Document:

Exhibit 4.2

VCampus Corporation

2006 Equity Incentive Plan

TABLE
OF CONTENTS

	
  1.

  	
   

  	
  Establishment,
  Purpose and Term of Plan

  	
  1

  
	
   

  	
   

  	
  1.1

  	
   

  	
  Establishment

  	
  1

  
	
   

  	
   

  	
  1.2

  	
   

  	
  Purpose

  	
  1

  
	
   

  	
   

  	
  1.3

  	
   

  	
  Term of Plan

  	
  1

  
	
  2.

  	
   

  	
  Definitions and
  Construction

  	
  1

  
	
   

  	
   

  	
  2.1

  	
   

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
  2.2

  	
   

  	
  Construction

  	
  7

  
	
  3.

  	
   

  	
  Administration

  	
  7

  
	
   

  	
   

  	
  3.1

  	
   

  	
  Administration
  by the Committee

  	
  7

  
	
   

  	
   

  	
  3.2

  	
   

  	
  Authority of Officers

  	
  7

  
	
   

  	
   

  	
  3.3

  	
   

  	
  Administration
  with Respect to Insiders

  	
  7

  
	
   

  	
   

  	
  3.4

  	
   

  	
  Committee
  Complying with Section 162(m)

  	
  7

  
	
   

  	
   

  	
  3.5

  	
   

  	
  Powers of the
  Committee

  	
  8

  
	
   

  	
   

  	
  3.6

  	
   

  	
  Intentionally Left
  Blank

  	
  9

  
	
   

  	
   

  	
  3.7

  	
   

  	
  Indemnification

  	
  9

  
	
  4.

  	
   

  	
  Shares Subject to Plan

  	
  9

  
	
   

  	
   

  	
  4.1

  	
   

  	
  Maximum Number
  of Shares Issuable

  	
  9

  
	
   

  	
   

  	
  4.2

  	
   

  	
  Share Accounting

  	
  9

  
	
   

  	
   

  	
  4.3

  	
   

  	
  Adjustment for
  Certain Unissued Predecessor Plan Shares

  	
  9

  
	
   

  	
   

  	
  4.4

  	
   

  	
  Adjustments
  for Changes in Capital Structure

  	
  10

  
	
  5.

  	
   

  	
  Eligibility,
  Participation and Award Limitations

  	
  10

  
	
   

  	
   

  	
  5.1

  	
   

  	
  Persons Eligible
  for Awards

  	
  10

  
	
   

  	
   

  	
  5.2

  	
   

  	
  Participation in Plan

  	
  10

  
	
   

  	
   

  	
  5.3

  	
   

  	
  Award Limitations

  	
  10

  
	
  6.

  	
   

  	
  Stock Options

  	
  12

  
	
   

  	
   

  	
  6.1

  	
   

  	
  Exercise Price

  	
  12

  
	
   

  	
   

  	
  6.2

  	
   

  	
  Exercisability
  and Term of Options

  	
  12

  
	
   

  	
   

  	
  6.3

  	
   

  	
  Payment of Exercise
  Price

  	
  12

  
	
   

  	
   

  	
  6.4

  	
   

  	
  Effect of
  Termination of Service

  	
  13

  
	
   

  	
   

  	
  6.5

  	
   

  	
  Transferability of
  Options

  	
  14

  
	
  7.

  	
   

  	
  Stock Appreciation
  Rights

  	
  14

  
	
   

  	
   

  	
  7.1

  	
   

  	
  Types of SARs
  Authorized

  	
  14

  
	
   

  	
   

  	
  7.2

  	
   

  	
  Exercise Price

  	
  14

  
	
   

  	
   

  	
  7.3

  	
   

  	
  Exercisability
  and Term of SARs

  	
  14

  
	
   

  	
   

  	
  7.4

  	
   

  	
  Exercise of SARs

  	
  15

  
	
   

  	
   

  	
  7.5

  	
   

  	
  Deemed Exercise of
  SARs

  	
  15

  
	
   

  	
   

  	
  7.6

  	
   

  	
  Effect of
  Termination of Service

  	
  15

  
	
   

  	
   

  	
  7.7

  	
   

  	
  Transferability of
  SARs

  	
  15

  

 i
 

 

	
  8.

  	
   

  	
  Restricted Stock
  Awards

  	
  16

  
	
   

  	
   

  	
  8.1

  	
   

  	
  Types of
  Restricted Stock Awards Authorized

  	
  16

  
	
   

  	
   

  	
  8.2

  	
   

  	
  Purchase
  Price

  	
  16

  
	
   

  	
   

  	
  8.3

  	
   

  	
  Purchase
  Period

  	
  16

  
	
   

  	
   

  	
  8.4

  	
   

  	
  Payment of Purchase
  Price

  	
  16

  
	
   

  	
   

  	
  8.5

  	
   

  	
  Vesting and
  Restrictions on Transfer

  	
  16

  
	
   

  	
   

  	
  8.6

  	
   

  	
  Voting Rights;
  Dividends and Distributions

  	
  17

  
	
   

  	
   

  	
  8.7

  	
   

  	
  Effect of
  Termination of Service

  	
  17

  
	
   

  	
   

  	
  8.8

  	
   

  	
  Nontransferability
  of Restricted Stock Award Rights

  	
  17

  
	
  9.

  	
   

  	
  Restricted Stock
  Unit Awards

  	
  17

  
	
   

  	
   

  	
  9.1

  	
   

  	
  Grant of
  Restricted Stock Unit Awards

  	
  17

  
	
   

  	
   

  	
  9.2

  	
   

  	
  Purchase Price

  	
  18

  
	
   

  	
   

  	
  9.3

  	
   

  	
  Vesting

  	
  18

  
	
   

  	
   

  	
  9.4

  	
   

  	
  Voting Rights,
  Dividend Equivalent Rights and Distributions

  	
  18

  
	
   

  	
   

  	
  9.5

  	
   

  	
  Effect of
  Termination of Service

  	
  18

  
	
   

  	
   

  	
  9.6

  	
   

  	
  Settlement of
  Restricted Stock Unit Awards

  	
  18

  
	
   

  	
   

  	
  9.7

  	
   

  	
  Nontransferability
  of Restricted Stock Unit Awards

  	
  19

  
	
  10.

  	
   

  	
  Performance Awards

  	
  19

  
	
   

  	
   

  	
  10.1

  	
   

  	
  Types of
  Performance Awards Authorize

  	
  19

  
	
   

  	
   

  	
  10.2

  	
   

  	
  Initial Value
  of Performance Shares and Performance Units

  	
  19

  
	
   

  	
   

  	
  10.3

  	
   

  	
  Establishment
  of Performance Period, Performance Goals and

  Performance Award Formula

  	
  20

  
	
   

  	
   

  	
  10.4

  	
   

  	
  Measurement of
  Performance Goals

  	
  20

  
	
   

  	
   

  	
  10.5

  	
   

  	
  Settlement of
  Performance Awards

  	
  21

  
	
   

  	
   

  	
  10.6

  	
   

  	
  Voting Rights;
  Dividend Equivalent Rights and Distributions

  	
  22

  
	
   

  	
   

  	
  10.7

  	
   

  	
  Effect of
  Termination of Service

  	
  23

  
	
   

  	
   

  	
  10.8

  	
   

  	
  Nontransferability
  of Performance Awards

  	
  23

  
	
  11.

  	
   

  	
  Deferred
  Compensation Awards

  	
  23

  
	
   

  	
   

  	
  11.1

  	
   

  	
  Establishment
  of Deferred Compensation Award Programs

  	
  23

  
	
   

  	
   

  	
  11.2

  	
   

  	
  Terms and
  Conditions of Deferred Compensation Awards

  	
  24

  
	
  12.

  	
   

  	
  Cash-Based
  Awards and Other Stock-Based Awards

  	
  25

  
	
   

  	
   

  	
  12.1

  	
   

  	
  Grant of Cash-Based
  Awards

  	
  25

  
	
   

  	
   

  	
  12.2

  	
   

  	
  Grant of Other
  Stock-Based Awards

  	
  25

  
	
   

  	
   

  	
  12.3

  	
   

  	
  Value of
  Cash-Based and Other Stock-Based Awards

  	
  25

  
	
   

  	
   

  	
  12.4

  	
   

  	
  Payment or
  Settlement of Cash-Based Awards and Other Stock-Based Awards

  	
  25

  
	
   

  	
   

  	
  12.5

  	
   

  	
  Voting Rights;
  Dividend Equivalent Rights and Distributions

  	
  25

  
	
   

  	
   

  	
  12.6

  	
   

  	
  Effect of
  Termination of Service

  	
  26

  
	
   

  	
   

  	
  12.7

  	
   

  	
  Nontransferability
  of Cash-Based Awards and Other Stock-Based Awards

  	
  26

  
	
  13.

  	
   

  	
  Standard Forms
  of Award Agreement

  	
  26

  
	
   

  	
   

  	
  13.1

  	
   

  	
  Award Agreements

  	
  26

  
	
   

  	
   

  	
  13.2

  	
   

  	
  Authority to Vary
  Terms

  	
  26

  

 ii
 

 

	
  14.

  	
   

  	
  Change
  in Control

  	
  26

  
	
   

  	
   

  	
  14.1

  	
   

  	
  Effect of
  Change in Control on Options and SARs

  	
  26

  
	
   

  	
   

  	
  14.2

  	
   

  	
  Effect of
  Change in Control on Restricted Stock Awards, Restricted Stock Unit Awards
  and Performance Awards

  	
  27

  
	
   

  	
   

  	
  14.3

  	
   

  	
  Effect of
  Change in Control on Deferred Compensation Awards

  	
  27

  
	
   

  	
   

  	
  14.4

  	
   

  	
  Effect of
  Change in Control on Cash-Based Awards and Other Stock-Based Awards

  	
  27

  
	
  15.

  	
   

  	
  Compliance with
  Securities Law

  	
  28

  
	
  16.

  	
   

  	
  Tax Withholding

  	
  28

  
	
   

  	
   

  	
  16.1

  	
   

  	
  Tax Withholding in
  General

  	
  28

  
	
   

  	
   

  	
  16.2

  	
   

  	
  Withholding in Shares

  	
  28

  
	
  17.

  	
   

  	
  Amendment or
  Termination of Plan

  	
  28

  
	
  18.

  	
   

  	
  Compliance with
  Section 409A

  	
  29

  
	
   

  	
   

  	
  18.1

  	
   

  	
  Awards Subject
  to Section 409A

  	
  29

  
	
   

  	
   

  	
  18.2

  	
   

  	
  Deferral
  and/or Distribution Elections

  	
  29

  
	
   

  	
   

  	
  18.3

  	
   

  	
  Subsequent Elections

  	
  29

  
	
   

  	
   

  	
  18.4

  	
   

  	
  Distributions
  Pursuant to Deferral Elections

  	
  30

  
	
   

  	
   

  	
  18.5

  	
   

  	
  Unforeseeable
  Emergency

  	
  30

  
	
   

  	
   

  	
  18.6

  	
   

  	
  Disabled

  	
  31

  
	
   

  	
   

  	
  18.7

  	
   

  	
  Death

  	
  31

  
	
   

  	
   

  	
  18.8

  	
   

  	
  No
  Acceleration of Distributions

  	
  31

  
	
  19.

  	
   

  	
  Miscellaneous
  Provisions

  	
  31

  
	
   

  	
   

  	
  19.1

  	
   

  	
  Repurchase Rights

  	
  31

  
	
   

  	
   

  	
  19.2

  	
   

  	
  Forfeiture Events

  	
  31

  
	
   

  	
   

  	
  19.3

  	
   

  	
  Provision of
  Information

  	
  32

  
	
   

  	
   

  	
  19.4

  	
   

  	
  Rights as
  Employee, Consultant or Director

  	
  32

  
	
   

  	
   

  	
  19.5

  	
   

  	
  Rights as a
  Stockholder

  	
  32

  
	
   

  	
   

  	
  19.6

  	
   

  	
  Delivery of Title
  to Shares

  	
  32

  
	
   

  	
   

  	
  19.7

  	
   

  	
  Fractional Shares

  	
  32

  
	
   

  	
   

  	
  19.8

  	
   

  	
  Retirement and
  Welfare Plans

  	
  32

  
	
   

  	
   

  	
  19.9

  	
   

  	
  Beneficiary
  Designation

  	
  32

  
	
   

  	
   

  	
  19.10

  	
   

  	
  Severability

  	
  33

  
	
   

  	
   

  	
  19.11

  	
   

  	
  No Constraint
  on Corporate Action

  	
  33

  
	
   

  	
   

  	
  19.12

  	
   

  	
  Unfunded Obligation

  	
  33

  
	
   

  	
   

  	
  19.13

  	
   

  	
  Choice of Law

  	
  33

  
	
  20.

  	
   

  	
  Nonemployee
  Director Grants

  	
  33

  
	
   

  	
   

  	
  20.1

  	
   

  	
  Procedure for Grants

  	
  33

  
	
   

  	
   

  	
  20.2

  	
   

  	
  No Right to
  Continue as a Director

  	
  34

  
	
   

  	
   

  	
  20.3

  	
   

  	
  Other Terms

  	
  34

  
	
  21.

  	
   

  	
  Execution of
  Receipts and Releases

  	
  34

  
	
  22.

  	
   

  	
  Unfunded Plan

  	
  35

  
	
  23.

  	
   

  	
  No Guarantee of
  Interests

  	
  35

  

A-33

 iii

VCampus
Corporation

2006 Equity Incentive Plan

1.   ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

1.1   Establishment.   The VCampus Corporation 2006 Equity
Incentive Plan (the “Plan”) is hereby established effective as of May 25,
2006, the date of its approval by the stockholders of the Company (the “Effective Date”).

1.2   Purpose.   The purpose of the Plan is to advance
the interests of the Participating Company Group
and its stockholders by providing an incentive to attract, retain and reward
persons performing services for the Participating Company Group and by
motivating such persons to contribute to the growth and profitability of the
Participating Company Group. The Plan seeks to achieve this purpose by
providing for Awards in the form of Options, Stock Appreciation Rights,
Restricted Stock Purchase Rights, Restricted Stock Bonuses, Restricted Stock
Units, Performance Shares, Performance Units, Deferred Compensation Awards,
Cash-Based Awards and Other Stock-Based Awards.

1.3   Term of
Plan.   The Plan
shall continue in effect until its termination by the Committee; provided, however, that all Awards shall be
granted, if at all, within ten (10) years from the Effective Date.

2.   DEFINITIONS AND
CONSTRUCTION.

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

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

(b)    “Award” means any
Option, Stock Appreciation Right, Restricted Stock Purchase Right, Restricted
Stock Bonus, Restricted Stock Unit, Performance Share, Performance Unit,
Deferred Compensation Award, Cash-Based Award or Other Stock-Based Award
granted under the Plan.

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

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

(e)    “Cash-Based Award”
means an Award denominated in cash and granted pursuant to Section 12.

(f)     “Cause” means,
unless such term or an equivalent term is otherwise defined with respect to an
Award by the Participant’s Award Agreement or by a written contract of
employment or service, any of the following: (i) the Participant’s theft,
dishonesty, willful misconduct, breach of fiduciary duty for personal profit,
or falsification of any Participating Company documents or records; (ii) the
Participant’s material failure to abide by a Participating Company’s code of
conduct or other policies (including, without limitation, policies relating to
confidentiality and reasonable workplace conduct); (iii) the Participant’s
unauthorized use, misappropriation, destruction or diversion of any tangible or
intangible asset or corporate opportunity of a Participating Company
(including, without limitation, the Participant’s improper use or disclosure of
a Participating Company’s confidential or proprietary

 1
 

information); (iv) any
intentional act by the Participant which has a material detrimental effect on a
Participating Company’s reputation or business; (v) the Participant’s
repeated failure or inability to perform any reasonable assigned duties after
written notice from a Participating Company of, and a reasonable opportunity to
cure, such failure or inability; (vi) any material breach by the
Participant of any employment, service, non-disclosure, non-competition,
non-solicitation or other similar agreement between the Participant and a
Participating Company, which breach is not cured pursuant to the terms of such
agreement; or (vii) the Participant’s conviction (including any plea of
guilty or nolo contendere) of any criminal act involving fraud, dishonesty,
misappropriation or moral turpitude, or which impairs the Participant’s ability
to perform his or her duties with a Participating Company.

(g)    “Change in Control”
means, unless such term or an equivalent term is otherwise defined with respect
to an Award by the Participant’s Award Agreement or by a written contract of
employment or service, the occurrence of any of the following:

(i)     any “person”
(as such term is used in Sections 13(d) and 14(d) of the Exchange
Act), other than (1) a trustee or other fiduciary holding securities of
the Company under an employee benefit plan of a Participating Company or (2) a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the stock of the
Company, becomes the “beneficial owner” (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of (i) the
outstanding shares of common stock of the Company or (ii) the total
combined voting power of the Company’s then-outstanding securities entitled to
vote generally in the election of directors; or

(ii)    an
Ownership Change Event or series of related Ownership Change Events
(collectively, a “Transaction”)
in which the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction direct or indirect beneficial
ownership of more than forty percent (40%) of the total combined voting power
of the outstanding voting securities of the Company or, in the case of an
Ownership Change Event described in Section 2.1(dd)(iii), the entity to
which the assets of the Company were transferred (the “Transferee”), as the case may be; or

(iii)   a
liquidation or dissolution of the Company.

For purposes of the preceding sentence, indirect
beneficial ownership shall include, without limitation, an interest resulting
from ownership of the voting securities of one or more corporations or other
business entities which own the Company or the Transferee, as the case may be,
either directly or through one or more subsidiary corporations or other
business entities. The Committee shall have the right to determine whether
multiple sales or exchanges of the voting securities of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.

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

(i)     “Committee” means
the Compensation Committee and such other committee or subcommittee of the
Board, if any, duly appointed to administer the Plan and having such powers in
each instance as shall be specified by the Board. If, at any time, there is no
committee of the Board then authorized or properly constituted to administer
the Plan, the Board shall exercise all of the powers of the Committee granted
herein, and, in any event, the Board may in its discretion exercise any or all of
such powers.

(j)     “Company” means
VCampus Corporation, a Delaware corporation, or any successor corporation
thereto.

 2
 

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

(l)     “Covered
Employee” means any Employee who is or may become a “covered
employee” as defined in Section 162(m), or any successor statute, and who
is designated, either as an individual Employee or a member of a class of
Employees, by the Committee no later than (i) the date ninety (90) days
after the beginning of the Performance Period, or (ii) the date on which
twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered
Employee” under this Plan for such applicable Performance Period.

(m)   “Deferred Compensation Award”
means an award granted to a Participant pursuant to Section 11.

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

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

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

(q)    “Employee” means
any person treated as an employee (including an Officer or a member of the
Board who is also treated as an employee) in the records of a Participating
Company and, with respect to any Incentive Stock Option granted to such person,
who is an employee for purposes of Section 422 of the Code; provided,
however, that neither service as a member of the Board nor payment of a
director’s fee shall be sufficient to constitute employment for purposes of the
Plan. The Company shall determine in good faith and in the exercise of its
discretion whether an individual has become or has ceased to be an Employee and
the effective date of such individual’s employment or termination of
employment, as the case may be. For purposes of an individual’s rights, if any,
under the terms of the Plan as of the time of the Company’s determination of
whether or not the individual is an Employee, all such determinations by the
Company shall be final, binding and conclusive as to such rights, if any,
notwithstanding that the Company or any court of law or governmental agency
subsequently makes a contrary determination as to such individual’s status as
an Employee.

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

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

(i)     Except as
otherwise determined by the Committee, if, on such date, the Stock is listed on
a national or regional securities exchange or market system, the Fair Market
Value of a share of Stock shall be the closing price of a share of Stock (or
the mean of the closing bid and asked prices of a share of Stock if the Stock
is so quoted instead) as quoted on the Nasdaq National Market, The Nasdaq
Capital Market or such other national or regional securities exchange or market
system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other
source as the Company deems reliable. If the relevant date does not fall on a
day on which the Stock has traded on such securities exchange or market system,
the date on which the Fair Market Value shall be established shall be the last
day on which the Stock was so 

 3
 

traded prior to the
relevant date, or such other appropriate day as shall be determined by the
Committee, in its discretion.

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

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

(t)     “Full Value Award”
means any Award settled in Stock, other than (i) an Option, (ii) a
Stock Appreciation Right, (iii) a Restricted Stock Purchase Right or an
Other Stock-Based Award under which the Company will receive monetary
consideration equal to the Fair Market Value of the shares subject to such
Award, (iv) a Deferred Compensation Award which is an elective cash
compensation reduction award described in Section 11.1(a) or a stock
issuance deferral award described in Section 11.1(b), or (v) an Other
Stock-Based award based on appreciation in the Fair Market Value of the Stock.

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

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

(w)   “Insider Trading Policy”
means the written policy of the Company pertaining to the purchase, sale,
transfer or other disposition of the Company’s equity securities by Directors, Officers,
Employees or other service providers who may possess material, nonpublic
information regarding the Company or its securities.

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

N = X(A-B)/A, where:

“N” = the number of shares of Stock to be issued to
the Participant upon exercise of the Option;

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

“A” = the Fair Market Value of one (1) share of
Stock determined on the exercise date; and

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

 4
 

 

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

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

(aa)  “Option”  means an
Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to Section 6.

(bb)  “Option Exchange Program”
means a program, approved by the Company’s Board of Directors or the
Committee, which provides for the cancellation of outstanding options,
including options granted pursuant to a Predecessor Plan, and the grant in
substitution therefore of Awards.

(cc)  “Other
Stock-Based Award” means an Award denominated in shares of Stock
and granted pursuant to Section 12.

(dd)  “Ownership Change Event”
means the occurrence of any of the following with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent
(50%) of the voting stock of the Company; (ii) a merger or consolidation
in which the Company is a party; or (iii) the sale, exchange, or transfer
of all or substantially all of the assets of the Company (other than a sale,
exchange or transfer to one or more subsidiaries of the Company).

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

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

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

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

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

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

(kk)  “Performance-Based
Compensation” means compensation under an Award that satisfies
the requirements of Section 162(m) for certain performance-based
compensation paid to Covered Employees.

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

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

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

 5

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

(pp)  “Predecessor Plan”
means the Company’s 1996 Stock Plan and any other stock plans of the Company
still in effect on the Effective Date.

(qq)  “Restricted Stock Award”
means an Award of a Restricted Stock Bonus or a Restricted Stock Purchase
Right.

(rr) “Restricted
Stock Bonus” means Stock granted to a Participant pursuant to Section 8.

(ss) “Restricted
Stock Purchase Right” means a right to purchase Stock granted to
a Participant pursuant to Section 8.

(tt) “Restricted
Stock Unit” or “Stock
Unit” means a right granted to a Participant pursuant to Section 9
or Section 11, respectively, to receive a share of Stock on a date
determined in accordance with the provisions of such Sections, as applicable,
and the Participant’s Award Agreement.

(uu)  “Restriction Period”
means the period established in accordance with Section 8.5 during which
shares subject to a Restricted Stock Award are subject to Vesting Conditions.

(vv)  “Retirement”
means termination of Service at or after the normal retirement age as set forth
in the retirement plan of the Company that is applicable to the Participant,
or, if the Participant is not covered by such a retirement plan, the normal
retirement age as defined by the social insurance program in effect in the
country where the Participant resides.

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

(xx)   “SAR” or “Stock Appreciation Right”
means a right granted to a Participant pursuant to Section 7 to receive
payment, for each share of Stock subject to such SAR, of an amount equal to the
excess, if any, of the Fair Market Value of a share of Stock on the date of
exercise of the SAR over the exercise price.

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

(zz)   “Section 409A”
means Section 409A of the Code (including regulations or administrative
guidelines thereunder).

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

(bbb) “Service”
means a Participant’s employment or service with the Participating Company Group,
whether in the capacity of an Employee, a Director or a Consultant. Unless
otherwise provided by the Committee, a Participant’s Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders such Service or a change in the Participating Company
for which the Participant renders such Service, provided that there is no
interruption or termination of the Participant’s Service. Furthermore, a
Participant’s Service shall not be deemed to have terminated if the Participant
takes any military leave, sick leave, or other bona fide leave of absence
approved by the Company. However, if any such leave taken by a Participant
exceeds ninety (90) days, then on the ninety-first (91st) day following the
commencement of such leave the Participant’s Service shall be deemed to have
terminated, unless the Participant’s right to return to Service is guaranteed
by statute or contract. Notwithstanding the foregoing, unless otherwise
designated by the Company or required by law, a leave of absence shall not be
treated as Service for purposes of determining vesting under the Participant’s
Award Agreement. A Participant’s Service shall be deemed to have terminated
either upon an actual termination of Service or upon the entity

 6
 

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

(ccc) “Stock”
means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.4.

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

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

(fff)  “Vesting Conditions”
mean those conditions established in accordance with the Plan prior to the
satisfaction of which shares subject to an Award remain subject to forfeiture
or a repurchase option in favor of the Company exercisable for the Participant’s
purchase price for such shares upon the Participant’s termination of Service.

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

3.   ADMINISTRATION.

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

3.2   Authority
of Officers.   Any Officer shall have the authority to act on
behalf of the Company with
respect to any matter, right, obligation, determination or election which is
the responsibility of or which is allocated to the Company herein, provided the
Officer has apparent authority with respect to such matter, right, obligation,
determination or election. The Board or Committee may, in its discretion,
delegate to a committee comprised of one or more Officers the authority to
grant one or more Awards, without further approval of the Board or the
Committee, to any Employee, other than a person who, at the time of such grant,
is an Insider or a Covered Person; provided, however, that: (a) such Awards
shall not be granted for shares in excess of the maximum aggregate number of
shares of Stock authorized for issuance pursuant to Section 4.1; (b) each
such Award which is a Full Value Award shall be subject to the minimum vesting
provisions described in Section 5.3(b); (c) each such Award shall be
subject to the terms and conditions of the appropriate standard form of Award
Agreement approved by the Board or the Committee and shall conform to the
provisions of the Plan; and (d) each such Award shall conform to such
limits and guidelines as shall be established from time to time by resolution
of the Board or the Committee.

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

3.4   Committee
Complying with Section 162(m).   If the Company is a “publicly held corporation”
within the meaning of Section 162(m),
the Board may establish a Committee of “outside directors” within the meaning
of Section 162(m) to approve the grant of any Award intended to
result in the payment of Performance-Based Compensation.

 7
 

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

(a)    to
determine the persons to whom, and the time or times at which, Awards shall be
granted and the number of shares of Stock, units or monetary value to be
subject to each Award;

(b)    to
determine the type of Award granted;

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

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

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

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

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

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

(i)     without
the consent of the affected Participant and notwithstanding the provisions of
any Award Agreement to the contrary, to unilaterally substitute at any time a
Stock Appreciation Right providing for settlement solely in shares of Stock in
place of any outstanding Option, provided that such Stock Appreciation Right
covers the same number of shares of Stock and provides for the same exercise
price (subject in each case to adjustment in accordance with Section 4.4)
as the replaced Option and otherwise provides substantially equivalent terms
and conditions as the replaced Option, as determined by the Committee;

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

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

 8
 

3.6   [Intentionally Left Blank]

3.7   Indemnification.   In addition to such other rights of
indemnification as they may have as members
of the Board or the Committee or as officers or employees of the Participating
Company Group, members of the Board or the Committee and any officers or
employees of the Participating Company Group to whom authority to act for the
Board, the Committee or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys’ fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all amounts
paid by them in settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60)
days after the institution of such action, suit or proceeding, such person
shall offer to the Company, in writing, the opportunity at its own expense to
handle and defend the same.

4.   SHARES SUBJECT TO PLAN.

4.1   Maximum
Number of Shares Issuable.   Subject to adjustment as provided in
Sections 4.2, 4.3 and
4.4, the maximum aggregate number of shares of Stock that may be issued under
the Plan shall be equal to one million (1,000,000) shares, plus a number of
shares equal to the remaining shares available for issuance under the existing
1996 Stock Plan, if any, upon its expiration in August 2006, and shall
consist of authorized but unissued or reacquired shares of Stock or any
combination thereof.

4.2   Share Accounting.

(a)    Each share
of Stock subject to an Award shall be counted against the limit set forth in Section 4.1
as one (1) share.

(b)    If an
outstanding Award for any reason expires or is terminated or canceled without
having been exercised or settled in full, or if shares of Stock acquired
pursuant to an Award subject to forfeiture or repurchase are forfeited or
repurchased by the Company for an amount not greater than the Participant’s
original purchase price, the shares of Stock allocable to the terminated
portion of such Award or such forfeited or repurchased shares of Stock shall
again be available for issuance under the Plan. Shares of Stock shall not be
deemed to have been issued pursuant to the Plan with respect to any portion of
an Award that is settled in cash. Upon payment in shares of Stock pursuant to
the exercise of an SAR, the number of shares available for issuance under the
Plan shall be reduced by the gross number of shares for which the SAR is
exercised. If the exercise price of an Option is paid by tender to the Company,
or attestation to the ownership, of shares of Stock owned by the Participant,
or by means of a Net-Exercise, the number of shares available for issuance
under the Plan shall be reduced by the gross number of shares for which the
Option is exercised. Shares withheld or reacquired by the Company in
satisfaction of tax withholding obligations pursuant to Section 16.2 shall
not again be available for issuance under the Plan.

4.3   Adjustment for Certain Unissued Predecessor Plan Shares.   The maximum aggregate number of shares of Stock that may
be issued under the Plan as set forth in Section 4.1 shall be cumulatively
increased from time to time by the number of shares of Stock subject to that
portion of any option outstanding pursuant to a Predecessor Plan as of the
Effective Date which, on or after the Effective Date, is canceled pursuant to
an Option Exchange Program, but only to the extent of a maximum of one million
(1,000,000) shares made subject to new Awards granted pursuant to such program
in replacement of such cancelled options.

 9

4.4   Adjustments
for Changes in Capital Structure.   Subject to any required action by the stockholders of the
Company, in the event of any change in the Stock effected without receipt of
consideration by the Company, whether through merger, consolidation, reorganization,
reincorporation, recapitalization, reclassification, stock dividend, stock
split, reverse stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares, or similar change in the capital structure of the
Company, or in the event of payment of a dividend or distribution to the
stockholders of the Company in a form other than Stock (excepting normal cash
dividends) that has a material effect on the Fair Market Value of shares of
Stock, appropriate adjustments shall be made in the number and kind of shares
subject to the Plan and to any outstanding Awards, in the Award limits set
forth in Section 5.3 and in the exercise or purchase price per share under
any outstanding Award in order to prevent dilution or enlargement of Participants’
rights under the Plan. For purposes of the foregoing, conversion of any
convertible securities of the Company shall not be treated as “effected without
receipt of consideration by the Company.” If a majority of the shares which are
of the same class as the shares that are subject to outstanding Awards are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change Event) shares of another corporation (the “New Shares”), the Committee may unilaterally amend the
outstanding Awards to provide that such Awards are for New Shares. In the event
of any such amendment, the number of shares subject to, and the exercise or
purchase price per share of, the outstanding Awards shall be adjusted in a fair
and equitable manner as determined by the Committee, in its discretion. Any
fractional share resulting from an adjustment pursuant to this Section 4.4
shall be rounded down to the nearest whole number, and in no event may the
exercise or purchase price under any Award be decreased to an amount less than
the par value, if any, of the stock subject to such Award. The Committee in its
sole discretion, may also make such adjustments in the terms of any Award to
reflect, or related to, such changes in the capital structure of the Company or
distributions as it deems appropriate, including modification of Performance
Goals, Performance Award Formulas and Performance Periods. The adjustments
determined by the Committee pursuant to this Section shall be final,
binding and conclusive.

The Committee may, without affecting the number of
Shares reserved or available hereunder, authorize the issuance or assumption of
benefits under this Plan in connection with any merger, consolidation,
acquisition of property or stock, or reorganization upon such terms and
conditions as it may deem appropriate, subject to compliance with
Sections 409A and 422 and any related guidance issued by the U.S. Treasury
Department, where applicable.

5.   ELIGIBILITY,
PARTICIPATION AND AWARD LIMITATIONS.

5.1   Persons Eligible
for Awards.   Awards may
be granted only to Employees, Consultants and Directors.

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

5.3   Award Limitations.

(a)    Incentive Stock Option Limitations.

(i)   Maximum
Number of Shares Issuable Pursuant to Incentive Stock Options.   Subject to adjustment as provided in Section 4.4,
the maximum aggregate number of shares of Stock that may be issued under the
Plan pursuant to the exercise of Incentive Stock Options shall not exceed the
number of shares reserved for issuance under the Plan in accordance with Section 4.1.
The maximum aggregate number of shares of Stock that may be issued under the
Plan pursuant to all Awards other than Incentive Stock Options shall be the
number of shares determined in accordance with Section 4.1, subject to
adjustment as provided in Sections 4.2, 4.3 and 4.4.

 10
 

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

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

(b)   Limit on Full Value Awards without Minimum Vesting.   Except with respect to a maximum of
ten percent (10%) of the maximum aggregate number of shares of Stock that may
be issued under the Plan, as provided in Section 4.1, and except with
respect to Full Value Awards granted pursuant to an Option Exchange Program,
Full Value Awards which vest on the basis of the Participant’s continued
Service shall not provide for vesting which is any more rapid than over a three
(3) year period, and Full Value Awards which vest on the basis of the
attainment of performance goals shall not provide for a performance period of
less than twelve (12) months. Full Value Awards granted pursuant to an Option
Exchange Program which vest on the basis of the Participant’s continued Service
shall not provide for vesting which is any more rapid than over a two (2) year
period. The foregoing limitations shall not preclude the acceleration of
vesting of any such Award upon the death, disability, retirement or involuntary
termination of Service of the Participant or upon or following a Change in
Control, as determined by the Committee in its discretion.

(c)   Section 162(m) Award
Limits.   The
following limits shall apply to the grant of any Award intended to qualify for
treatment as Performance-Based Compensation:

(i)   Options
and SARs.   Subject to
adjustment as provided in Section 4.4, no Employee shall be granted within
any fiscal year of the Company one or more Options or Freestanding SARs which
in the aggregate are for more than five hundred thousand (500,000) shares.

(ii)   Restricted
Stock Awards and Restricted Stock Unit Awards.   Subject to adjustment as provided in Section 4.4,
no Employee shall be granted within any fiscal year of the Company one or more
Restricted Stock Awards or Restricted Stock Unit Awards for more than two
hundred fifty thousand (250,000) shares.

 11
 

(iii)   Performance
Awards.   Subject to
adjustment as provided in Section 4.4, no Employee shall be granted (1) Performance
Shares which could result in such Employee receiving more than two hundred
fifty thousand (250,000) shares for each full fiscal year of the Company
contained in the Performance Period for such Award, or (2) Performance
Units which could result in such Employee receiving more than one million five
hundred thousand dollars ($1,500,000) for each full fiscal year of the Company
contained in the Performance Period for such Award.

(iv)   Cash-Based
Awards and Other Stock-Based Awards.   Subject to adjustment as provided in Section 4.4,
no Employee shall be granted (1) Cash-Based Awards in any fiscal year of
the Company which could result in such Employee receiving more than one million
five hundred thousand dollars ($1,500,000) for each full fiscal year of the
Company contained in the Performance Period for such Award, or (2) Other
Stock-Based Awards in any fiscal year of the Company which could result in such
Employee receiving more than two hundred fifty thousand (250,000) shares for
each full fiscal year of the Company contained in the Performance Period for
such Award.

6.   STOCK OPTIONS.

Options shall be evidenced by Award Agreements
specifying the number of shares of Stock covered thereby, in such form as the
Committee shall from time to time establish. No Option or purported Option
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Award Agreement. Award Agreements evidencing Options may
incorporate all or any of the terms of the Plan by reference, including the
provisions of Section 18 with respect to Section 409A if applicable,
and shall comply with and be subject to the following terms and conditions:

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

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

6.3   Payment
of Exercise Price.

(a)   Forms of Consideration Authorized.   Except as otherwise provided below,
payment of the exercise price for the number of shares of Stock being purchased
pursuant to any Option shall be made (i) in cash or by check or cash
equivalent, (ii) by tender to the Company, or attestation to the
ownership, of shares of Stock owned by the Participant having a Fair Market
Value not less than the exercise price, (iii) by delivery of a properly
executed notice of exercise together with irrevocable 

 12
 

instructions
to a broker providing for the assignment to the Company of the proceeds of a
sale or loan with respect to some or all of the shares being acquired upon the
exercise of the Option (including, without limitation, through an exercise
complying with the provisions of Regulation T as promulgated from time to time
by the Board of Governors of the Federal Reserve System) (a “Cashless Exercise”), (iv) by delivery of a properly executed
notice electing a Net-Exercise, (v) by such other consideration as may be
approved by the Committee from time to time to the extent permitted by
applicable law, or (vi) by any combination thereof. The Committee may at
any time or from time to time grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or
which otherwise restrict one or more forms of consideration.

(b)   Limitations on Forms of Consideration.

(i)   Tender of
Stock.   Notwithstanding
the foregoing, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company’s stock. Unless
otherwise provided by the Committee, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock unless such
shares either have been owned by the Participant for more than six (6) months
(or such other period, if any, as the Committee may permit) and not used for
another Option exercise by attestation during such period, or were not
acquired, directly or indirectly, from the Company.

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

6.4   Effect of
Termination of Service.

(a)   Option Exercisability.   Subject to earlier termination of the
Option as otherwise provided herein and unless otherwise provided by the
Committee in the grant of an Option and set forth in the Award Agreement, an
Option shall terminate immediately upon the Participant’s termination of
Service to the extent that it is then unvested and shall be exercisable after
the Participant’s termination of Service to the extent it is then vested only
during the applicable time period determined in accordance with this Section and
thereafter shall terminate:

(i)   Disability.   If the Participant’s Service
terminates because of the Disability of the Participant, the Option, to the
extent unexercised and exercisable for vested shares on the date on which the
Participant’s Service terminated, may be exercised by the Participant (or the
Participant’s guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Participant’s
Service terminated, but in any event no later than the date of expiration of
the Option’s term as set forth in the Award Agreement evidencing such Option
(the “Option Expiration Date”).

(ii)   Death.   If the Participant’s Service
terminates because of the death of the Participant, the Option, to the extent
unexercised and exercisable for vested shares on the date on which the
Participant’s Service terminated, may be exercised by the Participant’s legal
representative or other person who acquired the right to exercise the Option by
reason of the Participant’s death at any time prior to the expiration of twelve
(12) months after the date on which the Participant’s Service terminated, but
in any event no later than the Option Expiration Date. The Participant’s
Service shall be deemed to have terminated on account of death if the
Participant dies within three (3) months after the Participant’s
termination of Service.

 13

(iii)   Other
Termination of Service.   If the Participant’s Service terminates for any
reason, except Disability or death, the Option, to the extent unexercised and
exercisable for vested shares on the date on which the Participant’s Service
terminated, may be exercised by the Participant at any time prior to the
expiration of three (3) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration Date.

(b)   Extension if Exercise Prevented by Law.   Notwithstanding the foregoing, if the
exercise of an Option within the applicable time periods set forth in
Section 6.4(a) is prevented by the provisions of Section 15
below, the Option shall remain exercisable until three (3) months (or such
longer period of time as determined by the Committee, in its discretion) after
the date the Participant is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.

(c)   Extension if Participant Subject to Section 16(b).   Notwithstanding the foregoing, if a
sale within the applicable time periods set forth in Section 6.4(a) of
shares acquired upon the exercise of the Option would subject the Participant
to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Participant would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th)
day after the Participant’s termination of Service, or (iii) the Option
Expiration Date.

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

7.   STOCK APPRECIATION
RIGHTS.

Stock Appreciation Rights shall be evidenced by Award
Agreements specifying the number of shares of Stock subject to the Award, in
such form as the Committee shall from time to time establish. No SAR or
purported SAR shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement. Award Agreements evidencing SARs
may incorporate all or any of the terms of the Plan by reference, including
provisions of Section 18 with respect to Section 409A if applicable,
and shall comply with and be subject to the following terms and conditions:

7.1   Types of
SARs Authorized.   SARs may be granted in tandem with all or any
portion of a related Option (a “Tandem SAR”) or may be granted independently of any Option (a “Freestanding SAR”). A Tandem SAR may only be granted concurrently
with the grant of the related Option.

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

7.3   Exercisability
and Term of SARs.

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

 14
 

Stock
subject to the related Option. The Committee may, in its discretion, provide in
any Award Agreement evidencing a Tandem SAR that such SAR may not be exercised
without the advance approval of the Company and, if such approval is not given,
then the Option shall nevertheless remain exercisable in accordance with its
terms. A Tandem SAR shall terminate and cease to be exercisable no later than
the date on which the related Option expires or is terminated or canceled. Upon
the exercise of a Tandem SAR with respect to some or all of the shares subject
to such SAR, the related Option shall be canceled automatically as to the
number of shares with respect to which the Tandem SAR was exercised. Upon the
exercise of an Option related to a Tandem SAR as to some or all of the shares
subject to such Option, the related Tandem SAR shall be canceled automatically
as to the number of shares with respect to which the related Option was
exercised.

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

7.4   Exercise
of SARs.   Upon the
exercise (or deemed exercise pursuant to Section 7.5) of an SAR, the Participant (or the Participant’s
legal representative or other person who acquired the right to exercise the SAR
by reason of the Participant’s death) shall be entitled to receive payment of
an amount for each share with respect to which the SAR is exercised equal to
the excess, if any, of the Fair Market Value of a share of Stock on the date of
exercise of the SAR over the exercise price. Payment of such amount shall be
made (a) in the case of a Tandem SAR, solely in shares of Stock in a lump
sum as soon as practicable following the date of exercise of the SAR and (b) in
the case of a Freestanding SAR, in cash, shares of Stock, or any combination
thereof as determined by the Committee in compliance with Section 409A. Unless
otherwise provided in the Award Agreement evidencing a Freestanding SAR,
payment shall be made in a lump sum as soon as practicable following the date
of exercise of the SAR. The Award Agreement evidencing any Freestanding SAR may
provide for deferred payment in a lump sum or in installments in compliance
with Section 409A. When payment is to be made in shares of Stock, the
number of shares to be issued shall be determined on the basis of the Fair
Market Value of a share of Stock on the date of exercise of the SAR. For
purposes of Section 7, an SAR shall be deemed exercised on the date on
which the Company receives notice of exercise from the Participant or as
otherwise provided in Section 7.5.

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

7.6   Effect of
Termination of Service.   Subject to earlier termination of the SAR as otherwise
provided herein and
unless otherwise provided by the Committee in the grant of an SAR and set forth
in the Award Agreement, an SAR shall be exercisable after a Participant’s
termination of Service only to the extent and during the applicable time period
determined in accordance with Section 6.4 (treating the SAR as if it were
an Option) and thereafter shall terminate.

7.7   Transferability
of SARs.   During the
lifetime of the Participant, an SAR shall be exercisable only by the Participant or the
Participant’s guardian or legal representative. An SAR shall not be subject in
any manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent
and distribution. Notwithstanding the foregoing, to the extent permitted by the
Committee, in its discretion, and set forth in the Award Agreement evidencing
such Award, a Tandem SAR related to 

 15
 

a Nonstatutory Stock Option or a Freestanding SAR shall be
assignable or transferable subject to the applicable limitations, if any, described
in the General Instructions to Form S-8 Registration Statement under
the Securities Act.

8.   RESTRICTED STOCK AWARDS.

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

8.1   Types of
Restricted Stock Awards Authorized.   Restricted Stock Awards may be granted
in the form of either a
Restricted Stock Bonus or a Restricted Stock Purchase Right. Restricted Stock
Awards may be granted upon such conditions as the Committee shall determine,
including, without limitation, upon the attainment of one or more Performance
Goals described in Section 10.4. If either the grant of a Restricted Stock
Award or the lapsing of the Restriction Period is to be contingent upon the
attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 10.3
through 10.5(a).

8.2   Purchase
Price.   The purchase price for shares of Stock issuable under
each Restricted Stock Purchase Right
shall be established by the Committee in its discretion. No monetary payment
(other than applicable tax withholding) shall be required as a condition of
receiving shares of Stock pursuant to a Restricted Stock Bonus, the
consideration for which shall be services actually rendered to a Participating
Company or for its benefit. Notwithstanding the foregoing, if required by
applicable state corporate law, the Participant shall furnish consideration in
the form of cash or past services rendered to a Participating Company or for
its benefit having a value not less than the par value of the shares of Stock
subject to a Restricted Stock Award.

8.3   Purchase
Period.   A
Restricted Stock Purchase Right shall be exercisable within a period established by the Committee, which shall
in no event exceed thirty (30) days from the effective date of the grant of the
Restricted Stock Purchase Right.

8.4   Payment of
Purchase Price.   Except as otherwise provided below, payment of the
purchase price for the number
of shares of Stock being purchased pursuant to any Restricted Stock Purchase
Right shall be made (a) in cash or by check or cash equivalent, (b) by
such other consideration as may be approved by the Committee from time to time
to the extent permitted by applicable law, or (c) by any combination
thereof. The Committee may at any time or from time to time grant Restricted
Stock Purchase Rights which do not permit all of the foregoing forms of
consideration to be used in payment of the purchase price or which otherwise
restrict one or more forms of consideration.

8.5   Vesting
and Restrictions on Transfer.   Subject to Section 5.3(b), Shares issued
pursuant to any Restricted
Stock Award may (but need not) be made subject to Vesting Conditions based upon
the satisfaction of such Service requirements, conditions, restrictions or
performance criteria, including, without limitation, Performance Goals as
described in Section 10.4, as shall be established by the Committee and
set forth in the Award Agreement evidencing such Award. During any Restriction
Period in which shares acquired pursuant to a Restricted Stock Award remain
subject to Vesting Conditions, such shares may not be sold, exchanged,
transferred, pledged, assigned or otherwise disposed of other than pursuant to
an Ownership Change Event or as provided in Section 8.8. The Committee, in
its discretion, may provide in any Award Agreement evidencing a Restricted
Stock Award that, if the satisfaction of Vesting Conditions with respect to any
shares subject to such Restricted Stock Award would otherwise 

 16
 

occur on a day on which the sale of such shares would
violate the Company’s Insider Trading Policy, then the satisfaction of the
Vesting Conditions automatically be deemed to occur on the next day on which
the sale of such shares would not violate the Insider Trading Policy. Upon
request by the Company, each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.

8.6   Voting
Rights; Dividends and Distributions.   Except as provided in this Section, Section 8.5
and any Award Agreement,
during any Restriction Period applicable to shares subject to a Restricted
Stock Award, the Participant shall have all of the rights of a stockholder of
the Company holding shares of Stock, including the right to vote such shares
and to receive all dividends and other distributions paid with respect to such
shares. However, in the event of a dividend or distribution paid in shares of
Stock or other property or any other adjustment made upon a change in the
capital structure of the Company as described in Section 4.4, any and all
new, substituted or additional securities or other property (other than normal
cash dividends) to which the Participant is entitled by reason of the
Participant’s Restricted Stock Award shall be immediately subject to the same
Vesting Conditions as the shares subject to the Restricted Stock Award with
respect to which such dividends or distributions were paid or adjustments were
made.

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

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

9.   RESTRICTED STOCK UNIT
AWARDS.

Restricted Stock Unit Awards shall be evidenced by
Award Agreements specifying the number of Restricted Stock Units subject to the
Award, in such form as the Committee shall from time to time establish. No
Restricted Stock Unit Award or purported Restricted Stock Unit Award shall be a
valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement. Award Agreements evidencing Restricted Stock Units
may incorporate all or any of the terms of the Plan by reference, including the
provisions of Section 18 with respect to Section 409A, if applicable,
and shall comply with and be subject to the following terms and conditions:

9.1   Grant of
Restricted Stock Unit Awards.   Restricted Stock Unit Awards may be granted upon such conditions as the
Committee shall determine, including, without limitation, upon the attainment
of one or more Performance Goals described in Section 10.4. If either the
grant of a Restricted Stock Unit Award or the Vesting Conditions with respect
to such Award is to be contingent upon the attainment of 

 17
 

one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 10.3
through 10.5(a).

9.2   Purchase
Price.   No
monetary payment (other than applicable tax withholding, if any) shall be required as a condition of receiving a
Restricted Stock Unit Award, the consideration for which shall be services
actually rendered to a Participating Company or for its benefit. Notwithstanding
the foregoing, if required by applicable state corporate law, the Participant
shall furnish consideration in the form of cash or past services rendered to a
Participating Company or for its benefit having a value not less than the par
value of the shares of Stock issued upon settlement of the Restricted Stock
Unit Award.

9.3   Vesting.   Subject to Section 5.3(b),
Restricted Stock Unit Awards may (but need not) be made subject to Vesting Conditions based upon the
satisfaction of such Service requirements, conditions, restrictions or
performance criteria, including, without limitation, Performance Goals as
described in Section 10.4, as shall be established by the Committee and
set forth in the Award Agreement evidencing such Award.

9.4   Voting
Rights, Dividend Equivalent Rights and Distributions.   Participants shall have no voting rights with respect to
shares of Stock represented by Restricted Stock Units until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). However,
the Committee, in its discretion, may provide in the Award Agreement evidencing
any Restricted Stock Unit Award that the Participant shall be entitled to receive
Dividend Equivalents with respect to the payment of cash dividends on Stock
during the period beginning on the date such Award is granted and ending, with
respect to the particular shares subject to the Award, on the earlier of the
date the Award is settled or the date on which it is terminated. Such Dividend
Equivalents, if any, shall be paid by crediting the Participant with additional
whole Restricted Stock Units as of the date of payment of such cash dividends
on Stock. The number of additional Restricted Stock Units (rounded to the
nearest whole number) to be so credited shall be determined by dividing (a) the
amount of cash dividends paid on such date with respect to the number of shares
of Stock represented by the Restricted Stock Units previously credited to the
Participant by (b) the Fair Market Value per share of Stock on such date. Such
additional Restricted Stock Units shall be subject to the same terms and
conditions and shall be settled in the same manner and at the same time (or as
soon thereafter as practicable) as the Restricted Stock Units originally
subject to the Restricted Stock Unit Award. In the event of a dividend or
distribution paid in shares of Stock or other property or any other adjustment
made upon a change in the capital structure of the Company as described in Section 4.4,
appropriate adjustments shall be made in the Participant’s Restricted Stock
Unit Award so that it represents the right to receive upon settlement any and
all new, substituted or additional securities or other property (other than
normal cash dividends) to which the Participant would be entitled by reason of
the shares of Stock issuable upon settlement of the Award, and all such new,
substituted or additional securities or other property shall be immediately
subject to the same Vesting Conditions as are applicable to the Award.

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

9.6   Settlement
of Restricted Stock Unit Awards.   The Company shall issue to a
Participant on the date
on which Restricted Stock Units subject to the Participant’s Restricted Stock
Unit Award vest or on such other date determined by the Committee, in its
discretion, and set forth in the Award Agreement one (1) share of Stock
(and/or any other new, substituted or additional securities or other property
pursuant to an adjustment described in Section 9.4) for each Restricted
Stock Unit then becoming vested or otherwise to be settled on such date,
subject to the withholding of applicable taxes, if any. If permitted by the 

 18
 

Committee, subject to the provisions of Section 18
with respect to Section 409A, the Participant may elect in accordance with
terms specified in the Award Agreement to defer receipt of all or any portion
of the shares of Stock or other property otherwise issuable to the Participant
pursuant to this Section, and such deferred issuance date(s) elected by
the Participant shall be set forth in the Award Agreement. Notwithstanding the
foregoing, the Committee, in its discretion, may provide for settlement of any
Restricted Stock Unit Award by payment to the Participant in cash of an amount
equal to the Fair Market Value on the payment date of the shares of Stock or
other property otherwise issuable to the Participant pursuant to this Section. The
Committee, in its discretion, may provide in any Award Agreement evidencing a
Restricted Stock Unit Award that, if the settlement of the Award with respect
to any shares would otherwise occur on a day on which the sale of such shares
would violate the Company’s Insider Trading Policy, then the settlement with
respect to such shares shall occur on the next day on which the sale of such
shares would not violate the Insider Trading Policy.

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

10.   PERFORMANCE AWARDS.

Performance Awards shall be evidenced by Award
Agreements in such form as the Committee shall from time to time establish. No
Performance Award or purported Performance Award shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Award Agreement.
Award Agreements evidencing Performance Awards may incorporate all or any of
the terms of the Plan by reference, including the provisions of Section 18
with respect to Section 409A, if applicable, and shall comply with and be
subject to the following terms and conditions:

10.1   Types of
Performance Awards Authorized.   Performance Awards may be granted in the form of
either Performance Shares or Performance Units. Each Award Agreement evidencing a
Performance Award shall specify the number of Performance Shares or Performance
Units subject thereto, the Performance Award Formula, the Performance Goal(s) and
Performance Period applicable to the Award, and the other terms, conditions and
restrictions of the Award.

10.2   Initial Value of
Performance Shares and Performance Units.   Unless otherwise provided by the
Committee in granting a Performance Award, each Performance Share shall have an initial
monetary value equal to the Fair Market Value of one (1) share of Stock,
subject to adjustment as provided in Section 4.4, on the effective date of
grant of the Performance Share, and each Performance Unit shall have an initial
monetary value established by the Committee at the time of grant. The final
value payable to the Participant in settlement of a Performance Award
determined on the basis of the applicable Performance Award Formula will depend
on the extent to which Performance Goals established by the Committee are
attained within the applicable Performance Period established by the Committee.

 19

10.3   Establishment
of Performance Period, Performance Goals and Performance Award Formula.   In granting each Performance Award,
the Committee shall establish in
writing the applicable Performance Period (subject to Section 5.3(b)),
Performance Award Formula and one or more Performance Goals which, when
measured at the end of the Performance Period, shall determine on the basis of
the Performance Award Formula the final value of the Performance Award to be
paid to the Participant. Unless otherwise permitted in compliance with the
requirements under Section 162(m) with respect to each Performance
Award intended to result in the payment of Performance-Based Compensation, the
Committee shall establish the Performance Goal(s) and Performance Award
Formula applicable to each Performance Award no later than the earlier of (a) the
date ninety (90) days after the commencement of the applicable Performance
Period or (b) the date on which 25% of the Performance Period has elapsed,
and, in any event, at a time when the outcome of the Performance Goals remains
substantially uncertain. Once established, the Performance Goals and
Performance Award Formula applicable to a Covered Employee shall not be changed
during the Performance Period. The Company shall notify each Participant
granted a Performance Award of the terms of such Award, including the
Performance Period, Performance Goal(s) and Performance Award Formula.

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

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

(i)          revenue;

(ii)         sales;

(iii)        expenses;

(iv)        operating income;

(v)         gross margin;

(vi)        operating margin;

(vii)       earnings before any one or more of:
stock-based compensation expense, interest, taxes, depreciation and
amortization;

(viii)      pre-tax profit;

(ix)         net operating income;

(x)          net income;

 20
 

(xi)         economic value added;

(xii)        free cash flow;

(xiii)       operating cash flow;

(xiv)      stock price;

(xv)       earnings per share;

(xvi)      return on stockholder equity;

(xvii)     return
on capital;

(xviii)    return
on assets;

(xix)       return on investment;

(xx)        employee satisfaction;

(xxi)       employee retention;

(xxii)      balance of cash, cash equivalents and
marketable securities;

(xxiii)     market
share;

(xxiv)     customer
satisfaction;

(xxv)      product development;

(xxvi)     research
and development expenses;

(xxvii)    completion
of an identified special project; and

(xxviii)   completion
of a joint venture or other corporate transaction.

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

10.5   Settlement of Performance Awards.

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

(b)   Discretionary Adjustment of Award Formula.   In its discretion, the Committee may,
either at the time it grants a Performance Award or at any time thereafter,
provide for the positive or negative adjustment of the Performance Award
Formula applicable to a Performance Award granted to any Participant who is not
a Covered Employee to reflect such Participant’s individual performance in his
or her position with the Company or such other factors as the Committee may
determine. If permitted under a Covered Employee’s Award Agreement, the
Committee shall have the discretion, on the basis of such criteria as may be
established by the Committee, to reduce some or all of the value of the
Performance Award that would otherwise be paid to the Covered Employee upon its
settlement notwithstanding the attainment of any Performance Goal and the
resulting value of the Performance Award determined in accordance with the
Performance Award Formula. No such reduction may 

 21
 

result
in an increase in the amount payable upon settlement of another Participant’s
Performance Award that is intended to result in Performance-Based Compensation.

(c)   Effect of Leaves of Absence.   Unless otherwise required by law or a
Participant’s Award Agreement, payment of the final value, if any, of a
Performance Award held by a Participant who has taken in excess of thirty (30)
days in leaves of absence during a Performance Period shall be prorated on the
basis of the number of days of the Participant’s Service during the Performance
Period during which the Participant was not on a leave of absence.

(d)   Notice to Participants.   As soon as practicable following the
Committee’s determination and certification in accordance with
Sections 10.5(a) and (b), the Company shall notify each Participant
of the determination of the Committee.

(e)   Payment in Settlement of Performance Awards.   Subject to the provisions of Section 18
with respect to Section 409A, as soon as practicable following the
Committee’s determination and certification in accordance with
Sections 10.5(a) and (b), payment shall be made to each eligible
Participant (or such Participant’s legal representative or other person who
acquired the right to receive such payment by reason of the Participant’s
death) of the final value of the Participant’s Performance Award. Payment of
such amount shall be made in cash, shares of Stock, or a combination thereof as
determined by the Committee. Unless otherwise provided in the Award Agreement
evidencing a Performance Award, payment shall be made in a lump sum. If
permitted by the Committee, and subject to the provisions of Section 18
with respect to Section 409A, the Participant may elect to defer receipt
of all or any portion of the payment to be made to Participant pursuant to this
Section, and such deferred payment date(s) elected by the Participant
shall be set forth in the Award Agreement. If any payment is to be made on a
deferred basis, the Committee may, but shall not be obligated to, provide for
the payment during the deferral period of Dividend Equivalents or interest.

(f)   Provisions Applicable to Payment in Shares.   If payment is to be made in shares of
Stock, the number of such shares shall be determined by dividing the final
value of the Performance Award by the value of a share of Stock determined by
the method specified in the Award Agreement. Such methods may include, without
limitation, the closing market price on a specified date (such as the
settlement date) or an average of market prices over a series of trading days. Shares
of Stock issued in payment of any Performance Award may be fully vested and
freely transferable shares or may be shares of Stock subject to Vesting
Conditions as provided in Section 8.5. Any shares subject to Vesting
Conditions shall be evidenced by an appropriate Award Agreement and shall be
subject to the provisions of Sections 8.5 through 8.8 above.

10.6   Voting
Rights; Dividend Equivalent Rights and Distributions.   Participants shall have no voting
rights with respect to shares of Stock represented by Performance Share Awards until the date
of the issuance of such shares, if any (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the
Company). However, the Committee, in its discretion, may provide in the Award
Agreement evidencing any Performance Share Award that the Participant shall be
entitled to receive Dividend Equivalents with respect to the payment of cash
dividends on Stock during the period beginning on the date the Award is granted
and ending, with respect to the particular shares subject to the Award, on the
earlier of the date on which the Performance Shares are settled or the date on
which they are forfeited. Such Dividend Equivalents, if any, shall be credited
to the Participant in the form of additional whole Performance Shares as of the
date of payment of such cash dividends on Stock. The number of additional
Performance Shares (rounded to the nearest whole number) to be so credited
shall be determined by dividing (a) the amount of cash dividends paid on
the dividend payment date with respect to the number of shares of Stock
represented by the Performance Shares previously credited to the Participant by
(b) the Fair Market Value per share of Stock on such date. Dividend
Equivalents may be 

 22
 

paid currently or may be accumulated and paid to the extent
that Performance Shares become nonforfeitable, as determined by the Committee. Settlement
of Dividend Equivalents may be made in cash, shares of Stock, or a combination
thereof as determined by the Committee, and may be paid on the same basis as
settlement of the related Performance Share as provided in Section 10.5. Dividend
Equivalents shall not be paid with respect to Performance Units. In the event
of a dividend or distribution paid in shares of Stock or other property or any
other adjustment made upon a change in the capital structure of the Company as
described in Section 4.4, appropriate adjustments shall be made in the Participant’s
Performance Share Award so that it represents the right to receive upon
settlement any and all new, substituted or additional securities or other
property (other than normal cash dividends) to which the Participant would
entitled by reason of the shares of Stock issuable upon settlement of the
Performance Share Award, and all such new, substituted or additional securities
or other property shall be immediately subject to the same Performance Goals as
are applicable to the Award.

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

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

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

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

11.   DEFERRED COMPENSATION
AWARDS.

11.1   Establishment
of Deferred Compensation Award Programs.   This Section 11 shall not be
effective unless and until the Committee determines to establish a program pursuant to this Section. The
Committee, in its discretion and upon such terms and conditions as it may
determine, subject to the provisions of Section 18 with respect to Section 409A,
may establish one or more programs pursuant to the Plan under which:

(a)   Elective Cash Compensation Reduction Awards.   Participants designated by the
Committee who are Insiders or otherwise among a select group of highly
compensated Employees may irrevocably elect, prior to a date specified by the
Committee and complying with Section 409A, to reduce such Participant’s
compensation otherwise payable in cash (subject to any minimum or maximum
reductions imposed by the Committee) and to be granted automatically at such
time or 

 23
 

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

(b)   Stock Issuance Deferral Awards.   Participants designated by the
Committee who are Insiders or otherwise among a select group of highly
compensated Employees may irrevocably elect, prior to a date specified by the
Committee and complying with Section 409A, to be granted automatically an
Award of Stock Units with respect to such number of shares of Stock and upon
such other terms and conditions as established by the Committee in lieu of:

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

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

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

11.2   Terms and
Conditions of Deferred Compensation Awards.   Deferred Compensation Awards granted
pursuant to this Section 11 shall be evidenced by Award Agreements in such form as
the Committee shall from time to time establish. No such Deferred Compensation
Award or purported Deferred Compensation Award shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Award Agreement.
Award Agreements evidencing Deferred Compensation Awards may incorporate all or
any of the terms of the Plan by reference, including the provisions of Section 18
with respect to Section 409A, and, except as provided below, shall comply
with and be subject to the terms and conditions of Section 9.

(a)   Voting Rights; Dividend Equivalent Rights and Distributions.   Participants shall have no voting
rights with respect to shares of Stock represented by Stock Units until the
date of the issuance of such shares (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company).
However, a Participant shall be entitled to receive Dividend Equivalents with
respect to the payment of cash dividends on Stock during the period beginning
on the date the Stock Units are granted automatically to the Participant and
ending on the earlier of the date on which such Stock Units are settled or the
date on which they are forfeited. Such Dividend Equivalents shall be paid by
crediting the Participant with additional whole Stock Units as of the date of
payment of such cash dividends on Stock. The number of additional Stock Units
(rounded to the nearest whole number) to be so credited shall be determined by
dividing (A) the amount of cash dividends paid on the dividend payment
date with respect to the number of shares of Stock represented by the Stock
Units previously credited to the Participant by (B) the Fair Market Value
per share of Stock on such date. Such additional Stock Units shall be subject
to the same terms and conditions and shall be settled in the same manner and at
the same time (or as soon thereafter as practicable) as the Stock Units
originally subject to the Stock Unit Award. In the event of a dividend or
distribution paid in shares of Stock or other property or any other adjustment
made upon a change in the capital structure of the Company as described in Section 4.4,
appropriate adjustments shall be made in the Participant’s Stock Unit Award so
that it represents the right to receive upon settlement any and all new,
substituted or additional securities or other property (other than normal cash
dividends) to which the Participant would entitled by reason of the shares of
Stock issuable upon settlement of the Award.

(b)   Settlement of Stock Unit Awards.   A Participant electing to receive an
Award of Stock Units pursuant to this Section 11 shall specify at the time
of such election a settlement date with respect to such Award which complies
with Section 409A. The Company shall issue to the Participant on the
settlement date elected by the Participant, or as soon thereafter as
practicable, a number of whole 

 24
 

shares
of Stock equal to the number of vested Stock Units subject to the Stock Unit
Award. Such shares of Stock shall be fully vested, and the Participant shall
not be required to pay any additional consideration (other than applicable tax
withholding) to acquire such shares.

12.   CASH-BASED AWARDS AND
OTHER STOCK-BASED AWARDS.

Cash-Based Awards and Other Stock-Based Awards shall
be evidenced by Award Agreements in such form as the Committee shall from time
to time establish. No such Award or purported Award shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Award Agreement.
Award Agreements evidencing Cash-Based Awards and Other Stock-Based Awards may
incorporate all or any of the terms of the Plan by reference, including the
provisions of Section 18 with respect to Section 409A, if applicable,
and shall comply with and be subject to the following terms and conditions:

12.1   Grant of
Cash-Based Awards.   Subject to the provisions of the Plan, the
Committee, at any time and from time to time, may grant Cash-Based Awards to
Participants in such amounts
and upon such terms and conditions, including the achievement of performance criteria,
as the Committee may determine.

12.2   Grant of
Other Stock-Based Awards.   The Committee may grant other types of equity-based
or equity-related Awards not otherwise described by the terms of this Plan (including the grant or
offer for sale of unrestricted securities, stock-equivalent units, stock
appreciation units, securities or debentures convertible into common stock or
other forms determined by the Committee) in such amounts and subject to such
terms and conditions as the Committee shall determine. Such Awards may involve
the transfer of actual shares of Stock to Participants, or payment in cash or
otherwise of amounts based on the value of Stock and may include, without
limitation, Awards designed to comply with or take advantage of the applicable
local laws of jurisdictions other than the United States.

12.3   Value of
Cash-Based and Other Stock-Based Awards.   Each Cash-Based Award
shall specify a monetary payment amount or payment range as determined by the Committee. Each Other
Stock-Based Award shall be expressed in terms of shares of Stock or units based
on such shares of Stock, as determined by the Committee. Subject to Section 5.3(b),
the Committee may require the satisfaction of such Service requirements,
conditions, restrictions or performance criteria, including, without
limitation, Performance Goals as described in Section 10.4, as shall be
established by the Committee and set forth in the Award Agreement evidencing
such Award. If the Committee exercises its discretion to establish performance
criteria, the final value of Cash-Based Awards or Other Stock-Based Awards that
will be paid to the Participant will depend on the extent to which the
performance criteria are met. The establishment of performance criteria with
respect to the grant or vesting of any Cash-Based Award or Other Stock-Based
Award intended to result in Performance-Based Compensation shall follow
procedures substantially equivalent to those applicable to Performance Awards
set forth in Section 10.

12.4   Payment
or Settlement of Cash-Based Awards and Other Stock-Based Awards.   Payment or settlement, if any, with
respect to a Cash-Based Award or an Other Stock-Based Award shall be made
in accordance with the terms of the Award, in cash, shares of Stock or other
securities or any combination thereof as the Committee determines. The
determination and certification of the final value with respect to any
Cash-Based Award or Other Stock-Based Award intended to result in
Performance-Based Compensation shall comply with the requirements applicable to
Performance Awards set forth in Section 10. To the extent applicable,
payment or settlement with respect to each Cash-Based Award and Other
Stock-Based Award shall be made in compliance with the provisions of Section 18
with respect to Code Section 409A.

12.5   Voting
Rights; Dividend Equivalent Rights and Distributions.   Participants shall have no voting
rights with respect to shares of Stock represented by Other Stock-Based Awards until the date
of the issuance of such shares of Stock (as evidenced by the appropriate entry
on the books of the Company 

 25
 

or of a duly authorized transfer agent of the Company), if
any, in settlement of such Award. However, the Committee, in its discretion,
may provide in the Award Agreement evidencing any Other Stock-Based Award that
the Participant shall be entitled to receive Dividend Equivalents with respect
to the payment of cash dividends on Stock during the period beginning on the
date such Award is granted and ending, with respect to the particular shares
subject to the Award, on the earlier of the date the Award is settled or the
date on which it is terminated. Such Dividend Equivalents, if any, shall be
paid in accordance with the provisions set forth in Section 9.4. Dividend
Equivalent rights shall not be granted with respect to Cash-Based Awards.

12.6   Effect of
Termination of Service.   Each Award Agreement evidencing a Cash-Based Award
or Other Stock-Based Award shall set forth the extent to which the Participant shall have the
right to retain such Award following termination of the Participant’s Service. Such
provisions shall be determined in the sole discretion of the Committee, need
not be uniform among all Cash-Based Awards or Other Stock-Based Awards, and may
reflect distinctions based on the reasons for termination.

12.7   Nontransferability
of Cash-Based Awards and Other Stock-Based Awards.   Prior to the payment or settlement of
a Cash-Based Award or Other Stock-Based Award, the Award shall not be
subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. The Committee may impose such additional restrictions
on any shares of Stock issued in settlement of Cash-Based Awards and Other
Stock-Based Awards as it may deem advisable, including, without limitation,
minimum holding period requirements, restrictions under applicable federal
securities laws, under the requirements of any stock exchange or market upon
which such shares of Stock are then listed and/or traded, or under any state
securities laws applicable to such shares of Stock.

13.   STANDARD FORMS OF AWARD
AGREEMENT.

13.1   Award
Agreements.   Each Award
shall comply with and be subject to the terms and conditions set forth in the
appropriate form of Award Agreement approved by the Committee and as amended from time to
time. Any Award Agreement may consist of an appropriate form of Notice of Grant
and a form of Agreement incorporated therein by reference, or such other form
or forms, including electronic media, as the Committee may approve from time to
time.

13.2    Authority to
Vary Terms.    The Committee shall have the authority from time to
time to vary the terms of any standard form of Award Agreement either in
connection with the grant or
amendment of an individual Award or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of
any such new, revised or amended standard form or forms of Award Agreement are
not inconsistent with the terms of the Plan.

14.   CHANGE IN CONTROL.

14.1   Effect of
Change in Control on Options and SARs.   Subject to the provisions of
Section 18 with respect to Section 409A if applicable, the Committee
may provide for any one
or more of the following:

(a)   Accelerated Vesting.   The Committee may, in its sole
discretion, provide in any Award Agreement or, in the event of a Change in
Control, may take such actions as it deems appropriate to provide for the
acceleration of the exercisability and vesting in connection with such Change
in Control of any or all outstanding Options and SARs and shares acquired upon
the exercise of such Options and SARs upon such conditions, including termination
of the Participant’s Service prior to, upon, or following such Change in
Control, and to such extent as the Committee shall determine.

 26

(b)   Assumption or Substitution.   In the event of a Change in Control,
the surviving, continuing, successor, or purchasing entity or parent thereof,
as the case may be (the “Acquiror”), may, without the consent of any
Participant, either assume or continue the Company’s rights and obligations
under outstanding Options and SARs or substitute for outstanding Options and
SARs substantially equivalent options and stock appreciation rights (as the
case may be) for the Acquiror’s stock. Any Options or SARs which are neither
assumed or continued by the Acquiror in connection with the Change in Control
nor exercised as of the time of consummation of the Change in Control shall
become vested and fully and immediately exercisable and all forfeiture
restrictions shall be waived and all such Options and SARs not exercised at the
time of the closing of the Change of Control shall terminate and cease to be
outstanding effective as of the time of consummation of the Change in Control.

(c)   Cash-Out.   The Committee may, in its sole discretion and
without the consent of any Participant, determine that, upon the occurrence of
a Change in Control, each or any Option or SAR outstanding immediately prior to
the Change in Control shall be canceled in exchange for a payment with respect
to each vested share (and each unvested share, if so determined by the
Committee) of Stock subject to such canceled Option or SAR in (i) cash, (ii) stock
of the Company or of a corporation or other business entity a party to the
Change in Control, or (iii) other property which, in any such case, shall
be in an amount having a Fair Market Value equal to the excess of the Fair
Market Value of the consideration to be paid per share of Stock in the Change
in Control over the exercise price per share under such Option or SAR (the “Spread”). In the event such determination is made by the
Committee, the Spread (reduced by applicable withholding taxes, if any) shall
be paid to Participants in respect of the vested portion of their canceled
Options and SARs as soon as practicable following the date of the Change in
Control and in respect of the unvested portion of their canceled Options and
SARs in accordance with the vesting schedule applicable to such Awards as
in effect prior to the Change in Control.

14.2   Effect of
Change in Control on Restricted Stock Awards, Restricted Stock Unit Awards and
Performance Awards.   Subject to the provisions of Section 18 with respect to Section 409A
if applicable, the Committee may, in its discretion, provide in any Award
Agreement evidencing a Restricted Stock Award, Restricted Stock Unit Award or
Performance Award for, or in the event of a Change in Control may take such
actions as it deems appropriate to provide for, the lapsing of the Restriction
Period applicable to the shares subject to the Restricted Stock Award (and, in
the case of Restricted Stock Units and Performance Awards, acceleration of the
vesting and settlement of such Award) upon such conditions, including
termination of the Participant’s Service prior to, upon, or following such
Change in Control, and to such extent as the Committee shall determine.

14.3   Effect of
Change in Control on Deferred Compensation Awards.   Subject to the provisions of Section 18
with respect to Section 409A if applicable, the Committee may, in its discretion,
provide in any Award Agreement evidencing a Deferred Compensation Award or, in
the event of a Change in control, may take such actions as it deems appropriate
to provide that, in the event of a Change in Control, the Stock Units pursuant
to such Award shall become vested and shall be settled effective as of the date
of the Change in Control to such extent as the Committee shall determine.

14.4   Effect of
Change in Control on Cash-Based Awards and Other Stock-Based Awards.   Subject to the provisions of Section 18
with respect to Section 409A if applicable, the Committee
may, in its discretion, provide in any Award Agreement evidencing a Cash-Based
Award or Other Stock-Based Award for, or in the event of a Change in Control
may take such actions as it deems appropriate to provide for, acceleration of
the vesting and settlement of such Award upon such conditions, including
termination of the Participant’s Service prior to, upon, or following such
Change in Control, and to such extent as the Committee shall determine.

 27
 

15.   COMPLIANCE WITH
SECURITIES LAW.

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

16.   TAX WITHHOLDING.

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

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

17.   AMENDMENT OR TERMINATION
OF PLAN.

The Committee may amend, suspend or terminate the Plan
at any time. However, without the approval of the Company’s stockholders, there
shall be (a) no increase in the maximum aggregate number of shares of
Stock that may be issued under the Plan (except by operation of the provisions
of Section 4.4), (b) no change in the class of persons eligible to
receive Incentive Stock Options, and (c) no other amendment of the Plan
that would require approval of the Company’s stockholders under any applicable
law, regulation or rule, including the rules of any stock exchange or
market system upon which the Stock may then be listed. No amendment, suspension
or termination of the Plan shall affect any then outstanding Award unless
expressly provided by the Committee. Except as provided by the next sentence,
no amendment, suspension or termination of the Plan may adversely affect any
then outstanding Award without the consent of the Participant. Notwithstanding
any other provision of the Plan to the contrary, the Committee may, in its sole
and absolute discretion and without the consent of any Participant, amend the
Plan or any Award Agreement, to take effect retroactively or otherwise, as it
deems necessary or advisable 

 28
 

for the purpose of
conforming the Plan or such Award Agreement to any present or future law,
regulation or rule applicable to the Plan, including, but not limited to, Section 409A.

18.   COMPLIANCE WITH SECTION 409A.

18.1   Awards Subject to Section 409A.   The provisions of this Section 18
shall apply to any Award or portion thereof that is or becomes subject to Section 409A, notwithstanding any
provision to the contrary contained in the Plan or the Award Agreement
applicable to such Award. Awards subject to Section 409A include, without
limitation:

(a)    Any
Nonstatutory Stock Option that permits the deferral of compensation other than
the deferral of recognition of income until the exercise of the Award.

(b)    Each
Deferred Compensation Award.

(c)    Any
Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other
Stock-Based Award that either (i) provides by its terms for settlement of
all or any portion of the Award on one or more dates following the Short-Term
Deferral Period (as defined below) or (ii) permits or requires the
Participant to elect one or more dates on which the Award will be settled.

Subject to any applicable U.S. Treasury Regulations
promulgated pursuant to Section 409A or other applicable guidance, the
term “Short-Term
Deferral Period”
means the period ending on the later of (i) the date that is two and
one-half months from the end of the Company’s fiscal year in which the
applicable portion of the Award is no longer subject to a substantial risk of
forfeiture or (ii) the date that is two and one-half months from the end
of the Participant’s taxable year in which the applicable portion of the Award
is no longer subject to a substantial risk of forfeiture. For this purpose, the
term “substantial risk of forfeiture” shall have the meaning set forth in any
applicable U.S. Treasury Regulations promulgated pursuant to Section 409A
or other applicable guidance.

18.2   Deferral and/or Distribution Elections.   Except as otherwise permitted or
required by Section 409A or any applicable U.S. Treasury Regulations
promulgated pursuant to Section 409A
or other applicable guidance, the following rules shall apply to any
deferral and/or distribution elections (each, an “Election”) that may be
permitted or required by the Committee pursuant to an Award subject to Section 409A:

(a)    All
Elections must be in writing and specify the amount of the distribution in
settlement of an Award being deferred, as well as the time and form of
distribution as permitted by this Plan.

(b)    All
Elections shall be made by the end of the Participant’s taxable year prior to
the year in which services commence for which an Award may be granted to such
Participant; provided, however, that if the Award qualifies as “performance-based
compensation” for purposes of Section 409A and is based on services performed
over a period of at least twelve (12) months, then the Election may be made no
later than six (6) months prior to the end of such period.

(c)    Elections
shall continue in effect until a written election to revoke or change such
Election is received by the Company, except that a written election to revoke
or change such Election must be made prior to the last day for making an
Election determined in accordance with paragraph (b) above or as
permitted by Section 18.3.

18.3   Subsequent Elections.   Any Award subject to Section 409A
which permits a subsequent Election to delay the distribution or change the
form of distribution in
settlement of such Award shall comply with the following requirements:

(a)    No
subsequent Election may take effect until at least twelve (12) months after the
date on which the subsequent Election is made;

 29
 

(b)    Each
subsequent Election related to a distribution in settlement of an Award not
described in Section 18.3(b), 18.4(b), or 18.4(f) must result in a
delay of the distribution for a period of not less than five (5) years
from the date such distribution would otherwise have been made; and

(c)    No
subsequent Election related to a distribution pursuant to Section 18.4(d) shall
be made less than twelve (12) months prior to the date of the first scheduled
payment under such distribution.

18.4   Distributions Pursuant to Deferral Elections.   No distribution in settlement of an
Award subject to Section 409A may commence earlier than:

(a)    Separation
from service (as determined by the Secretary of the United States Treasury);

(b)    The date
the Participant becomes Disabled (as defined below);

(c)    Death;

(d)    A
specified time (or pursuant to a fixed schedule) that is either (i) specified
by the Committee upon the grant of an Award and set forth in the Award
Agreement evidencing such Award or (ii) specified by the Participant in an
Election complying with the requirements of Section 18.2 and/or 18.3, as
applicable;

(e)    To the
extent provided by the Secretary of the U.S. Treasury, a change in the
ownership or effective control or the Company or in the ownership of a
substantial portion of the assets of the Company; or

(f)     The
occurrence of an Unforeseeable Emergency (as defined below).

Notwithstanding anything else herein to the contrary,
to the extent that a Participant is a “Specified Employee” (as defined in Section 409A(a)(2)(B)(i))
of the Company, no distribution pursuant to Section 18.4(a) in
settlement of an Award subject to Section 409A may be made before the date
which is six (6) months after such Participant’s date of separation from
service, or, if earlier, the date of the Participant’s death.

18.5   Unforeseeable
Emergency.   The
Committee shall have the authority to provide in the Award Agreement evidencing
any Award subject to Section 409A for distribution in settlement of
all or a portion of such Award in the event that a Participant establishes, to
the satisfaction of the Committee, the occurrence of an Unforeseeable Emergency.
In such event, the amount(s) distributed with respect to such
Unforeseeable Emergency cannot exceed the amounts necessary to satisfy such
Unforeseeable Emergency plus amounts necessary to pay taxes reasonably
anticipated as a result of such distribution(s), after taking into account the
extent to which such hardship is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of the Participant’s
assets (to the extent the liquidation of such assets would not itself cause
severe financial hardship). All distributions with respect to an Unforeseeable
Emergency shall be made in a lump sum as soon as practicable following the
Committee’s determination that an Unforeseeable Emergency has occurred.

The occurrence of an Unforeseeable Emergency shall be
judged and determined by the Committee. The Committee’s decision with respect
to whether an Unforeseeable Emergency has occurred and the manner in which, if
at all, the distribution in settlement of an Award shall be altered or
modified, shall be final, conclusive, and not subject to approval or appeal.

 30
 

18.6   Disabled.   The Committee shall have the authority to provide in
any Award subject to Section 409A for distribution in settlement of such
Award in the event that the Participant
becomes Disabled. A Participant shall be considered “Disabled” if either:

(a)    the
Participant is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, or

(b)    the
Participant is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than three (3) months under
an accident and health plan covering employees of the Participant’s employer.

All distributions payable by reason of a Participant
becoming Disabled shall be paid in a lump sum or in periodic installments as
established by the Participant’s Election, commencing as soon as practicable
following the date the Participant becomes Disabled. If the Participant has
made no Election with respect to distributions upon becoming Disabled, all such
distributions shall be paid in a lump sum as soon as practicable following the
date the Participant becomes Disabled.

18.7   Death.   If a Participant dies before complete
distribution of amounts payable upon settlement of an Award subject to Section 409A,
such undistributed amounts shall be
distributed to his or her beneficiary under the distribution method for death
established by the Participant’s Election as soon as administratively possible
following receipt by the Committee of satisfactory notice and confirmation of
the Participant’s death. If the Participant has made no Election with respect
to distributions upon death, all such distributions shall be paid in a lump sum
as soon as practicable following the date of the Participant’s death.

18.8   No
Acceleration of Distributions.   Notwithstanding anything to the contrary herein,
this Plan does not permit the acceleration of the time or schedule of any distribution under this
Plan, except as provided by Section 409A and/or the Secretary of the U.S. Treasury.

19.   MISCELLANEOUS
PROVISIONS.

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

19.2   Forfeiture Events.

(a)    The
Committee may specify in an Award Agreement that the Participant’s rights,
payments, and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture, or recoupment upon the occurrence of specified
events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events may include, but shall not be limited to,
termination of Service for Cause or any act by a Participant, whether before or
after termination of Service, that would constitute Cause for termination of
Service.

(b)    If the
Company is required to prepare an accounting restatement due to the material
noncompliance of the Company, as a result of misconduct, with any financial
reporting requirement under the securities laws, any Participant who knowingly
or through gross negligence engaged in the

 31
 

misconduct, or who
knowingly or through gross negligence failed to prevent the misconduct, and any
Participant who is one of the individuals subject to automatic forfeiture under
Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company
the amount of any payment in settlement of an Award earned or accrued during
the twelve- (12-) month period following the first public issuance or
filing with the United States Securities and Exchange Commission (whichever
first occurred) of the financial document embodying such financial reporting
requirement.

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

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

19.5   Rights as
a Stockholder.   A Participant shall have no rights as a stockholder
with respect to any shares covered by an Award until the date of the issuance
of such shares (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
such shares are issued, except as provided in Section 4.4 or another
provision of the Plan.

19.6   Delivery
of Title to Shares.   Subject to any governing rules or regulations,
the Company shall issue or cause to be issued the shares of Stock acquired
pursuant to an Award and
shall deliver such shares to or for the benefit of the Participant by means of one
or more of the following: (a) by delivering to the Participant evidence of
book entry shares of Stock credited to the account of the Participant, (b) by
depositing such shares of Stock for the benefit of the Participant with any
broker with which the Participant has an account relationship, or (c) by
delivering such shares of Stock to the Participant in certificate form.

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

19.8   Retirement
and Welfare Plans.   Neither Awards made under this Plan nor shares of
Stock or cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the
benefits payable to any Participant under any Participating Company’s
retirement plans (both qualified and non-qualified) or welfare benefit plans
unless such other plan expressly provides that such compensation shall be taken
into account in computing a Participant’s benefit.

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

 32

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

19.11   No
Constraint on Corporate Action.   Nothing in this Plan shall be construed to: (a) limit,
impair, or otherwise
affect the Company’s or another Participating Company’s right or power to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure, or to merge or consolidate, or dissolve, liquidate, sell,
or transfer all or any part of its business or assets; or (b) limit the
right or power of the Company or another Participating Company to take any
action which such entity deems to be necessary or appropriate.

19.12   Unfunded
Obligation.   Participants
shall have the status of general unsecured creditors of the Company. Any amounts payable to
Participants pursuant to the Plan shall be unfunded and unsecured obligations
for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974. No Participating Company shall be
required to segregate any monies from its general funds, or to create any
trusts, or establish any special accounts with respect to such obligations. The
Company shall retain at all times beneficial ownership of any investments,
including trust investments, which the Company may make to fulfill its payment
obligations hereunder. Any investments or the creation or maintenance of any
trust or any Participant account shall not create or constitute a trust or
fiduciary relationship between the Committee or any Participating Company and a
Participant, or otherwise create any vested or beneficial interest in any
Participant or the Participant’s creditors in any assets of any Participating
Company. The Participants shall have no claim against any Participating Company
for any changes in the value of any assets which may be invested or reinvested
by the Company with respect to the Plan.

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

20.   NONEMPLOYEE
DIRECTOR GRANTS.

20.1   Procedure for Grants.   All grants of Awards to directors who
are not also employees of the
Company (“Outside Directors”) under this Plan shall be automatic and
non-discretionary and shall be made strictly in accordance with the following
provisions:

(a)    No person
shall have any discretion to select which Outside Directors shall be granted
Options or to determine the number of shares to be covered by options granted
to Outside Directors.

(b)    Each
Outside Director shall be automatically granted:

(i)     an Option
to purchase 10,000 shares of Stock on the date of the first Board meeting on or
after the date of the annual meeting of stockholders of each year on which such
person remains a Director of the Company;

(ii)    In
addition, in the case of a new Outside Director, the initial automatic grant
shall be effective upon such Director’s initial election or appointment to the
Board, with the number of underlying shares equal to the product of 2,500
multiplied by the number of regularly scheduled Board meetings remaining prior
to the next annual meeting of stockholders; and

(iii)   Each
Outside Director will automatically be granted a fully vested Option to
purchase an additional 2,500 shares on each date the director attends a meeting
of a committee of the Board other than on the same day or within one day of a
Board meeting.

(c)    The terms
of an Option granted under this Section 21 shall be as follows:

 33
 

(i)     The term
of the Option shall be ten (10) years.

(ii)    The
Option shall be exercisable only while the Outside Director remains a Director
of the Company, except

(A)   Termination
of Continuous Status as a Director. In the event a Director’s continuous status
as a director terminates (other than upon the Director’s death or total and
permanent disability), the Director may exercise his or her Option, but only
within 90 days from the date of such termination, and only to the extent that
the Director was entitled to exercise it at the date of such termination (but
in no event later than the expiration of its 10-year term). To the extent
that the Director does not exercise such Option within the time specified
herein, the Option shall terminate.

(B)   Disability
of Director. In the event Director’s continuous status as a director terminates
as a result of total and permanent disability, the Director may exercise his or
her Option, but only within six months from the date of such termination, and
only to the extent that the Director was entitled to exercise it at the date of
such termination (but in no event later than the expiration of its 10-year
term). To the extent that the Director does not exercise such Option within the
time specified herein, the Option shall terminate.

(C)   Death of
Director. In the event of an Director’s death, the Director’s estate or a
person who acquired the right to exercise the Option by bequest or inheritance
may exercise the option, but only within six months following the date of
death, and only to the extent that the Director was entitled to exercise it at
the date of death (but in no event later than the expiration of its 10-year
term). To the extent that the Director’s estate or a person who acquired the
right to exercise such Option does not exercise such Option within the time
specified herein, the Option shall terminate.

(iii)   The
exercise price per share shall be the fair market value per share on the date
of grant of the option.

(iv)   Subject to
continued status as a Director, the shares subject to an Option granted under
this Section shall be subject to a vesting schedule whereby the shares
shall be released as follows: 2,500 shares shall vest on each date the director
attends a Board meeting in person before the next annual meeting of
stockholders.

(d)    In the
event that any Option granted hereunder would cause the number of shares
subject to outstanding options plus the number of shares previously purchased
under Options to exceed the maximum number of shares available for issuance
under this Plan, then the remaining shares available for Option grant shall be
granted under Options to the Outside Directors on a pro rata basis. No further
grants shall be made until such time, if any, as additional shares become
available for grant under the Plan through action of the stockholders to
increase the number of shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.

20.2   No Right to Continue as a Director.   The Plan shall not confer upon any
Participant any right with
respect to continuation of service as a director or nomination to serve as a
director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his or her directorship at any time.

20.3   Other Terms.   In all other respects, Options granted under this Section shall
be governed by the terms and provisions
of the Plan, unless otherwise required to meet the requirements of Rule 16b-3,
as amended from time to time.

21.   EXECUTION
OF RECEIPTS AND RELEASES.   Any payment of cash or any issuance or transfer of shares of stock
to a Participant, or to his legal representative, heir, legatee, or
distributee, in accordance 

 34
 

with the provisions hereof, shall, to the extent thereof, be
in full satisfaction of all claims or such individuals hereunder. The Committee
may require any grantee, legal representative, heir, legatee, or distributee,
as a condition precedent to such payment, to execute a release and receipt
therefor in such form as it shall determine.

22.   UNFUNDED
PLAN.   Insofar as it provides for awards of cash and other
stock rights, the Plan shall be unfunded.
Although bookkeeping accounts may be established with respect to Participants
who are entitled to cash, stock, or rights thereto under the Plan, any such
accounts shall be used merely as a bookkeeping convenience. The Company shall
not be required to segregate any assets that may at any time be represented by
cash, stock, or rights thereto, nor shall the Plan be construed as providing
for such segregation, nor shall the Company, the Board of Directors nor the
Committee be deemed to be a trustee of any cash, stock, or rights thereto to be
granted under the Plan. Any liability of the Company to any grantee (or his
transferee) with respect to a grant of cash, stock, or rights thereto under the
Plan shall be based solely upon any contractual obligations that may be created
by the Plan and any agreement; no such obligation of the Company shall be
deemed to be secured by any pledge or other encumbrance on any property of the
Company. Neither the Company, the Board of Directors nor the Committee shall be
required to give any security or bond for the performance of any obligation
that may be created by the Plan.

23.   NO GUARANTEE OF
INTERESTS.   Neither the Committee nor the Company guarantees
the Stock from loss or
depreciation.

 35Exhibit 10.1

 

KeyBank National Association

Mailcode:
CA-03-03-2900

Three Embarcadero Center, Ste. 2900

San Francisco, CA 94111

Tel:        
415-733-2476

Fax:         415-733-2480

E-mail:

kmcbride@keybancem.com

August 4,
2006

Wireless
Facilities, Inc.

4810 Eastgate Mall

San Diego, California 92121

Attention:                                         Scott Brickner

Treasurer

Re: $85,000,000 Senior Secured Credit Facilities – Facility Letter

Ladies and Gentlemen:

You
have advised KeyBank National Association (“KeyBank”) that Wireless Facilities,
Inc. (“you” or the “Company”) intends
to acquire (the “Acquisition”) all the issued and outstanding capital stock (the “Shares”) of Madison
Research Corporation (the “Target”) for
cash (the “Offer”) by a wholly-owned subsidiary of the Company (“Offer Subsidiary”) for a majority of the outstanding
Shares on a fully diluted basis (the “Minimum Shares”) through a merger (the “Merger”)
of the Target with a Merger subsidiary
of the Offer Subsidiary. The target will be the surviving entity and a wholly-owned subsidiary of the Offer Subsidiary. We
understand that the cash consideration to be paid for the Shares acquired in connection with the Acquisition will
be up to $70,000,000. You have further
advised us that in connection with the foregoing the Company will obtain a five-year revolving credit
facility (the “Facility” and; together with
the Acquisition, the “Transactions”) in an aggregate principal amount of up to $85,000,000 (as more fully described in the Summary
of Principal Terms and Conditions attached
hereto as Exhibit A (the “Term Sheet”)).

You
have requested that KeyBank (i) agree to structure, arrange and syndicate the Facility and (ii) commit to provide the Facility
and to serve as exclusive advisor, sole lead arranger, sole bookrunner, sole syndication agent and administrative
agent therefore, KeyBank is pleased
to advise you of (i) its willingness to act as exclusive advisor, sole lead arranger, sole bookrunner, sole syndication
agent and administrative agent for the Facility
and (ii) its commitment to provide the entire amount of the Facility (the “Commitment”)
upon the terms and subject to the conditions set forth or referred to in this commitment letter and the Term Sheet (together
the “Commitment Letter”).

 

KeyBank reserves the right and intends, prior to or after
the execution of the definitive documentation with respect to the Facility (the “Facility
Documents”), to syndicate all or a portion of its commitment to one or more financial
institutions or other persons (such entities, together with KeyBank, the “Lenders”)
identified by KeyBank in consultation with, and reasonably acceptable to, you, which
Lenders will become parties to the Facility Documents. It is agreed that KeyBank will act
as the sole administrative agent and exclusive advisor for, and sole lead arranger, sole
bookrunner and sole syndication agent of, the Facility and that no additional
agents or co-agents or co-arrangers will be appointed without the prior written
consent of KeyBank.

Key shall be entitled, after
consultation with Borrower, to change the pricing, terms, allocation or structure
of the Facilities (provided that; the total amount of the Facilities remains
unchanged) either before or after the closing of the Facilities, if Key the
Lead Arranger
determines in its reasonable discretion that such changes are advisable in
order to ensure a successful
syndication or an optimal capital structure. The commitments of Key under any Commitment Letter shall be subject
to the agreements of this paragraph. The
Term Sheet shall be deemed to be amended to reflect such changes and the syndication process shall continue. The
agreements in this paragraph shall survive the closing of the Facilities.

KeyBank will manage, in consultation with you, all
aspects of the syndication, including decisions as to the selection of institutions to
be approached and when they will be approached, when their commitments will be
accepted and which institutions will participate in the allocations of the commitments
among the Lenders. You agree to assist KeyBank in forming any such syndicate and to
provide the potential Lenders, promptly upon request, with all information reasonably
requested by them to complete successfully the syndication, including but not
limited to (a) your assistance in the preparation of an information package,
including a Confidential Information Memorandum for the Facility and other marketing
materials for delivery to potential Lenders and participants, and (b) such other information
and projections prepared by you or your advisors relating to the Transactions as may be
reasonably requested by KeyBank or the potential Lenders. You also agree to
participate in, and to make appropriate senior officers and representatives of the Company available
to participate in, informational meetings for potential Lenders and
participants at such times and places as KeyBank may reasonably request and to
use commercially
reasonable efforts to ensure that KeyBank’s syndication efforts materially
benefit from the Company’s existing lending relationships.

To
ensure an orderly and effective syndication of the Facility, you agree that,
from the date hereof until the termination of
the syndication (as reasonably determined by KeyBank), you will not and will not permit any of your affiliates to and,
after consummation of the Merger you
will not permit the Target and its affiliates to, syndicate or issue, attempt
to syndicate or issue, announce or authorize the announcement of the syndication or issuance of, or engage in
discussions concerning the syndication or issuance of, any debt security
or commercial bank or other debt facility (including any

 

renewals thereof), without the prior written consent of
KeyBank; provided, however, that the foregoing shall not apply to the
transactions contemplated in this Commitment Letter.

You represent and warrant and covenant that, to the best
of your knowledge:

(a)   all written information (other than financial projections) taken with
your filings with the SEC which
have been or are hereafter furnished to KeyBank by you or any of your representatives in connection with the
Transactions is complete and correct as of the date thereof in all material respects and does not
contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements contained therein not
misleading in light of the circumstances under which such statements were or are made; and

(b)     all financial projections taken with your filings with the SEC that have
been or are hereafter
prepared by you or on your behalf and made available to KeyBank have been or will be prepared in good
faith based upon what you believe to be reasonable assumptions (it being understood that
such projections are subject to significant uncertainties and contingencies, many of
which are beyond your, or the Target’s, control and that no assurance can be given
that the projections will be realized).

You agree to supplement the information and projections
referred to in clauses (a) and (b) above from time to time until completion of the syndication so that the
representations and warranties in the
preceding sentence remain correct without regard to when such information
and projections were furnished. In issuing this Commitment Letter and arranging and syndicating the Facility, KeyBank
will be entitled to use and rely on such information and projections without independent verification thereof.

The commitment of KeyBank hereunder is subject to your
compliance with the terms and conditions of this Commitment Letter and the Fee
Letter (as hereinafter defined); please note, however, that the terms and conditions of KeyBank’s commitment
hereunder are not limited to those set
forth herein and that those matters that are not covered or made clear herein are subject to mutual agreement of
the parties hereto.

In addition to the fees
described in the Term Sheet (including Annex I thereto) hereto, the Company will pay the fees
set forth in the fee letter dated the date hereof (the “Fee Letter”) between you
and KeyBank. The terms of the Fee Letter are an integral part of KeyBank’s commitment and
undertaking hereunder and constitute part of this Commitment Letter for
all purposes hereof. Each of the fees described in the Fee Letters and the Term
Sheet hereto shall be nonrefundable when paid unless otherwise specified. You agree that neither
you nor any of your affiliates will pay to any Lender any compensation or award
any titles of any kind for its participation in the Facility except as
expressly provided for in this Commitment Letter, Term Sheet or in the Fee
Letter, or as you and we otherwise agree.

 

You agree to reimburse KeyBank
and its affiliates for their reasonable out-of-pocket fees and expenses
incurred in connection with the preparation, execution and delivery of this letter, the Fee Letter
and the Facility Documents and the activities thereunder or contemplated thereby,
including without limitation syndication expenses and the reasonable fees and
expenses of a single outside counsel to KeyBank and its affiliates (whether incurred
before or after the execution of this letter), whether or not any of the transactions contemplated
hereby are consummated. You further agree to pay all reasonable out-of-pocket
costs and expenses of KeyBank (including without limitation, reasonable fees and
disbursements of counsel) incurred in connection with the enforcement of any of
its rights and remedies hereunder.

You agree to indemnify and hold harmless each of KeyBank
and each other Lender, their respective affiliates and each of their respective
directors, officers, employees, agents and advisors (each, an “Indemnified
Party”), from and against any and all claims, damages, liabilities (including
securities law liabilities), losses and expenses, including reasonable fees, expenses and
disbursements of counsel, which may be incurred by or asserted against an Indemnified
Party in connection with KeyBank’s or any Lender’s commitment or participation in the
transactions contemplated by this letter, the Facility or any related matter or any
investigation, litigation or proceeding in connection therewith and whether or
not the Acquisition is consummated or the Facility is drawn upon and whether or
not such
investigation, litigation or proceeding is brought by the Company, any of its shareholders or
creditors, an Indemnified Party or any other person, or an Indemnified Party is
otherwise a party thereto, except to the extent such claim, damage, loss,
liability or expense resulted
from such Indemnified Party’s own gross negligence or willful misconduct. No Indemnified Party shall be
responsible or liable to any other party hereto or any other person for consequential damages that may be alleged as a
result of this letter or the breach of any party’s obligations hereunder
or have any liability (whether direct or
indirect, in contract, tort or otherwise) to the Company or any of its
shareholders or creditors for or in connection with the transactions
contemplated hereby except to the extent such liability resulted from such
Indemnified Party’s gross negligence or willful misconduct.

This letter is delivered to you on the understanding
that neither this letter nor any other agreement between us related to this
letter or the Transactions, including the Term Sheet, and the Fee Letter, nor
any of their terms or substance shall be disclosed, directly or indirectly, to any other
person except (a) to your officers, agents and advisors who are directly
involved in the consideration of this matter (and then only on a confidential
and “need
to know” basis) or (b) as may be compelled in a judicial or administrative proceeding or as
otherwise required by law (in which case you agree to inform us promptly thereof);
provided, however, that you may, after your acceptance of this Commitment Letter and the Fee Letter, and
only in connection with the Acquisition, disclose
this letter and the Term Sheet (including Annex I attached thereto) and their terms
and substance (but not the Fee Letter or its terms and substance) (i) to the
Target and others in connection with or
related to the Acquisition, and (ii) to other persons to the extent the information being disclosed has been
previously made publicly available other

 

than through a breach of the terms of this Commitment
Letter. Notwithstanding any of the
foregoing to the contrary, you, KeyBank and each Lender may disclose to any and
all persons any information with
respect to the U.S. federal income tax treatment and U.S. federal income tax
structure of the transactions contemplated hereby and all materials of any kind
(including opinions or other tax analyses) that are provided to KeyBank or such
Lender relating to the tax treatment and tax structure.

Our
offer to provide the Facility will terminate at 5 PM, Pacific Standard Time,
(i) on August 8, 2006, unless on or
before that time you accept this letter by signing and returning an enclosed counterpart of this letter
and the Fee Letter and (ii) if accepted by you on or prior to such time, on the earlier of (a) (i) termination of
the merger agreement and (ii)
December 31, 2006 and (b) and the date of execution of the Facility Documents. In any event your obligations with respect to
indemnification, fees, costs, expenses and confidentiality shall remain in full force and effect, regardless of any
termination of the commitment of
KeyBank made hereunder; provided, that upon execution of the Facility Documents, your obligations with respect to
indemnification set forth herein shall terminate
automatically and be superseded by the indemnification provisions of the Facility Documents.

This
letter is intended to be solely for the benefit of the parties hereto and is
not intended to confer any benefits
upon, or create any rights in favor of, any person other than the parties hereto. This Commitment Letter is not
intended to create a fiduciary relationship among the parties hereto. You acknowledge that KeyBank may provide debt
financing, equity capital or other services (including financial advisory
services) to parties whose interests
may conflict with your or the Target’s respective interests. KeyBank will not furnish confidential information obtained from you,
the Target or any of your or its respective
affiliates to any of KeyBank’s other customers. Furthermore, KeyBank shall have no obligation to use in connection with the
transactions contemplated hereby, or to furnish to you or the Target,
confidential information obtained by KeyBank or any of its affiliates from any
other person.

This
letter and KeyBank’s commitment hereunder may not be assigned by you without the prior written consent of KeyBank, and any
attempted assignment without such consent
shall be void. KeyBank’s commitment hereunder may be assigned thereby to any of
its affiliates or, in consultation with you, to any Lender. Any such assignment
to an affiliate shall not relieve KeyBank from any of its obligations hereunder
unless and until the Facility
Documents with respect to such assigned commitment shall have been executed and delivered by the parties thereto, but
any assignment to a Lender shall be by novation and shall release KeyBank from
its commitment hereunder pro tanto. This letter may not be amended or modified
or any provision hereof waived except in writing signed by you and KeyBank.
This Commitment Letter together with the Term Sheet (including Annex 1 thereto) and the Fee Letter sets forth the
entire agreement between the parties with respect to the matters addressed
herein and supersedes all prior communications, written or oral, with respect hereto. This letter shall be governed by
and construed in accordance with the
internal laws of the State of California. Each party hereto irrevocably

 

waives all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract, tort
or otherwise) arising out of or relating to this Commitment Letter or the transactions
contemplated hereby or the actions of the parties hereto in the negotiation, performance or enforcement hereof. This
letter may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original and
all of which together shall constitute one and the same instrument. Delivery of
an executed counterpart of a
signature page of this letter by facsimile transmission shall be effective as delivery of a manually signed
counterpart hereof.

We appreciate the opportunity to assist you in this very
important transaction.

Very truly yours,

	
  KEYBANK NATIONAL ASSOCIATION

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Robert W.
  Boswell

  	
   

  
	
  Name:

  	
  Robert W.
  Boswell

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  
	
   

  
	
   

  
	
  Accepted and
  agreed to as of the date first

  above written:

  
	
   

  
	
  WIRELESS
  FACILITIES, INC.

  	
  

  
	
   

  
	
  By:

  	
  /s/ Scott
  Brickner

  
	
  Name:

  	
  Scott Brickner

  
	
  Title:

  	
  Treasurer

  
								

 

 

	
  

  	
   

  	
  Summary of Terms and Conditions

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $85,000,000 Senior Credit Facility

  
	
   

  	
   

  	
   

  
	
  Borrower:

  	
   

  	
  Wireless Facilities, Inc.

  
	
   

  	
   

  	
   

  
	
  Lead Arranger and Book Runner:

  	
   

  	
  KeyBanc Capital Markets (“KeyBanc”)

  
	
   

  	
   

  	
   

  
	
  Administrative Agent:

  	
   

  	
  KeyBank National Association (“KeyBank”)

  
	
   

  	
   

  	
   

  
	
  Lenders:

  	
   

  	
  A syndicate of financial institutions (including
  KeyBank) arranged by Key, which institutions shall be acceptable to the
  Borrower and the Administrative Agent.

  
	
   

  	
   

  	
   

  
	
  Facility:

  	
   

  	
  $85,000,000 five-year revolving credit facility to
  be provided by the Lenders with revolving commitments and will include a
  $10,000,000 sub-limit for letters of credit to be issued by the LC Issuer.

  
	
   

  	
   

  	
   

  
	
  Closing Date:

  	
   

  	
  On or about September 30th, 2006

  
	
   

  	
   

  	
   

  
	
  Security:

  	
   

  	
  Facility secured by:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·  First
  priority perfected security interest in all domestic tangible and intangible
  assets of Borrower and Guarantors 

  
	
   

  	
   

  	
  ·  Pledge
  of 65% of capital stock of all Borrower’s and Guarantors’ existing and future
  material direct foreign subsidiaries 

  
	
   

  	
   

  	
  ·  Negative
  Pledge on all assets 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Borrower shall request that an assignment of claims
  be executed for US Government receivables. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Baskets for leased assets and purchase money loans
  will be provided.

  
	
   

  	
   

  	
   

  
	
  Accordion Provision:

  	
   

  	
  At any time prior to December 31st, 2006, the Borrower will be
  able to expand the Facility to a maximum of $125,000,000 at any time after
  closing. Any increase will first be offered to existing Lenders, with no
  Lender required to increase its commitment. Additional Lenders may be added
  to reach the requested commitment amount without the consent of existing
  Lenders to the extent such increased commitment is not provided in full by
  the existing Lenders.

  
	
   

  	
   

  	
   

  
	
  Syndication Provision:

  	
   

  	
  Key shall be entitled, after consultation with
  Borrower, to change the pricing, terms, allocation or structure of the
  Facilities. If the Lead Arranger determines in its reasonable discretion that
  such changes are advisable in order to ensure a 

  

 

 

 1
 

 

 

 

	
  

  	
   

  	
  successful syndication. The commitments of Key under
  any Commitment Letter shall be subject to the agreements of this paragraph.
  The Term Sheet shall be deemed to be amended to reflect such changes and the
  syndication process shall continue. The agreements in this paragraph shall
  survive the closing of the Facility.

  
	
   

  	
   

  	
   

  
	
  Clear Market Provision:

  	
   

  	
  To ensure an orderly and effective syndication of
  the Facilities, until the completion of the syndication (as determined by
  KeyBank), the Borrower will not, and will not permit any of its affiliates
  to, syndicate or issue, attempt to syndicate or issue, announce or authorize
  the announcement of the syndication or issuance of, or engage in discussions
  concerning the syndication or issuance of, any debt or credit facility or
  debt security (including any renewals thereof) in the commercial bank,
  private placement or public securities markets, except as may be done with
  the prior written consent of KeyBank. This Clear Market Provision shall not
  apply to any performance of surety bonds entered into by the Borrower during
  the normal course of business.

  
	
   

  	
   

  	
   

  
	
  Letter of Credit Sub-limit:

  	
   

  	
  $10,000,000 sub-limit for the issuance of Standby
  Letters of Credit.

  
	
   

  	
   

  	
   

  
	
  Purpose:

  	
   

  	
  General corporate purposes including refinancing of
  existing bank debt, working capital and acquisitions.

  
	
   

  	
   

  	
   

  
	
  Amortization:

  	
   

  	
  The Facility shall be interest only and have no
  amortization payments prior to the Maturity Date.

  
	
   

  	
   

  	
   

  
	
  Availability:

  	
   

  	
  Provided no Default or Event of Default exists, the
  borrowings under the Facility shall be available from the Closing Date until
  the Maturity Date (defined below). Borrower will be able to borrow, repay and
  re-borrow up to the total commitment amount until the Maturity Date.

  
	
   

  	
   

  	
   

  
	
  Maturity:

  	
   

  	
  Five (5) years from the Closing Date (the “Maturity
  Date”).

  
	
   

  	
   

  	
   

  
	
  Guarantors:

  	
   

  	
  All material domestic subsidiaries. Material foreign
  subsidiaries to provide a 65% stock pledge.

  
	
   

  	
   

  	
   

  
	
  Drawdowns:

  	
   

  	
  Minimum initial amount of $1,000,000 with additional
  increments of $500,000. Maximum number of separate drawdowns at any one time
  set at five. Drawdowns are at the Borrower’s option with same day notice for
  Prime Rate borrowings, and three business days notice for LIBOR borrowings.

  
	
   

  	
   

  	
   

  
	
  Commitment Termination:

  	
   

  	
  The Borrower, at its sole option, may terminate the
  commitments of at least $5,000,000 at any time given three-business days
  notice.

  

 

 2
 

 

 

	
  Borrowing Rates:

  	
   

  	
  At the Borrower’s option, Alternative Base Rate plus
  the ABR Margin or 1-, 2-, 3-, and 6-month LIBOR plus the LIBOR Margin.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ABR: The Alternative Base Rate
  (“ABR”) will be the higher of the Prime Rate and the Federal Funds Rate plus
  1⁄2%.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Prime Rate: Means at any time the
  rate of interest most recently announced within KeyBank as its Prime Rate,
  with the understanding that KeyBank’s Prime Rate is one of its base rates and
  serves as the basis upon which effective rates of interest are calculated for
  those loans making reference thereto, and is evidenced by the recording
  thereof after its announcement in such internal publication or publications
  as KeyBank may designate. Each change in the Prime Rate will be effective on
  the day the change is announced within KeyBank.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LIBOR: For an interest period
  means the average of the rate of interest at which deposits (approximately equal
  to the amount of the requested loan and for the same term as the interest
  period) are offered to the Administrative Agent in the London interbank
  eurodollar market for delivery on the first day of the interest period, as
  adjusted for reserve requirements and rounded upwards if necessary to the
  next higher 1/100%.

  
	
   

  	
   

  	
   

  
	
  Applicable Margin / Fees:

  	
   

  	
  The pricing matrix below will be based on the
  Borrower’s ratio of Total Debt / EBITDA up to the most recent fiscal quarter
  end and calculated on a rolling four-quarter basis.

  

 

	
  Leverage Ratio (“X”)

  	
   

  	
   

  	
   

  	
  Commitment

  Fee (bps)

  	
   

  	
  LIBOR

  Margin (bps)

  	
   

  	
  Base Rate Margin

  (bps)

  	
   

  
	
  X ≥ 3.5

  	
   

  	
  75.0

  	
   

  	
  350.0

  	
   

  	
  150.0

  	
   

  
	
  X is ≥ 3.0 but
  < 3.5

  	
   

  	
  75.0

  	
   

  	
  300.0

  	
   

  	
  100.0

  	
   

  
	
  X is ≥ 2.5 but
  < 3.0

  	
   

  	
  60.0

  	
   

  	
  250.0

  	
   

  	
  50.0

  	
   

  
	
  X is ≥ 2.0 but
  < 2.5

  	
   

  	
  50.0

  	
   

  	
  225.0

  	
   

  	
  25.0

  	
   

  
	
  X is ≥ 1.5 but
  < 2.0

  	
   

  	
  40.0

  	
   

  	
  200.0

  	
   

  	
  0.0

  	
   

  
	
  X < 1.5

  	
   

  	
  30.0

  	
   

  	
  175.0

  	
   

  	
  0.0

  	
   

  

 

	
  

  	
   

  	
  Commitment Fee: A commitment fee,
  due quarterly in arrears, calculated on the average undrawn commitment amount
  of the Facility, as indicated in the pricing matrix above.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Underwriting Fee: Per the Fee
  Letter.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Accordion Fee: Per the Fee Letter.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Administration Fee: Per the Fee
  Letter.

  

 

 3
 

 

 

	
  Interest Payment Dates:

  	
   

  	
  Interest on ABR loans will be payable quarterly.
  Interest on LIBOR loans will be payable at the end if each interest period
  selected by the Borrower (one, two, three or six-month), and at the end of
  three months in the case of a six-month interest period. From and after the
  occurrence of an Event of Default, interest will accrue at the rate otherwise
  applicable plus 2.00% per annum. Interest on all loans will also be payable
  upon their conversion to another pricing option, prepayment and maturity. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  All interest and fees will be computed on the basis
  of actual days elapsed in a 360-day year.

  
	
   

  	
   

  	
   

  
	
  Notices of Borrowing:

  	
   

  	
  The Borrower will give KeyBank advance notice of its
  intent to borrow as follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ABR borrowings — 1 business day

  LIBOR borrowings — 3 business days

  
	
   

  	
   

  	
   

  
	
  Voluntary Prepayments:

  	
   

  	
  The Borrower may prepay any ABR loan without premium
  or penalty on one business day’s advance notice. Subject to applicable LIBOR
  breakage costs, the Borrower may prepay any LIBOR loan without premium or
  penalty during an interest period on three business days’ advance notice.
  Prepayments will be at least $1,000,000 and a multiple of $500,000, and will
  include interest accrued to the prepayment date, plus LIBOR breakage costs as
  indicated below, if applicable.

  
	
   

  	
   

  	
   

  
	
  Breakage Costs; Yield Protection and Increased
  Costs:

  	
   

  	
  If the Borrower makes prepayment of a LIBOR loan
  before the end of the related interest period, or fails to borrow, convert or
  extend a LIBOR loan after giving notice thereof, the Borrower will reimburse
  KeyBank for any related funding losses and losses of anticipated earnings.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Borrower will compensate KeyBank if certain
  changes in circumstances result in increased costs or reduced returns such as
  taxes, reserves, special deposit insurance or capital adequacy requirements.
  All payments by the Borrower will be made free and clear of present and
  future taxes, withholding or deductions, except for taxes on the net income
  of the Lender.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Borrower shall pay the Lender such additional
  amounts as will compensate the Lender in the event applicable law, or any
  changes in law, subjects the Lender to reserve requirements, capital
  requirements, taxes (except for taxes on the net income of the Lender), or
  other charges which increase the cost or reduce the yield to the Lender,
  under customary yield protection provisions.

  

 

 4
 

 

 

	
  Financial Covenants:

  	
   

  	
  Maximum Total Leverage Ratio (measured quarterly):
  The ratio of Senior Debt / EBITDA shall not exceed 4.00x through the period
  ended March 31, 2007, decreasing by 0.25x each quarter thereafter until the
  period ended September 30, 2007 when the ratio reaches 3.50x. The Total Leverage
  Ratio shall decrease to 3.00x for the period ending December 31, 2007, at
  which level it shall remain fixed through the Maturity Date.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Minimum Liquidity Ratio (measured quarterly):
  The ratio of Quick Assets (cash & equivalents, marketable securities, and
  billed & unbilled accounts receivable) / Current Liabilities not to be
  less than 1.35x

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Minimum Fixed Charge Coverage (measured quarterly):
  The ratio of trailing twelve month EBITDA plus operating lease expense to
  capital expenditures, interest charges, operating lease expense, and cash
  taxes paid less tax refunds actually received shall not be less than 1.10x
  through the period ending March 30, 2007 and 1.25x thereafter.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EBITDA shall mean the sum of the
  following, provided that the items contained in clauses (b)-(g) below shall
  be added to clause (a) only to the extent they have been deducted in the
  calculation of Consolidated Net Income plus the amounts in clauses (a)
  through (g) attributable Acquisitions occurring after June 30, 2006: (a) Net
  Income, provided that, all items of expense or loss that are properly
  classified as extraordinary in accordance with GAAP or are unusual or
  non-recurring (but do not fall within clauses (b)-(g) below) shall be
  excluded from Consolidated Net Income; (b) Interest Charges; (c) the amount
  of taxes, based on or measured by income, used or included in the
  determination of such Consolidated Net Income; (d) the amount of depreciation
  and amortization expense deducted in determining such Consolidated Net
  Income, including any impairment of goodwill or other purchased intangibles
  or assets as defined under FAS 142 or FAS 143; (e) any non-cash stock based
  compensation charges in such period per GAAP; (f) the amount of non-cash and
  non-recurring costs from discontinued operations, disposal of assets or
  changes to GAAP; and (g) the amount of earn-out or similar payments required
  to be reported as compensation expense instead of goodwill.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Senior Debt shall include all
  Indebtedness, as defined in the current Credit Agreement, less consolidated
  cash and cash equivalents, and shall exclude performance bonds, hold backs
  related to acquisitions and other normal course bonds.

  

 

 5
 

 

 

	
  Other Limitations:

  	
   

  	
  Limitations on Acquisitions to include:

  
	
   

  	
   

  	
  ·  Pro
  Forma compliance with all financial covenants;

  
	
   

  	
   

  	
  ·  No
  hostile acquisitions;

  
	
   

  	
   

  	
  ·  Acquisitions
  must be in related industries;

  
	
   

  	
   

  	
  ·  Limits
  on cash acquisitions without prior Lender approval;

  
	
   

  	
   

  	
  ·  Limitations
  on additional indebtedness.

  
	
   

  	
   

  	
   

  
	
  Financial Reporting:

  	
   

  	
  The Borrower will provide to KeyBank:

  
	
   

  	
   

  	
  ·  Quarterly
  (unaudited) consolidated financial statements to include balance sheets and
  statements of income, retained earnings and cash flow, in accordance with
  GAAP, within 45 days of quarter end. Within 45 days after the end of each
  quarter, a written covenant compliance certificate, showing calculations and
  confirming compliance of the Borrower with all financial covenants, certified
  by a senior financial officer.

  
	
   

  	
   

  	
  ·  Annual
  (audited) consolidated financial statements, as described above, with an
  unqualified opinion from a recognized independent accounting firm and the
  Borrower’s covenant compliance certificate, together with calculations,
  confirming the Borrower’s compliance with all financial covenants, certified
  by a senior financial officer, within 90 days after the end of each fiscal
  year.

  
	
   

  	
   

  	
  ·  Other
  financial reports as the Agent may reasonably request.

  
	
   

  	
   

  	
   

  
	
  Representations and Warranties:

  	
   

  	
  Usual and customary for transactions of this nature.

  
	
   

  	
   

  	
   

  
	
  Loan Documents:

  	
   

  	
  The loans shall be subject to the negotiation,
  execution and delivery of a loan agreement, notes, security agreement and
  other documents (collectively, the “Loan Documents”), which will contain but
  not be limited to conditions to borrowings, representations and warranties,
  covenants, events of default, indemnification, and other provisions that are
  customary for similar financings by the Administrative Agent including,
  without limitation, those indicated herein.

  
	
   

  	
   

  	
   

  
	
  Conditions Precedent to Funding:

  	
   

  	
  Customary for transactions of this nature and
  subject to materiality provisions where appropriate, including but not
  limited to:

  
	
   

  	
   

  	
  ·  Acquisitions
  must comply with financial covenants on a pro-forma basis; 

  
	
   

  	
   

  	
  ·  Absence
  of Default; 

  
	
   

  	
   

  	
  ·  Accuracy
  of Representations & Warranties; and 

  
	
   

  	
   

  	
  ·  Negotiation
  & Execution of Satisfactory Closing Documents.

  

 

 6
 

 

 

	
  Events of Default:

  	
   

  	
  Customary for transactions of this nature and
  subject to materiality provisions where appropriate, including but not
  limited to:

  
	
   

  	
   

  	
  ·  failure
  to pay any principal under the Facility when due;

  
	
   

  	
   

  	
  ·  failure
  to pay any interest or under the Facility fees when due;

  
	
   

  	
   

  	
  ·  defaults
  in the payment of principal, interest and or fees on other debt instruments
  in an amount in excess of $10,000,000;

  
	
   

  	
   

  	
  ·  violations
  of covenants;

  
	
   

  	
   

  	
  ·  ERISA
  Termination;

  
	
   

  	
   

  	
  ·  cross
  default, subject to materiality and for amounts in excess of $10,000,000; and

  
	
   

  	
   

  	
  ·  change
  of control.

  
	
   

  	
   

  	
   

  
	
  Remedies:

  	
   

  	
  Customary for transactions of this nature,
  including:

  
	
   

  	
   

  	
  ·  Acceleration;

  
	
   

  	
   

  	
  ·  Recovery
  of Amounts;

  
	
   

  	
   

  	
  ·  Cost
  of Collection; and

  
	
   

  	
   

  	
  ·  No
  Advances.

  
	
   

  	
   

  	
   

  
	
  Assignments and Participations:

  	
   

  	
  The Borrower may not assign its obligations without
  the prior written consent of KeyBank.

  
	
   

  	
   

  	
   

  
	
  Expenses and Indemnifications:

  	
   

  	
  All reasonable costs, expenses and charges incurred
  by the Lender, including but not limited to, fees and charges of external
  legal counsel for the Lender will be reimbursed by the Borrower.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Borrower agrees to indemnify the Lender and its
  directors, officers, employees and agents from, and hold each harmless
  against, any and all losses, liabilities, claims, damages or expenses
  incurred except by reason of the gross negligence or willful misconduct of the
  Lender.

  
	
   

  	
   

  	
   

  
	
  Governing Law:

  	
   

  	
  State of California.

  
	
   

  	
   

  	
   

  
	
  KeyBank’s Counsel:

  	
   

  	
  To be determined.

  
	
   

  	
   

  	
   

  

 

This proposal is subject to mutually acceptable
documentation and all other specifics acceptable to all parties to the
transaction. This proposal shall expire on August 9th, 2006 unless extended in writing by KeyBanc Capital
Markets.

If the terms and conditions contemplated herein
are acceptable, please indicate your acceptance by signing below and returning
the original copy of this Summary of Terms and Conditions along with the first
portion of the Underwriting Fee.

Acknowledged
and Accepted,

Wireless Facilities, Inc..

	
  By:

  	
   

  	
  /s/ Scott M. Brickner

  	
   

  
	
  Title:

  	
   

  	
  Treasurer

  	
   

  
	
  Date:

  	
   

  	
  August 8, 2006

  	
   

  

 

 

 7

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