Document:

exv10w1

 

Exhibit 10.1

LODGENET ENTERTAINMENT CORPORATION

SECOND AMENDMENT TO CREDIT AGREEMENT

     This SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is dated as
of June 13, 2003 and entered into by and between LODGENET ENTERTAINMENT
CORPORATION, a Delaware corporation (“Borrower”) and CANADIAN IMPERIAL BANK OF
COMMERCE, as administrative agent for the Lenders (in such capacity,
“Administrative Agent”), and is made with reference to that certain Credit
Agreement dated as of August 29, 2001, as amended to date (as so amended, the
“Credit Agreement”), by and among Borrower, the Lenders named therein,
Administrative Agent, the Syndication Agent named therein, the Co-Documentation
Agents named therein, the Co-Lead Arrangers named therein and the Swing Line
Lender named therein. Capitalized terms used herein without definition shall
have the same meanings herein as set forth in the Credit Agreement.

RECITALS

     WHEREAS, Borrower and Lenders desire to (i) amend the Credit Agreement to
permit Borrower to issue up to $200 million of new senior subordinated notes
and use a portion of the proceeds of such issuance to refinance in full the
Senior 1996 Notes; and (ii) make certain other amendments as set forth below.

     NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:

     Section 1. AMENDMENTS TO THE CREDIT AGREEMENT

     1.1 Amendments to Section 1: Provisions Relating to Defined Terms

     A.     Subsection 1.1 of the Credit Agreement is hereby amended by adding
thereto the following definitions:

     ““Subordinated 2003 Notes” means the unsecured senior subordinated notes
due 2013 issued by Borrower with an aggregate face value not to exceed
$200,000,000.”

     ““Subordinated 2003 Notes Transaction Costs” means the reasonable
transaction costs associated with the issuance of the Subordinated 2003 Notes.”

     B.     Subsection 1.1 of the Credit Agreement is hereby further amended by
amending and restating the definition of “Applicable LIBOR Margin” to read in
its entirety as follows:

 

 

     “Applicable LIBOR Margin” means (a) with respect to Term Loans that are
LIBOR Loans, 4.00% per annum, and (b) with respect to Revolving Loans that are
LIBOR Loans, a percentage per annum as set forth below opposite the applicable
Consolidated Total Leverage Ratio:

	 	 	 	 	 	 	 
	Consolidated Total Leverage Ratio	 	Applicable LIBOR Margin	 
	
	 	
	 
	 	greater than or equal to 4.5:1.00
	 	 	3.25	%
	 	 	less than 4.50:1.00
	 	 	3.00	%
	but greater than or equal to 4.00:1.00
	 	 	 	 
	 	 	less than 4.00:1.00
	 	 	2.75	%
	but greater than or equal to 3.50:1.00
	 	 	 	 
	 	 	less than 3.50:1.00
	 	 	2.50	%
	but greater than or equal to 3.00:1.00
	 	 	 	 
	 	 	less than 3.00:1.00
	 	 	2.25	%

; provided that until the date that is five Business Days after the date on
which Borrower delivers the first Margin Determination Certificate required to
be delivered to Administrative Agent pursuant to subjection 6.1(xiv), the
Applicable LIBOR Margin for Revolving Loans that are LIBOR Loans shall be
3.00%.

     C.     Subsection 1.1 of the Credit Agreement is hereby further amended by
amending the definition of “Consolidated Total Debt” to insert the phrase, “and
after the Subordinated 2003 Notes are issued and until the earlier of (a) 30
days after such issuance and (b) the date of redemption of the Senior 1996
Notes, less the principal amount of the Senior 1996 Notes (so long as Borrower
maintains restricted cash in the amount of the Senior 1996 Notes for the
purpose of redeeming the Senior 1996 Notes).

     D.     Subsection 1.1 of the Credit Agreement is hereby further amended by
amending the definition of “Senior Note Documents” to insert the phrase “and
the documents relating to the issuance of the Subordinated 2003 Notes” after
the phrase “the Senior 1996 Note Indenture.”

     E.     Subsection 1.1 of the Credit Agreement is hereby further amended by
amending the definition of “Senior Notes” to insert the phrase, “and the
Subordinated 2003 Notes” at the end thereof.

     F.     Subsection 1.1 of the Credit Agreement is hereby further amended by
amending the definition of “Subordinated Indebtedness” to insert the phrase
“and (ii) the Senior Notes” at the end thereof.

     1.3 Amendments to Subsection 7.1: Indebtedness

     A.     Subsection 7.1(iv) of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:

2

 

     “(iv) Borrower may remain liable with respect to the Senior Notes (and
senior unsecured or subordinated Indebtedness to refinance the Senior Notes
acceptable to Administrative Agent) in an aggregate principal amount not to
exceed the lesser of (a) $168 million plus the Subordinated 2003 Notes
Transaction Costs plus, until 30 days after the issuance of the Subordinated
2003 Notes, the outstanding principal amount of the Senior 1996 Notes, or (b)
the then outstanding principal amount of the Senior Notes plus any reasonable
transaction costs associated with any acceptable refinancing of such Senior
Notes, provided, that within 30 days after the issuance of the Subordinated
2003 Notes, Borrower redeems in full all of the outstanding Senior 1996 Notes.”

     B.     Subsection 7.1(vi) of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:

     “Borrower may become and remain liable with respect to Subordinated
Indebtedness in an aggregate principal amount not to exceed $100,000,000 less
the face amount of Subordinated 2003 Notes issued in excess of the sum of
$150,000,000 plus the Subordinated 2003 Notes Transaction Costs.”

     1.4 Amendments to Subsection 7.2D: No Restrictions on Subsidiary
Distributions to Borrower or Other Subsidiaries

     Subsection 7.2D is hereby amended by adding at the beginning thereof the
following phrase: “Except to the extent necessary to comply with the terms of
the Subordinated 2003 Notes,”.

     1.5 Amendments to Subsection 7.5: Restricted Junior Payments

     A.     Section 7.5 of the Credit Agreement is hereby amended by deleting the
first proviso clause commencing on the second line thereof and inserting in
lieu thereof the following phrase: “provided that Borrower may make regularly
scheduled payments of principal and interest in respect of any Subordinated
Indebtedness in accordance with the terms of, and only to the extent required
by, and subject to the subordination provisions contained in, the indenture or
other agreement pursuant to which such Subordinated Indebtedness was issued, as
such indenture or other agreement may be amended from time to time to the
extent permitted under subsection 7.14;”.

     B.     Subsection 7.5 of the Credit Agreement is hereby further amended by
adding at the end thereof the following phrase: “and, provided, further, that
Borrower may make Restricted Junior Payments to repay in full the Senior 1996
Notes with a portion of the proceeds of the issuance of the Subordinated 2003
Notes and may further repay the principal of any Senior Notes in connection
with a refinancing thereof permitted pursuant to subsection 7.1(iv).”

     1.6 Amendments to Subsection 7.6: Financial Covenants

     Subsections 7.6A and 7.6B of the Credit Agreement are each hereby amended
and restated to read in their entirety as follows:

3

 

     A.     Minimum Consolidated Interest Coverage Ratio. Borrower shall not
permit the Consolidated Interest Coverage Ratio for any four consecutive Fiscal
Quarter period ending during any of the periods set forth below to be less than
the correlative ratio indicated:

	 	 	 	 	 
	 	 	 	Minimum Consolidated Interest	 
	Period	 	Coverage Ratio	 
	
	 	
	 
	1st Fiscal Quarter, Fiscal Year 2003
	 	 	2.25:1.00	 
	2nd Fiscal Quarter, Fiscal Year 2003
	 	 	2.25:1.00	 
	3rd Fiscal Quarter, Fiscal Year 2003
	 	 	2.25:1.00	 
	4td Fiscal Quarter, Fiscal Year 2003
	 	 	2.25:1.00	 
	1st Fiscal Quarter, Fiscal Year 2004
	 	 	2.25:1.00	 
	2nd Fiscal Quarter, Fiscal Year 2004
	 	 	2.25:1.00	 
	3rd Fiscal Quarter, Fiscal Year 2004
	 	 	2.25:1.00	 
	4td Fiscal Quarter, Fiscal Year 2004
	 	 	2.25:1.00	 
	1st Fiscal Quarter, Fiscal Year 2005
	 	 	2.50:1.00	 
	2nd Fiscal Quarter, Fiscal Year 2005
	 	 	2.50:1.00	 
	3rd Fiscal Quarter, Fiscal Year 2005
	 	 	2.50:1.00	 
	4td Fiscal Quarter, Fiscal Year 2005
	 	 	2.50:1.00	 
	1st Fiscal Quarter, Fiscal Year 2006 and
each Fiscal Quarter thereafter
	 	 	2.75:1.00	 

     B.     Maximum Consolidated Total Leverage Ratio. Borrower shall not permit
the Consolidated Total Leverage Ratio as of the last day of the most recently
ended Fiscal Quarter ending during any of the periods set forth below to exceed
the correlative ratio indicated:

	 	 	 	 	 
	 	 	 	Maximum Consolidated Total	 
	Period	 	Leverage Ratio	 
	
	 	
	 
	1st Fiscal Quarter, Fiscal Year 2003
	 	 	4.50:1.00	 
	2nd Fiscal Quarter, Fiscal Year 2003
	 	 	5.00:1.00	 
	3rd Fiscal Quarter, Fiscal Year 2003
	 	 	5.00:1.00	 
	4td Fiscal Quarter, Fiscal Year 2003
	 	 	5.00:1.00	 
	1st Fiscal Quarter, Fiscal Year 2004
	 	 	4.75:1.00	 
	2nd Fiscal Quarter, Fiscal Year 2004
	 	 	4.75:1.00	 
	3rd Fiscal Quarter, Fiscal Year 2004
	 	 	4.50:1.00	 
	4td Fiscal Quarter, Fiscal Year 2004
	 	 	4.50:1.00	 
	1st Fiscal Quarter, Fiscal Year 2005
	 	 	4.25:1.00	 
	2nd Fiscal Quarter, Fiscal Year 2005
	 	 	4.25:1.00	 
	3rd Fiscal Quarter, Fiscal Year 2005
	 	 	4.25:1.00	 
	4td Fiscal Quarter, Fiscal Year 2005
	 	 	4.00:1.00	 
	1st Fiscal Quarter, Fiscal Year 2006
	 	 	3.75:1.00	 
	2nd Fiscal Quarter, Fiscal Year 2006
	 	 	3.75:1.00	 
	3rd Fiscal Quarter, Fiscal Year 2006
	 	 	3.75:1.00	 
	4td Fiscal Quarter, Fiscal Year 2006 and
each
Fiscal Quarter thereafter
	 	 	3.50:1.00	 

4

 

     1.7 Amendments to Subsection 7.8: Consolidated Capital Expenditures

     Subsection 7.8 of the Credit Agreement is hereby amended by deleting the
figures “$95,000,000” and “$90,000,000,” as applicable, corresponding to Fiscal
Years 2003 through 2007 and replacing such figures in each case with the figure
“$80,000,000.”

     1.8 Amendments to Subsection 7.14: Amendments of Senior Notes

     Subsection 7.14 of the Credit Agreement is hereby amended by adding at the
end thereof the following phrase: “, provided that Borrower may amend the
provisions of the Senior Notes to shorten the required notice period for a
redemption of the Senior Notes permitted pursuant to Section 7.5.”

     1.9 Amendments to Schedule 5.16: Material Contracts with Restrictions on
Assignment

     Schedule 5.16 of the Credit Agreement is hereby amended by inserting as
item number 3 thereon the following description: “Indenture between the
Borrower and a trustee entered into in connection with the Subordinated 2003
Notes.”

     Section 2. ACKNOWLEDGMENTS

     A.     Acknowledgement Pursuant to Section 7.1(iv)

     Pursuant to, and in accordance with, subsection 7.1(iv) of the Credit
Agreement, the Administrative Agent and Requisite Lenders hereby acknowledge
that the Subordinated 2003 Notes constitute subordinated Indebtedness to
refinance the Senior Notes acceptable to Administrative Agent.

     B.     Acknowledgment Pursuant to Section 7.1(vi)

     Pursuant to, and in accordance with, subsection 7.1(vi) of the Credit
Agreement, the Administrative Agent and Requisite Lenders hereby acknowledge
that the excess of (a) the aggregate principal amount of the Subordinated 2003
Notes outstanding at any time over (b) the sum of (x) the original principal
amount of the Senior 1996 Notes ($150,000,000) plus (y) the Subordinated 2003
Notes Transaction Costs, constitutes Subordinated Indebtedness that is
subordinated to the Obligations on terms and conditions that are acceptable to
the Administrative Agent and Requisite Lenders.

     Section 3. CONDITIONS TO EFFECTIVENESS

     Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the “Amendment
Effective Date”):

5

 

     A.     On or before the Amendment Effective Date, Borrower shall deliver to
Lenders (or to Administrative Agent for Lenders with sufficient originally
executed copies, where appropriate, for each Lender and its counsel) copies of
this Amendment, executed by Borrower.

     B.     On or before the Amendment Effective Date, all corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Administrative Agent, acting on behalf of Lenders, and its
counsel shall be satisfactory in form and substance to Administrative Agent and
such counsel, and Administrative Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents as
Administrative Agent may reasonably request.

     C.     On or before the Amendment Effective Date, Borrower shall have paid to
Administrative Agent for distribution to each Lender that has executed a
consent to this Amendment in the form attached hereto as Exhibit A (a “Lender
Consent”), an amendment fee for each such Lender equal to 0.125% of the sum of
the Term Loan Exposure plus the Revolving Loan Exposure of such Lender.

     D.     On or before the Amendment Effective Date, Borrower shall have
delivered to Administrative Agent copies of the documents relating to the
issuance of the Subordinated 2003 Notes.

     Section 4. BORROWER’S REPRESENTATIONS AND WARRANTIES

     In order to induce Lenders to enter into this Amendment and to amend the
Credit Agreement in the manner provided herein, Borrower represents and
warrants to each Lender that the following statements are true, correct and
complete:

     A.     Corporate Power and Authority. Borrower has all requisite corporate
power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the “Amended Agreement”).

     B.     Authorization of Agreements. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of Borrower.

     C.     No Conflict. The execution and delivery by Borrower of this Amendment
and the performance by Borrower of the Amended Agreement do not and will not
(i) violate any provision of any law or any governmental rule or regulation
applicable to Borrower or any of its Subsidiaries, the Certificate or Articles
of Incorporation or Bylaws of Borrower or any of its Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on
Borrower or any of its Subsidiaries; (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Borrower or any of its Subsidiaries; (iii) result in
or require the creation or imposition of any Lien upon any of the properties or
assets of Borrower or any of its Subsidiaries; or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Borrower or any of its Subsidiaries.

6

 

     D.     Governmental Consents. The execution and delivery by Borrower of this
Amendment and the performance by Borrower of the Amended Agreement do not and
will not require any registration with, consent or approval of, or notice to,
or other action to, with or by, any federal, state or other governmental
authority or regulatory body.

     E.     Binding Obligation. This Amendment and the Amended Agreement have been
duly executed and delivered by Borrower and are the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors’
rights generally or by equitable principles relating to enforceability.

     F.     Incorporation of Representations and Warranties From Credit Agreement.
The representations and warranties contained in Section 5 of the Credit
Agreement are and will be true, correct and complete in all material respects
on and as of the Amendment Effective Date to the same extent as though made on
and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.

     G.     Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default.

     Section 5. MISCELLANEOUS

     A.     Reference to and Effect on the Credit Agreement and the Other Loan
Documents.

     (i)  On and after the Amendment Effective Date, each reference in the
Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words
of like import referring to the Credit Agreement, and each reference in the
other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or
words of like import referring to the Credit Agreement shall mean and be a
reference to the Amended Agreement.

     (ii)  Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and effect
and are hereby ratified and confirmed.

     (iii)  The execution, delivery and performance of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any provision of,
or operate as a waiver of any right, power or remedy of Administrative Agent or
any Lender under, the Credit Agreement or any of the other Loan Documents.

7

 

     B.     Fees and Expenses. Borrower acknowledges that all costs, fees and
expenses as described in subsection 10.2 of the Credit Agreement incurred by
Administrative Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Borrower.

     C.     Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive
effect.

     D.     Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

     E.     Counterparts; Effectiveness. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment (other than the
provisions of Section 1 hereof, the effectiveness of which is governed by
Section 3 hereof) shall become effective upon the execution of a counterpart
hereof by Borrower and Administrative Agent and the execution of a Lender
Consent by Requisite Lenders and receipt by Borrower and Administrative Agent
of written or telephonic notification of such execution and authorization of
delivery thereof.

(remainder of page intentionally left blank)

8

 

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

	 
	LODGENET ENTERTAINMENT CORPORATION
	 
	By:        /s/ Gary H. Ritondaro

Name:      Gary H. Ritondaro

Title:     Chief Financial Officer
	 
	CANADIAN IMPERIAL BANK OF COMMERCE, 
as
Administrative Agent
	 
	By:        /s/ Paul J. Chakmak

Name:      Paul J. Chakmak

Title:     Managing Director

          CIBC World Markets Corp., as AGENT

 

EXHIBIT A

to Second Amendment

to Credit Agreement

CONSENT OF LENDER

     Reference is hereby made to the Second Amendment to Credit Agreement (the
“Amendment”) dated as of June      , 2003 by and between LodgeNet Entertainment
Corporation, a Delaware corporation (“Borrower”), and Canadian Imperial Bank of
Commerce, as administrative agent for the Lenders (“Administrative Agent”),
which is made with reference to that certain Credit Agreement dated as of
August 29, 2001, as amended, by and among Borrower, the Lenders named therein,
Administrative Agent, the Syndication Agent named therein, the Co-Documentation
Agents named therein, the Co-Lead Arrangers named therein and the Swing Line
Lender named therein.

     The undersigned Lender hereby (i) consents to the execution and delivery
of the Amendment by Administrative Agent on its behalf, substantially in the
form of the draft presented to the undersigned Lender on June      , 2003 and
(ii) authorizes the Administrative Agent to make the acknowledgments contained
in Section 2 of the Amendment.

Dated:______________________, 2003

	 
	

[Name of Institution]
	 
	By: 

	Name: 

	Title:<PAGE>

                                                                    EXHIBIT 10.2

                          PROPOSED AMENDED AND RESTATED

                                 SCANSOFT, INC.

                        1995 EMPLOYEE STOCK PURCHASE PLAN

         The following constitute the provisions of the 1995 Employee Stock
Purchase Plan of ScanSoft, Inc, as proposed to be amended and restated:

         1.   Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended. The provisions of the Plan shall, accordingly,
be construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.

         2.   Definitions.

                  (a) "Board" shall mean the Board of Directors of the Company.

                  (b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.

                  (c) "Common Stock" shall mean the common stock of the Company.

                  (d) "Company" shall mean ScanSoft, Inc., a Delaware
corporation.

                  (e) "Compensation" shall mean an Employee's regular straight
time gross earnings and commissions, and shall not include payments for
overtime, shift premium, incentive compensation, incentive payments, bonuses and
other compensation.

                  (f) "Continuous Status as an Employee" shall mean the absence
of any interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered interrupted in the case of a leave of
absence agreed to in writing by the Company, provided that such leave is for a
period of not more than ninety (90) days or reemployment upon the expiration of
such leave is guaranteed by contract or statute.

                  (g) "Contributions" shall mean all amounts credited to the
account of a participant pursuant to the Plan.

                  (h) "Designated Subsidiary" shall mean any Subsidiary that has
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.

                  (i) "Employee" shall mean any person who is an employee of an
Employer for tax purposes and is customarily employed for at least twenty (20)
hours per week and more than five (5) months in a calendar year by the Employer.

<PAGE>

                  (j) "Employer" shall mean the Company and any Designated
Subsidiary of the Company.

                  (k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

                  (l) "Offering Date" shall mean the first Trading Day of each
Offering Period.

                  (m) "Offering Period" shall mean a period of approximately
twelve (12) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after February 16 and
August 16 of each year and terminating on the last Trading Day in the periods
ending twelve (12) months later. The duration and timing of Offering Periods may
be changed pursuant to Section 4 hereof.

                  (n) "Plan" shall mean this 1995 Employee Stock Purchase Plan.

                  (o) "Purchase Date" shall mean the last Trading Day of each
Purchase Period.

                  (p) "Purchase Period" shall mean the approximately six (6)
month period commencing after one Purchase Date and ending with the next
Purchase Date, except that the first Purchase Period of any Offering Period
shall commence on the Offering Date and end with the next Purchase Date.

                  (q) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than fifty percent (50%) of the voting shares are
held by the Company or a Subsidiary, whether or not such corporation now exists
or is hereafter organized or acquired by the Company or a Subsidiary.

                  (r) "Trading Day" shall mean a day on which U.S. national
stock exchanges and the Nasdaq System are open for trading.

         3.   Eligibility.

                  (a) Any person who is an Employee as of the Offering Date of a
given Offering Period shall be eligible to participate in such Offering Period
under the Plan, subject to the requirements of Section 5(a) hereof and the
limitations imposed by Section 423(b) of the Code.

                  (b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own stock and/or hold outstanding options to purchase stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any Subsidiary, or (ii) if such option
would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) worth of stock (determined at the fair market value of such stock at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.

         4.   Offering Periods. The Plan shall be implemented by a series of
consecutive, overlapping Offering Periods, with a new Offering Period commencing
on the first Trading Day

                                       2

<PAGE>

on or after February 16 and August 16 of each year (or at such other time or
times as may be determined by the Board), and continuing thereafter until
terminated in accordance with Section 19 hereof. The Board shall have the power
to change the duration and/or the frequency of Offering Periods (including the
commencement dates thereof) with respect to future offerings without stockholder
approval if such change is announced at least fifteen (15) days prior to the
scheduled beginning of the first Offering Period to be affected thereafter.
Eligible Employees may not participate in more than one Offering Period at a
time.

         5.   Participation.

                  (a) An Employee who is eligible to participate in the Plan
pursuant to Section 3 hereof may become a participant in the Plan by completing
an enrollment form provided by the Company for such purpose and filing it with
the Company's payroll office prior to the applicable Offering Date, unless a
later time for filing the enrollment form is set by the Board for all eligible
Employees with respect to a given Offering Period.

                  (b) Payroll deductions for a participant shall commence on the
first payroll paid following the Offering Date and shall end on the last payroll
paid in the Offering Period to which the enrollment form is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.

         6.   Method of Payment of Contributions.

                  (a) At the time a participant files his or her enrollment form
as provided in Section 5 hereof, he or she shall elect to have payroll
deductions made on each payday during the Offering Period in an amount not less
than one percent (1%) and not more than twelve percent (12%) of such
participant's Compensation on each such payday. All payroll deductions made for
a participant shall be credited to his or her account under the Plan and shall
be withheld in whole percentages only. A participant may not make any additional
payments into such account.

                  (b) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or, on one occasion only during the
Offering Period, may decrease the rate of his or her Contributions during the
Offering Period by completing and filing with the Company a new enrollment form
authorizing the decrease in Contribute rate. The change in rate shall be
effective as of the beginning of the next calendar month following the date of
the Company's receipt of the new enrollment form, if the form is received at
least ten (10) business days prior to such date and, if not, as of the beginning
of the next succeeding calendar month. A participant's enrollment form shall
remain in effect for successive Offering Periods unless terminated as provided
in Section 10 hereof.

                  (c) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's Contributions may be decreased to zero percent (0%) at any time
during a Offering Period. Contributions shall recommence at the rate provided in
such participant's enrollment form at the beginning of the first Purchase Period
which is scheduled to end in the following calendar year, unless terminated by
the participant as provided in Section 10 hereof.

                                       3

<PAGE>

                  (d) At the time the option is exercised, in whole or in part,
or at the time some or all of the Common Stock issued under the Plan is disposed
of, the participant must make adequate provision for the Company's federal,
state, or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to the sale or early disposition of
Common Stock by the participant.

         7.   Grant of Option.

                  (a) On the Offering Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Purchase Date during such Offering Period a number of
shares of Common Stock determined by dividing such participant's Contributions
accumulated prior to such Purchase Date and retained in the participant's
account as of the Purchase Date by the purchase price specified in Section 7(b)
below; provided, however, that the maximum number of shares a participant may
purchase during each Purchase Period shall be two thousand (2,000) shares
(subject to any adjustment pursuant to Section 18 hereof), and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 13 hereof. The Board may, for future Offering Periods, increase or
decrease, in its absolute discretion, the maximum number of shares of Common
Stock that a participant may purchase during each Purchase Period of such
Offering Period. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The
option shall expire on the last day of the Offering Period.

                  (b) The purchase price per share of Common Stock covered by
each option granted under the Plan shall be the lower of: (i) eighty-five
percent (85%) of the fair market value of a share of Common Stock on the
Offering Date; or (ii) eighty-five percent (85%) of the fair market value of a
share of Common Stock on the Purchase Date. The fair market value of the Common
Stock on a given date shall be determined by the Board in its discretion based
on the closing price of the Common Stock for such date (or, in the event that
the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported by The Nasdaq National Market ("Nasdaq") or, if such
price is not reported, the mean of the bid and asked prices per share of the
Common Stock as reported by Nasdaq or, in the event the Common Stock is listed
on a stock exchange, the fair market value per share shall be the closing price
on such exchange on such date (or, in the event that the Common Stock is not
traded on such date, on the immediately preceding trading date), as reported in
The Wall Street Journal.

         8.   Exercise of Option.

                  (a) Unless a participant withdraws from the Plan as provided
in Section 10 hereof, his or her option for the purchase of shares of Common
Stock will be exercised automatically on each Purchase Date of an Offering
Period, and the maximum number of full shares subject to the option will be
purchased for such participant at the applicable purchase price specified in
Section 7(b) hereof with the accumulated Contributions in his or her account.
The shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to

                                       4

<PAGE>

the participant on the Purchase Date. No fractional shares of Common Stock shall
be purchased; any Contributions accumulated in a participant's account that are
not sufficient to purchase a full share shall be retained in the participant's
account for the subsequent Purchase Period or Offering Period, subject to
earlier withdrawal by the participant as provided in Section 10 hereof. Any
other cash remaining to the credit of a participant's account under the Plan
after the Purchase Date shall be returned to said participant. During his or her
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.

                  (b) If the Board determines that, on a given Purchase Date,
the number of shares with respect to which options are to be exercised may
exceed (i) the number of shares of Common Stock that were available for sale
under the Plan on the Offering Date of the applicable Offering Period, or (ii)
the number of shares available for sale under the Plan on such Purchase Date,
the Board may in its sole discretion (x) provide that the Company shall make a
pro rata allocation of the shares of Common Stock available for purchase on such
Offering Date or Purchase Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Purchase Date, and continue all Offering Period then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Offering Date or Purchase Date, as applicable, in as uniform a
manner as shall be practicable and as it shall determine in its sole discretion
to be equitable among all participants exercising options to purchase Common
Stock on such Purchase Date, and terminate any or all Offering Periods then in
effect pursuant to Section 19 hereof. The Company may make pro rata allocation
of the shares available on the Offering Date of any applicable Offering Period
pursuant to the preceding sentence, notwithstanding any authorization of
additional shares for issuance under the Plan by the Company's shareholders
subsequent to such Offering Date.

         9.   Delivery. As promptly as practicable following each Purchase Date
on which a purchase of shares of Common Stock occurs, the Company shall arrange
the delivery to each participant, as appropriate, of a certificate representing
the shares purchased upon exercise of his or her option. If permitted by the
Company, the shares will be electronically delivered to a brokerage account for
the benefit of the participant.

         10.  Voluntary Withdrawal; Termination of Employment.

                  (a) A participant may withdraw all but not less than all the
Contributions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time prior to each Purchase Date by giving
written notice to the Company. All of the participant's Contributions credited
to his or her account will be paid to him or her promptly after the Company's
receipt of his or her notice of withdrawal and his or her option for the
Offering Period will be automatically terminated, and no further Contributions
for the purchase of shares will be made during the Offering Period. If a
participant withdraws from an Offering Period, Contributions shall not resume at
the beginning of the succeeding Offering Period unless the participant files a
new enrollment form in accordance with Section 5 hereof.

                  (b) Upon termination of a participant's Continuous Status as
an Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, he or she will be deemed to have elected to
withdraw from the Plan and the Contributions credited to his or her account but
not yet used to exercise his or her option under the Plan will be returned to

                                       5

<PAGE>

him or her or, in the case of his or her death, to the person or persons
entitled thereto under Section 14 hereof, and his or her option will be
automatically terminated.

                  (c) In the event an Employee fails to remain in Continuous
Status as an Employee for at least twenty (20) hours per week during the
Offering Period in which the Employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account but not yet used to exercise his or her option under the Plan
will be returned to him or her, and his or her option will be automatically
terminated.

                  (d) A participant's withdrawal from an Offering Period will
not have any effect upon his or her eligibility to participate in a succeeding
Offering Period that commences after the termination of the Offering Period from
which the participant withdraws or in any similar plan which may hereafter be
adopted by the Company.

         11.  Interest. No interest shall accrue on the Contributions of a
participant in the Plan.

         12.  Stock.

                  (a) The maximum number of shares of Common Stock which shall
be made available for sale under the Plan shall be one million five hundred
thousand (1,500,000) shares, subject to adjustment upon changes in the
capitalization of the Company as provided in Section 18 hereof. If the total
number of shares which would otherwise be subject to options granted pursuant to
Section 7(a) hereof on the Offering Date of an Offering Period exceeds the
number of shares then available under the Plan (after deduction of all shares
for which options have been exercised or are then outstanding), the Company
shall make a pro rata allocation of the shares remaining available for option
grant in as uniform a manner as shall be practicable and as it shall determine
to be equitable. In such event, the Company shall give written notice of such
reduction of the number of shares subject to the option to each Employee
affected thereby and shall similarly reduce the rate of Contributions, if
necessary.

                  (b) The participant will have no right to vote or receive
dividends or any other rights as a shareholder of the Company with respect to
the shares covered by his or her option until such option has been exercised and
certificates representing such shares have been issued, recorded on the records
of the Company or its transfer agents or registrars, and delivered to the
participant as provided in Section 9 hereof.

                  (c) Shares to be delivered to a participant under the Plan
will be registered in the name of the participant or in the name of the
participant and his or her spouse.

         13.  Administration. The Board, or a committee named by the Board,
shall supervise and administer the Plan, and shall have full and exclusive
discretionary power to adopt, amend and rescind any rules deemed desirable and
appropriate for the administration of the Plan and not inconsistent with the
Plan, to construe, interpret and apply the terms of the Plan, to determine
eligibility and to adjudicate all disputed claims filed under the Plan, and to
make all other determinations necessary or advisable for the administration of
the Plan. Every finding, decision and determination made by the Board or its
committee shall, to the fullest extent permitted by law, be final and binding
upon all parties.

                                       6

<PAGE>

         14.  Designation of Beneficiary.

                  (a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to a Purchase Date on which the option is exercised but prior to
delivery to him or her of such shares and cash. In addition, a participant may
file a written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to the exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.

                  (b) Such designation of beneficiary may be changed by the
participant (and his or her spouse, if any) at any time by written notice. In
the event of the death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.

         15.  Transferability. Neither Contributions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.

         16.  Use of Funds. All Contributions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such Contributions.

         17.  Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees promptly following the Purchase Date, which statements will set forth
the amounts of Contributions, the purchase price per share, the number of shares
purchased and the remaining cash balance, if any.

         18.  Adjustments Upon Changes in Capitalization; Corporate
Transactions.

                  (a) Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the number of shares of Common Stock covered
by each option under the Plan which has not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but have not yet been placed under option (collectively,

                                       7

<PAGE>

the "Reserves"), as well as the purchase price per share and the number of
shares of Common Stock covered by each option under the Plan which has not yet
been exercised and the maximum number of shares each participant may purchase
during each [Purchase] Period (pursuant to Section 7 hereof), shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.

                  (b) Corporate Transactions. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
will terminate immediately prior to the consummation of such proposed action,
unless otherwise provided by the Board. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option under the Plan shall
be assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Purchase Date (the "New Purchase Date"). If the Board shortens the
Offering Period then in progress in lieu of assumption or substitution in the
event of a merger or sale of assets, the Board shall notify each participant in
writing, at least ten (10) days prior to the New Purchase Date, that the
Purchase Date for his or her option has been changed to the New Purchase Date,
and that his or her option will be exercised automatically on the New Purchase
Date, unless prior to such date he or she has withdrawn from the Offering Period
as provided in Section 10 hereof. For purposes of this paragraph, an option
granted under the Plan shall be deemed to be assumed if, following the sale of
assets or merger, the option confers the right to purchase, for each share of
option stock subject to the option immediately prior to the sale of assets or
merger, the consideration (whether stock, cash or other securities or property)
received in the sale of assets or merger by holders of Common Stock for each
share of Common Stock held on the effective date of the transaction (and if such
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding shares of Common Stock);
provided, however, that if such consideration received in the sale of assets or
merger was not solely common stock of the successor corporation or its parent
(as defined in Section 424(e) of the Code), the Board may, with the consent of
the successor corporation and the participant, provide for the consideration to
be received upon exercise of the option to be solely common stock of the
successor corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock and the sale of assets or
merger. The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the
purchase price per share of Common Stock covered by each outstanding option, in
the event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of shares
of its

                                       8

<PAGE>

outstanding Common Stock, and in the event of the Company being consolidated
with or merged into any other corporation.

         19.  Amendment or Termination.

                  (a) The Board may at any time and for any reason terminate or
amend the Plan. Except as provided in Section 18 and this Section 19 hereof, no
such termination may affect options previously granted, nor may an amendment
make any change in any option theretofore granted which adversely affects the
rights of any participant. In addition, to the extent necessary to comply with
Section 423 of the Code (or any successor rule or provision or any applicable
law or regulation), the Company shall obtain stockholder approval in such a
manner and to such a degree as so required.

                  (b) Without stockholder consent and without regard to whether
any participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.

                  (c) In the event the Board determines that the ongoing
operation of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such accounting
consequence including, but not limited to:

                           (i) altering the purchase price per share of the
shares offered in any Offering Period including an Offering Period underway at
the time of the change in purchase price;

                           (ii) shortening any Offering Period so that Offering
Period ends on a new Purchase Date, including an Offering Period underway at the
time of the Board action; and

                           (iii) allocating shares.

         Such modifications or amendments shall not require stockholder approval
or the consent of any Plan participants.

         20.  Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the

                                       9

<PAGE>

form specified by the Company at the location, or by the person, designated by
the Company for the receipt thereof.

         21.  Conditions Upon Issuance of Shares. Shares of Common Stock shall
not be issued with respect to an option under the Plan unless the exercise of
such option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance. As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

         22.  No Effect on Employment. Nothing in the Plan shall be deemed to
give any Employee the right to be retained in the employ of any Employer or to
interfere with the right of the Employer to discharge the Employee at any time.

         23.  Term of Plan; Effective Date. The Plan shall become effective upon
the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of twenty
(20) years unless sooner terminated under Section 19 hereof.

                                       10

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