        and Restrictions on Transfer.
        Shares
        issued pursuant to any Restricted Stock Award may or may not be made subject
        to
        Vesting Conditions based upon the satisfaction of such Service requirements,
        conditions, restrictions or performance criteria, including, without limitation,
        Performance Goals as described in Section 10.4,
        as
        shall be established by the Committee and set forth in the Award Agreement
        evidencing such Award. During any Restriction Period in which shares acquired
        pursuant to a Restricted Stock Award remain subject to Vesting Conditions,
        such
        shares may not be sold, exchanged, transferred, pledged, assigned or otherwise
        disposed of other than as provided in the Award Agreement or as provided
        in
        Section 9.7.
        Upon
        request by the Company, each Participant shall execute any agreement evidencing
        such transfer restrictions prior to the receipt of shares of Stock hereunder
        and
        shall promptly present to the Company any and all certificates representing
        shares of Stock acquired

       

      
        
          
          

        

        
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hereunder
          for the placement on such certificates of appropriate legends evidencing
          any
          such transfer restrictions.

      

       

      9.5  Voting
        Rights, Dividends and Distributions.
        Except
        as provided in this Section, Section 9.4
        and any
        Award Agreement, during the Restriction Period applicable to shares subject
        to a
        Restricted Stock Award, the Participant shall have all of the rights of a
        shareholder of the Company holding shares of Stock, including the right to
        vote
        such shares and to receive all dividends and other distributions paid with
        respect to such shares. However, in the event of a dividend or distribution
        paid
        in shares of Stock or any other adjustment made upon a change in the capital
        structure of the Company as described in Section 4.2,
        any and
        all new, substituted or additional securities or other property (other than
        normal cash dividends) to which the Participant is entitled by reason of
        the
        Participant’s Restricted Stock Award shall be immediately subject to the same
        Vesting Conditions as the shares subject to the Restricted Stock Award with
        respect to which such dividends or distributions were paid or adjustments
        were
        made.

       

      9.6  Effect
        of Termination of Service.
        Unless
        otherwise provided by the Committee in the grant of a Restricted Stock Award
        and
        set forth in the Award Agreement, if a Participant’s Service terminates for any
        reason, whether voluntary or involuntary (including the Participant’s death or
        disability), then the Participant shall forfeit to the Company any shares
        acquired by the Participant pursuant to a Restricted Stock Award which remain
        subject to Vesting Conditions as of the date of the Participant’s termination of
        Service in exchange for the payment of the purchase price, if any, paid by
        the
        Participant. The Company shall have the right to assign at any time any
        repurchase right it may have, whether or not such right is then exercisable,
        to
        one or more persons as may be selected by the Company.

       

      9.7  Nontransferability
        of Restricted Stock Award Rights.
        Prior to
        the issuance of shares of Stock pursuant to a Restricted Stock Award, rights
        to
        acquire such shares shall not be subject in any manner to anticipation,
        alienation, sale, exchange, transfer, assignment, pledge, encumbrance or
        garnishment by creditors of the Participant or the Participant’s beneficiary,
        except transfer by will or the laws of descent and distribution. All
        rights with respect to a Restricted Stock Award granted to a Participant
        hereunder shall be exercisable during his or her lifetime only by such
        Participant or the Participant’s guardian or legal representative.

       

      10.  Terms
        and Conditions of Performance Awards.

       

      Performance
        Awards shall be evidenced by Award Agreements in such form as the Committee
        shall from time to time establish. No Performance Award or purported Performance
        Award shall be a valid and binding obligation of the Company unless evidenced
        by
        a fully executed Award Agreement. Award Agreements evidencing Performance
        Awards
        may incorporate all or any of the terms of the Plan by reference and shall
        comply with and be subject to the following terms and conditions:

       

      10.1  Types
        of Performance Awards Authorized.
        Performance Awards may be in the form of either Performance Shares or
        Performance Units. Each Award Agreement evidencing a Performance Award shall
        specify the number of Performance Shares or Performance Units 

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          
subject
          thereto, the Performance Award Formula, the Performance Goal(s) and Performance
          Period applicable to the Award, and the other terms, conditions and restrictions
          of the Award.

      

       

      10.2  Initial
        Value of Performance Shares and Performance Units.
        Unless
        otherwise provided by the Committee in granting a Performance Award, each
        Performance Share shall have an initial value equal to the Fair Market Value
        of
        one (1) share of Stock, subject to adjustment as provided in
        Section 4.2,
        on the
        effective date of grant of the Performance Share. Each Performance Unit shall
        have an initial value determined by the Committee. The final value payable
        to
        the Participant in settlement of a Performance Award determined on the basis
        of
        the applicable Performance Award Formula will depend on the extent to which
        Performance Goals established by the Committee are attained within the
        applicable Performance Period established by the Committee.

       

      10.3  Establishment
        of Performance Period, Performance Goals and Performance Award
        Formula.
        In
        granting each Performance Award, the Committee shall establish in writing
        the
        applicable Performance Period, Performance Award Formula and one or more
        Performance Goals which, when measured at the end of the Performance Period,
        shall determine on the basis of the Performance Award Formula the final value
        of
        the Performance Award to be paid to the Participant. To the extent compliance
        with the requirements under Section 162(m) with respect to
“performance-based compensation” is desired, the Committee shall establish the
        Performance Goal(s) and Performance Award Formula applicable to each Performance
        Award no later than the earlier of (a) the date ninety (90) days after the
        commencement of the applicable Performance Period or (b) the date on which
        25%
        of the Performance Period has elapsed, and, in any event, at a time when
        the
        outcome of the Performance Goals remains substantially uncertain. Once
        established, the Performance Goals and Performance Award Formula shall not
        be
        changed during the Performance Period. The Company shall notify each Participant
        granted a Performance Award of the terms of such Award, including the
        Performance Period, Performance Goal(s) and Performance Award
        Formula.

       

      10.4  Measurement
        of Performance Goals.
        Performance Goals shall be established by the Committee on the basis of targets
        to be attained (“Performance
        Targets”)
        with
        respect to one or more measures of business or financial performance (each,
        a
“Performance
        Measure”),
        subject to the following:

       

      (a)  Performance
        Measures.
        Performance Measures shall have the same meanings as used in the Company’s
        financial statements, or, if such terms are not used in the Company’s financial
        statements, they shall have the meaning applied pursuant to generally accepted
        accounting principles, or as used generally in the Company’s industry.
        Performance Measures shall be calculated with respect to the Company and
        each
        Subsidiary Corporation consolidated therewith for financial reporting purposes
        or such division or other business unit as may be selected by the Committee.
        For
        purposes of the Plan, the Performance Measures applicable to a Performance
        Award
        shall be calculated in accordance with generally accepted accounting principles,
        but prior to the accrual or payment of any Performance Award for the same
        Performance Period and excluding the effect (whether positive or negative)
        of
        any change in accounting standards or any extraordinary, unusual or nonrecurring
        item, as determined by the Committee, occurring after the establishment of
        the
        Performance Goals applicable to the Performance Award. Each such adjustment,
        if
        any, shall be made solely for the purpose of 

       

      
        
          
          

        

        
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        providing
          a consistent basis from period to period for the calculation of Performance
          Measures in order to prevent the dilution or enlargement of the Participant’s
          rights with respect to a Performance Award. Performance Measures may be
          one or
          more of the following, as determined by the Committee: (i) sales revenue;
          (ii) gross margin; (iii) operating margin; (iv) operating income;
          (v) pre-tax profit; (vi) earnings before interest, taxes and
          depreciation and amortization; (vii) net income; (viii) expenses;
          (ix) the market price of the Stock; (x) earnings per share;
          (xi) return on shareholder equity; (xii) return on capital;
          (xiii) return on net assets; (xiv) economic value added; and
          (xv) market share; (xvi) customer service; (xvii) customer
          satisfaction; (xviii) safety; (xix) total shareholder return; or
          (xx) such other measures as determined by the Committee consistent with
          this Section 10.4(a).

      

       

      (b)  Performance
        Targets.
        Performance Targets may include a minimum, maximum, target level and
        intermediate levels of performance, with the final value of a Performance
        Award
        determined under the applicable Performance Award Formula by the level attained
        during the applicable Performance Period. A Performance Target may be stated
        as
        an absolute value or as a value determined relative to a standard selected
        by
        the Committee.

       

      10.5  Settlement
        of Performance Awards.

       

      (a)  Determination
        of Final Value.
        As soon
        as practicable following the completion of the Performance Period applicable
        to
        a Performance Award, the Committee shall certify in writing the extent to
        which
        the applicable Performance Goals have been attained and the resulting final
        value of the Award earned by the Participant and to be paid upon its settlement
        in accordance with the applicable Performance Award Formula.

       

      (b)  Discretionary
        Adjustment of Award Formula.
        In its
        discretion, the Committee may, either at the time it grants a Performance
        Award
        or at any time thereafter, provide for the positive or negative adjustment
        of
        the Performance Award Formula applicable to a Performance Award that is not
        intended to constitute “qualified performance based compensation” to a “covered
        employee” within the meaning of Section 162(m) (a “Covered
        Employee”)
        to
        reflect such Participant’s individual performance in his or her position with
        the Company or such other factors as the Committee may determine. With respect
        to a Performance Award intended to constitute qualified performance-based
        compensation to a Covered Employee, the Committee shall have the discretion
        to
        reduce some or all of the value of the Performance Award that would otherwise
        be
        paid to the Covered Employee upon its settlement notwithstanding the attainment
        of any Performance Goal and the resulting value of the Performance Award
        determined in accordance with the Performance Award Formula. 

       

      (c)  Payment
        in Settlement of Performance Awards.
        As soon
        as practicable following the Committee’s determination and certification in
        accordance with Sections 10.5(a)
        and
(b),
        payment
        shall be made to each eligible Participant (or such Participant’s legal
        representative or other person who acquired the right to receive such payment
        by
        reason of the Participant’s death) of the final value of the Participant’s
        Performance Award. Payment of such amount shall be made in cash, shares of
        Stock, or a combination thereof as determined by the Committee. 

       

      
        
          
          

        

        
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      10.6  Voting
        Rights, Dividend Equivalent Rights and Distributions.
        Participants shall have no voting rights with respect to shares of Stock
        represented by Performance Share Awards until the date of the issuance of
        such
        shares, if any (as evidenced by the appropriate entry on the books of the
        Company or of a duly authorized transfer agent of the Company). However,
        the
        Committee, in its discretion, may provide in the Award Agreement evidencing
        any
        Performance Share Award that the Participant shall be entitled to receive
        Dividend Equivalents with respect to the payment of cash dividends on Stock
        having a record date prior to the date on which the Performance Shares are
        settled or forfeited. Such Dividend Equivalents, if any, shall be credited
        to
        the Participant in the form of additional whole Performance Shares as of
        the
        date of payment of such cash dividends on Stock. The number of additional
        Performance Shares (rounded to the nearest whole number) to be so credited
        shall
        be determined by dividing (a) the amount of cash dividends paid on such
        date with respect to the number of shares of Stock represented by the
        Performance Shares previously credited to the Participant by (b) the Fair
        Market Value per share of Stock on such date. Dividend Equivalents may be
        paid
        currently or may be accumulated and paid to the extent that Performance Shares
        become nonforfeitable, as determined by the Committee. Settlement of Dividend
        Equivalents may be made in cash, shares of Stock, or a combination thereof
        as
        determined by the Committee, and may be paid on the same basis as settlement
        of
        the related Performance Share as provided in Section 10.5.
        Dividend Equivalents shall not be paid with respect to Performance Units.
        In the
        event of a dividend or distribution paid in shares of Stock or any other
        adjustment made upon a change in the capital structure of the Company as
        described in Section 4.2,
        appropriate adjustments shall be made in the Participant’s Performance Share
        Award so that it represents the right to receive upon settlement any and
        all
        new, substituted or additional securities or other property (other than normal
        cash dividends) to which the Participant would be entitled by reason of the
        shares of Stock issuable upon settlement of the Performance Share Award,
        and all
        such new, substituted or additional securities or other property shall be
        immediately subject to the same Performance Goals as are applicable to the
        Award.

       

      10.7  Effect
        of Termination of Service.
        Unless
        otherwise provided by the Committee in the grant of a Performance Award and
        set
        forth in the Award Agreement, the effect of a Participant’s termination of
        Service on the Performance Award shall be as follows:

       

      (a)  Death
        or Disability.
        If the
        Participant’s Service terminates because of the death or Disability of the
        Participant before the completion of the Performance Period applicable to
        the
        Performance Award, the final value of the Participant’s Performance Award shall
        be determined by the extent to which the applicable Performance Goals have
        been
        attained with respect to the entire Performance Period and shall be prorated
        based on the number of months of the Participant’s Service during the
        Performance Period. Payment shall be made following the end of the Performance
        Period in any manner permitted by Section 10.5.

       

      (b)  Other
        Termination of Service.
        If the
        Participant’s Service terminates for any reason except death or Disability
        before the completion of the Performance Period applicable to the Performance
        Award, such Award shall be forfeited in its entirety; provided, however,
        that in
        the event of an involuntary termination of the Participant’s Service, the
        Committee, in its sole discretion, may waive the automatic forfeiture of
        all or
        any portion of any such Award.

       

      
        
          
          

        

        
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      10.8  Nontransferability
        of Performance Awards.
        Prior to
        settlement in accordance with the provisions of the Plan, no Performance
        Award
        shall be subject in any manner to anticipation, alienation, sale, exchange,
        transfer, assignment, pledge, encumbrance, or garnishment by creditors of
        the
        Participant or the Participant’s beneficiary, except transfer by will or by the
        laws of descent and distribution. All rights with respect to a Performance
        Award
        granted to a Participant hereunder shall be exercisable during his or her
        lifetime only by such Participant or the Participant’s guardian or legal
        representative.

       

      11.  Terms
        and Conditions of Restricted Stock Unit Awards.

       

      Restricted
        Stock Unit Awards shall be evidenced by Award Agreements specifying the number
        of Restricted Stock Units subject to the Award, in such form as the Committee
        shall from time to time establish. No Restricted Stock Unit Award or purported
        Restricted Stock Unit Award shall be a valid and binding obligation of the
        Company unless evidenced by a fully executed Award Agreement. Award Agreements
        evidencing Restricted Stock Units may incorporate all or any of the terms
        of the
        Plan by reference and shall comply with and be subject to the following terms
        and conditions:

       

      11.1  Grant
        of Restricted Stock Unit Awards.
        Restricted Stock Unit Awards may be granted upon such conditions as the
        Committee shall determine, including, without limitation, upon the attainment
        of
        one or more Performance Goals described in Section 10.4.
        If
        either the grant of a Restricted Stock Unit Award or the Vesting Conditions
        with
        respect to such Award is to be contingent upon the attainment of one or more
        Performance Goals, the Committee shall follow procedures substantially
        equivalent to those set forth in Sections 10.3
        through 10.5(a).

       

      11.2  Vesting.
        Restricted Stock Units may or may not be made subject to Vesting Conditions
        based upon the satisfaction of such Service requirements, conditions,
        restrictions or performance criteria, including, without limitation, Performance
        Goals as described in Section 10.4,
        as
        shall be established by the Committee and set forth in the Award Agreement
        evidencing such Award.

       

      11.3  Voting
        Rights, Dividend Equivalent Rights and Distributions.
        Participants shall have no voting rights with respect to shares of Stock
        represented by Restricted Stock Units until the date of the issuance of such
        shares (as evidenced by the appropriate entry on the books of the Company
        or of
        a duly authorized transfer agent of the Company). However, the Committee,
        in its
        discretion, may provide in the Award Agreement evidencing any Restricted
        Stock
        Unit Award that the Participant shall be entitled to receive Dividend
        Equivalents with respect to the payment of cash dividends on Stock having
        a
        record date prior to the date on which Restricted Stock Units held by such
        Participant are settled. Such Dividend Equivalents, if any, shall be paid
        by
        crediting the Participant with additional whole Restricted Stock Units as
        of the
        date of payment of such cash dividends on Stock. The number of additional
        Restricted Stock Units (rounded to the nearest whole number) to be so credited
        shall be determined by dividing (a) the amount of cash dividends paid on
        such
        date with respect to the number of shares of Stock represented by the Restricted
        Stock Units previously credited to the Participant by (b) the Fair Market
        Value
        per share of Stock on such date. Such additional Restricted Stock Units shall
        be
        subject to the same terms and conditions and shall be settled in the same
        manner
        and at the same time (or as soon thereafter as practicable) as the Restricted
        Stock Units originally subject to the

       

      
        
          
          

        

        
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      Restricted
        Stock Unit Award. In the event of a dividend or distribution paid in shares
        of
        Stock or any other adjustment made upon a change in the capital structure
        of the
        Company as described in Section 4.2,
        appropriate adjustments shall be made in the Participant’s Restricted Stock Unit
        Award so that it represents the right to receive upon settlement any and
        all
        new, substituted or additional securities or other property (other than normal
        cash dividends) to which the Participant would be entitled by reason of the
        shares of Stock issuable upon settlement of the Award, and all such new,
        substituted or additional securities or other property shall be immediately
        subject to the same Vesting Conditions as are applicable to the
        Award.

       

      11.4  Effect
        of Termination of Service.
        Unless
        otherwise provided by the Committee in the grant of a Restricted Stock Unit
        Award and set forth in the Award Agreement, if a Participant’s Service
        terminates for any reason, whether voluntary or involuntary (including the
        Participant’s death or disability), then the Participant shall forfeit to the
        Company any Restricted Stock Units pursuant to the Award which remain subject
        to
        Vesting Conditions as of the date of the Participant’s termination of
        Service.

       

      11.5  Settlement
        of Restricted Stock Unit Awards.
        The
        Company shall issue to a Participant on the date on which Restricted Stock
        Units
        subject to the Participant’s Restricted Stock Unit Award vest or on such other
        date determined by the Committee, in its discretion, and set forth in the
        Award
        Agreement one (1) share of Stock (and/or any other new, substituted or
        additional securities or other property pursuant to an adjustment described
        in
        Section 11.3)
        for
        each Restricted Stock Unit then becoming vested or otherwise to be settled
        on
        such date, subject to the withholding of applicable taxes. Notwithstanding
        the
        foregoing, if permitted by the Committee and set forth in the Award Agreement,
        the Participant may elect in accordance with terms specified in the Award
        Agreement to defer receipt of all or any portion of the shares of Stock or
        other
        property otherwise issuable to the Participant pursuant to this
        Section.

       

      11.6  Nontransferability
        of Restricted Stock Unit Awards.
        Prior to
        the issuance of shares of Stock in settlement of a Restricted Stock Unit
        Award,
        the Award shall not be subject in any manner to anticipation, alienation,
        sale,
        exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
        of the Participant or the Participant’s beneficiary, except transfer by will or
        by the laws of descent and distribution. All rights with respect to a Restricted
        Stock Unit Award granted to a Participant hereunder shall be exercisable
        during
        his or her lifetime only by such Participant or the Participant’s guardian or
        legal representative.

       

      12.  Deferred
        Compensation Awards.

       

      12.1  Establishment
        of Deferred Compensation Award Programs.
        This
        Section 12
        shall
        not be effective unless and until the Committee determines to establish a
        program pursuant to this Section. The Committee, in its discretion and upon
        such
        terms and conditions as it may determine, may establish one or more programs
        pursuant to the Plan under which:

       

      (a)  Participants
        designated by the Committee who are Insiders or otherwise among a select
        group
        of highly compensated Employees may irrevocably elect, prior to a date specified
        by the Committee, to reduce such Participant’s compensation otherwise payable in
        cash (subject to any minimum or maximum reductions imposed by the Committee)
        and
        to be granted automatically at such time or times as specified by the Committee
        one or more Awards of Stock 

       

      
        
          
          

        

        
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      Units
        with respect to such numbers of shares of Stock as determined in accordance
        with
        the rules of the program established by the Committee and having such other
        terms and conditions as established by the Committee.

       

      (b)  Participants
        designated by the Committee who are Insiders or otherwise among a select
        group
        of highly compensated Employees may irrevocably elect, prior to a date specified
        by the Committee, to be granted automatically an Award of Stock Units with
        respect to such number of shares of Stock and upon such other terms and
        conditions as established by the Committee in lieu of:

       

      (i)  shares
        of
        Stock otherwise issuable to such Participant upon the exercise of an
        Option;

       

      (ii)  cash
        or
        shares of Stock otherwise issuable to such Participant upon the exercise
        of an
        SAR; or

       

      (iii)  cash
        or
        shares of Stock otherwise issuable to such Participant upon the settlement
        of a
        Performance Award or Performance Unit.

       

      12.2  Terms
        and Conditions of Deferred Compensation Awards.
        Deferred
        Compensation Awards granted pursuant to this Section 12
        shall be
        evidenced by Award Agreements in such form as the Committee shall from time
        to
        time establish. No such Deferred Compensation Award or purported Deferred
        Compensation Award shall be a valid and binding obligation of the Company
        unless
        evidenced by a fully executed Award Agreement. Award Agreements evidencing
        Deferred Compensation Awards may incorporate all or any of the terms of the
        Plan
        by reference and shall comply with and be subject to the following terms
        and
        conditions:

       

      (a)  Vesting
        Conditions.
        Deferred Compensation Awards shall not be subject to any vesting
        conditions.

       

      (b)  Terms
        and Conditions of Stock Units.

       

      (i)  Voting
        Rights, Dividend Equivalent Rights and Distributions.
        Participants shall have no voting rights with respect to shares of Stock
        represented by Stock Units until the date of the issuance of such shares
        (as
        evidenced by the appropriate entry on the books of the Company or of a duly
        authorized transfer agent of the Company). However, a Participant shall be
        entitled to receive Dividend Equivalents with respect to the payment of cash
        dividends on Stock having a record date prior to the date on which Stock
        Units
        held by such Participant are settled. Such Dividend Equivalents shall be
        paid by
        crediting the Participant with additional whole and/or fractional Stock Units
        as
        of the date of payment of such cash dividends on Stock. The method of
        determining the number of additional Stock Units to be so credited shall
        be
        specified by the Committee and set forth in the Award Agreement. Such additional
        Stock Units shall be subject to the same terms and conditions and shall be
        settled in the same manner and at the same time (or as soon thereafter as
        practicable) as the Stock Units originally subject to the Stock Unit Award.
        In
        the event of a dividend or distribution paid in shares of Stock or any other
        adjustment made upon a change in the capital structure of the Company as
        described in Section 4.2,
        appropriate adjustments shall be made in the Participant’s Stock Unit

       

      
        
          
          

        

        
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      Award
        so
        that it represents the right to receive upon settlement any and all new,
        substituted or additional securities or other property (other than normal
        cash
        dividends) to which the Participant would be entitled by reason of the shares
        of
        Stock issuable upon settlement of the Award.

       

      (ii)  Settlement
        of Stock Unit Awards.
        A
        Participant electing to receive an Award of Stock Units pursuant to this
        Section 12,
        shall
        specify at the time of such election a settlement date with respect to such
        Award. The Company shall issue to the Participant as soon as practicable
        following the earlier of the settlement date elected by the Participant or
        the
        date of termination of the Participant’s Service, a number of whole shares of
        Stock equal to the number of whole Stock Units subject to the Stock Unit
        Award.
        Such shares of Stock shall be fully vested, and the Participant shall not
        be
        required to pay any additional consideration (other than applicable tax
        withholding) to acquire such shares. Any fractional Stock Unit subject to
        the
        Stock Unit Award shall be settled by the Company by payment in cash of an
        amount
        equal to the Fair Market Value as of the payment date of such fractional
        share.

       

      (iii)  Nontransferability
        of Stock Unit Awards.
        Prior to
        their settlement in accordance with the provision of the Plan, no Stock Unit
        Award shall be subject in any manner to anticipation, alienation, sale,
        exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
        of the Participant or the Participant’s beneficiary, except transfer by will or
        by the laws of descent and distribution. All rights with respect to a Stock
        Unit
        Award granted to a Participant hereunder shall be exercisable during his
        or her
        lifetime only by such Participant or the Participant’s guardian or legal
        representative.

       

      13.  Other
        Stock-Based Awards.

       

      In
        addition to the Awards set forth in Sections 6 through 12 above, the Committee,
        in its sole discretion, may carry out the purpose of this Plan by awarding
        Stock-Based Awards as it determines to be in the best interests of the Company
        and subject to such other terms and conditions as it deems necessary and
        appropriate.

       

      14.  Change
        in Control.

       

      14.1  Effect
        of Change in Control on Options and SARs.
        In the
        event of a Change in Control, the surviving, continuing, successor, or
        purchasing corporation or other business entity or parent thereof, as the
        case
        may be (the “Acquiror”),
        may,
        without the consent of any Participant, either assume or continue the Company’s
        rights and obligations under outstanding Options or SARs or substitute for
        outstanding Options or SARs substantially equivalent options or SARs covering
        the Acquiror’s stock. Any Options or SARs which are neither assumed or continued
        by the Acquiror in connection with the Change in Control nor exercised as
        of the
        Change in Control shall, contingent on the Change in Control, become fully
        vested and exercisable immediately prior to the Change in Control. Options
        and
        SARs which are assumed or continued in connection with a Change in Control
        shall
        be subject to such additional accelerated vesting and/or exercisability in
        connection with the Participant’s subsequent termination of Service as the Board
        may determine.

       

      
        
          
          

        

        
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      14.2  Effect
        of Change in Control on Other Awards.
        In the
        event of a Change in Control, the Acquiror may, without the consent of any
        Participant, either assume or continue the Company’s rights and obligations
        under outstanding Awards other than Options or SARs or substitute for such
        Awards substantially equivalent Awards covering the Acquiror’s stock. Any such
        Awards which are neither assumed or continued by the Acquiror in connection
        with
        the Change in Control shall, contingent on the Change in Control, become
        fully
        vested and all restrictions shall be released immediately prior to the Change
        in
        Control. Awards which are assumed or continued in connection with a Change
        in
        Control shall be subject to such additional accelerated vesting or lapse
        of
        restrictions in connection with the Participant’s subsequent termination of
        Service as the Board may determine.

       

      14.3  Nonemployee
        Director Awards.
        Notwithstanding the foregoing, Nonemployee Director Awards shall be subject
        to
        the terms of Section 7, and not this Section 14. 

       

      15.  Compliance
        with Securities Law.

       

      The
        grant
        of Awards and the issuance of shares of Stock pursuant to any Award shall
        be
        subject to compliance with all applicable requirements of federal, state
        and
        foreign law with respect to such securities and the requirements of any stock
        exchange or market system upon which the Stock may then be listed. In addition,
        no Award may be exercised or shares issued pursuant to an Award unless
        (a) a registration statement under the Securities Act shall at the time of
        such exercise or issuance be in effect with respect to the shares issuable
        pursuant to the Award or (b) in the opinion of legal counsel to the
        Company, the shares issuable pursuant to the Award may be issued in accordance
        with the terms of an applicable exemption from the registration requirements
        of
        the Securities Act. The inability of the Company to obtain from any regulatory
        body having jurisdiction the authority, if any, deemed by the Company’s legal
        counsel to be necessary to the lawful issuance and sale of any shares hereunder
        shall relieve the Company of any liability in respect of the failure to issue
        or
        sell such shares as to which such requisite authority shall not have been
        obtained. As a condition to issuance of any Stock, the Company may require
        the
        Participant to satisfy any qualifications that may be necessary or appropriate,
        to evidence compliance with any applicable law or regulation and to make
        any
        representation or warranty with respect thereto as may be requested by the
        Company.

       

      16.  Tax
        Withholding.

       

      16.1  Tax
        Withholding in General.
        The
        Company shall have the right to deduct from any and all payments made under
        the
        Plan, or to require the Participant, through payroll withholding, cash payment
        or otherwise, including by means of a Cashless Exercise or Net Exercise of
        an
        Option, to make adequate provision for, the federal, state, local and foreign
        taxes, if any, required by law to be withheld by the Participating Company
        Group
        with respect to an Award or the shares acquired pursuant thereto. The Company
        shall have no obligation to deliver shares of Stock, to release shares of
        Stock
        from an escrow established pursuant to an Award Agreement, or to make any
        payment in cash under the Plan until the Participating Company Group’s tax
        withholding obligations have been satisfied by the Participant.

       

      16.2  Withholding
        in Shares.
        The
        Company shall have the right, but not the obligation, to deduct from the
        shares
        of Stock issuable to a Participant upon the exercise or

       

      
        
          
          

        

        
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      settlement
        of an Award, or to accept from the Participant the tender of, a number of
        whole
        shares of Stock having a Fair Market Value, as determined by the Company,
        equal
        to all or any part of the tax withholding obligations of the Participating
        Company Group. The Fair Market Value of any shares of Stock withheld or tendered
        to satisfy any such tax withholding obligations shall not exceed the amount
        determined by the applicable minimum statutory withholding rates.

       

      17.  Amendment
        or Termination of Plan.

       

      The
        Board
        or the Committee may amend, suspend or terminate the Plan at any time. However,
        without the approval of the Company’s shareholders, there shall be (a) no
        increase in the maximum aggregate number of shares of Stock that may be issued
        under the Plan (except by operation of the provisions of Section 4.2),
        (b) no change in the class of persons eligible to receive Incentive Stock
        Options, and (c)  no other amendment of the Plan that would require
        approval of the Company’s shareholders under any applicable law, regulation or
        rule. Notwithstanding the foregoing, only the Board may amend Section 7. No
        amendment, suspension or termination of the Plan shall affect any then
        outstanding Award unless expressly provided by the Board or the Committee.
        In
        any event, no amendment, suspension or termination of the Plan may adversely
        affect any then outstanding Award without the consent of the Participant
        unless
        necessary to comply with any applicable law, regulation or rule.

       

      18.  Miscellaneous
        Provisions.

       

      18.1  Repurchase
        Rights.
        Shares
        issued under the Plan may be subject to one or more repurchase options, or
        other
        conditions and restrictions as determined by the Committee in its discretion
        at
        the time the Award is granted. The Company shall have the right to assign
        at any
        time any repurchase right it may have, whether or not such right is then
        exercisable, to one or more persons as may be selected by the Company. Upon
        request by the Company, each Participant shall execute any agreement evidencing
        such transfer restrictions prior to the receipt of shares of Stock hereunder
        and
        shall promptly present to the Company any and all certificates representing
        shares of Stock acquired hereunder for the placement on such certificates
        of
        appropriate legends evidencing any such transfer restrictions.

       

      18.2  Provision
        of Information.
        Each
        Participant shall be given access to information concerning the Company
        equivalent to that information generally made available to the Company’s common
        shareholders.

       

      18.3  Rights
        as Employee, Consultant or Director.
        No
        person, even though eligible pursuant to Section 5,
        shall
        have a right to be selected as a Participant, or, having been so selected,
        to be
        selected again as a Participant. Nothing in the Plan or any Award granted
        under
        the Plan shall confer on any Participant a right to remain an Employee,
        Consultant or Director or interfere with or limit in any way any right of
        a
        Participating Company to terminate the Participant’s Service at any time. To the
        extent that an Employee of a Participating Company other than the Company
        receives an Award under the Plan, that Award shall in no event be understood
        or
        interpreted to mean that the Company is the Employee’s employer or that the
        Employee has an employment relationship with the Company.

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      18.4  Rights
        as a Shareholder.
        A
        Participant shall have no rights as a shareholder with respect to any shares
        covered by an Award until the date of the issuance of such shares (as evidenced
        by the appropriate entry on the books of the Company or of a duly authorized
        transfer agent of the Company). No adjustment shall be made for dividends,
        distributions or other rights for which the record date is prior to the date
        such shares are issued, except as provided in Section 4.2
        or
        another provision of the Plan.

       

      18.5  Fractional
        Shares.
        The
        Company shall not be required to issue fractional shares upon the exercise
        or
        settlement of any Award.

       

      18.6  Severability.
        If any
        one or more of the provisions (or any part thereof) of this Plan shall be
        held
        invalid, illegal or unenforceable in any respect, such provision shall be
        modified so as to make it valid, legal and enforceable, and the validity,
        legality and enforceability of the remaining provisions (or any part thereof)
        of
        the Plan shall not in any way be affected or impaired thereby.

       

      18.7  Beneficiary
        Designation.
        Subject
        to local laws and procedures, each Participant may file with the Company
        a
        written designation of a beneficiary who is to receive any benefit under
        the
        Plan to which the Participant is entitled in the event of such Participant’s
        death before he or she receives any or all of such benefit. Each designation
        will revoke all prior designations by the same Participant, shall be in a
        form
        prescribed by the Company, and will be effective only when filed by the
        Participant in writing with the Company during the Participant’s lifetime. If a
        married Participant designates a beneficiary other than the Participant’s
        spouse, the effectiveness of such designation may be subject to the consent
        of
        the Participant’s spouse. If a Participant dies without an effective designation
        of a beneficiary who is living at the time of the Participant’s death, the
        Company will pay any remaining unpaid benefits to the Participant’s legal
        representative.

       

      18.8  Unfunded
        Obligation.
        Participants shall have the status of general unsecured creditors of the
        Company. Any amounts payable to Participants pursuant to the Plan shall be
        unfunded and unsecured obligations for all purposes, including, without
        limitation, Title I of the Employee Retirement Income Security Act of 1974.
        No Participating Company shall be required to segregate any monies from its
        general funds, or to create any trusts, or establish any special accounts
        with
        respect to such obligations. The Company shall retain at all times beneficial
        ownership of any investments, including trust investments, which the Company
        may
        make to fulfill its payment obligations hereunder. Any investments or the
        creation or maintenance of any trust or any Participant account shall not
        create
        or constitute a trust or fiduciary relationship between the Committee or
        any
        Participating Company and a Participant, or otherwise create any vested or
        beneficial interest in any Participant or the Participant’s creditors in any
        assets of any Participating Company. The Participants shall have no claim
        against any Participating Company for any changes in the value of any assets
        which may be invested or reinvested by the Company with respect to the Plan.
        Each Participating Company shall be responsible for making benefit payments
        pursuant to the Plan on behalf of its Participants or for reimbursing the
        Company for the cost of such payments, as determined by the Company in its
        sole
        discretion. In the event the respective Participating Company fails to make
        such
        payment or reimbursement, a Participant’s (or other individual’s) sole recourse
        shall be against the respective Participating Company, and

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

      not
        against the Company. A Participant’s acceptance of an Award pursuant to the Plan
        shall constitute agreement with this provision.

       

      18.9  Choice
        of Law.
        Except
        to the extent governed by applicable federal law, the validity, interpretation,
        construction and performance of the Plan and each Award Agreement shall be
        governed by the laws of the State of California, without regard to its conflict
        of law rules.

       

      

      

      
        
          
          

          
          

        

        
          32

          
            

          

        

        
          
          

          
          

        

      

      PLAN
        HISTORY AND NOTES TO COMPANY

      

      
        	
                December 15,
                  2004

                 

              	
                Board
                  adopts Plan with a reserve of 12 million shares.

                 

              
	
                April
                  20, 2005

                 

              	
                Shareholders
                  approve Plan.

                 

              
	
                January
                  1, 2006

                 

              	
                Plan
                  Effective Date

                 

              
	
                February
                  15, 2006

                 

              	
                Change
                  in control provisions are amendedPG&E Corporation Executive Stock Ownership Program Guidelines

    Exhibit
      10.46

       

      	 	
              PG&E
                CORPORATION

            

      	 	
              EXECUTIVE
                STOCK OWNERSHIP PROGRAM

            

      

      Administrative
        Guidelines

      (As
        amended February 15, 2006)

       

      	1.  	
              Description.
                The Executive Stock Ownership Program (“Program”) was approved by the
                Nominating and Compensation Committee of the Board of Directors on
                October
                15, 1997. The Program is an important element of the Committee’s
                compensation policy of aligning executive interests with those of
                the
                Corporation’s shareholders. As an integral part of the Program, the
                Committee also authorized the use of Special Incentive Stock Ownership
                Premiums (“SISOPs”) which are designed to provide incentives to Eligible
                Executives to assist in achieving minimum stock ownership targets
                established by the Committee. These Guidelines were originally adopted
                by
                the Committee on November 19, 1997, amended by the Committee on July
                22,
                1998, October 21, 1998, February 16, 2000, September 19, 2000, February
                19, 2003, and February 15, 2006. These amended Guidelines, along
                with the
                written materials provided to the Committee on October 15, 1997,
                describe
                the Program which became effective on January 1, 1998. The Program
                is
                administered by the Corporation’s Senior Human Resources
                Officer.

            

       

      	2.  	
              Eligible
                Executives.
                The Chief Executive Officer shall designate the officers of the
                Corporation and its affiliates who shall be Eligible Executives covered
                by
                the Program. The officers covered by the Guidelines and the applicable
                total stock ownership target (“Target”) are:

            

       

      
        	
                 

                Officer
                  Band

                 

              	
                 

                Position

                 

              	
                 

                Total
                  Stock

                Ownership
                  Target

                 

              
	
                 

                1

                 

              	
                 

                CEO

                 

              	
                 

                3
                  x
                  base salary

                 

              
	
                 

                2

                 

              	
                 

                Heads
                  of Business Lines, CFO, & General Counsel

                 

              	
                 

                2
                  x
                  base salary

                 

              
	
                 

                3

                 

              	
                 

                SVPs
                  of Corp. & Utility

                 

              	
                 

                1.5
                  x base salary

                 

              

      

       

      	3.  	
              Annual
                Milestones.
                Under the Guidelines, Targets are designed to be achieved by the
                end of
                the fifth calendar year following the calendar year in which an officer
                first becomes an Eligible Executive (“Target Date”). Annual Milestones
                have been established as a means of measuring progress towards achieving
                Targets and of providing incentives for Eligible Executives to
                expeditiously meet their Targets. The Annual Milestone at the end
                of the
                first full calendar year is 20 percent of the Target, and the Annual
                Milestone for each succeeding year is an additional 20 percent of
                the
                Target. Annual Milestones shall be adjusted to reflect changes in
                base
                salary; provided, however, that in each instance any such modification
                shall be amortized over the remaining original five-year term. Following
                the Target Date, Targets also shall be modified to reflect changes
                in base
                salary. 

            

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      	4.  	
              Calculation
                of Stock Ownership Levels.
                Stock ownership level is the dollar value of stock and stock equivalents
                owned by an Eligible Executive and calculated as of the last day
                of the
                calendar year (“Measurement Date”). The purpose of this calculation is to
                determine the value of the stock or stock equivalents owned by the
                Eligible Executive as compared with the Annual Milestone or Target
                for
                that executive. For purposes of this calculation, the value per share
                of
                stock or stock equivalent ("Measurement Value") is the average closing
                price of PG&E Corporation common stock as traded on the New York Stock
                Exchange for the last thirty (30) trading days of the
                year.

            

       

      	a)  	
              The
                value of stock beneficially owned by the Eligible Executive is determined
                by multiplying the number of shares owned beneficially on the Measurement
                Date times the Measurement Value.

            

       

      	b)  	
              The
                value of PG&E Corporation phantom stock units credited to the Eligible
                Executive's account in the PG&E Corporation Supplemental Retirement
                Savings Plan (“SRSP”) is determined by multiplying the number of phantom
                stock units credited to the Eligible Executive's SRSP account on
                the
                Measurement Date times the Measurement
                Value.

            

       

      	c)  	
              The
                value of stock held in the PG&E Corporation stock fund of any defined
                contribution plan maintained by PG&E Corporation or any of its
                subsidiaries is determined by multiplying the number of shares in
                such
                plan on the Measurement Date times the Measurement
                Value.

            

       

      	d)  	
              The
                value of restricted stock held by the Eligible Executive is determined
                by
                multiplying the number of shares held by the Eligible Executive on
                the
                Measurement Date times the Measurement Value (for purposes of this
                calculation, restricted stock shall include any shares that have
                been
                approved by the Nominating, Compensation and Governance Committee
                but not
                yet issued as of the Measurement Date).

            

       

      	e)  	
              For
                Eligible Executive’s whose Target Date is on or before 12/31/2004, the
                value of the frozen share-equivalent units of the vested "in the
                money"
                stock options as of 12/31/2000 is the difference between the number
                of
                options on 12/31/2000 multiplied by the Measurement Value on 12/31/2000
                minus the number of options on 12/31/2000 multiplied by the option
                exercise price (for purposes of this calculation, any value attributable
                to dividend equivalents is excluded). 

            

       

      	5.  	
              Award
                of SISOPs.
                SISOPs are awarded to Eligible Executives who achieve and maintain
                stock
                ownership levels prior to the end of the third year following the
                year in
                which an officer first became an Eligible Executive. For purposes
                of
                determining awards, the total stock ownership level is calculated
                as set
                forth under paragraph 4 on the Measurement Date; however, such
                calculations will exclude the value of restricted stock held by the
                Eligible Executive as defined in paragraph 4(d). The amount of a
                SISOP
                award shall be equal to:

            

       

      	a)  	
              For
                the first year, 20 percent of the amount of the Eligible Executive’s stock
                ownership level at the end of the year, up to the Annual Milestone,
                plus
                an additional 30 percent of the amount by which the stock ownership
                level
                exceeds the Annual Milestone up to the Target;
                and

            

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      	b)  	
              For
                each of the second and third years, the current stock ownership level
                is
                reduced by the stock ownership level used to calculate previous SISOP
                awards to determine the new ownership, then 20 percent of the amount
                up to
                the Annual Milestone by which the end of the year stock ownership
                level
                exceeds the beginning of the year stock ownership level, plus an
                additional 30 percent of the amount by which the end of the year
                balance
                exceeds the Annual Milestone, up to the
                Target.

            

       

      Each
        time
        a SISOP award calculation is made, a second calculation also is made to
        determine the minimum number of shares which must be retained by the Eligible
        Executive to avoid forfeiture of the SISOP award ("Minimum Ownership Level")
        as
        discussed below in paragraph 8. This calculation converts the dollar value
        of
        the stock ownership level used as the basis for qualifying for SISOPs into
        a
        number of shares of stock by dividing that stock ownership level by the
        Measurement Value. Thus, for example, if an Eligible Executive's stock ownership
        level (less restricted stock held) was $250,000 and the Measurement Value
        was
        $25 per share, then the Minimum Ownership Level would be 10,000
        shares.

       

      For
        purposes of this calculation, the maximum share ownership level used is the
        Eligible Executive's Target. If an Eligible Executive has a share ownership
        level higher than his/her Target, the increment over the Target is not included.
        Thus, for example, if an Eligible Executive has a Target of $750,000 and
        his/her
        share ownership level is $900,000, then only $750,000 is used to calculate
        the
        Minimum Ownership Level.

       

      	6.  	
              SISOPs
                Credited to the SRSP.
                Upon award, SISOPs are credited to the Eligible Executive's SRSP
                account
                and converted into units of phantom stock each equal in value to
                a share
                of PG&E Corporation common stock ("SISOP units") as determined in
                accordance with the SRSP. The SISOP units constitute "incentive awards"
                authorized to be awarded by the Committee to Eligible Executives
                under the
                PG&E Corporation 2006 Long-Term Incentive Plan ("2006 LTIP"). Upon
                credit of SISOP units to an Eligible Executive's SRSP account, an
                equal
                number of shares of PG&E Corporation common stock shall be reserved
                for issuance from the pool of shares authorized for issuance under
                the
                2006 LTIP. Once a SISOP unit is credited to the Eligible Executive's
                SRSP
                account, it shall be subject to all of the terms and conditions
                specifically applicable to SISOP units under the SRSP. Once vested
                in
                accordance with paragraph 7 below, SISOP units are distributed in
                the form
                of an equal number of shares of PG&E Corporation common stock as
                provided in the SRSP. 

            

       

      	7.  	
              Vesting.
                SISOPs vest only upon the expiration of three years after the date
                of
                award (provided the Eligible Executive continues to be employed on
                such
                date). An Eligible Executive's unvested SISOPs will be forfeited
                upon
                termination of employment except as otherwise provided in the Vesting
                Guidelines in effect on the grant date for a particular award.
                

            

       

      	8.  	
              Forfeiture
                of SISOP Units.
                So long as SISOP units remain unvested, such units are subject to
                forfeiture if, on each Measurement Date, the Eligible Executive's
                stock
                ownership is less than the Minimum Ownership Level established when
                the
                SISOPs were granted (see paragraph 5). To determine forfeiture, the
                following steps are followed on each Measurement
                Date:

            

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      	a)  	
              The
                total stock and stock equivalents owned by an Eligible Executive
                is
                determined as set forth under paragraph 4, excluding section 4(d).
                This
                total ("Current Holdings") is compared with the Minimum Ownership
                Level
                determined when the SISOPs were granted. If the Current Holdings
                are equal
                to or greater than the Minimum Ownership Level, then no unvested
                SISOP
                units are forfeited. If the Current Holdings are less than the Minimum
                Ownership Level, then the unvested SISOP units are forfeited in the
                same
                proportion as the Current Holdings are less than Minimum Ownership
                Level
                (for example, if the Current Holdings are 20 percent less than the
                Minimum
                Ownership Level, then 20 percent of the SISOP units are
                forfeited).

            

       

      	9.  	
              Failure
                to Achieve or Maintain Target.
                Failure to achieve stock ownership levels at Target on the Target
                Date, or
                to maintain stock ownership levels at Target on any Measurement Date
                thereafter, will result in the deferral into the PG&E Corporation
                Phantom Stock Fund of the SRSP of awards from the PG&E Corporation
                Long-Term Incentive Program and/or 2006 LTIP that are settled only
                in cash
                (“Cash-Settled Awards”), and the Short-Term Incentive Plan (“STIP”). As of
                any Measurement Date, to the extent that stock ownership levels are
                below
                Target, Cash-Settled Awards shall be converted into PG&E Corporation
                Phantom Stock Units and held in the PG&E Corporation Phantom Stock
                Fund of the SRSP. If, with the addition of the phantom stock units
                attributable to the Cash-Settled Awards, the stock ownership level
                is
                still below Target for any Measurement Date, any STIP award above
                target
                STIP also shall be converted into phantom stock units, to the extent
                necessary to achieve the Target stock ownership level. Such conversion
                of
                Cash-Settled Awards and STIP awards shall continue for successive
                Measurement Dates, if necessary, until Target is met. Phantom stock
                units
                attributable to Cash-Settled Awards and STIP awards described in
                this
                paragraph 9 will be paid from the SRSP in a lump sum in the seventh
                month
                following the month in which the Eligible Executive's employment
                terminates. 

            

      

      
        
           

        

        
          4

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