Document:

Ex-10.3

 

EMPLOYMENT AGREEMENT

     THIS AGREEMENT is entered into as of April 17, 2006 by and between GATEWAY BANK & TRUST CO., a
North Carolina banking corporation (hereinafter referred to as the “Bank”) and THEODORE L. SALTER,
an individual resident of Virginia (hereinafter referred to as the “Officer”).

     For and in consideration of their mutual promises, covenants and conditions hereinafter set
forth, and other good and valuable consideration, the receipt and sufficiency of which hereby is
acknowledged, the parties agree as follows:

     1. Employment. The Bank agrees to employ the Officer and the Officer agrees to accept
employment upon the terms and conditions stated herein as the Chief Financial Officer of the Bank.
The Officer shall render such administrative and management services to the Bank as are customarily
performed by persons situated in a similar executive capacity. The Officer shall promote the
business of the Bank and perform such other duties as shall, from time to time, be reasonably
assigned by the Chief Executive Officer of the Bank. Upon the request of the Chief Executive
Officer, the Officer shall disclose all business activities or commercial pursuits in which Officer
is engaged, other than Bank duties.

     2. Compensation. The Bank shall pay the Officer during the term of this Agreement, as
compensation for all services rendered by the Officer to the Bank, a base salary at the rate of
$200,000 per annum, payable in cash not less frequently than monthly. The rate of such salary
shall be reviewed by the Compensation Committee of the Board of Directors of the Bank (the
“Committee”) not less often than annually and the Committee may increase, but shall not decrease,
such rate during the term of this Agreement. Such rate of salary, or increased rate of salary, as
the case may be, may be further increased from time to time in such amounts as the Committee, in
its discretion, may decide. In determining salary increases, the Committee shall compensate the
Officer for increases in the cost of living and may also provide for performance or merit
increases. Participation in the Bank’s incentive compensation, deferred compensation,
discretionary bonus, profit-sharing, retirement and other employee benefit plans and participation
in any fringe benefits shall not reduce the salary payable to the Officer under this Paragraph. In
the event of a Change in Control (as defined in Paragraph 10), the Officer’s rate of salary shall
be increased not less than five percent annually during the term of this Agreement. Any payments
made under this Agreement shall be subject to such deductions as are required by law or regulation
or as may be agreed to by the Bank and the Officer.

     3. Discretionary Bonuses. During the term of this Agreement, the Officer shall be
entitled to such discretionary bonuses as may be authorized, declared and paid by the Committee to
the Bank’s key management employees. No other compensation provided for in this Agreement shall be
deemed a substitute for the Officer’s right to such discretionary bonuses when and as declared by
the Committee.

     4. Participation in Retirement and Employee Benefit Plans; Fringe Benefits.

     (a) The Bank shall provide family medical coverage and disability insurance for the Officer
and the Officer shall also be entitled to participate in any plan relating to deferred
compensation, stock options, stock purchases, pension, thrift, profit sharing, group life
insurance, education, or other retirement or employee benefits that the Bank has adopted, or may,
from time to time adopt, for the benefit of its executive employees or for employees generally,
subject to the eligibility rules of such plans.

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     (b) The Officer shall also be entitled to participate in any other fringe benefits which are
now or may be or become applicable to the Bank’s executive employees, including the payment of
reasonable expenses for attending annual and periodic meetings of trade associations, and any other
benefits which are commensurate with the duties and responsibilities to be performed by the Officer
under this Agreement. Additionally, the Officer shall be entitled to such vacation and sick leave
as shall be established under uniform employee policies promulgated by the Bank. The Bank shall
reimburse the Officer for all out-of-pocket reasonable and necessary business expenses which the
Officer may incur in connection with the Officer’s services on behalf of the Bank.

     (c) The Bank shall pay the dues of the Officer for membership in the Kingsmill Country Club
and one additional country club in the market area of the Bank at the Officer’s election and dues
for membership in civic clubs. The Bank shall also provide the Officer with the use of a late
model automobile suitable to the status of the Officer of a type and for lease terms to be approved
by the Committee and with the use of a cellphone.

     5. Term. The initial term of employment under this Agreement shall be for the period
commencing upon the effective date of this Agreement and ending three calendar years from the
effective date of this Agreement. On each anniversary of the effective date of this Agreement, the
term of this Agreement shall automatically be extended for an additional one-year period beyond the
then effective expiration date unless written notice from the Bank or the Officer is received 90
days prior to an anniversary date advising the other that this Agreement shall not be further
extended; provided that the Committee shall review the Officer’s performance annually and make a
specific determination pursuant to such review to renew this Agreement prior to the 90 days’
notice.

     6. Loyalty; Noncompetition; Confidentiality.

     (a) The Officer shall devote his full efforts and entire business time to the performance of
the Officer’s duties and responsibilities under this Agreement.

     (b) During the term of this Agreement, or any renewals thereof, and for a period of one year
after termination, the Officer agrees he will not, within the “Restricted Area,” directly or
indirectly, engage in any business that competes with the Bank or any of its subsidiaries without
the prior written consent of the Bank; provided, however, that the provisions of this Paragraph
shall not apply in the event the Officer’s employment is unilaterally terminated by the Bank for
Cause, (as such term is defined in Paragraph 8(c) hereof) or in the event the Officer terminates
his employment with the Bank after the occurrence of a “Termination Event” (as such term is defined
in Paragraph 10(b) hereof) following a “Change of Control” (as such term is defined in Paragraph
10(d) hereof). The Restricted Area covers the following divisible list of territories: Camden,
Chowan, Currituck, Dare, Pasquotank, and Perquimans Counties, North Carolina and Chesapeake and
Virginia Beach, Virginia, and within 15 miles of any Bank office operated during the term of this
Agreement. The one-year restricted period, however, does not include any period of violation or
period of time required for litigation to enforce the Officer’s agreement not to compete against
the Bank. Notwithstanding the foregoing, the Officer shall be free, without such
consent, to purchase or hold as an investment or otherwise, up to five percent of the outstanding
stock or other security of any corporation which has its securities publicly traded on any
recognized securities exchange or in any over-the counter market.

     (c) The Officer agrees he will hold in confidence all knowledge or information of a
confidential nature with respect to the business of the Bank or any subsidiary received by the
Officer during the term of this Agreement and will not disclose or make use of such information
without the prior written consent of the Bank. The Officer agrees that he will be liable to the
Bank for any damages caused by unauthorized disclosure of such information. Upon termination of
his employment, the Officer agrees

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to return all records or copies thereof of the Bank or any subsidiary in his possession or
under his control which relate to the activities of the Bank or any subsidiary.

     (d) The Officer acknowledges that it would not be possible to ascertain the amount of monetary
damages in the event of a breach by the Officer under the provisions of this Paragraph 6. The
Officer agrees that, in the event of a breach of this Paragraph 6, injunctive relief enforcing the
terms of this Paragraph 6 is an appropriate remedy. If the scope of any restriction contained in
this Paragraph 6 is determined to be too broad by any court of competent jurisdiction, then such
restriction shall be enforced to the maximum extent permitted by law and the Officer consents that
the scope of this restriction may be modified judicially.

     7. Standards. The Officer shall perform his duties and responsibilities under this
Agreement in accordance with such reasonable standards expected of employees with comparable
positions in comparable organizations and as may be established from time to time by the Bank. The
Bank will provide the Officer with the working facilities and staff customary for similar
executives and necessary for the Officer to perform his duties.

     8. Termination and Termination Pay. (a) The Officer’s employment under this
Agreement shall be terminated upon the death of the Officer during the term of this Agreement, in
which event, the Officer’s estate shall be entitled to receive the compensation due the Officer
through the last day of the calendar month in which the Officer’s death shall have occurred and for
a period of one month thereafter.

     (b) The Officer’s employment under this Agreement may be terminated at any time by the Officer
upon 60 days’ written notice to the Bank. Upon such termination, the Officer shall be entitled to
receive compensation through the effective date of such termination.

     (c) The Bank may terminate the Officer’s employment at any time, but any termination by the
Bank, other than termination for Cause, shall not prejudice the Officer’s right to compensation or
other benefits under this Agreement. The Bank shall provide written notice specifying the grounds
for termination for Cause. The Officer shall have no right to receive compensation or other
benefits for any period after termination for Cause. Termination for Cause shall include
termination because of the Officer’s personal dishonesty or moral turpitude, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any provision of this Agreement.
Notwithstanding such termination, the obligations under Paragraph 6(c) shall survive any
termination of employment.

     (d) Subject to the Bank’s obligations and the Officer’s rights under (i) Title I of the
Americans with Disabilities Act, §504 of the Rehabilitation Act, and the Family and Medical Leave
Act, and to (ii) the vacation leave, disability leave, sick leave and any other leave policies of
the Bank, the Officer’s employment under this Agreement automatically shall be terminated in the
event the Officer becomes disabled during the term of this Agreement and it is determined by the
Bank that the Officer is unable to perform the essential functions of the Officer’s job under this
Agreement for ninety (90) business days or more during any 12-month period. Upon any such
termination, the Officer shall be entitled to receive any compensation the Officer shall have
earned prior to the date of termination but which remains unpaid, and shall be entitled to any
payments provided under any disability income plan of the Bank which is applicable to the Officer.

     In the event of any disagreement between the Officer and the Bank as to whether the Officer is
physically or mentally incapacitated such as will result in the termination of the Officer’s
employment pursuant to this Paragraph 8(d), the question of such incapacity shall be submitted to
an impartial physician licensed to practice medicine in North Carolina for determination and who
will be selected by

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mutual agreement of the Officer and the Bank, or failing such agreement, by two (2) physicians
(one (1) of whom shall be selected by the Bank and the other by the Officer), and such
determination of the question of such incapacity by such physician or physicians shall be final and
binding on the Officer and the Bank. The Bank shall pay the reasonable fees and expenses of such
physician or physicians in making any determination required under this Paragraph 8(d).

     9. Additional Regulatory Requirements. Notwithstanding anything contained in this
Agreement to the contrary, it is understood and agreed that the Bank (or any of its successors in
interest) shall not be required to make any payment or take any action under this Agreement if:

     (a) such payment or action is prohibited by any governmental agency having jurisdiction over
the Bank (hereinafter referred to as “Regulatory Authority”) because the Bank is declared by such
Regulatory Authority to be insolvent, in default or operating in an unsafe or unsound manner; or,

     (b) in the reasonable opinion of counsel to the Bank, such payment or action (i) would be
prohibited by or would violate any provision of state or federal law applicable to the Bank,
including, without limitation, the Federal Deposit Insurance Act as now in effect or hereafter
amended, (ii) would be prohibited by or would violate any applicable rules, regulations, orders or
statements of policy, whether now existing or hereafter promulgated, of any Regulatory Authority,
or (iii) otherwise would be prohibited by any Regulatory Authority.

     10. Change in Control. (a) In the event of a termination of the Officer’s employment
in connection with, or within twenty-four (24) months after, a “Change in Control” (as defined in
Subparagraph (d) below) of the Bank other than for Cause (as defined in Paragraph 8), the Officer
shall be entitled to receive the amount set forth in Subparagraph (c) below. Said sum shall be
payable as provided in Subparagraph (e) below.

     (b) In addition to any rights the Officer might have to terminate this Agreement contained in
Paragraph 8, the Officer shall have the right to terminate this Agreement upon the occurrence of
any of the following events (the “Termination Events”) within twenty-four months following a Change
in Control of the Bank:

     (i) Officer is assigned any duties and/or responsibilities that, in Officer’s reasonable
determination, are inconsistent with or constitute a demotion or reduction in the Officer’s
position, duties, responsibilities or status as such existed at the time of the Change in
Control or with his reporting responsibilities or titles with the Bank in effect at such time,
regardless of Officer’s resulting position; or

     (ii) Officer’s annual base salary rate is reduced below the annual amount in effect as of
the effective date of a Change in Control or as the same shall have been increased from time to
time following such effective date; or

     (iii) Officer’s life insurance, medical or hospitalization insurance, disability
insurance, stock options plans, stock purchase plans, deferred compensation plans, management
retention plans, retirement plans or similar plans or benefits being provided by the Bank to
the Officer as of the effective date of the Change in Control are reduced in their level, scope
or coverage, or any such insurance, plans or benefits are eliminated, unless such reduction or
elimination applies proportionately to all salaried employees of the Bank who participated in
such benefits prior to such Change in Control; or

     (iv) Officer is transferred to a location which is more than 15 miles from his current
principal work location without the Officer’s express written consent.

A Termination Event shall be deemed to have occurred on the date such action or event is
implemented or takes effect.

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     (c) In the event that the Officer’s employment is terminated pursuant to this Paragraph 10,
the Bank will be obligated to pay or cause to be paid to Officer an amount equal to 2.99 times the
Officer’s “base amount” as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as
amended (the “Code”).

     (d) For the purposes of this Agreement, the term Change in Control shall mean any of the
following events:

     (i) After the effective date of this Agreement, any “person” (as such term is defined in
Section 7(j)(8)(A) of the Change in Bank Control Act of 1978), directly or indirectly, acquires
beneficial ownership of voting stock, or acquires beneficial ownership of voting stock, or
acquires irrevocable proxies or any combination of voting stock and irrevocable proxies,
representing twenty-five percent (25%) or more of any class of voting securities of the Bank,
or acquires control of, in any manner, the election of a majority of the Directors; or

     (ii) The Bank consolidates or merges with or into another corporation, association or
entity, or is otherwise reorganized, where the Bank is not the surviving corporation in such
transaction; or

     (iii) All or substantially all of the assets of the Bank are sold or otherwise
transferred to or are acquired by any other corporation, association or other person, entity or
group.

Notwithstanding the other provisions of this Paragraph 10, a transaction or event shall not be
considered a Change in Control if, prior to the consummation or occurrence of such transaction or
event, Officer and Bank agree in writing that the same shall not be treated as a Change in Control
for purposes of this Agreement.

     (e) Such amounts payable pursuant to this Paragraph 10 shall be paid, at the option of the
Officer, either in one lump sum or in thirty-six (36) equal monthly payments following termination
of Officer’s employment.

     (f) Following a Termination Event which gives rise to Officer’s rights hereunder, the Officer
shall have twelve (12) months from the date of occurrence of the Termination Event to terminate
this Agreement pursuant to this Paragraph 10. Any such termination shall be deemed to have
occurred only upon delivery to the Bank (or to any successor corporation) of written notice of
termination which describes the Change in Control and the Termination Event. If Officer does not
so terminate this Agreement within such twelve-month period, he shall thereafter have no further
rights hereunder with respect to that Termination Event, but shall retain rights, if any, hereunder
with respect to any other Termination Event as to which such period has not expired.

     (g) In the event any dispute shall arise between the Officer and the Bank as to the terms or
interpretation of this Agreement, including this Paragraph 10, whether instituted by formal legal
proceedings or otherwise, including any action taken by the Officer to enforce the terms of this
Paragraph 10 or in defending against any action taken by the Bank, the Bank shall reimburse the
Officer for all costs and expenses, proceedings or actions, in the event the Officer prevails in
any such action.

     11. Successors and Assigns. (a) This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Bank which shall acquire, directly or
indirectly, by conversion, merger, purchase or otherwise, all or substantially all of the assets of
the Bank.

     (b) Since the Bank is contracting for the unique and personal skills of the Officer, the
Officer shall be precluded from assigning or delegating his rights or duties hereunder without
first obtaining the written consent of the Bank.

     12. Modification; Wavier; Amendments. This Agreement represents, constitutes, and
incorporates the entire, exclusive, and complete understanding of the parties hereto and replaces
all previous agreements. This Agreement replaces the “probationary period” employment letter
between the Officer

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and the Bank dated as of his employment, which established the non-competition covenant in
consideration of Officer’s employment by the Bank. The Officer, by execution of this Agreement,
acknowledges that by acceptance of the terms of this Agreement, the Officer agrees not to dispute,
and waives any argument as to, the adequacy of the consideration for the non-competition and other
covenants in this Agreement. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing, signed by the
Officer and on behalf of the Bank by such officer as may be specifically designated by the Board of
Directors. No waiver by either party hereto, at any time, of any breach by the other party hereto
of, or compliance with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No amendment or addition to this Agreement shall be binding unless
in writing and signed by both parties, except as herein otherwise provided.

     13. Applicable Law. This Agreement shall be governed in all respects whether as to
validity, construction, capacity, performance or otherwise, by the laws of North Carolina, except
to the extent that federal law shall be deemed to apply.

     14. Severability. The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or enforceability of
the other provisions hereof.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first
hereinabove written.

	 	 	 	 	 	 	 
	 

	 	GATEWAY BANK & TRUST CO.
	 
	 	 	 	 
	 

	 	By:	 	/s/ D. Ben Berry
	 

	 	 	 	 
	 

	 	 	 	D. Ben Berry, Chief Executive
Officer
	 
	 	 	 	 
	Attest:
	 	 	 	 
	 
	 	 	 	 
	/s/
Wendy W. Small
	 	 	 	 
	 

Wendy W. Small, Corporate Secretary

	 	 	 	 
	 
	 	 	 	 
	 

	 	OFFICER
	 
	 	 	 	 
	 

	 	/s/ Theodore L.
Salter	 	[SEAL]
	 

	 	 
	 

	 	Theodore L. Salter

6EX-10.8 AMENDED AND RESTATED 1996 STOCK PLAN

 

EXHIBIT 10.8

EMDEON CORPORATION

1996 STOCK PLAN

(AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 27, 2006)

1. Purposes of the Plan. The purposes of this 1996 Stock Plan are to attract and retain
the best available personnel for positions of substantial responsibility, to provide additional
incentive to Employees and Consultants of the Company and its Subsidiaries and to promote the
success of the Company’s business. Options granted under the Plan may be Incentive Stock Options
or Nonstatutory Stock Options, as determined by the Administrator at the time of grant of an Option
and subject to the applicable provisions of Section 422 of the Code and the regulations promulgated
thereunder. Stock Purchase Rights may also be granted under the Plan.

2. Definitions. As used herein, the following definitions shall apply:

     (a) “ADMINISTRATOR” means the Board or any of its Committees appointed pursuant to Section 4
of the Plan.

     (b) “APPLICABLE LAWS” means the requirements relating to the administration of stock option
plans under U. S. state corporate laws, U.S. federal and state securities laws, the Code, any stock
exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws
of any foreign country or jurisdiction where Options or Stock Purchase Rights are, or will be,
granted under the Plan.

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

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

     (e) “COMMITTEE” means a Committee appointed by the Board of Directors in accordance with
Section 4 of the Plan.

     (f) “COMMON STOCK” means the Common Stock of the Company.

     (g) “COMPANY” means Emdeon Corporation, a Delaware corporation.

     (h) “CONSULTANT” means any person who is engaged by the Company or any Parent or Subsidiary to
render consulting or advisory services and is compensated for such services, and any Director of
the Company whether compensated for such services or not.

 

 

     (i) “CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT” means that the employment or consulting
relationship with the Company, any Parent or Subsidiary is not interrupted or terminated.
Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of
(i) any leave of absence approved by the Company or (ii) transfers between locations of the Company
or between the Company, its Parent, any Subsidiary, or any successor. A leave of absence approved
by the Company shall include sick leave, military leave, or any other personal leave approved by an
authorized representative of the Company. For purposes of Incentive Stock Options, no such leave
may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or
contract, including Company policies. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 91st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock option and shall be
treated for tax purposes as a Nonstatutory Stock Option.

     (j) “DIRECTOR” means a member of the Board of Directors.

     (k) “EMPLOYEE” means any person, including Officers and Directors, employed by the Company or
any Parent or Subsidiary of the Company. The payment of a Director’s fee by the Company shall not
be sufficient to constitute “employment” by the Company.

     (1) “EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended.

     (m) “FAIR MARKET VALUE” means, as of any date, the value of Common Stock determined as
follows:

(i) If the Common Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq National Market of the National Association
of Securities Dealers, Inc. Automated Quotation (“NASDAQ”) System, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day prior to the
time of determination and reported in THE WALL STREET JOURNAL or such other source as the
Administrator deems reliable;

(ii) If the Common Stock is quoted on the NASDAQ System (but not on the Nasdaq National
Market thereof) or regularly quoted by a recognized securities dealer but selling prices
are not reported, its Fair Market Value shall be the mean between the high bid and low
asked prices for the Common Stock on the last market trading day prior to the day of
determination; or

(iii) In the absence of an established market for the Common Stock, the Fair Market Value
thereof shall be determined in good faith by the Administrator.

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     (n) “INCENTIVE STOCK OPTION” means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code.

     (o) “NONSTATUTORY STOCK OPTION” means an Option not intended to qualify as an Incentive Stock
Option.

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

     (q) “OPTION” means a stock option granted pursuant to the Plan.

     (r) “OPTIONED STOCK” means the Common Stock subject to an Option or a Stock Purchase Right.

     (s) “OPTIONEE” means an Employee or Consultant who receives an Option or Stock Purchase Right.

     (t) “PARENT” means a “parent corporation,” whether now or hereafter existing, as defined in
Section 424 (e) of the Code.

     (u) “PLAN” means this 1996 Stock Plan.

     (v) “RESTRICTED STOCK” means shares of Common Stock acquired pursuant to a grant of a Stock
Purchase Right under Section 11 below.

     (w) “SECTION 16(b)” means Section 16(b) of the Securities Exchange Act of 1934, as amended.

     (x) “SHARE” means a share of the Common Stock, as adjusted in accordance with Section 12
below.

     (y) “STOCK PURCHASE RIGHT” means a right to purchase Common Stock pursuant to Section 11
below.

     (z) “SUBSIDIARY” means a “subsidiary corporation,” whether now or hereafter existing, as
defined in Section 424 (f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the
maximum aggregate number of Shares which may be optioned Stock and sold under the Plan is
36,785,785 shares. The Shares may be authorized but unissued, or reacquired Common Stock. If an
Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in
full, or is surrendered pursuant to an option exchange program, the unpurchased Shares which were
subject thereto shall become available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that

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have actually been issued under the Plan, upon exercise of either an option or Stock Purchase
Right, shall not be returned to the Plan and shall not become available for future distribution
under the Plan, except that if either (i) Shares of Restricted Stock or (ii) Shares issued upon
exercise of unvested Options and subject to a repurchase right at cost, are repurchased by the
Company at their original purchase price, such Shares shall become available for future grant under
the Plan.

4. Administration of the Plan.

(a) Procedure

(i) Multiple Administrative Bodies. The Plan may be administered by different
Committees with respect to different groups of Service Providers.

(ii) Section 162(m). To the extent that the Administrator determines it to be
desirable to qualify Options granted hereunder as “performance-based compensation” within
the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of
two or more “outside directors” within the meaning of Section 162(m) of the Code.

(iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as
exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to
satisfy the requirements for exemption under Rule 16b-3.

(iv) Other Administration. Other than as provided above, the Plan shall be
administered by (A) the Board or (B) a Committee, which committee shall be constituted to
satisfy Applicable Laws.

     (b) Powers of the Administrator. Subject to the provisions of the Plan and, in the
case of a Committee, the specific duties delegated by the Board to such Committee, and subject to
the approval of any relevant authorities, including the approval, if required, of any stock
exchange upon which the Common Stock is listed, the Administrator shall have the authority in its
discretion:

(i) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(1)
of the Plan;

(ii) to select the Employees and Consultants to whom Options and Stock Purchase Rights may
from time to time be granted hereunder;

(iii) to determine whether and to what extent Options and Stock Purchase Rights or any
combination thereof are granted hereunder;

(iv) to determine the number of Shares to be covered by each such award granted hereunder;

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(v) to approve forms of agreement for use under the Plan;

(vi) to determine the terms and conditions of any award granted hereunder and to modify or
amend such terms and conditions, subject to any required consents under Section 14;

(vii) to determine whether and under what circumstances an Option may be settled in cash
under subsection 9(f) instead of Common Stock;

(viii) to reduce the exercise price of any Option to the then current Fair Market Value if
the Fair Market Value of the Common Stock covered by such Option has declined since the
date the Option was granted;

(ix) to allow Optionees to satisfy withholding tax obligations by electing to have the
Company withhold from the Shares to be issued upon exercise of an option or Stock Purchase
Right that number of Shares having a Fair Market Value equal to the amount required to be
withheld. The Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and under such
conditions as the Administrator may deem necessary or advisable;

(x) to construe and interpret the terms of the Plan and awards granted pursuant to the
Plan; and

(xi) to accelerate or extend the vesting or exercisability or extend the term of any or all
outstanding awards (in the case of Options, within the maximum ten-year term of such
awards) in such circumstances as the Administrator may deem appropriate (including, without
limitation, in connection with a termination of employment or services or other events of a
personal nature) subject to any required consent under Section 14; provided that such
extension or acceleration does not cause the holder of the award to be subject to tax under
Section 409A of the Code.

     (c) Effect of Administrator’s Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Optionees and any other
holders of any Options or Stock Purchase Rights.

5. Eligibility.

     (a) Nonstatutory Stock Options and Stock Purchase Rights may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An Employee or Consultant
who has been granted an Option or Stock Purchase Right may, if otherwise eligible, be granted
additional Options or Stock Purchase Rights.

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     (b) Each Option shall be designated in the written option agreement as either an Incentive
Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the
extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by the Optionee during any calendar year (under all
plans of the Company and any Parent or Subsidiary) exceeds $100,000, such options shall be treated
as Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted. The Fair Market Value of the Shares
shall be determined as of the time the option with respect to such Shares is granted.

     (c) Neither the Plan nor any Option or Stock Purchase Right shall confer upon any Optionee any
right with respect to continuation of his or her employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the Company’s right to
terminate his or her employment or consulting relationship at any time, with or without cause.

     (d) The following limitations shall apply to grants of options and Stock Purchase Rights to
Employees:

(i) No Employee shall be granted, in any fiscal year of the Company, Options and Stock
Purchase Rights to purchase more than 500,000 Shares.

(ii) In connection with his or her initial employment, an Employee may be granted Options
and Stock Purchase Rights to purchase up to an additional 500,000 Shares which shall not
count against the limit set forth in subsection (i) above.

(iii) The foregoing limitations shall be adjusted proportionately in connection with any
change in the Company’s capitalization as described in Section 12.

(iv) If an Option or Stock Purchase Right is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction described in
Section 12), the cancelled Option or Stock Purchase Right shall be counted against the
limit set forth in subsection (i) above. For this purpose, if the exercise price of an
Option or Stock Purchase Right is reduced, such reduction will be treated as a cancellation
of the Option or Stock Purchase Right and the grant of a new Option or Stock Purchase
Right.

     6. Term of Plan. The Plan became effective on February 28, 1996. It shall continue
in effect for a term of ten (10) years unless sooner terminated under Section 14 of the Plan.

     7. Term of Option. The term of each Option shall be the term stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years from the date of
grant thereof. In the case of an Incentive Stock Option granted to an

6

 

Optionee who, at the time the option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent or subsidiary, the
term of the option shall be five (5) years from the date of grant thereof or such shorter term as
may be provided in the Option Agreement.

     8. Option Exercise Price and Consideration

     (a) The per share exercise price for the Shares to be issued upon exercise of an option shall
be such price as is determined by the Administrator, but shall be subject to the following:

     (i) In the case of an Incentive Stock Option:

(A) granted to an Employee who, at the time of grant of such Option, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than 110% of the Fair Market Value per Share on the date of grant.

(B) granted to any other Employee, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be
determined by the Administrator. In the case of a Nonstatutory Stock option intended to
qualify as “performance-based compensation” within the meaning of Section 162(m) of the
Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.

(iii) Notwithstanding the foregoing, options may be granted with a per Share exercise price
of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a
merger or other corporate transaction.

     (b) The consideration to be paid for the Shares to be issued upon exercise of an option,
including the method of payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock option, shall be determined at the time of grant). Such consideration may consist
of (1) cash, (2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more than six months on
the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which such Option shall be exercised, (5) delivery of
a properly executed exercise notice together with such other documentation as the Administrator and
a broker, if applicable, shall require to effect an exercise of the Option and delivery to the
Company of the sale or loan proceeds required to pay the exercise price, or (6) any combination of
the foregoing methods of payment. In making its determination as to the type of

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consideration to accept, the Administrator shall consider if acceptance of such consideration
may be reasonably expected to benefit the Company.

     9. Exercise of Option

     (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder
shall be exercisable at such times and under such conditions as determined by the Administrator,
including performance criteria with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such exercise has been given to
the Company in accordance with the terms of the Option by the person entitled to exercise the
option and full payment for the Shares with respect to which the option is exercised has been
received by the Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) hereof. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right to vote, receive
dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. No adjustment shall be made for a dividend
or other right for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 12 hereof. Exercise of an option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is exercised.

     (b) Termination of Employment or Consulting Relationship. Unless the Administrator
provides otherwise in an Option Agreement or it is provided otherwise in an Optionee’s employment
or other agreement with the Company or one of its Subsidiaries, in the event of termination of an
Optionee’s Continuous Status as an Employee or Consultant (but not in the event of an Optionee’s
change of status from Employee to Consultant (in which case an Employee’s Incentive Stock option
shall      automatically convert to a Nonstatutory Stock Option on the- date three (3) months and one
day following such change of status) or from Consultant to Employee), (i) such Optionee may, but
only within ninety (90) days or such longer period of time determined by the Administrator, with
such determination in the case of an Incentive Stock option not exceeding three (3) months after
the date of such termination (but in no event later than the expiration date of the term      of such
Option as set forth in the Option Agreement), exercise his or her Option to the extent that the
Optionee was entitled to exercise it at the date of such termination and (ii) to the extent that
the Optionee was not entitled to exercise the Option at the date of such termination, or if the
Optionee does not exercise such Option to the extent so entitled within the time specified herein,
the option shall terminate.

     (c) Disability of Optionee. Unless the Administrator provides otherwise in an Option
Agreement or it is provided otherwise in an Optionee’s employment or other

8

 

agreement with the Company or one of its Subsidiaries, in the event of termination of an
Optionee’s Continuous Status as an Employee or Consultant as a result of his or her disability, (i)
the Optionee may, but only within twelve (12) months from the date of such termination (and in no
event later than the expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such
termination and (ii) to the extent that the Optionee was not entitled to exercise the Option at the
date of termination, or if the Optionee does not exercise such option to the extent so entitled
within the time specified herein, the option shall terminate, and the Shares covered by such Option
shall revert to the Plan. If such disability is not a “disability” as such term is defined in
Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive Stock Option
shall automatically cease to be treated as an Incentive Stock Option and shall be treated for tax
purposes as a Nonstatutory Stock Option on the day three months and one day following such
termination..

     (d) Death of Optionee. Unless the Administrator provides otherwise in an Option
Agreement or it is provided otherwise in an Optionee’s employment or other agreement with the
Company or one of its Subsidiaries, in the event of the death of an Optionee, (i) the Option may be
exercised at any time within twelve (12) months following the date of death (but in no event later
than the expiration of the term of such Option as set forth in the Option Agreement) by the
Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that the Optionee was entitled to exercise the option on the
date of death, or such greater extent as the Administrator may determine, (ii) if, at the time of
death, the Optionee was not entitled to exercise his or her entire option and the Administrator
does not determine a greater extent to which such Option may be exercised, the Shares covered by
the unexercisable portion of the option shall immediately revert to the Plan and (iii) if, after
the Optionee’s death, the Optionee’s estate or a person who acquires the right to exercise the
Option by bequest or inheritance does not exercise the option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

     (e) Buyout Provisions. The Administrator may at any time offer to buy out for a
payment in cash or Shares, an Option or Stock Purchase Right previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the Optionee at the
time that such offer is made.

     10. Non-Transferability of Options and Stock Purchase Rights. Unless determined
otherwise by the Administrator, Options and Stock Purchase Rights may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws
of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the
Optionee. If the Administrator makes an Option or Stock Purchase Right transferable, such option or
Stock Purchase Right shall contain such additional terms and conditions as the Administrator deems
appropriate.

9

 

     11. Stock Purchase Rights.

     (a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition
to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the
Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan,
it shall advise the offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to purchase, the price to
be paid, and the time within which such person must accept such offer, which shall in no event
exceed thirty (30) days from the date upon which the Administrator makes the determination to grant
the Stock Purchase Right. The offer shall be accepted by execution of a Restricted Stock purchase
agreement in the form determined by the Administrator. Shares purchased pursuant to the grant of a
Stock Purchase Right shall be referred to herein as “Restricted Stock”.

     (b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted
Stock purchase agreement shall grant the Company a repurchase option exercisable upon the voluntary
or involuntary termination of the purchasers employment with the Company for any reason (including
death or disability). The purchase price for Shares repurchased pursuant to the Restricted Stock
purchase agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse
at such rate as the Administrator may determine.

     (c) Other Provisions. The Restricted Stock purchase agreement shall contain such
other terms, provisions and conditions not inconsistent with the Plan as may be determined by the
Administrator in its sole discretion. In addition, the provisions of Restricted Stock purchase
agreements need not be the same with respect to each purchaser.

     (d) Rights as a Stockholder. Once the Stock Purchase Right is exercised, the
purchaser shall have rights equivalent to those of a stockholder and shall be a stockholder when
his or her purchase is entered upon the records of the duly authorized transfer agent of the
Company. No adjustment shall be made for a dividend or other right for which the record date is
prior to the date the Stock Purchase Right is exercised, except as provided in Section 12 of the
Plan.

     12. Adjustments upon Changes in Capitalization or Merger.

     (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 outstanding Option or Stock
Purchase Right, and the number of shares of Common Stock which have been authorized for issuance
under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which
have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase
Right, as well as the price per share of Common Stock covered by each such outstanding option or
Stock Purchase Right, shall

10

 

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 issued
shares of Common Stock effected without receipt of consideration by the Company. The 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 or Stock Purchase Right.

     (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify the Optionee at least fifteen (15) days
prior to such proposed action. To the extent it has not been previously exercised, the Option or
Stock Purchase Right shall terminate immediately prior to the consummation of such proposed action.

     (c) Merger. Unless the Administrator provides otherwise in an Option Agreement or
Restricted Stock award agreement or it is provided otherwise in an Optionee’s employment or other
agreement with the Company or one of its Subsidiaries, in the event of a merger of the Company with
or into another corporation, (i) each outstanding Option or Stock Purchase Right may be assumed or
an equivalent option or right may be substituted by such successor corporation or a parent or
subsidiary of such successor corporation and (ii) if, in such event, an Option or Stock Purchase
Right is not assumed or substituted, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to
which it would not otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes
fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale
of assets, the Administrator shall notify the Optionee in writing or electronically that the Option
or Stock Purchase Right shall be fully vested and exercisable for a period of fifteen (15) days
from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger, the Option or Stock Purchase Right confers
the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the merger, the consideration (whether stock, cash, or other
securities or property) received in the merger by holders of Common Stock for each Share held on
the effective date of the transaction (and if the holders are offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding Shares). If such
consideration received in the merger is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Option or Stock Purchase Right, for each
Share of Optioned Stock subject to the option or Stock Purchase Right, to be solely common stock of
the successor

11

 

corporation or its Parent equal in fair market value to the per share consideration received
by holders of Common Stock in the merger.

     13. Time of Granting Options and Stock Purchase Rights. The date of grant of an
Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrator
makes the determination granting such option or Stock Purchase Right, or such other date as is
determined by the Administrator. Notice of the determination shall be given to each Employee or
Consultant to whom an Option or Stock Purchase Right is so granted within a reasonable time after
the date of such grant.

     14. Amendment and Termination of the Plan.

     (a) Amendment and Termination. The Board may at any time amend, alter, suspend or
discontinue the Plan, but no amendment, alteration, suspension or discontinuation shall be made
which would impair the rights of any Optionee under any grant theretofore made, without his or her
consent. In addition, to the extent necessary and desirable to comply with Applicable Laws, the
Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a
degree as required.

     (b) Effect of Amendment or Termination. Any such amendment or termination of the Plan
shall not affect Options or Stock Purchase Rights already granted, and such Options and Stock
Purchase Rights shall remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company. In addition, no amendment
of any outstanding Option Agreement or Restricted Stock award agreement shall, without consent of
the Optionee, be made which would impair the rights of the Optionee under any Option or Stock
Purchase Right granted under this Plan prior to the effective date of such change.

     15. Conditions upon Issuance of Shares. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such option or Stock Purchase
Right and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, 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 or Stock Purchase Right, the Company may require the person exercising such option or Stock
Purchase Right 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 relevant provisions of law.

12

 

     16. Reservation of Shares. The Company, during the term of this Plan, shall at all
times reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan. The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite authority shall not
have been obtained.

     17. Agreements. Options and Stock Purchase Rights shall be evidenced by written
agreements in such form as the Administrator shall approve from time to time.

13

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