Document:

exv10w2

 

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

BETWEEN AND AMONG

JEFFERIES GROUP, INC.

AS ISSUER,

AND

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY AND

C.M. LIFE INSURANCE COMPANY,

AS PURCHASERS

Dated as of February 17, 2006

 

 

     REGISTRATION RIGHTS AGREEMENT, dated February 17, 2006 (this “Agreement”), between Jefferies
Group, Inc., a corporation incorporated under the laws of the State of Delaware (the “Company”),
and Massachusetts Mutual Life Insurance Company and C.M. Life Insurance Company, as the Purchasers
(the “Purchasers”), under the Purchase Agreement dated February 17, 2006 between the Company and
the Purchasers, as amended from time to time (the “Purchase Agreement”). In order to induce the
Purchasers to enter into the Purchase Agreement, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution of this Agreement is a condition to the closing
under the Purchase Agreement.

     The Company agrees with the Purchasers, (i) for the benefit of the Purchasers, as Purchasers,
and (ii) for the benefit of the beneficial owners from time to time of the Underlying Common Stock
(as defined herein) issuable upon conversion of the Convertible Preferred Stock (each of the
foregoing a “Holder” and together the “Holders”), as follows:

     Section 1. Definitions. Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:

     “Affiliate” means with respect to any specified person, an “affiliate,” as defined in Rule
144 (as in effect on the date hereof), of such person.

     “Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day
on which banking institutions in the City of New York are authorized or obligated by law or
executive order to close.

     “Certificate
of Designations” means the Certificate of Designations,
dated as of February 17,
2006 setting forth the powers, designations, preferences and relative, participating,
optional or other rights, if any, or the qualifications, limitations or restrictions of the
Convertible Preferred Stock.

     “Common Stock” means the shares of common stock, $.0001 par value, of the Company, and any
other securities as may constitute “Common Stock” for purposes of the Certificate of
Designations, including the Underlying Common Stock.

     “Convertible Preferred Stock” means the 3.25% Series A Cumulative Convertible Preferred
Stock, par value $.0001 per share, of the Company that has the powers, designations,
preferences and relative, participating, optional or other rights, if any, or the
qualifications, limitations or restrictions set forth in the Certificate of Designations in
respect thereof adopted in accordance with the provisions of the Amended and Restated
Certificate of Incorporation of the Company as in effect on the date hereof.

     “Damages Accrual Period” has the meaning set forth in Section 2(g) hereof.

     “Damages Payment Date” means each Dividend Payment Date specified in the Certificate of
Designations.

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     “Deferral Notice” has the meaning set forth in Section 3(g) hereof.

     “Deferral Period” has the meaning set forth in Section 3(g) hereof.

     “Effectiveness Deadline Date” has the meaning set forth in Section 2(b) hereof.

     “Effectiveness Period” means the period commencing on the date the Initial Shelf
Registration Statement is declared effective by the SEC and ending on the date that all
Registrable Securities have ceased to be Registrable Securities.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the SEC promulgated thereunder.

     “Existing Shelf Registration Statement” has the meaning set forth in Section 2(a) hereof.

     “Filing Deadline Date” has the meaning set forth in Section 2(a) hereof.

     “Holder” has the meaning set forth in the second paragraph of this Agreement.

     “Initial Shelf Registration Statement” has the meaning set forth in Section 2(a)
hereof.

     “Issue Date” means the first date of original issuance of the Convertible Preferred Stock.

     “Liquidated Damages” has the meaning set forth in Section 2(g) hereof.

     “Losses” has the meaning set forth in Section 6(d) hereof.

     “Material Event” has the meaning set forth in Section 3(g) hereof.

     “New York Court” has the meaning set forth in Section 7(l) hereof.

     “Notice and Questionnaire” means a written notice delivered to the Company containing
substantially the information called for by the notice and questionnaire attached hereto as
Exhibit A.

     “Notice Holder” means, on any date, any Holder that has delivered a completed and signed
Notice and Questionnaire to the Company on or prior to such date.

     “Periodic Report” means a Current Report on Form 8-K, a Quarterly Report on Form 10-Q or an
Annual Report on Form 10-K (together with any required prospectus supplement) which the
Company files, pursuant to Rule 430B(d) under the Securities Act, to provide information
omitted from a Prospectus pursuant to Rule 430B(b) or to amend any such information
previously provided.

     “Prospectus” means the prospectus forming part of a Registration Statement and any
prospectus supplement thereo (including, without limitation, a prospectus or prospectus
supplement that discloses information previously omitted from a prospectus filed as part of
any effective Registration Statement in reliance upon Rule 430B under the Securities

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     Act), and all materials incorporated by reference or explicitly deemed to be incorporated by
reference in such Prospectus.

     “Purchase Agreement” has the meaning set forth in the preamble hereof.

     “Purchasers” has the meaning set forth in the preamble to this Agreement.

     “Record Date” has the meaning assigned to such term in the Certificate of Designations.

     “Record Holder” means with respect to any Damages Payment Date relating to Underlying Common
Stock as to which any such Liquidated Damages have accrued, the registered holder of such
Underlying Common Stock or the Convertible Preferred Stock which is convertible into such
Underlying Common Stock.

     “Registrable Securities ” means the Underlying Common Stock and any securities into or for
which such Underlying Common Stock has been converted or exchanged, and any security issued
with respect thereto upon any stock dividend, split, reclassification or similar event
until, in the case of any such security, (A) the earliest of (i) its effective registration
under the Securities Act and resale in accordance with the Registration Statement covering
it, (ii) expiration of the holding period that would be applicable thereto under Rule 144(k)
to a sale by a non-Affiliate of the Company or (iii) its sale to the public pursuant to Rule
144 (or any similar provision then in force, but not Rule 144A) under the Securities Act,
and (B) as a result of the event or circumstance described in any of the foregoing clauses
(A)(i) through (iii), the legend with respect to transfer restrictions required by the
Certificate of Designations is removed or removable in accordance with the terms of the
Certificate of Designations or such legend, as the case may be.

     “Registration Default” has the meaning set forth in Section 2(g) hereof.

     “Registration Expenses” has the meaning set forth in Section 5 hereof.

     “Registration Statement” means a registration statement of the Company that covers any of
the Registrable Securities pursuant to the provisions of this Agreement including any
post-effective amendment thereto, all exhibits, and all materials incorporated by reference
or explicitly deemed to be incorporated by reference in such registration statement.

     “Requesting Holders” has the meaning set forth in Section 2(a) hereof.

     “Rule 144” means Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or any successor or similar rule or regulation hereafter adopted by the SEC.

     “Rule 144A” means Rule 144A under the Securities Act, as such Rule may be amended from time
to time, or any successor or similar rule or regulation hereafter adopted by the SEC.

     “SEC” means the Securities and Exchange Commission.

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     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations
promulgated by the SEC thereunder.

     “Shelf Registration Statement” means a Registration Statement for an offering to be made on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act.

     “Subsequent Shelf Registration Statement” has the meaning set forth in Section 2(d)
hereof.

     “Underlying Common Stock” means the Common Stock into which the Convertible Preferred
Stock is convertible or that is issued upon any such conversion.

Section 2. Shelf Registration.

          (a) No later than the 45th day (the “Filing Deadline Date”) after the receipt by the Company
of a request from the Holders of at least 20% of the outstanding Registrable Securities to register
their Registrable Securities (the “Requesting Holders”), the Company shall file with the SEC either
(a) an amendment to an effective Shelf Registration Statement (an “Existing Shelf Registration
Statement”), a Prospectus supplement or a Periodic Report, or (b) a Shelf Registration Statement
(an “Initial Shelf Registration Statement”) covering the resale from time to time of the
Registrable Securities held by the Holders making the registration request and containing the
information required by the Securities Act with respect to such Registrable Securities and such
Holders, including the method of distribution of such Registrable Securities selected by such
Holders.

          (b) The Company shall use its reasonable best efforts to cause any amendment to an Existing
Shelf Registration Statement or any Initial Shelf Registration Statement it files pursuant to
Section 2(a) to be declared effective under the Securities Act as promptly as is practicable but in
any event by the date (the “Effectiveness Deadline Date”) that is 135 days after the Filing
Deadline Date.

          (c) The Company shall use its reasonable best efforts to keep the Existing Shelf Registration
Statement or the Initial Shelf Registration Statement (or any Subsequent Shelf Registration
Statement) continuously effective under the Securities Act and available for the resale of the
Registrable Securities until the Registrable Securities covered thereby cease to be Registrable
Securities. Each Requesting Holder that became a Notice Holder at least ten (10) Business Days
prior to the of effectiveness of any amendment to an Existing Shelf Registration Statement filed
pursuant to Section 2(a) or of any Initial Shelf Registration Statement or the date of filing of
any Prospectus supplement or Periodic Report shall be named as a selling securityholder in the
relevant Prospectus in such a manner as to permit such Requesting Holder to deliver such Prospectus
to purchasers of Registrable Securities in accordance with applicable law.

          (d) If an Existing Shelf Registration Statement, an Initial Shelf Registration Statement or
any Subsequent Shelf Registration Statement covering Registrable Securities ceases to be effective
for any reason at any time while such Registrable Securities are Registrable Securities (other than
because all Registrable Securities registered thereunder shall have been resold pursuant thereto or
shall have otherwise ceased to be Registrable Securities), the Company

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shall use its best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 30 days of such cessation of effectiveness
amend the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of
the order suspending the effectiveness thereof, or file an additional Shelf Registration Statement
covering the securities that as of the date of such filing are Registrable Securities (a
“Subsequent Shelf Registration Statement”). If a Subsequent Shelf Registration Statement is filed,
the Company shall use its commercially reasonable best efforts to cause the Subsequent Shelf
Registration Statement to become effective as promptly as is practicable after such filing and to
keep such Shelf Registration Statement (or any subsequent Shelf Registration Statement)
continuously effective and available for the resale of the Registrable Securities until the
Registrable Securities covered thereby cease to be Registrable Securities.

          (e) The Company shall not be required to comply with Section 2(a) more than three times.

          (f) Following the date that, pursuant to Section 2(a) and 2(b) any Initial Shelf Registration
Statement is declared effective, an amendment to an Existing Shelf Registration Statement is
declared effective or a Prospectus supplement or Periodic Report is filed, each Holder that is not
a Notice Holder who wishes to sell Registrable Securities pursuant to a Shelf Registration
Statement and related Prospectus shall deliver a Notice and Questionnaire to the Company prior to
any intended distribution by it of Registrable Securities under the Shelf Registration Statement.
The Company shall, as promptly as practicable after the date a Notice and Questionnaire is
delivered, and in any event upon the later of (x) ten (10) Business Days after such date or (y) ten
(10) Business Days after the expiration of any Deferral Period in effect when the Notice and
Questionnaire is delivered or put into effect within ten (10) Business Days of such delivery date:

     (i) if permitted by applicable law, prepare and file with the SEC (i) a
post-effective amendment to the Shelf Registration Statement, (ii) a supplement to
the Prospectus forming part of the Shelf Registration Statement, or (iii) a
Periodic Report, so that the Holder delivering such Notice and Questionnaire is able
to sell its Registrable Securities under the Shelf Registration Statement and its
related Prospectus. If the Company elects to file a post-effective amendment to the
Shelf Registration Statement, it shall use its commercially reasonable best efforts
to cause such post-effective amendment to be declared effective under the Securities
Act as promptly as is practicable; provided that the Company shall not be obligated
to file more than one post-effective amendment, one Prospectus or Prospectus
supplement or one Periodic Report in any three month period;

     (ii) provide such Holder copies of any documents filed pursuant to Section
2(f)(i); and

     (iii) notify such Holder as promptly as practicable after the effectiveness
under the Securities Act of any post-effective amendment filed pursuant to Section
2(f)(i);

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provided that if such Notice and Questionnaire is delivered during a Deferral Period, the Company
shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set
forth in clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in accordance
with this Section 2(f) and Section 3(g) of this Agreement. Notwithstanding anything contained
herein to the contrary, the Company shall be under no obligation to name any Holder that is not a
Notice Holder as a selling securityholder in any Registration Statement or Prospectus.

          (g) The parties hereto agree that the Holders of Registrable Securities will suffer damages,
and that it would not be feasible to ascertain the extent of such damages with precision, if

     (i) a Prospectus, an Initial Shelf Registration Statement or a Periodic Report
has not been filed on or prior to the Filing Deadline Date,

     (ii) an Initial Shelf Registration Statement, if filed, has not been declared
effective under the Securities Act on or prior to the Effectiveness Deadline Date
(and, prior to such date a Prospectus related to an Existing Shelf Registration
Statement or a Periodic Report covering the Registrable Securities sought to be
registered on the Initial Shelf Registration Statement, has not been filed),

     (iii) the Company has failed to perform its obligations set forth in Section
2(f) within the time period required therein,

     (iv) the aggregate duration of Deferral Periods in any period exceeds the
number of days permitted in respect of such period pursuant to Section 3(g) hereof,
or

     (v) the number of Deferral Periods in any period exceeds the number permitted
in respect of such period pursuant to Section 3(g) hereof.

Each event described in any of the foregoing clauses (i) through (v) is individually referred to
herein as a “Registration Default.” For purposes of this Agreement, each Registration Default set
forth above shall begin on the dates set forth in the table set forth below and shall continue
until the ending dates set forth in the table below:

	 	 	 	 	 
	Type of	 	 	 	 
	Registration	 	 	 	 
	Default by Clause	 	Beginning Date	 	Ending Date
	(i)

	 	Filing Deadline Date
	 	the date a
Prospectus or
Prospectus
supplement, a
Periodic Report or
an Initial Shelf
Registration
Statement is filed
	 
	 	 	 	 
	(ii)

	 	Effectiveness Deadline Date
	 	the date the
Initial Shelf
Registration

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	Type of	 	 	 	 
	Registration	 	 	 	 
	Default by Clause	 	Beginning Date	 	Ending Date
	 

	 	 	 	Statement becomes
effective under the
Securities Act or a
Prospectus or a
Periodic Report in
lieu thereof is
filed
	 
	 	 	 	 
	(iii)

	 	the date by which the
Company is required to
perform its obligations
set forth in Section 2(f)
	 	the date the
Company performs
its obligations
under Section 2(f)
	 
	 	 	 	 
	(iv)

	 	the date on which the
aggregate duration of
Deferral Periods in any
period exceeds the number
of days permitted by
Section 3(g)
	 	termination of the
Deferral Period
that caused the
limit on the
aggregate duration
of Deferral Periods
to exceed the
number of days
permitted pursuant
to Section 3(g)
	 
	 	 	 	 
	(v)

	 	the date of commencement
of a Deferral Period that
causes the number of
Deferral Periods to exceed
the number permitted by
Section 3(g)
	 	termination of the
Deferral Period
that caused the
number of Deferral
Periods to exceed
the number
permitted

Commencing on (and including) any date that a Registration Default has begun and ending on (but
excluding) the next date on which there are no Registration Defaults that have occurred and are
continuing (a “Damages Accrual Period”), the Company shall pay, as liquidated damages and not as a
penalty, to Record Holders of the Registrable Securities affected by the Registration Default an
amount (the “Liquidated Damages”) accruing, for each day in the Damages Accrual Period, in respect
of each share of Underlying Common Stock (which is a Registrable Security affected by such
Registration Default) at a rate of 0.25% per annum (based upon a 365 day year) of the Conversion
Price, as such term is set forth in the Certificate of Designations, in effect on the first day of
any such period to and including the 30th day following the date on which any such Registration
Default shall occur and 0.50% per annum of the Conversion Price, as such term is set forth in the
Certificate of Designations, in effect on the first day of any such period from and after the 31st
day following the date on which any such Registration Default shall occur, but excluding the date
on which all Registration Defaults have been cured. Notwithstanding the foregoing, no Liquidated
Damages (i) shall be payable to any Record Holder that has not delivered a Current Notice and
Questionnaire to the Company; or (ii) shall accrue as to any Registrable Security from and after
the date such security ceases to be a Registrable Security. The rate of accumulation of the
Liquidated Damages with respect to any period shall not exceed the rate provided for in this
paragraph notwithstanding the occurrence of multiple concurrent Registration Defaults.

Liquidated Damages shall cumulate from the first day of the applicable Damages Accrual Period, and
shall be payable in cash on each Damages Payment Date during the Damages Accrual Period to the
Record Holder of the Registrable Securities affected by the Registration Default on the Record Date
immediately preceding the applicable Damages Payment Date (and on the Damages Payment Date next
succeeding the end of the Damages Accrual Period if the Damages Accrual Period does not end on a
Damages Payment Date) to the Record Holders of the Registrable Securities affected by the
Registration Default as of the date that such Damages Accrual Period ends. Notwithstanding
anything to the contrary in this Agreement, the parties agree that the sole

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damages payable for a violation of the terms of this Agreement with respect to which Liquidated
Damages are expressly provided shall be such Liquidated Damages.

All of the Company’s obligations set forth in this Section 2(g) that are outstanding with respect
to any Registrable Security at the time such security ceases to be a Registrable Security shall
survive until such time as all such obligations with respect to such security have been satisfied
in full (notwithstanding termination of this Agreement pursuant to Section 7(k)).

The parties agree that the Liquidated Damages provided for in this Section 2(g) constitute a
reasonable estimate of the damages that may be incurred by Holders of Registrable Securities by
reason of a Registration Default affecting such Registrable Securities.

     Section 3. Registration Procedures. In connection with the registration obligations of the
Company under Section 2 hereof, the Company shall:

          (a) Prepare and file with the SEC a Prospectus or Prospectus supplement or a Periodic Report
in respect of an Existing Shelf Registration Statement or an Initial Shelf Registration Statement
on an appropriate form under the Securities Act available for the sale of the Registrable
Securities by the Requesting Holders thereof in accordance with the intended method or methods of
distribution thereof, and use its reasonable best efforts to cause any such Initial Shelf
Registration Statement or Existing Shelf Registration Statement to become effective and remain
effective as provided herein; provided that before filing any Initial Shelf Registration Statement
or any Prospectus or any amendments or supplements thereto with the SEC, furnish to the Holders
copies of all such documents proposed to be filed for their review.

          (b) Prepare and file with the SEC such amendments, post-effective amendments and prospectus
supplements to each Registration Statement as may be necessary to keep such Registration Statement
continuously effective and available for the resale of the Registrable Securities for the
applicable period specified in Sections 2(c); cause any Prospectus to be supplemented by any
required prospectus supplement or a Periodic Report and to make any required filing of a Prospectus
supplement pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act;
and use its commercially reasonable best efforts to comply with the provisions of the Securities
Act applicable to it with respect to the disposition of all securities covered by such Registration
Statement during the Effectiveness Period in accordance with the intended methods of disposition by
the sellers thereof set forth in such Registration Statement as so amended or such Prospectus as so
supplemented.

          (c) As promptly as practicable give notice to the Notice Holders (i) when any Prospectus,
Prospectus supplement, Periodic Report, Registration Statement or post-effective amendment to a
Registration Statement has been filed with the SEC and, with respect to a Registration Statement or
any post-effective amendment, when the same has been declared effective, (ii) of any request,
following the effectiveness of a Registration Statement under the Securities Act by the SEC or any
other federal or state governmental authority for an amendment to any Registration Statement or a
supplement to Prospectus, (iii) of the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of any Registration Statement
or the initiation of any proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or

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exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or
the initiation of any proceeding for such purpose, (v) of the occurrence of a Material Event, and
(vi) of the determination by the Company that a post-effective amendment to a Registration
Statement will be filed with the SEC, which notice, at the discretion of the Company (or as
required pursuant to Section 3(g)), may state that it constitutes a Deferral Notice, in which event
the provisions of Section 3(g) shall apply.

          (d) Use its reasonable best efforts to obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement or the lifting of any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction in
which they have been qualified for sale, in either case at the earliest possible moment, and
provide immediate notice to each Notice Holder and the Purchasers of the withdrawal of any such
order.

          (e) Deliver to each Notice Holder in connection with any sale of such Notice Holder’s
Registrable Securities, as many copies of the Prospectus relating to such Registrable Securities
(including each preliminary prospectus) and any amendment or supplement thereto as such Notice
Holder may reasonably request. The Company hereby consents (except during such periods that a
Deferral Notice is outstanding and has not been revoked) to the use of such Prospectus or each
amendment or supplement thereto by each Notice Holder in connection with any offering and sale of
the Registrable Securities covered by such Prospectus or any amendment or supplement thereto in the
manner set forth therein.

          (f) Prior to any public offering of the Registrable Securities pursuant to a Registration
Statement, use its commercially reasonable best efforts (i) to register or qualify or cooperate
with the Notice Holders in connection with the registration or qualification (or exemption from
such registration or qualification) of such Notice Holder’s Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the United States as any
Notice Holder reasonably requests in writing (which request may be included in the Notice and
Questionnaire); and (ii) to keep each such registration or qualification (or exemption therefrom)
effective during the period of the Notice Holder’s offer and sale of their Registrable Securities
pursuant to such registration or qualification (or exemption therefrom); provided that the Company
will not be required to (i) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but for this Agreement or (ii)
take any action that would subject it to general service of process in suits or to taxation in any
such jurisdiction where it is not then so subject.

          (g) Upon (A) the issuance by the SEC of a stop order suspending the effectiveness of any
Registration Statement or the initiation of proceedings with respect to any Registration Statement
under Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of any event or the existence
of any fact (a “Material Event”) as a result of which any Registration Statement shall contain any
untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or any Prospectus shall contain
any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or (C) the occurrence or pending corporate development that, in the
reasonable discretion of the Company based on consultation

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with its counsel, makes it appropriate to suspend the availability of the Shelf Registration
Statement and the related Prospectus for a period of time:

     (i) in the case of clause (B) above, subject to clause (ii) below, as promptly
as practicable prepare and file, if necessary pursuant to applicable law, a
post-effective amendment to such Registration Statement or a supplement to the
related Prospectus or any other required document that would be incorporated by
reference into such Registration Statement and Prospectus so that such Registration
Statement does not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the statements
therein not misleading, and such Prospectus does not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading, as thereafter delivered to the purchasers of
the Registrable Securities being sold thereunder and, in the case of a
post-effective amendment to a Registration Statement, subject to the next sentence,
use its commercially reasonable best efforts to cause it to be declared effective as
promptly as is practicable, and

     (ii) give notice to the Notice Holders that the availability of the
Registration Statement is suspended (a “Deferral Notice”) and, upon receipt of any
Deferral Notice, each Notice Holder agrees not to sell any Registrable Securities
pursuant to the Registration Statement until such Notice Holder’s receipt of copies
of a supplemented or amended Prospectus, or until it is advised in writing by the
Company that the Prospectus may be used, and has received copies of any additional
or supplemental filings that are incorporated or deemed incorporated by reference in
such Prospectus.

The Company will use its commercially reasonable best efforts to ensure that the use of the
Prospectus may be resumed (x) in the case of clause (A) above, as promptly as is practicable, (y)
in the case of clause (B) above, as soon as, in the reasonable judgment of the Company, public
disclosure of such Material Event would not be prejudicial to or contrary to the interests of the
Company or, if necessary to avoid unreasonable burden or expense, as soon as practicable thereafter
and (z) in the case of clause (C) above, as soon as in the reasonable discretion of the Company,
such suspension is no longer appropriate. The Company shall be entitled to exercise its right
under this Section 3(g) to suspend the availability of a Registration Statement or a Prospectus,
without incurring or accruing any obligation to pay Liquidated Damages pursuant to Section 2(g), no
more than one (1) time in any three month period or four (4) times in any twelve month period, and
any such period during which the availability of the Registration Statement and any Prospectus is
suspended (the “Deferral Period”) shall, without incurring any obligation to pay Liquidated Damages
pursuant to Section 2(g), not to exceed 30 days in any three month period or 60 days in any 360 day
period.

          (h) Cooperate with each Notice Holder to facilitate the timely preparation and delivery of
certificates representing Registrable Securities sold or to be sold pursuant to a Registration
Statement, and cause such Registrable Securities to be in such denominations and

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registered in such names as such Notice Holder may request in writing at least three (3) Business
Days prior to any sale of such Registrable Securities.

          (i) Cooperate and assist in any filings required to be made with the New York Stock Exchange.

Nothing in this Agreement shall be deemed to require the Company to facilitate or participate in
any underwritten offering of any Registrable Securities by any Notice Holder or, in connection with
any such underwritten offering, to enter into any underwriting agreement or to provide any
auditor’s “comfort letters” or any opinions of counsel to any Notice Holder or underwriter.

     Section 4. Holder’s Obligations. Each Holder agrees, by acquisition of the Registrable
Securities, that no Holder shall be entitled to sell any of such Registrable Securities pursuant to
a Registration Statement or to receive a Prospectus relating thereto, unless such Holder has
furnished the Company with a Notice and Questionnaire as required pursuant to Section 2(f) hereof
(including the information required to be included in such Notice and Questionnaire) and the
information set forth in the next sentence. Each Notice Holder agrees promptly to furnish to the
Company all information required to be disclosed in order to make the information previously
furnished to the Company by such Notice Holder not incomplete or misleading and any other
information regarding such Notice Holder and the distribution of such Registrable Securities as the
Company may from time to time reasonably request. Any sale of any Registrable Securities by any
Holder shall constitute a representation and warranty by such Holder that the information relating
to such Holder and its plan of distribution is as set forth in the Prospectus delivered by such
Holder in connection with such disposition, that such Prospectus does not as of the time of such
sale contain any untrue statement of a material fact relating to or provided by such Holder or its
plan of distribution and that such Prospectus does not as of the time of such sale omit to state
any material fact relating to or provided by such Holder or its plan of distribution necessary to
make the statements in such Prospectus, in the light of the circumstances under which they were
made, not misleading.

     Section 5. Registration Expenses. The Company shall bear all fees and expenses incurred
directly or indirectly in connection with the performance by the Company of its obligations under
Sections 2 and 3 of this Agreement (the “Registration Expenses”) whether or not any Registration
Statement is declared effective. Such fees and expenses shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses (x) with respect to
filings required to be made with the New York Stock Exchange and (y) with the SEC and otherwise
relating to compliance with federal and state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications
of the Registrable Securities under the laws of such jurisdictions in the United States as the
Notice Holders of a majority of the Registrable Securities being sold pursuant to a Registration
Statement may designate), (ii) printer’s expenses (including, without limitation, expenses of
reproduction of the Registration Statements and the Prospectus and the filing by EDGAR of any
Registration Statement, Prospectus, Prospectus supplement or Periodic Report), (iii) fees and
disbursements of counsel for the Company and of counsel to the Holders, in each case in connection
with any Registration Statements, Prospectus or Periodic Report, (iv) fees and disbursements of the
transfer agent, and (v) fees and

12

 

disbursements of the independent certified public accountants whose consent is required to be
filed as an exhibit to any Registration Statement.

Section 6. Indemnification.

          (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each
Holder of Registrable Securities covered by a Registration Statement, the directors, officers,
employees, Affiliates and agents of each such Holder and each person who controls any such Holder
within the meaning of either the Securities Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or other federal or state statutory law or regulation,
at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any violation by the Company of the provisions of
the Securities Act or any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or in any amendment thereof, in each case at the time such became
effective under the Securities Act, or in any Prospectus, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements therein (in the
case of any Prospectus, in the light of the circumstances under which they were made) not
misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by it in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability arises out of or is
based upon any such untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information furnished to the Company
by or on behalf of any Holder specifically for inclusion therein.

          The Company also agrees to indemnify as provided in this Section 6(a) against, or contribute
as provided in Section 6(d) hereof to Losses of each person who may be deemed to be an underwriter
of Registrable Securities registered under the Registration Statement (pursuant to the last
sentence of Section 2 (11) of the Securities Act), its directors, officers, employees, Affiliates
or agents and each person who controls such underwriter on substantially the same basis as that of
the indemnification of the Holders provided in this paragraph (a).

          (b) Indemnification by Holders. Each Holder of securities covered by the Registration
Statement, severally and not jointly agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers who signs the Registration Statement and each person who controls
the Company within the meaning of either the Securities Act or the Exchange Act, to the same extent
as the foregoing indemnity from the Company to each such Holder, but only with reference to written
information relating to such Holder furnished to the Company by or on behalf of such Holder
specifically for inclusion in the documents referred to in the foregoing indemnity.

          (c) Conduct of Indemnification Proceedings. Promptly after receipt by an indemnified party
under this Section 6 or notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party

13

 

under this Section 6, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from liability under
paragraph (a) or (b) above unless such failure results in the forfeiture by the indemnifying party
of substantial rights and defenses or otherwise materially prejudices the indemnifying party; and
(ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel (including local counsel) of the
indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party
in any action for which indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel, other than local
counsel if not appointed by the indemnifying party, retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be reasonably satisfactory
to the indemnified party. Notwithstanding the indemnifying party’s election to appoint counsel
(including local counsel) to represent the indemnified party in an action, the indemnified parties
shall have the right to employ one separate counsel (and one local counsel), and the indemnifying
parties shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use
of counsel chosen by the indemnifying party to represent the indemnified parties would present such
counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any
such action include both the indemnified party and the indemnifying party and the indemnified
parties shall have reasonably concluded that there may be legal defenses available to them that are
different from or additional to those available to the indemnifying party; (iii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified parties to
represent them within a reasonable time after notice of the institution of such action; or (iv) the
indemnifying party shall authorize the indemnified parties to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not, without the prior written
consent of the indemnified parties (which shall not be unreasonably delayed or refused), settle or
compromise or consent to the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or proceeding. No
indemnified party shall consent to any settlement or compromise without the prior written consent
of the indemnifying party, which shall not be unreasonably delayed or refused.

          (d) Contribution. In the event that the indemnity provided in paragraph (a) or (b) of this
Section 6 is unavailable to or insufficient to hold harmless an indemnified party for any reason,
then each applicable indemnifying party shall have a joint and several obligation to contribute to
the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending loss, claim, liability, damage or action)
(collectively “Losses”) to which such indemnified party may be subject in such proportion as is
appropriate to reflect the relative benefits received by such indemnifying party, on the one hand,
and such indemnified party, on the other hand, from the registration and sale of the Underlying
Common Stock pursuant to the Registration Statement which resulted in such Losses; provided,
however, that in no case shall the Holders be responsible, in the aggregate, for any amount in
excess of the amount, net of any discount or commission, received by them from their respective
sales of such Underlying Common Stock. If the allocation

14

 

provided by the immediately preceding sentence is unavailable for any reason, the indemnifying
party and the indemnified party shall contribute in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of such indemnifying party, on the one
hand, and such indemnified party, on the other hand, in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds from the issuance and
sale of the Convertible Preferred Stock which was converted into the Underlying Common Stock sold
under the Registration Statement; benefits received by the Holders shall be deemed to be equal to
the proceeds received from the sale of their Underlying Common Stock under the Registration
Statement. Relative fault shall be determined by reference to, among other things, whether any
untrue or any alleged untrue statement of a material fact or omission or alleged omission to state
a material fact relates to information provided by the indemnifying party, on the one hand, or by
the indemnified party, on the other hand, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such untrue statement or omission. The
parties agree that it would not be just and equitable if contribution were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or any other method of
allocation which does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 6, each person who controls a Holder within the meaning of either the Securities
Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have
the same rights to contribution as such Holder, and each person who controls the Company within the
meaning of either the Securities Act or the Exchange Act, each officer of the Company who shall
have signed the Registration Statement and each director of the Company shall have the same rights
to contribution as the Company, subject in each case to the applicable terms and conditions of this
paragraph (d).

          (e) Continuing Effect. The provisions of this Section 6 shall remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of
the indemnified persons referred to in this Section 6, and shall survive the sale by a Holder of
Registrable Securities covered by the Registration Statement.

     Section 7. Miscellaneous.

          (a) No Conflicting Agreements. The Company hereby represents and warrants to each Holder that
it is not, as of the date hereof, a party to, and agrees that it shall not, on or after the date of
this Agreement, enter into, any agreement with respect to its securities that conflicts with the
rights granted to the Holders in this Agreement. The Company further represents and warrants that
the rights granted to the Holders hereunder do not in any way conflict with the rights granted to
the holders of the Company’s securities under any other agreements.

          (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the Company has obtained the written consent of
Holders of a majority of the then outstanding Underlying

15

 

Common Stock constituting Registrable Securities (with Holders of Convertible Preferred Stock
deemed to be the Holders, for purposes of this Section, of the number of outstanding shares of
Underlying Common Stock into which such Convertible Preferred Stock is or would be convertible as
of the date on which such consent is requested). Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders whose securities are being sold pursuant to a Registration Statement and that
does not directly or indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities being sold by such Holders pursuant to such
Registration Statement; provided, that the provisions of this sentence may not be amended, modified
or supplemented except in accordance with the provisions of the immediately preceding sentence.
Each Holder of Registrable Securities outstanding at the time of any such amendment, modification,
supplement, waiver or consent or thereafter shall be bound by any such amendment, modification,
supplement, waiver or consent effected pursuant to this Section 7(b), whether or not any notice,
writing or marking indicating such amendment, modification, supplement, waiver or consent appears
on the Registrable Securities or is delivered to such Holder.

          (c) Notices. All notices and other communications provided for or permitted hereunder shall
be made in writing by hand delivery, by telecopier, by courier guaranteeing overnight delivery or
by first-class mail, return receipt requested, and shall be deemed given (i) when made, if made by
hand delivery, (ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after
being deposited with such courier, if made by overnight courier or (iv) on the date indicated on
the notice of receipt, if made by first-class mail, to the parties as follows:

     (i) if to the Company, at its address set forth in the Purchase Agreement; and

     (ii) if to the Holders, at their addresses set forth in Purchase Agreement or,
if not so set forth, in the the stock register for the Convertible Preferred Stock
or the Underlying Common Stock, as appropriate.

          (d) Approval of Holders. Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable Securities held by the
Company or its subsidiaries (as such term is defined in Rule 405 under the Securities Act) or
Affiliates (as such term is defined in Rule 144) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.

          (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon
the permitted successors and assigns of each of the parties and shall inure to the benefit of and
be binding upon each Holder.

          (f) Counterparts. This Agreement may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be deemed to be
original and all of which taken together shall constitute one and the same agreement.

16

 

          (g) Headings. The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.

          (h) Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.

          (i) Severability. If any term, provision, covenant or restriction of this Agreement is held
to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, and the parties hereto shall use their commercially
reasonable best efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision, covenant or
restriction, it being intended that all of the rights and privileges of the parties shall be
enforceable to the fullest extent permitted by law.

          (j) Entire Agreement. This Agreement is intended by the parties as a final expression of
their agreement and is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained herein and the
registration rights granted by the Company with respect to the Registrable Securities. Except as
provided in the Purchase Agreement, there are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein, with respect to the registration
rights granted by the Company with respect to the Registrable Securities. This Agreement
supersedes all prior agreements and undertakings among the parties with respect to such
registration rights. No party hereto shall have any rights, duties or obligations other than those
specifically set forth in this Agreement.

          (k) Termination. This Agreement and the obligations of the parties hereunder shall terminate
upon the end of the Effectiveness Period, except for any liabilities or obligations under Sections
4, 5 or 6 hereof and the obligations to make payments of and provide for Liquidated Damages under
Section 2(g) hereof to the extent such damages cumulate prior to the end of the Effectiveness
Period, each of which shall remain in effect in accordance with its terms.

          (l) Submission to Jurisdiction. Each of the parties hereto irrevocably (i) agrees that any
legal suit, action or proceeding arising out of or based upon this Agreement or the transactions
contemplated hereby may be instituted in any state or federal court located in The City, County and
State of New York (each a “New York Court”), (ii) waives, to the fullest extent it may effectively
do so, any objection which it may now or hereafter have to the laying of venue of any such
proceeding and (iii) submits to the exclusive jurisdiction of such courts in any such suit, action
or proceeding. The Company expressly consents to the jurisdiction of any New York Court in respect
of any such action, and waives any other requirements of or objections to personal jurisdiction
with respect thereto.

[Signature page follows.]

17

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	JEFFERIES GROUP, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Joseph A. Schenk
 

	 	 
	 

	 	 	 	Name:
	 	Joseph A. Schenk	 	 
	 

	 	 	 	Title:
	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 	 	 
	Confirmed and accepted as of the date first above written:	 	 
	 
	 	 	 	 	 	 	 	 
	MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY	 	 
	By:	 	Babson Capital Management LLC, as Investment Adviser	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Richard E. Spencer, II 

	 	 
	Name:
	 	Richard E. Spencer, II	 	 
	Title:
	 	Managing Director	 	 
	 
	 	 	 	 	 	 	 	 
	C.M. LIFE INSURANCE COMPANY	 	 
	By:	 	Babson Capital Management LLC, as Investment Sub-Adviser	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Richard E. Spencer, II 

	 	 
	Name:
	 	Richard E. Spencer, II	 	 
	Title:
	 	Managing Director	 	 

18

 

EXHIBIT
A

FORM OF SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE

The undersigned beneficial holder of Common Stock of the Jefferies Group, Inc. (the “Company”), par
value $0.0001 per share (the “Registrable Securities”), understands that the Company has filed or
intends to file with the SEC a registration statement (the “Shelf Registration Statement”) for the
registration and resale under Rule 415 of the Securities Act of 1933, as amended, of the
Registrable Securities in accordance with the terms of the Registration Rights Agreement, dated as
of February      , 2006 (the “Registration Rights Agreement”), among the Company and the Purchasers
named therein. A copy of the Registration Rights Agreement is available from the Company upon
request at the address set forth below. All capitalized terms not otherwise defined herein shall
have the meaning ascribed thereto in the Registration Rights Agreement.

Each beneficial owner of Registrable Securities is entitled to the benefits of the Registration
Rights Agreement. In order to sell or otherwise dispose of any Registrable Securities pursuant to
the Shelf Registration Statement, a beneficial owner of Registrable Securities generally will be
required to be named as a selling Securityholder in the related prospectus, deliver a prospectus to
purchasers of Registrable Securities and be bound by those provisions of the Registration Rights
Agreement applicable to such beneficial owner (including certain indemnification provisions as
described below). Beneficial owners are encouraged to complete and deliver this Notice and
Questionnaire prior to the effectiveness of the Shelf Registration Statement so that such
beneficial owners may be named as selling Securityholders in the related prospectus at the time of
effectiveness.

Certain legal consequences arise from being named as selling Securityholders in the Shelf
Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel regarding the
consequences of being named or not being named as a selling Securityholder in the Shelf
Registration Statement and the related prospectus.

Notice

The undersigned beneficial owner (the “Selling Securityholder”) of Registrable Securities hereby
gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities
beneficially owned by it and listed below in Item 3(b) pursuant to the Shelf Registration
Statement. The undersigned, by signing and returning this Notice and Questionnaire, understands
that it will be bound by the terms and conditions of this Notice and Questionnaire and the
Registration Rights Agreement.

The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate and complete:

19

 

QUESTIONNAIRE

	 	 	 	 	 
	1.

	 	(a)
	 	Full Legal Name of Selling Securityholder:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	(b)
	 	Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities listed in Item (3) below are held:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	(c)
	 	Full Legal Name of DTC Participant (if applicable and if not the same as (b) above)
through which Registrable Securities listed in Item (3) below are held:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	2.

	 	 	 	Address for Notices to Selling Securityholder:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Telephone:
	 
	 	 	 	 
	Fax:
	 
	 	 	 	 
	Email address:
	 
	 	 	 	 
	Contact Person:
	 
	 	 	 	 
	3.

	 	Beneficial Ownership of Registrable Securities:
	 
	 	 	Except as set forth below in this Item (3), the undersigned Selling Securityholder does not
beneficially own any Securities or shares of Common Stock issued upon conversion, repurchase or
redemption of any Securities.
	 
	 	 	 	 
	 	 	(a) Principal amount of all Registrable Securities (as defined in the Registration Rights
Agreement) beneficially owned:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	CUSIP No(s). of such Registrable Securities:
	 
	 	 	 	 
	 

	 	 	 	 

20

 

	 	 	 	 	 
	 

	 	(b)
	 	Principal amount of the Registrable Securities which the undersigned wishes to be included
	 	 	in the Shelf Registration Statement:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	CUSIP No(s). of such Registrable Securities to be included in the Shelf Registration
Statement:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	4.

	 	 	 	Beneficial Ownership of other Company Securities owned by the Selling Securityholder:
	 
	 	 	 	 
	 	 	Except as set forth below in this Item (4), the undersigned is not the beneficial or registered
owner of any securities of other than the Registrable Securities listed above in Item (3).
	 
	 	 	 	 
	 

	 	(a)
	 	Type and amount of other securities beneficially owned by the Selling Securityholder:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	(b)	 	CUSIP No(s). of such other Securities beneficially owned:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	5.

	 	 	 	Relationship with the Company:
	 
	 	 	 	 
	 	 	Except as set forth below, neither the undersigned nor any of its affiliates, directors or
principal equity holders (5% or more) has held any position or office or has had any other
material relationship with the Company (or its predecessors or affiliates) during the past three
years.
	 
	 	 	 	 
	 	 	State any exceptions here:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

21

 

	 	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

	 	 	 	 	 
	6.

	 	 	 	Nature of the Selling Securityholder:
	 
	 	 	 	 
	 

	 	(a)
	 	Is the Selling Securityholder a reporting company under the Securities Exchange Act, a majority owned subsidiary of a reporting company under the Securities Exchange Act, or a
registered investment company under the Investment Company Act, and if so, please state which
one.
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	If the entity is a majority owned subsidiary of a reporting company, identify the majority stockholder that is a reporting company.
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	If the entity is not any of the above, identify the natural person or persons having voting
and investment control over the Company’s securities that the entity owns.
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	(b)
	 	Is the Selling Securityholder a registered broker-dealer?
	 
	 	 	 	 
	 

	 	 	 	[  ] Yes*     [  ] No
	 
	 	 	 	 
	State whether the Selling Securityholder received the Registrable Securities as compensation for
underwriting activities and, if so, provide a brief description of the transaction(s) involved.
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	State whether the Selling Securityholder is an affiliate of a broker-dealer and if so, list the
name(s) of the broker-dealer affiliate(s).
	 
	 	 	 	 
	 

	 	 	 	[  ] Yes*      [  ] No

22

 

	 	 	 	 	 
	 

	 	 	 	* If the answer is “Yes” to either question above, you must answer both the
following questions:
	 
	 	 	 	 
	Were the Registrable Securities purchased in the ordinary course of business?
	 
	 	 	 	 
	 

	 	 	 	[  ] Yes     [  ] No
	 
	 	 	 	 
	At the time of the purchase of the Registrable Securities, did the Selling Securityholder have any
agreements or understandings, directly or indirectly, with any person to distribute the Registrable
Securities.
	 
	 	 	 	 
	 

	 	 	 	[  ] Yes**     [  ] No
	 
	 	 	 	 
	 

	 	 	 	** If the answer is “Yes,” please describe such agreements or understandings:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 
	 	 	 	 
	7.

	 	 	 	Plan of Distribution:
	 
	 	 	 	 
	 	 	Except as set forth below, the undersigned (including its donees or pledgees) intends to
distribute the Registrable Securities listed above in Item (3) pursuant to the Shelf
Registration Statement only as follows (if at all): such Registrable Securities may be sold from
time to time directly by the undersigned or alternatively through underwriters, broker-dealers
or agents. If the Registrable Securities are sold through underwriters, broker-dealers or
agents, the Selling Securityholder will be responsible for underwriting discounts, fees and
commissions or agent’s commissions. Such Registrable Securities may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices
determined at the time of sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve crosses or block transactions) (i) on any national securities
exchange or quotation service on which the Registrable Securities may be listed or quoted at the
time of sale, (ii) in the over-the-counter market or (iii) in transactions otherwise than on
such exchanges or services or in the over-the-counter market. The Selling Securityholder may
pledge or grant a security interest in some or all of the Registrable Securities owned by it
and, if it defaults in the performance of its secured obligations, the pledgees or secured
parties may offer and sell the Registrable Securities from time to time pursuant to the
prospectus. The Selling Securityholder also may transfer and donate shares in other
circumstances in which case the transferees, donees, pledgees or other successors in interest
will be the selling Securityholder for purposes of the prospectus.
	 
	 	 	 	 
	 	 	State any exceptions here:
	 
	 	 	 	 
	 

	 	 	 	 

23

 

	 	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 

Note: In no event may such method(s) of distribution take the form of an underwritten offering
of the Registrable Securities without the prior agreement of the Company.

     The undersigned acknowledges that it understands its obligation to comply with the
provisions of the Securities Exchange Act of 1934, as amended, and the rules thereunder relating to
stock manipulation, particularly Regulation M thereunder (or any successor rules or regulations),
in connection with any offering of Registrable Securities pursuant to the Shelf Registration
Statement. The undersigned agrees that neither it nor any person acting on its behalf will engage
in any transaction in violation of such provisions.

     The Selling Securityholder hereby acknowledges its obligations under the Registration Rights
Agreement to indemnify and hold harmless certain persons set forth therein.

     Pursuant to the Registration Rights Agreement, the Company has agreed under certain
circumstances to indemnify the Selling Securityholders against certain liabilities.

     The undersigned understands that the Securities and Exchange Commission may require further
information about the undersigned and its affiliates and its and their respective officers,
directors, employers and owners as a condition of registering the Registrable Securities of the
undersigned.

     In accordance with the undersigned’s obligation under the Registration Rights Agreement to
provide such information as may be required by law for inclusion in the Shelf Registration
Statement, the undersigned agrees to provide any additional information the Company may reasonably
request and to promptly notify the Company of any inaccuracies or changes in the information
provided that may occur at any time while the Shelf Registration Statement remains effective. All
notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing by
hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows:

	 	 	 	 	 	 	 
	 

	 	(i)
	 	To the Company:
	 	Jefferies Group, Inc.
	 

	 	 	 	 	 	520 Madison Avenue
	 

	 	 	 	 	 	12th Floor
	 

	 	 	 	 	 	New York, NY 10022
	 

	 	 	 	 	 	Attention: General Counsel
	 
	 	 	 	 	 	 
	 

	 	(ii)
	 	With a copy to:
	 	Morgan, Lewis & Bockius LLP
	 

	 	 	 	 	 	101 Park Avenue
	 

	 	 	 	 	 	New York, NY 10178
	 

	 	 	 	 	 	Attention: Stephen P. Farrell, Esq.

24

 

     In the event any Selling Securityholder transfers all or any portion of the Registrable
Securities listed in Item 3 above after the date on which such information is provided to the
Company, the Selling Securityholder will notify the transferee(s) at the time of transfer of its
rights and obligations under this Notice and Questionnaire and the Registration Rights Agreement.

     By signing this Notice and Questionnaire, the undersigned consents to the disclosure of the
information contained herein in its answers to items (1) through (7) above and the inclusion of
such information in the Shelf Registration Statement, the related prospectus and any state
securities or Blue Sky applications. The undersigned understands that such information will be
relied upon by the Company without independent investigation or inquiry in connection with the
preparation or amendment of the Shelf Registration Statement, the related prospectus and any state
securities or Blue Sky applications.

     Once this Notice and Questionnaire is executed by the Selling Securityholder and received by
the Company, the terms of this Notice and Questionnaire and the representations and warranties
contained herein shall be binding on, shall inure to the benefit of, and shall be enforceable by
the respective successors, heirs, personal representatives and assigns of the Company and the
Selling Securityholder with respect to the Registrable Securities beneficially owned by such
Selling Securityholder and listed in Item (3) above. This Notice and Questionnaire shall be
governed by, and construed in accordance with the laws of the State of New York without regard to
the conflicts-of-laws provisions thereof.

     IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its authorized agent.

	 	 	 	 	 
	Dated:
	 	 	 	 
	 	 	Beneficial Owner:
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

Please return the completed and executed notice and questionnaire to:

Jefferies Group, Inc.

  520 Madison Avenue

12th
Floor                

   New York, NY 10022

Attention: Investor Relations

25exv10w2

 

EXHIBIT 10.2

EAGLE TEST SYSTEMS, INC.

2006 STOCK OPTION AND INCENTIVE PLAN

SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS

     The name of the plan is the Eagle Test Systems, Inc. 2006 Stock Option and Incentive Plan (the
“Plan”). The purpose of the Plan is to encourage and enable the officers, employees, Non-Employee
Directors and other key persons (including consultants and prospective employees) of Eagle Test
Systems, Inc. (the “Company”) and its Subsidiaries upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a direct stake in the
Company’s welfare will assure a closer identification of their interests with those of the Company
and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening
their desire to remain with the Company.

     The following terms shall be defined as set forth below:

     “Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

     “Administrator” is defined in Section 2(a).

     “Award” or “Awards,” except where referring to a particular category of grant under the Plan,
shall include Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Deferred Stock Awards, Restricted Stock Awards, Unrestricted Stock Awards and Dividend Equivalent
Rights.

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

     “Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and
related rules, regulations and interpretations.

     “Committee” means the compensation committee of the Board or a similar committee performing
the functions of the compensation committee and which is comprised of not less than two
Non-Employee Directors who are independent.

     “Covered Employee” means an employee who is a “Covered Employee” within the meaning of Section
162(m) of the Code.

     “Deferred Stock Award” means Awards granted pursuant to Section 8.

     “Dividend Equivalent Right” means Awards granted pursuant to Section 11.

 

 

     “Effective Date” means the date on which the Plan is approved by stockholders as set forth in
Section 19.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.

     “Fair Market Value” of the Stock on any given date means the fair market value of the Stock
determined in good faith by the Administrator; provided, however, that if the Stock is admitted to
quotation on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”),
NASDAQ National System or a national securities exchange, the determination shall be made by
reference to market quotations. If there are no market quotations for such date, the determination
shall be made by reference to the last date preceding such date for which there are market
quotations; provided further, however, that if the date for which Fair Market Value is determined
is the first day when trading prices for the Stock are reported on NASDAQ or on a national
securities exchange, the Fair Market Value shall be the “Price to the Public” (or equivalent) set
forth on the cover page for the final prospectus relating to the Company’s Initial Public Offering.

     “Incentive Stock Option” means any Stock Option designated and qualified as an “incentive
stock option” as defined in Section 422 of the Code.

     “Initial Public Offering” means the consummation of the first fully underwritten, firm
commitment public offering pursuant to an effective registration statement under the Act covering
the offer and sale by the Company of its equity securities, or such other event as a result of or
following which the Stock shall be publicly held.

     “Non-Employee Director” means a member of the Board who is not also an employee of the Company
or any Subsidiary.

     “Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.

     “Option” or “Stock Option” means any option to purchase shares of Stock granted pursuant to
Section 5.

     “Performance Cycle” means one or more periods of time, which may be of varying and overlapping
durations, as the Administrator may select, over which the attainment of one or more performance
criteria will be measured for the purpose of determining a grantee’s right to and the payment of a
Restricted Stock Award or Deferred Stock Award.

     “Restricted Stock Award” means Awards granted pursuant to Section 7.

     “Section 409A” means Section 409A of the Code and the regulations and other guidance
promulgated thereunder.

     “Stock” means the Common Stock, par value $0.01 per share, of the Company, subject to
adjustments pursuant to Section 3.

2

 

     “Stock Appreciation Right” means any Award granted pursuant to Section 6.

     “Subsidiary” means any corporation or other entity (other than the Company) in which the
Company has a controlling interest, either directly or indirectly.

     “Ten Percent Owner” means an employee who owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power
of all classes of stock of the Company or any parent or subsidiary corporation.

     “Unrestricted Stock Award” means any Award granted pursuant to Section 9.

			
	SECTION 2.	 ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS

     (a) Committee. The Plan shall be administered by either the Board or the Committee
(the “Administrator”).

     (b) Powers of Administrator. The Administrator shall have the power and authority to
grant Awards consistent with the terms of the Plan, including the power and authority:

          (i) to select the individuals to whom Awards may from time to time be granted;

          (ii) to determine the time or times of grant, and the extent, if any, of Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Deferred
Stock Awards, Unrestricted Stock Awards and Dividend Equivalent Rights, or any combination of the
foregoing, granted to any one or more grantees;

          (iii) to determine the number of shares of Stock to be covered by any Award;

          (iv) to determine and modify from time to time the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions
may differ among individual Awards and grantees, and to approve the form of written instruments
evidencing the Awards;

          (v) to accelerate at any time the exercisability or vesting of all or any portion of any
Award;

          (vi) subject to the provisions of Section 5(a)(ii), to extend at any time the period in which
Stock Options may be exercised; and

          (vii) at any time to adopt, alter and repeal such rules, guidelines and practices for
administration of the Plan and for its own acts and proceedings as it shall deem advisable; to
interpret the terms and provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the administration of the Plan; to
decide all disputes arising in connection with the Plan; and to otherwise supervise the
administration of the Plan.

3

 

     All decisions and interpretations of the Administrator shall be binding on all persons,
including the Company and Plan grantees.

     (c) Delegation of Authority to Grant Awards. The Administrator, in its discretion,
may delegate to the Chief Executive Officer of the Company all or part of the Administrator’s
authority and duties with respect to the granting of Awards, to individuals who are not subject to
the reporting and other provisions of Section 16 of the Exchange Act or Covered Employees. Any
such delegation by the Administrator shall include a limitation as to the amount of Awards that may
be granted during the period of the delegation and shall contain guidelines as to the determination
of the exercise price of any Stock Option or Stock Appreciation Right, the conversion ratio or
price of other Awards and the vesting criteria. The Administrator may revoke or amend the terms of
a delegation at any time but such action shall not invalidate any prior actions of the
Administrator’s delegate or delegates that were consistent with the terms of the Plan.

     (d) Indemnification. Neither the Board nor the Committee, nor any member of either or
any delegate thereof, shall be liable for any act, omission, interpretation, construction or
determination made in good faith in connection with the Plan, and the members of the Board and the
Committee (and any delegate thereof) shall be entitled in all cases to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense (including, without
limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent
permitted by law and/or under any directors’ and officers’ liability insurance coverage which may
be in effect from time to time and/or any indemnification agreement between such individual and the
Company.

SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

     (a) Stock Issuable. The maximum number of shares of Stock reserved and available for
issuance under the Plan shall be 2,600,000 shares, subject to adjustment as provided in Section
3(b); provided that not more than 2,600,000 shares shall be issued in the form of Incentive Stock
Options. For purposes of this limitation, the shares of Stock underlying any Awards that are
forfeited, canceled, held back upon exercise of an Option or settlement of an Award to cover the
exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without
the issuance of Stock or otherwise terminated (other than by exercise) shall be added back to the
shares of Stock available for issuance under the Plan. Subject to such overall limitations, shares
of Stock may be issued up to such maximum number pursuant to any type or types of Award; provided,
however, that Stock Options or Stock Appreciation Rights with respect to no more than 1,100,000
shares of Stock may be granted to any one individual grantee during any one calendar year period.
The shares available for issuance under the Plan may be authorized but unissued shares of Stock or
shares of Stock reacquired by the Company.

     (b) Changes in Stock. Subject to Section 3(c) hereof, if, as a result of any
reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company’s capital stock, the outstanding shares of Stock are
increased or decreased or are exchanged for a different number or kind of shares or other
securities of the Company, or additional shares or new or different shares or other securities of
the Company or other non-cash assets are distributed with respect to such shares of Stock or

4

 

other securities, or, if, as a result of any merger or consolidation, sale of all or
substantially all of the assets of the Company, the outstanding shares of Stock are converted into
or exchanged for a different number or kind of securities of the Company or any successor entity
(or a parent or subsidiary thereof), the Administrator shall make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for issuance under the Plan, including the
maximum number of shares that may be issued in the form of Unrestricted Stock Awards, Restricted
Stock Awards or Deferred Stock Awards, (ii) the number of Stock Options or Stock Appreciation
Rights that can be granted to any one individual grantee and the maximum number of shares that may
be granted under a Performance-based Award, (iii) the number and kind of shares or other securities
subject to any then outstanding Awards under the Plan, (iv) the repurchase price, if any, per share
subject to each outstanding Restricted Stock Award, (v) the number of Stock Options automatically
granted to Non-Employee Directors, and (vi) the price for each share subject to any then
outstanding Stock Options and Stock Appreciation Rights under the Plan, without changing the
aggregate exercise price (i.e., the exercise price multiplied by the number of Stock Options and
Stock Appreciation Rights) as to which such Stock Options and Stock Appreciation Rights remain
exercisable. The adjustment by the Administrator shall be final, binding and conclusive. No
fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but
the Administrator in its discretion may make a cash payment in lieu of fractional shares.

     The Administrator may also adjust the number of shares subject to outstanding Awards and the
exercise price and the terms of outstanding Awards to take into consideration material changes in
accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock
or property or any other event if it is determined by the Administrator that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no such adjustment
shall be made in the case of a Stock Option or Stock Appreciation Right, without the consent of the
grantee, if it would constitute a modification, extension or renewal of the Option within the
meaning of Section 424(h) of the Code.

     (c) Mergers and Other Transactions. In the case of and subject to the consummation of
(i) the dissolution or liquidation of the Company, (ii) the sale of all or substantially all of the
assets of the Company on a consolidated basis to an unrelated person or entity, (iii) a merger,
reorganization or consolidation in which the outstanding shares of Stock are converted into or
exchanged for a different kind of securities of the successor entity and the holders of the
Company’s outstanding voting power immediately prior to such transaction do not own a majority of
the outstanding voting power of the successor entity immediately upon completion of such
transaction, or (iv) the sale of all of the Stock of the Company to an unrelated person or entity
(in each case, a “Sale Event”), all Options and Stock Appreciation Rights that are not exercisable
immediately prior to the effective time of the Sale Event shall become fully exercisable as of the
effective time of the Sale Event and all other Awards shall become fully vested and nonforfeitable
as of the effective time of the Sale Event, except as the Administrator may otherwise specify with
respect to particular Awards in the relevant Award documentation, and Awards with conditions and
restrictions relating to the attainment of performance goals may become vested and nonforfeitable
in connection with a Sale Event in the Administrator’s discretion. Upon the effective time of the
Sale Event, the Plan and all outstanding Awards granted hereunder shall terminate, unless provision
is made in connection with the Sale Event in the sole discretion of the parties thereto for the
assumption or continuation of Awards theretofore

5

 

granted by the successor entity, or the substitution of such Awards with new Awards of the
successor entity or parent thereof, with appropriate adjustment as to the number and kind of shares
and, if appropriate, the per share exercise prices, as such parties shall agree (after taking into
account any acceleration hereunder). In the event of such termination, each grantee shall be
permitted, within a specified period of time prior to the consummation of the Sale Event as
determined by the Administrator, to exercise all outstanding Options and Stock Appreciation Rights
held by such grantee, including those that will become exercisable upon the consummation of the
Sale Event; provided, however, that the exercise of Options and Stock Appreciation Rights not
exercisable prior to the Sale Event shall be subject to the consummation of the Sale Event.

     Notwithstanding anything to the contrary in this Section 3(c), in the event of a Sale Event
pursuant to which holders of the Stock of the Company will receive upon consummation thereof a cash
payment for each share surrendered in the Sale Event, the Company shall have the right, but not the
obligation, to make or provide for a cash payment to the grantees holding Options and Stock
Appreciation Rights, in exchange for the cancellation thereof, in an amount equal to the difference
between (A) the value as determined by the Administrator of the consideration payable per share of
Stock pursuant to the Sale Event (the “Sale Price”) times the number of shares of Stock subject to
outstanding Options and Stock Appreciation Rights (to the extent then exercisable at prices not in
excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding Options and
Stock Appreciation Rights.

     (d) Substitute Awards. The Administrator may grant Awards under the Plan in
substitution for stock and stock based awards held by employees, directors or other key persons of
another corporation in connection with the merger or consolidation of the employing corporation
with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Administrator may direct that the substitute awards be
granted on such terms and conditions as the Administrator considers appropriate in the
circumstances. Any substitute Awards granted under the Plan shall not count against the share
limitation set forth in Section 3(a).

SECTION 4. ELIGIBILITY

     Grantees under the Plan will be such full or part-time officers and other employees,
Non-Employee Directors and key persons (including consultants and prospective employees) of the
Company and its Subsidiaries as are selected from time to time by the Administrator in its sole
discretion.

SECTION 5. STOCK OPTIONS

     Any Stock Option granted under the Plan shall be in such form as the Administrator may from
time to time approve.

     Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified
Stock Options. Incentive Stock Options may be granted only to employees of the Company or any
Subsidiary that is a “subsidiary corporation” within the meaning of

6

 

Section 424(f) of the Code. To the extent that any Option does not qualify as an Incentive
Stock Option, it shall be deemed a Non-Qualified Stock Option.

     (a) Stock Options Granted to Employees and Key Persons. The Administrator in its
discretion may grant Stock Options to eligible employees and key persons of the Company or any
Subsidiary. Stock Options granted pursuant to this Section 5(a) shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not inconsistent with
the terms of the Plan, as the Administrator shall deem desirable. If the Administrator so
determines, Stock Options may be granted in lieu of cash compensation at the optionee’s election,
subject to such terms and conditions as the Administrator may establish.

          (i) Exercise Price. The exercise price per share for the Stock covered by a Stock
Option granted pursuant to this Section 5(a) shall be determined by the Administrator at the time
of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. In
the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the option price of
such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value on the
grant date.

          (ii) Option Term. The term of each Stock Option shall be fixed by the Administrator,
but no Stock Option shall be exercisable more than ten years after the date the Stock Option is
granted. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the term
of such Stock Option shall be no more than five years from the date of grant.

          (iii) Exercisability; Rights of a Stockholder. Stock Options shall become exercisable
at such time or times, whether or not in installments, as shall be determined by the Administrator
at or after the grant date. The Administrator may at any time accelerate the exercisability of all
or any portion of any Stock Option. An optionee shall have the rights of a stockholder only as to
shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.

          (iv) Method of Exercise. Stock Options may be exercised in whole or in part, by
giving written notice of exercise to the Company, specifying the number of shares to be purchased.
Payment of the purchase price may be made by one or more of the following methods to the extent
provided in the Option Award agreement:

          (A) In cash, by certified or bank check or other instrument acceptable to the
Administrator;

          (B) Through the delivery (or attestation to the ownership) of shares of Stock that have
been purchased by the optionee on the open market or that are beneficially owned by the
optionee and are not then subject to restrictions under any Company plan. Such surrendered
            shares shall be valued at Fair Market Value on the exercise date. To the extent required to
avoid variable accounting treatment under FAS 123R or other applicable accounting rules,
such surrendered shares shall have been owned by the optionee for at least six months; or

          (C) By the optionee delivering to the Company a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to

7

 

the Company cash or a check payable and acceptable to the Company for the purchase
price; provided that in the event the optionee chooses to pay the purchase price as so
provided, the optionee and the broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Administrator shall prescribe as a
condition of such payment procedure.

Payment instruments will be received subject to collection. The transfer to the optionee on the
records of the Company or of the transfer agent of the shares of Stock to be purchased pursuant to
the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser
acting in his stead in accordance with the provisions of the Stock Option) by the Company of the
full purchase price for such shares and the fulfillment of any other requirements contained in the
Option Award agreement or applicable provisions of laws (including the satisfaction of any
withholding taxes that the Company is obligated to withhold with respect to the optionee). In the
event an optionee chooses to pay the purchase price by previously-owned shares of Stock through the
attestation method, the number of shares of Stock transferred to the optionee upon the exercise of
the Stock Option shall be net of the number of shares attested to.

          (v) Annual Limit on Incentive Stock Options. To the extent required for “incentive
stock option” treatment under Section 422 of the Code, the aggregate Fair Market Value (determined
as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options
granted under this Plan and any other plan of the Company or its parent and subsidiary corporations
become exercisable for the first time by an optionee during any calendar year shall not exceed
$100,000. To the extent that any Stock Option exceeds this limit, it shall constitute a
Non-Qualified Stock Option.

(b) Stock Options Granted to Non-Employee Directors.

          (i) Automatic Grant of Options.

          (A) Each Non-Employee Director shall be granted, upon his initial election, a
Non-Qualified Stock Option to acquire 20,000 shares of Stock, 10,000 of which shall
immediately vest in full upon grant and 10,000 of which shall vest in equal monthly
installments over the next thirty-six months.

          (B) Each Non-Employee Director who is serving as a Director of the Company on the fifth
business day after each annual meeting of shareholders, beginning with the 2007 annual
meeting, shall automatically be granted on such day a Non-Qualified Stock Option to acquire
5,000 shares of Stock, which shall vest in equal monthly installments over the next
forty-eight months.

          (C) The exercise price per share for the Stock covered by a Stock Option granted under
this Section 5(b) shall be equal to the Fair Market Value of the Stock on the date the Stock
Option is granted.

          (D) The Administrator, in its discretion, may grant additional Non-Qualified Stock
Options to Non-Employee Directors. Any such grant may vary among individual Non-Employee
Directors.

8

 

          (ii) Exercise; Termination.

          (A) An Option issued under this Section 5(b) shall not be exercisable after the
expiration of ten years from the date of grant.

          (B) Options granted under this Section 5(b) may be exercised only by written notice to
the Company specifying the number of shares to be purchased. Payment of the full purchase
price of the shares to be purchased may be made by one or more of the methods specified in
Section 5(a)(iv). An optionee shall have the rights of a stockholder only as to shares
acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.

SECTION 6. STOCK APPRECIATION RIGHTS

     (a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an Award
entitling the recipient to receive shares of Stock having a value equal to the excess of the Fair
Market Value of the Stock on the date of exercise over the exercise price of the Stock Appreciation
Right, which price shall not be less than 100 percent of the Fair Market Value of the Stock on the
date of grant (or more than the option exercise price per share, if the Stock Appreciation Right
was granted in tandem with a Stock Option) multiplied by the number of shares of Stock with respect
to which the Stock Appreciation Right shall have been exercised.

     (b) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be
granted by the Administrator in tandem with, or independently of, any Stock Option granted pursuant
to Section 5 of the Plan. In the case of a Stock Appreciation Right granted in tandem with a
Non-Qualified Stock Option, such Stock Appreciation Right may be granted either at or after the
time of the grant of such Option. In the case of a Stock Appreciation Right granted in tandem with
an Incentive Stock Option, such Stock Appreciation Right may be granted only at the time of the
grant of the Option.

     A Stock Appreciation Right or applicable portion thereof granted in tandem with a Stock Option
shall terminate and no longer be exercisable upon the termination or exercise of the related
Option.

     (c) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights
shall be subject to such terms and conditions as shall be determined from time to time by the
Administrator, subject to the following:

          (i) Stock Appreciation Rights granted in tandem with Options shall be exercisable at such time
or times and to the extent that the related Stock Options shall be exercisable.

          (ii) Upon exercise of a Stock Appreciation Right, the applicable portion of any related Option
shall be surrendered.

9

 

SECTION 7. RESTRICTED STOCK AWARDS

     (a) Nature of Restricted Stock Awards. A Restricted Stock Award is an Award entitling
the recipient to acquire, at such purchase price (which may be zero) as determined by the
Administrator, shares of Stock subject to such restrictions and conditions as the Administrator may
determine at the time of grant (“Restricted Stock”). Conditions may be based on continuing
employment (or other service relationship) and/or achievement of pre-established performance goals
and objectives. The grant of a Restricted Stock Award is contingent on the grantee executing the
Restricted Stock Award agreement. The terms and conditions of each such agreement shall be
determined by the Administrator, and such terms and conditions may differ among individual Awards
and grantees.

     (b) Rights as a Stockholder. Upon execution of a written instrument setting forth the
Restricted Stock Award and payment of any applicable purchase price, a grantee shall have the
rights of a stockholder with respect to the voting of the Restricted Stock, subject to such
conditions contained in the written instrument evidencing the Restricted Stock Award. Unless the
Administrator shall otherwise determine, (i) uncertificated Restricted Stock shall be accompanied
by a notation on the records of the Company or the transfer agent to the effect that they are
subject to forfeiture until such Restricted Stock are vested as provided in Section 7(d) below, and
(ii) certificated Restricted Stock shall remain in the possession of the Company until such
Restricted Stock is vested as provided in Section 7(d) below, and the grantee shall be required, as
a condition of the grant, to deliver to the Company such instruments of transfer as the
Administrator may prescribe.

     (c) Restrictions. Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of except as specifically provided herein or in the Restricted
Stock Award agreement. Except as may otherwise be provided by the Administrator either in the
Award agreement or, subject to Section 16 below, in writing after the Award agreement is issued, if
any, if a grantee’s employment (or other service relationship) with the Company and its
Subsidiaries terminates for any reason, any Restricted Stock that has not vested at the time of
termination shall automatically and without any requirement of notice to such grantee from or other
action by or on behalf of, the Company be deemed to have been reacquired by the Company at its
original purchase price from such grantee or such grantee’s legal representative simultaneously
with such termination of employment (or other service relationship), and thereafter shall cease to
represent any ownership of the Company by the grantee or rights of the grantee as a stockholder.
Following such deemed reacquisition of unvested Restricted Stock that are represented by physical
certificates, a grantee shall surrender such certificates to the Company upon request without
consideration.

     (d) Vesting of Restricted Stock. The Administrator at the time of grant shall specify
the date or dates and/or the attainment of pre-established performance goals, objectives and other
conditions on which the non-transferability of the Restricted Stock and the Company’s right of
repurchase or forfeiture shall lapse. Notwithstanding the foregoing, in the event that any such
Restricted Stock shall have a performance-based goal, the restriction period with respect to such
shares shall not be less than one year, and in the event any such Restricted Stock shall have a
time-based restriction, the total restriction period with respect to such shares shall not be less
than three years; provided, however, that Restricted Stock with a time-based restriction may

10

 

become vested incrementally over such three-year period. Subsequent to such date or dates
and/or the attainment of such pre-established performance goals, objectives and other conditions,
the shares on which all restrictions have lapsed shall no longer be Restricted Stock and shall be
deemed “vested.” Except as may otherwise be provided by the Administrator either in the Award
agreement or, subject to Section 16 below, in writing after the Award agreement is issued, a
grantee’s rights in any shares of Restricted Stock that have not vested shall automatically
terminate upon the grantee’s termination of employment (or other service relationship) with the
Company and its Subsidiaries and such shares shall be subject to the provisions of Section 7(c)
above.

SECTION 8. DEFERRED STOCK AWARDS

     (a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award of phantom
stock units to a grantee, subject to restrictions and conditions as the Administrator may determine
at the time of grant. Conditions may be based on continuing employment (or other service
relationship) and/or achievement of pre-established performance goals and objectives. The grant of
a Deferred Stock Award is contingent on the grantee executing the Deferred Stock Award agreement.
The terms and conditions of each such agreement shall be determined by the Administrator, and such
terms and conditions may differ among individual Awards and grantees. Notwithstanding the
foregoing, in the event that any such Deferred Stock Award shall have a performance-based goal, the
restriction period with respect to such award shall not be less than one year, and in the event any
such Deferred Stock Award shall have a time-based restriction, the total restriction period with
respect to such award shall not be less than three years; provided, however, that any Deferred
Stock Award with a time-based restriction may become vested incrementally over such three-year
period. At the end of the deferral period, the Deferred Stock Award, to the extent vested, shall
be paid to the grantee in the form of shares of Stock.

     (b) Election to Receive Deferred Stock Awards in Lieu of Compensation. The
Administrator may, in its sole discretion, permit a grantee to elect to receive a portion of future
cash compensation otherwise due to such grantee in the form of a Deferred Stock Award. Any such
election shall be made in writing and shall be delivered to the Company no later than the date
specified by the Administrator and in accordance with Section 409A and such other rules and
procedures established by the Administrator. The Administrator shall have the sole right to
determine whether and under what circumstances to permit such elections and to impose such
limitations and other terms and conditions thereon as the Administrator deems appropriate. Any
such deferred compensation shall be converted to a fixed number of phantom stock units based on the
Fair Market Value of Stock on the date the compensation would otherwise have been paid to the
grantee but for the deferral.

     (c) Rights as a Stockholder. During the deferral period, a grantee shall have no
rights as a stockholder; provided, however, that the grantee may be credited with Dividend
Equivalent Rights with respect to the phantom stock units underlying his Deferred Stock Award,
subject to such terms and conditions as the Administrator may determine.

     (d) Termination. Except as may otherwise be provided by the Administrator either in
the Award agreement or, subject to Section 16 below, in writing after the Award agreement is
issued, a grantee’s right in all Deferred Stock Awards that have not vested shall automatically

11

 

terminate upon the grantee’s termination of employment (or cessation of service relationship)
with the Company and its Subsidiaries for any reason.

SECTION 9. UNRESTRICTED STOCK AWARDS

     Grant or Sale of Unrestricted Stock. The Administrator may, in its sole discretion,
grant (or sell at par value or such higher purchase price determined by the Administrator) an
Unrestricted Stock Award to any grantee pursuant to which such grantee may receive shares of Stock
free of any restrictions (“Unrestricted Stock”) under the Plan. Unrestricted Stock Awards may be
granted in respect of past services or other valid consideration, or in lieu of cash compensation
due to such grantee.

SECTION 10. PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES

     Notwithstanding anything to the contrary contained herein, if any Restricted Stock Award or
Deferred Stock Award granted to a Covered Employee is intended to qualify as “Performance-based
Compensation” under Section 162(m) of the Code and the regulations promulgated thereunder (a
“Performance-based Award”), such Award shall comply with the provisions set forth below:

     (a) Performance Criteria. The performance criteria used in performance goals
governing Performance-based Awards granted to Covered Employees may include any or all of the
following: (i) the Company’s return on equity, assets, capital or investment: (ii) pre-tax or
after-tax profit levels of the Company or any Subsidiary, a division, an operating unit or a
business segment of the Company, or any combination of the foregoing; (iii) cash flow, funds from
operations or similar measure; (iv) total stockholder return; (v) changes in the market price of
the Stock; (vi) sales or market share; or (vii) earnings per share.

     (b) Grant of Performance-based Awards. With respect to each Performance-based Award
granted to a Covered Employee, the Committee shall select, within the first 90 days of a
Performance Cycle (or, if shorter, within the maximum period allowed under Section 162(m) of the
Code) the performance criteria for such grant, and the achievement targets with respect to each
performance criterion (including a threshold level of performance below which no amount will become
payable with respect to such Award). Each Performance-based Award will specify the amount payable,
or the formula for determining the amount payable, upon achievement of the various applicable
performance targets. The performance criteria established by the Committee may be (but need not
be) different for each Performance Cycle and different goals may be applicable to Performance-based
Awards to different Covered Employees.

     (c) Payment of Performance-based Awards. Following the completion of a Performance
Cycle, the Committee shall meet to review and certify in writing whether, and to what extent, the
performance criteria for the Performance Cycle have been achieved and, if so, to also calculate and
certify in writing the amount of the Performance-based Awards earned for the Performance Cycle.
The Committee shall then determine the actual size of each Covered Employee’s Performance-based
Award, and, in doing so, may reduce or eliminate the amount of the Performance-based Award for a
Covered Employee if, in its sole judgment, such reduction or elimination is appropriate.

12

 

     (d) Maximum Award Payable. The maximum Performance-based Award payable to any one
Covered Employee under the Plan for a Performance Cycle is 1,100,000 Shares (subject to adjustment
as provided in Section 3(b) hereof).

SECTION 11. DIVIDEND EQUIVALENT RIGHTS

     (a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award entitling the
grantee to receive credits based on cash dividends that would have been paid on the shares of Stock
specified in the Dividend Equivalent Right (or other award to which it relates) if such shares had
been issued to and held by the grantee. A Dividend Equivalent Right may be granted hereunder to
any grantee as a component of another Award or as a freestanding award. The terms and conditions
of Dividend Equivalent Rights shall be specified in the Award agreement. Dividend equivalents
credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional shares of Stock, which may thereafter accrue additional equivalents. Any
such reinvestment shall be at Fair Market Value on the date of reinvestment or such other price as
may then apply under a dividend reinvestment plan sponsored by the Company, if any. Dividend
Equivalent Rights may be settled in cash or shares of Stock or a combination thereof, in a single
installment or installments. A Dividend Equivalent Right granted as a component of another Award
may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or
payment of, or lapse of restrictions on, such other award, and that such Dividend Equivalent Right
shall expire or be forfeited or annulled under the same conditions as such other award. A Dividend
Equivalent Right granted as a component of another Award may also contain terms and conditions
different from such other award.

     (b) Interest Equivalents. Any Award under this Plan that is settled in whole or in
part in cash on a deferred basis may provide in the grant for interest equivalents to be credited
with respect to such cash payment. Interest equivalents may be compounded and shall be paid upon
such terms and conditions as may be specified by the grant.

     (c) Termination. Except as may otherwise be provided by the Administrator either in
the Award agreement or, subject to Section 16 below, in writing after the Award agreement is
issued, a grantee’s rights in all Dividend Equivalent Rights or interest equivalents granted as a
component of another Award that has not vested shall automatically terminate upon the grantee’s
termination of employment (or cessation of service relationship) with the Company and its
Subsidiaries for any reason.

SECTION 12. TRANSFERABILITY OF AWARDS

     (a) Transferability. Except as provided in Section 12(b) below, during a grantee’s
lifetime, his or her Awards shall be exercisable only by the grantee, or by the grantee’s legal
representative or guardian in the event of the grantee’s incapacity. No Awards shall be sold,
assigned, transferred or otherwise encumbered or disposed of by a grantee other than by will or by
the laws of descent and distribution. No Awards shall be subject, in whole or in part, to
attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be
null and void.

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     (b) Committee Action. Notwithstanding Section 12(a), the Administrator, in its
discretion, may provide either in the Award agreement regarding a given Award or by subsequent
written approval that the grantee (who is an employee or director) may transfer his or her Awards
(other than any Incentive Stock Options) to his or her immediate family members, to trusts for the
benefit of such family members, or to partnerships in which such family members are the only
partners, provided that the transferee agrees in writing with the Company to be bound by all of the
terms and conditions of this Plan and the applicable Award.

     (c) Family Member. For purposes of Section 12(b), “family member” shall mean a
grantee’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or sister-in-law, including adoptive relationships, any person sharing the grantee’s household
(other than a tenant of the grantee), a trust in which these persons (or the grantee) have more
than 50 percent of the beneficial interest, a foundation in which these persons (or the grantee)
control the management of assets, and any other entity in which these persons (or the grantee) own
more than 50 percent of the voting interests.

     (d) Designation of Beneficiary. Each grantee to whom an Award has been made under the
Plan may designate a beneficiary or beneficiaries to exercise any Award or receive any payment
under any Award payable on or after the grantee’s death. Any such designation shall be on a form
provided for that purpose by the Administrator and shall not be effective until received by the
Administrator. If no beneficiary has been designated by a deceased grantee, or if the designated
beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate.

SECTION 13. TAX WITHHOLDING

     (a) Payment by Grantee. Each grantee shall, no later than the date as of which the
value of an Award or of any Stock or other amounts received thereunder first becomes includable in
the gross income of the grantee for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any Federal, state, or local
taxes of any kind required by law to be withheld by the Company with respect to such income. The
Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the grantee. The Company’s obligation to
deliver evidence of book entry (or stock certificates) to any grantee is subject to and conditioned
on tax withholding obligations being satisfied by the grantee.

     (b) Payment in Stock. Subject to approval by the Administrator, a grantee may elect
to have the Company’s minimum required tax withholding obligation satisfied, in whole or in part,
by (i) authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award
a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected)
that would satisfy the withholding amount due, or (ii) transferring to the Company shares of Stock
owned by the grantee with an aggregate Fair Market Value (as of the date the withholding is
effected) that would satisfy the withholding amount due.

14

 

			
	SECTION 14.	 ADDITIONAL CONDITIONS APPLICABLE TO
NONQUALIFIED DEFERRED COMPENSATION
 UNDER
SECTION 409A. 

     In the event any Stock Option or Stock Appreciation Right under the Plan is granted with an
exercise price of less than 100 percent of the Fair Market Value on the date of grant (regardless
of whether or not such exercise price is intentionally or unintentionally priced at less than Fair
Market Value), or such grant is materially modified and deemed a new grant at a time when the Fair
Market Value exceeds the exercise price, or any other Award is otherwise determined to constitute
“nonqualified deferred compensation” within the meaning of Section 409A (a “409A Award”), the
following additional conditions shall apply and shall supersede any contrary provisions of this
Plan or the terms of any agreement relating to such 409A Award.

     (a) Exercise and Distribution. Except as provided in Section 14(b) hereof, no 409A
Award shall be exercisable or distributable earlier than upon one of the following:

          (i) Specified Time. A specified time or a fixed schedule set forth in the written
instrument evidencing the 409A Award.

          (ii) Separation from Service. Separation from service (within the meaning of Section
409A) by the 409A Award grantee; provided, however, that if the 409A Award grantee is a “key
employee” (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) and
any of the Company’s Stock is publicly traded on an established securities market or otherwise,
exercise or distribution under this Section 14(a)(ii) may not be made before the date that is six
months after the date of separation from service.

          (iii) Death. The date of death of the 409A Award grantee.

          (iv) Disability. The date the 409A Award grantee becomes disabled (within the meaning
of Section 14(c)(ii) hereof).

          (v) Unforeseeable Emergency. The occurrence of an unforeseeable emergency (within the
meaning of Section 14(c)(iii) hereof), but only if the net value (after payment of the exercise
price) of the number of shares of Stock that become issuable does not exceed the amounts necessary
to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of
the exercise, after taking into account the extent to which the emergency is or may be relieved
through reimbursement or compensation by insurance or otherwise or by liquidation of the grantee’s
other assets (to the extent such liquidation would not itself cause severe financial hardship).

          (vi) Change in Control Event. The occurrence of a Change in Control Event (within the
meaning of Section 14(c)(i) hereof), including the Company’s discretionary exercise of the right to
accelerate vesting of such grant upon a Change in Control Event or to terminate the Plan or any
409A Award granted hereunder within 12 months of the Change in Control Event.

     (b) No Acceleration. A 409A Award may not be accelerated or exercised prior to the
time specified in Section 14(a) hereof, except in the case of one of the following events:

15

 

          (i) Domestic Relations Order. The 409A Award may permit the acceleration of the
exercise or distribution time or schedule to an individual other than the grantee as may be
necessary to comply with the terms of a domestic relations order (as defined in Section
414(p)(1)(B) of the Code).

          (ii) Conflicts of Interest. The 409A Award may permit the acceleration of the
exercise or distribution time or schedule as may be necessary to comply with the terms of a
certificate of divestiture (as defined in Section 1043(b)(2) of the Code).

          (iii) Change in Control Event. The Administrator may exercise the discretionary right
to accelerate the vesting of such 409A Award upon a Change in Control Event or to terminate the
Plan or any 409A Award granted thereunder within 12 months of the Change in Control Event and
cancel the 409A Award for compensation.

     (c) Definitions. Solely for purposes of this Section 14 and not for other purposes of
the Plan, the following terms shall be defined as set forth below:

          (i) “Change in Control Event” means the occurrence of a change in the ownership of the
Company, a change in effective control of the Company, or a change in the ownership of a
substantial portion of the assets of the Company (as defined in Section 1.409A-3(g) of the proposed
regulations promulgated under Section 409A by the Department of the Treasury on September 29, 2005
or any subsequent guidance).

          (ii) “Disabled” means a grantee who (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not less than 12 months,
or (ii) is, by reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months, receiving income replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the Company or its Subsidiaries.

          (iii) “Unforeseeable Emergency” means a severe financial hardship to the grantee resulting
from an illness or accident of the grantee, the grantee’s spouse, or a dependent (as defined in
Section 152(a) of the Code) of the grantee, loss of the grantee’s property due to casualty, or
similar extraordinary and unforeseeable circumstances arising as a result of events beyond the
control of the grantee.

SECTION 15. TRANSFER, LEAVE OF ABSENCE, ETC.

     For purposes of the Plan, the following events shall not be deemed a termination of
employment:

     (a) a transfer to the employment of the Company from a Subsidiary or from the Company to a
Subsidiary, or from one Subsidiary to another; or

     (b) an approved leave of absence for military service or sickness, or for any other purpose
approved by the Company, if the employee’s right to re-employment is guaranteed

16

 

either by a statute or by contract or under the policy pursuant to which the leave of absence
was granted or if the Administrator otherwise so provides in writing.

SECTION 16. AMENDMENTS AND TERMINATION

     The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any
time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any
other lawful purpose, but no such action shall adversely affect rights under any outstanding Award
without the holder’s consent. Except as provided in Section 3(b) or 3(c), in no event may the
Administrator exercise its discretion to reduce the exercise price of outstanding Stock Options or
Stock Appreciation Rights or effect repricing through cancellation and re-grants. Any material
Plan amendments (other than amendments that curtail the scope of the Plan), including any Plan
amendments that (i) increase the number of shares reserved for issuance under the Plan, (ii) expand
the type of Awards available under, materially expand the eligibility to participate in, or
materially extend the term of, the Plan, or (iii) materially change the method of determining Fair
Market Value, shall be subject to approval by the Company stockholders entitled to vote at a
meeting of stockholders. In addition, to the extent determined by the Administrator to be required
by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under
Section 422 of the Code or to ensure that compensation earned under Awards qualifies as
performance-based compensation under Section 162(m) of the Code, Plan amendments shall be subject
to approval by the Company stockholders entitled to vote at a meeting of stockholders. Nothing in
this Section 16 shall limit the Administrator’s authority to take any action permitted pursuant to
Section 3(c).

SECTION 17. STATUS OF PLAN

     With respect to the portion of any Award that has not been exercised and any payments in cash,
Stock or other consideration not received by a grantee, a grantee shall have no rights greater than
those of a general creditor of the Company unless the Administrator shall otherwise expressly
determine in connection with any Award or Awards. In its sole discretion, the Administrator may
authorize the creation of trusts or other arrangements to meet the Company’s obligations to deliver
Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts
or other arrangements is consistent with the foregoing sentence.

SECTION 18. GENERAL PROVISIONS

     (a) No Distribution; Compliance with Legal Requirements. The Administrator may
require each person acquiring Stock pursuant to an Award to represent to and agree with the Company
in writing that such person is acquiring the shares without a view to distribution thereof.

     No shares of Stock shall be issued pursuant to an Award until all applicable securities law
and other legal and stock exchange or similar requirements have been satisfied. The Administrator
may require the placing of such stop-orders and restrictive legends on certificates for Stock and
Awards as it deems appropriate.

     (b) Delivery of Stock Certificates. Stock certificates to grantees under this Plan
shall be deemed delivered for all purposes when the Company or a stock transfer agent of the

17

 

Company shall have mailed such certificates in the United States mail, addressed to the
grantee, at the grantee’s last known address on file with the Company. Uncertificated Stock shall
be deemed delivered for all purposes when the Company or a Stock transfer agent of the Company
shall have given to the grantee by electronic mail (with proof of receipt) or by United States
mail, addressed to the grantee, at the grantee’s last known address on file with the Company,
notice of issuance and recorded the issuance in its records (which may include electronic “book
entry” records).

     (c) Other Compensation Arrangements; No Employment Rights. Nothing contained in this
Plan shall prevent the Board from adopting other or additional compensation arrangements, including
trusts, and such arrangements may be either generally applicable or applicable only in specific
cases. The adoption of this Plan and the grant of Awards do not confer upon any employee any right
to continued employment with the Company or any Subsidiary.

     (d) Trading Policy Restrictions. Option exercises and other Awards under the Plan
shall be subject to such Company’s insider trading policy and procedures, as in effect from time to
time.

     (e) Forfeiture of Awards under Sarbanes-Oxley Act. If the Company is required to
prepare an accounting restatement due to the material noncompliance of the Company, as a result of
misconduct, with any financial reporting requirement under the securities laws, then any grantee
who is one of the individuals subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 shall reimburse the Company for the amount of any Award received by such
individual under the Plan during the 12-month period following the first public issuance or filing
with the United States Securities and Exchange Commission, as the case may be, of the financial
document embodying such financial reporting requirement.

SECTION 19. EFFECTIVE DATE OF PLAN

     This Plan shall become effective upon approval by the holders of a majority of the votes cast
at a meeting of stockholders at which a quorum is present. No grants of Stock Options and other
Awards may be made hereunder after the tenth (10) anniversary of the Effective Date and no grants
of Incentive Stock Options may be made hereunder after the tenth (10) anniversary of the date the
Plan is approved by the Board.

SECTION 20. GOVERNING LAW

     This Plan and all Awards and actions taken thereunder shall be governed by, and construed in
accordance with, the laws of the State of Delaware, applied without regard to conflict of law
principles.

	 	 	 
	DATE APPROVED BY BOARD OF DIRECTORS:

	 	February, 2006
	 
	 	 
	DATE APPROVED BY STOCKHOLDERS:

	 	February, 2006

18

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