Document:

Exhibit 4.1

 

MRV COMMUNICATIONS, INC.

2007 OMNIBUS INCENTIVE PLAN

 

ARTICLE I

PURPOSE AND ADOPTION OF THE PLAN

 

1.01.  Purpose.  The purpose of the MRV
Communications, Inc. 2007 Incentive Plan (as amended from time to time,
the “Plan”) is to assist in attracting and retaining highly competent
employees, directors and consultants to act as an incentive in motivating
selected employees, directors and consultants of MRV Communications, Inc.
and its Subsidiaries to achieve long-term corporate objectives and to enable
stock-based and cash-based incentive awards to qualify as performance-based
compensation for purposes of the tax deduction limitations under
Section 162(m) of the Code.

 

1.02.  Adoption and Term.  The Plan has
been approved by the Board of Directors of the Company to be effective as of
the date of such approval, but is subject to the approval of the shareholders
of the Company. The Plan shall remain in effect until terminated
by action of the Board; provided, however, that no Awards may be granted
hereunder after the tenth anniversary of its initial effective date.

 

ARTICLE II

DEFINITIONS

 

For
the purpose of this Plan, capitalized terms shall have the
following meanings:

 

2.01.  Award means any one or a combination of
Non-Qualified Stock Options or Incentive Stock Options described in
Article VI, Stock Appreciation Rights described in Article VI,
Restricted Shares described in Article VII, Performance Awards described
in Article VIII, Stock Units and other stock-based Awards described in
Article IX, short-term cash incentive Awards described in Article X
or any other Award made under the terms of the Plan.

 

2.02.  Award Agreement means a written agreement
between the Company and a Participant or a written acknowledgment from the
Company to a Participant specifically setting forth the terms and conditions of
an Award granted under the Plan.

 

2.03.  Award Period means, with respect to an
Award, the period of time, if any, set forth in the Award Agreement during
which specified target performance goals must be achieved or other conditions
set forth in the Award Agreement must be satisfied.

 

2.04.  Beneficiary means an individual, trust or
estate who or which, by a written designation of the Participant filed with the
Company, or if no such written designation is filed, by operation of law,
succeeds to the rights and obligations of the Participant under the Plan and
the Award Agreement upon the Participant’s death.

 

2.05.  Board means the Board of Directors of the
Company.

 

2.06.  Change in Control means, and shall be
deemed to have occurred upon the occurrence of, any one of the following
events:

 

(a) The
acquisition in one or more transactions, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act), other than the Company, a Subsidiary or any
employee benefit plan (or related trust) sponsored or maintained by the Company
or a Subsidiary, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of a number of Company Voting Securities in
excess of 25% of the Company Voting Securities unless such acquisition has been
approved by the Board;

 

(b) Any
election has occurred of persons to the Board that causes two-thirds of the
Board to consist of persons other than (i) persons who were members of the
Board on the effective date of the Plan and (ii) persons who were
nominated for elections as members of the Board at a time when two-thirds of
the Board consisted of persons who were members of the Board on the effective
date of the Plan, provided, however, that any person nominated for election by
a Board at least two-thirds of whom constituted persons described in
clauses (i) and/or (ii) or by persons who were themselves
nominated by such Board shall, for this purpose, be deemed to have been
nominated by a Board composed of persons described in clause (i);

 

(c) The
consummation (i.e.  closing)
of a reorganization, merger or consolidation involving the Company, unless,
following such reorganization, merger or consolidation, all or substantially
all of the individuals and entities who were the respective beneficial owners
of the Outstanding Common Stock and Company Voting Securities immediately prior
to such reorganization, merger or consolidation, following such reorganization,
merger or consolidation beneficially own, directly or indirectly, more than
seventy five percent (75%) of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors or trustees,
as the case may be, of the entity resulting from such reorganization, merger or
consolidation in substantially the same proportion as their ownership of the
Outstanding Common Stock and Company Voting Securities immediately prior to
such reorganization, merger or consolidation, as the case may be;

 

(d) The
consummation (i.e.  closing)
of a sale or other disposition of all or substantially all the assets of the
Company, unless, following such sale or disposition, all or substantially all
of the individuals and entities who were the respective beneficial owners of
the Outstanding Common Stock and Company Voting Securities immediately prior to
such reorganization, merger or consolidation, following such

 

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reorganization,
merger or consolidation beneficially own, directly or indirectly, more than
seventy five percent (75%) of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors or trustees,
as the case may be, of the entity purchasing such assets in substantially the
same proportion as their ownership of the Outstanding Common Stock and Company
Voting Securities immediately prior to such sale or disposition, as the case
may be; or

 

(e) a
complete liquidation or dissolution of the Company.

 

2.07.  Code means the Internal Revenue Code of
1986, as amended. References to a section of the Code shall include that
section and any comparable section or sections of any future legislation that
amends, supplements or supersedes said section.

 

2.08.  Committee means the Committee defined in
Section 3.01.

 

2.09.  Company means MRV Communications, Inc.,
a Delaware corporation, and its successors.

 

2.10.  Common Stock means Common Stock of the
Company, par value $0.0017 par value per share.

 

2.11.  Company Voting Securities means the
combined voting power of all outstanding voting securities of the Company
entitled to vote generally in the election of directors to the Board.

 

2.12.  Date of Grant means the Date of Grant
following the first Available Grant Date as specified in the Policy and subject
to postponement as specified in the Policy.

 

2.13.  Dividend Equivalent Account means a
bookkeeping account related to an Award that is credited with the amount of any
cash dividends or stock distributions that would be payable with respect to the
shares of Common Stock subject to such Awards had such shares been outstanding
shares of Common Stock.

 

2.14  Exchange Act means the Securities Exchange
Act of 1934, as amended.

 

2.15.  Exercise Price means, with respect to a
Stock Appreciation Right, the amount established by the Committee in the Award
Agreement which is to be subtracted from the Fair Market Value on the date of
exercise in order to determine the amount of the payment to be made to the
Participant, as further described in Section 6.02(b).

 

2.16.  Fair Market Value means, on any date,
(i) the closing sale price of a share of Common Stock, as reported on the
Composite Tape for New York Stock Exchange Listed Companies (or other
established stock exchange on which the Common Stock is regularly traded) on
such date or, if there were no sales on such date, on the last date preceding
such date on which a sale was reported; (ii) if the Common Stock is not
listed for trading on an established stock exchange, but a regular, active
public market for the Common Stock exists (as determined in the sole discretion
of the Committee or Board, whose discretion shall be conclusive and binding),
the average of the closing bid and ask quotations per share of Common Stock in
the over-the-counter (“OTC”) market for such shares on such date or, if no
quotations are available on such date, on the last date preceding such date on
which a quotation was reported; or (iii) if shares of Common Stock are not
listed for trading on an established stock exchange or quoted on the OTC, Fair
Market Value shall be determined by the Committee in good faith. Such
definition of Fair Market Value shall be specified in the Award Agreement and
may differ depending on whether Fair Market Value is in reference to the grant,
exercise, vesting, or settlement or payout of an Award.

 

2.17  Form S-8 means registration
statements on Form S-8 under the Securities Act, or any successor Form under
which the shares of Common Stock of the Company reserved for issuance under the
Plan upon the issuance or exercise of Awards are registered,

 

2.18.  Incentive Stock Option means a stock
option within the meaning of Section 422 of the Code.

 

2.19.  Merger means any merger, reorganization,
consolidation, exchange, transfer of assets or other transaction having similar
effect involving the Company.

 

2.20.  Non-Qualified Stock Option means a stock
option which is not an Incentive Stock Option.

 

2.21.  Options means all Non-Qualified Stock
Options and Incentive Stock Options granted at any time under the Plan.

 

2.22.  Outstanding Common Stock means, at any
time, the issued and outstanding shares of Common Stock.

 

2.23.  Participant means a person designated to
receive an Award under the Plan in accordance with Section 5.01.

 

2.24.  Performance Awards means Awards granted in
accordance with Article VIII.

 

2.25.  Performance Goals means net earnings or
net income (before or after taxes); earnings per share or earnings per share
growth, total units, or unit growth; net sales, sales growth, total revenue, or
revenue growth; net operating profit; return measures (including, but not
limited to, return on assets, capital, invested capital, equity, sales, or
revenue); cash flow (including, but not limited to, operating cash flow, free
cash flow, cash flow return on equity, and cash flow return on investment); earnings
before or after taxes, interest, depreciation, and/or amortization; gross or
operating margins; productivity ratios; share price or relative share price
(including, but not limited to, growth measures and total stockholder return);
expense targets; margins; operating efficiency; market share or change in
market share; customer retention or satisfaction; working capital targets;
economic value added or EVA® (net operating profit after tax
minus the sum of capital multiplied by the cost of capital).

 

2.26.  Plan
shall have the meaning given to such term in Section 1.01.

 

2.27  Policy shall mean the Policy of MRV
Communications, Inc. Relating to Grants of Equity-based Awards adopted by
the Board on October 10, 2006 as amended by the Board from time to time.

 

2.28.  Purchase Price, with respect to Options,
shall have the meaning set forth in Section 6.01(b).

 

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2.29.  Restoration
Option means a Non-Qualified Stock Option granted pursuant to
Section 6.01(f).

 

2.30.  Restricted Shares means Common Stock
subject to restrictions imposed in connection with Awards granted under
Article VII.

 

2.31.  Retirement means early or normal
retirement under a pension plan or arrangement of the Company or one of its
Subsidiaries in which the Participant participates or, in the case of a
Participant who is a non-employee member of the Board, retirement under the
Board’s retirement policy, if any.

 

2.32.  Rule 16b-3 means Rule 16b-3
promulgated by the Securities and Exchange Commission under Section 16 of
the Exchange Act, as the same may be amended from time to time, and any
successor rule.

 

2.33  Securities Act means the Securities Act of
1933, as amended.

 

2.34.  Stock Appreciation Rights means awards
granted in accordance with Article VI.

 

2.35  Subsidiary means a subsidiary of the
Company within the meaning of Section 424(f) of the Code.

 

2.36.  Termination of Service means the voluntary
or involuntary termination of a Participant’s service as an employee, director
or consultant with the Company or a Subsidiary for any reason, including death,
disability, retirement or as the result of the divestiture
of the Participant’s employer or any similar transaction in which the
Participant’s employer ceases to be the Company or one of its Subsidiaries.
Whether entering military or other government service shall constitute
Termination of Service, or whether and when a Termination of Service shall
occur as a result of disability, shall be determined in each case by the
Committee in its sole discretion.

 

ARTICLE III

ADMINISTRATION

 

3.01.  Committee.

 

(a) Duties and Authority.  The Plan
shall be administered by the Compensation Committee of the Board except in the
case Participants who are members of Board or Section 16 Officers, in
which case the Plan shall be administered by the Board and as used herein the
term “Committee” shall refer to either the Compensation Committee or the Board
as the context shall so require in reference to the Participant and if not in
reference to a Participant, the term “Committee” shall refer to the
Compensation Committee or the Board. The Committee shall have exclusive and
final authority in each determination, interpretation or other action affecting
the Plan and its Participants. The Committee shall have the sole discretionary
authority to interpret the Plan, to establish and modify administrative rules for
the Plan, to impose such conditions and restrictions on Awards as it determines
appropriate, and to take such steps in connection with the Plan and Awards granted
hereunder as it may deem necessary or advisable. The Committee shall not,
however, have or exercise any discretion that would disqualify amounts payable
under Article X as performance-based compensation for purposes of
Section 162(m) of the Code. The Committee may delegate such of its
powers and authority under the Plan as it deems appropriate to a subcommittee
of the Committee and/or designated officers or employees of the Company. In
addition, the full Board may exercise any of the powers and authority of the
Committee under the Plan. In the event of such delegation of authority or
exercise of authority by the Board, references in the Plan to the Committee
shall be deemed to refer, as appropriate, to the delegate of the Committee or
the Board. Actions taken by the Committee or any subcommittee thereof, and any
delegation by the Committee to designated officers or employees, under this
Section 3.01 shall comply with Section 16(b) of the Exchange
Act, the performance-based provisions of Section 162(m) of the Code,
and the regulations promulgated under each of such statutory provisions, or the
respective successors to such statutory provisions or regulations, as in effect
from time to time, to the extent applicable.

 

(b) Indemnification.  Each person
who is or shall have been a member of the Board or the Committee, or an officer
of the Company to whom authority was delegated in accordance with the Plan
shall be indemnified and held harmless by the Company against and from any
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company’s approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf; provided, however, that the foregoing indemnification shall not
apply to any loss, cost, liability, or expense that is a result of his or her
own willful misconduct. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company’s Certificate of Incorporation or Bylaws, conferred
in a separate agreement with the Company, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold them harmless.

 

ARTICLE IV

SHARES

 

4.01.  Number of Shares Issuable.  The
total number of shares initially authorized to be issued under the Plan shall
be 12,000,000 shares of common Stock. No more than 12,000,000 shares
of Common Stock may be issued under the Plan as Incentive Stock Options. No
more than 1,000,000 shares of Common Stock may be issued under the Plan as
Awards under Articles VII, VIII and IX. The foregoing share limits shall
be subject to adjustment in accordance with Section 11.07. The shares to
be offered under the Plan shall be authorized and unissued Common Stock, or
issued Common Stock that shall have been reacquired by the Company.

 

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4.02.  Shares Subject to Terminated Awards.  Common
Stock covered by any unexercised portions of terminated or forfeited Options (including
canceled Options) granted under Article VI, Common Stock forfeited as
provided in Section 7.02(a), Stock Units and other stock-based Awards
terminated or forfeited as provided in Article IX, and Common Stock
subject to any Awards that are otherwise surrendered by the Participant may
again be subject to new Awards under the Plan. Shares of Common Stock
surrendered to or withheld by the Company in payment or satisfaction of the
Purchase Price of an Option or tax withholding obligation with respect to an
Award shall be available for the grant of new Awards under the Plan. In the
event of the exercise of Stock Appreciation Rights, whether or not granted in
tandem with Options, only the number of shares of Common Stock actually issued
in payment of such Stock Appreciation Rights shall be charged against the
number of shares of Common Stock available for the grant of Awards hereunder,
and any Common Stock subject to tandem Options, or portions thereof, which have
been surrendered in connection with any such exercise of Stock Appreciation
Rights shall not be charged against the number of shares of Common Stock
available for the grant of Awards hereunder.

 

ARTICLE V

PARTICIPATION

 

5.01.  Eligible
Participants.  Participants in the Plan
shall be such employees, directors and consultants of the Company and its
Subsidiaries as the Committee, in its sole discretion, may designate from time
to time. The Committee’s designation of a Participant in any year shall not
require the Committee to designate such person to receive Awards or grants in
any other year. The designation of a Participant to receive Awards or grants
under one portion of the Plan does not require the Committee to include such
Participant under other portions of the Plan. The Committee shall consider such
factors as it deems pertinent in selecting Participants and in determining the
type and amount of their respective Awards. Subject to adjustment in accordance
with Section 11.07, in any calendar year, no Participant shall be granted
Awards in respect of more than 500,000 shares of Common Stock (whether
through grants of Options or Stock Appreciation Rights or other Awards of
Common Stock or rights with respect thereto) or cash-based Awards for more than
$250,000.

 

ARTICLE VI

STOCK OPTIONS AND STOCK

APPRECIATION RIGHTS

 

6.01.  Option Awards.

 

(a) Grant of Options.  The Committee
may grant, to such Participants as the Committee may select, Options entitling
the Participant to purchase shares of Common Stock from the Company in such
number, at such price, and on such terms and subject to such conditions, not
inconsistent with the terms of this Plan, as may be established by the
Committee. The terms of any Option granted under this Plan shall be set forth
in an Award Agreement.

 

(b) Purchase Price of Options.  The
Purchase Price of each share of Common Stock which may be purchased upon
exercise of any Option granted under the Plan shall be determined by the
Committee; provided, however, that the Purchase Price of the Common Stock
purchased pursuant to Options shall be equal to or greater than the Fair Market
Value on the Date of Grant.

 

(c) Designation of Options.  The
Committee shall designate, at the time of the grant of each Option, the Option
as an Incentive Stock Option or a Non-Qualified Stock Option.

 

(d) Incentive Stock Option Share Limitation.   No
Participant may be granted Incentive Stock Options under the Plan (or any other
plans of the Company and its Subsidiaries) that would result in shares
with an aggregate Fair Market Value (measured on the Date of Grant) of
more than $100,000 first becoming exercisable in any one calendar year.

 

(e) Rights As a Shareholder.  A
Participant or a transferee of an Option pursuant to Section 11.04 shall
have no rights as a shareholder with respect to Common Stock covered by an
Option until the Participant or transferee shall have become the holder of
record of any such shares, and no adjustment shall be made for dividends in
cash or other property or distributions or other rights with respect to any
such Common Stock for which the record date is prior to the date on which the
Participant or a transferee of the Option shall have become the holder of
record of any such shares covered by the Option; provided, however, that
Participants are entitled to share adjustments to reflect capital changes under
Section 11.07.

 

(f) Restoration Options Upon the Exercise of a
Non-Qualified Stock Option.  In the event that any
Participant delivers to the Company, or has withheld from the shares otherwise
issuable upon the exercise of a Non-Qualified Stock Option, shares of Common
Stock in payment of the Purchase Price of any Non-Qualified Stock Option
granted hereunder in accordance with Section 6.04, the Committee shall
have the authority to grant or provide for the automatic grant of a Restoration
Option to such Participant. The grant of a Restoration Option shall be subject
to the satisfaction of such conditions or criteria as the Committee in its sole
discretion shall establish from time to time. A Restoration Option shall entitle
the holder thereof to purchase a number of shares of Common Stock equal to the
number of such shares so delivered or withheld upon exercise of the original
Option and, in the discretion of the Committee, the number of shares, if any,
delivered or withheld to the Corporation to satisfy any withholding tax
liability arising in connection with the exercise of the original Option. A
Restoration Option shall have a per share Purchase Price of not less than 100%
of the per share Fair Market Value of the Common Stock on the date of grant of
such Restoration Option, a term not longer than the remaining term of the
original Option at the time of exercise thereof, and such other terms and
conditions as the Committee in its sole discretion shall determine.

 

(g) Dividend Equivalents.  For any
Option (with or without alternative Stock Appreciation Rights) granted under
the Plan, the Committee shall have the discretion, upon the grant of the Option
or thereafter, to establish a Dividend Equivalent Account with respect to the
Option, and the applicable Award Agreement or an amendment

 

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thereto
shall confirm such establishment. If a Dividend Equivalent Account is
established, the following terms apply.

 

(i) Subject
to such conditions, limitations and restrictions as shall be established by the
Committee, from the Date of Grant of the Option or, if later, the date of
establishment of the Dividend Equivalent Account, to the earlier of
(i) the date of payment of such Dividend Equivalent Account or
(ii) the date of cancellation, termination or expiration of the Option,
the Dividend Equivalent Account shall be credited as of the record date of each
cash dividend on the Common Stock with an amount equal to the cash dividends which
would be paid with respect to the Common Stock then covered by the Option if
the Option had been exercised and such Common Stock had been held of record on
such record date. The Participant or other holder of such Option shall be
entitled to receive from the Company in cash the balance credited to the
Dividend Equivalent Account at such time, or from time to time, as shall be
determined by the Committee and set forth in the applicable Award Agreement or
an amendment thereto; provided, however, that if the applicable Award Agreement
shall so provide, the Committee may determine that the balance credited to a
Participant’s Dividend Equivalent Account be paid in the form of shares of
Common Stock having a fair market value equal to such balance, or a combination
of cash and shares.

 

(ii) To
the extent that an Option and any alternative Stock Appreciation Rights granted
in conjunction with the Option are canceled, terminate or expire without the
exercise of the Option or the alternative Stock Appreciation Rights, if any,
granted in conjunction with the Option, the Dividend Equivalent Account with
respect to the Option shall be eliminated, and no payment with respect to the
Dividend Equivalent Account shall be made by the Company. Dividend Equivalent
Accounts shall be established and maintained only on the books and records of
the Company and no assets or funds of the Company shall be set aside, placed in
trust, removed from the claims of the Company’s general creditors, or otherwise
made available until such amounts are actually payable as provided hereunder.

 

6.02.  Stock Appreciation Rights.

 

(a) Stock Appreciation Right Awards.  The
Committee is authorized to grant to any Participant one or more Stock
Appreciation Rights. Such Stock Appreciation Rights may be granted either
independent of or in tandem with Options granted to the same Participant. Stock
Appreciation Rights granted in tandem with Options may be granted
simultaneously with, or, in the case of Non-Qualified Stock Options, subsequent
to, the grant to such Participant of the related Option; provided however,
that: (i) any Option covering any share of Common Stock shall expire and
not be exercisable upon the exercise of any Stock Appreciation Right with
respect to the same share, (ii) any Stock Appreciation Right covering any
share of Common Stock shall expire and not be exercisable upon the exercise of
any related Option with respect to the same share, and (iii) an Option and
Stock Appreciation Right covering the same share of Common Stock may not be exercised
simultaneously. Upon exercise of a Stock Appreciation Right with respect to a
share of Common Stock, the Participant shall be entitled to receive an
amount equal to the excess, if any, of (A) the Fair Market Value of a
share of Common Stock on the date of exercise over (B) the Exercise Price
of such Stock Appreciation Right established in the Award Agreement, which
amount shall be payable as provided in Section 6.02(c).

 

(b) Exercise Price.  The Exercise
Price established under any Stock Appreciation Right granted under this Plan
shall be determined by the Committee, but in the case of Stock Appreciation
Rights granted in tandem with Options shall not be less than the Purchase Price
of the related Option. Upon exercise of Stock Appreciation Rights granted in
tandem with options, the number of shares subject to exercise under any related
Option shall automatically be reduced by the number of shares of Common Stock
represented by the Option or portion thereof which are surrendered as a result
of the exercise of such Stock Appreciation Rights.

 

(c) Payment of Incremental Value.  Any
payment which may become due from the Company by reason of a Participant’s
exercise of a Stock Appreciation Right may be paid to the Participant as
determined by the Committee (i) all in cash, (ii) all in Common
Stock, or (iii) in any combination of cash and Common Stock. In the event
that all or a portion of the payment is made in Common Stock, the number of
shares of Common Stock delivered in satisfaction of such payment shall be determined
by dividing the amount of such payment or portion thereof by the Fair Market
Value on the Exercise Date. No fractional share of Common Stock shall be issued
to make any payment in respect of Stock Appreciation Rights; if any fractional
share would be issuable, the combination of cash and Common Stock payable to
the Participant shall be adjusted as directed by the Committee to avoid the
issuance of any fractional share.

 

6.03.  Terms of Stock Options and Stock Appreciation Rights.

 

(a) Conditions on Exercise.  An
Award Agreement with respect to Options and/or Stock Appreciation Rights may
contain such waiting periods, exercise dates and restrictions on exercise
(including, but not limited to, periodic installments) as may be determined by
the Committee at the time of grant.

 

(b) Duration of Options and Stock Appreciation Rights.  Options
and Stock Appreciation Rights shall terminate upon the first to occur of the
following events:

 

(i) Expiration
of the Option or Stock Appreciation Right as provided in the Award
Agreement; or

 

(ii) Termination
of the Award in the event of a Participant’s disability, Retirement, death or
other Termination of Service as provided in the Award Agreement; or

 

(iii) In
the case of an Incentive Stock Option, ten years from the Date of
Grant; or

 

(iv) Solely
in the case of a Stock Appreciation Right granted in tandem with an Option,
upon the expiration of the related Option.

 

(c) Acceleration or Extension of Exercise Time.  The
Committee, in its sole discretion, shall have the right (but shall not be
obligated),

 

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exercisable
on or at any time after the Date of Grant, to permit the exercise of an Option
or Stock Appreciation Right (i) prior to the time such Option or Stock
Appreciation Right would become exercisable under the terms of the Award
Agreement, (ii) after the termination of the Option or Stock Appreciation
Right under the terms of the Award Agreement, or (iii) after the
expiration of the Option or Stock Appreciation Right.

 

6.04.  Exercise Procedures.  Each
Option and Stock Appreciation Right granted under the Plan shall be exercised
prior to the close of business on the expiration date of the Option or Stock
Appreciation Right by written notice to the Company or by such other method as
provided in the Award Agreement or as the Committee may establish or approve
from time to time. The Purchase Price of shares purchased upon exercise of an
Option granted under the Plan shall be paid in full in cash by the Participant
pursuant to the Award Agreement; provided, however, that the Committee may (but
shall not be required to) permit payment to be made by delivery to the Company
of either (a) Common Stock (which may include Restricted Shares or shares
otherwise issuable in connection with the exercise of the Option, subject to
such rules as the Committee deems appropriate) or (b) any combination
of cash and Common Stock, or (c) such other consideration as the Committee
deems appropriate and in compliance with applicable law (including payment in
accordance with a cashless exercise program under which, if so instructed by
the Participant, Common Stock may be issued directly to the Participant’s
broker or dealer upon receipt of an irrevocable written notice of exercise from
the Participant). In the event that any Common Stock shall be transferred to
the Company to satisfy all or any part of the Purchase Price, the part of the
Purchase Price deemed to have been satisfied by such transfer of Common Stock
shall be equal to the product derived by multiplying the Fair Market Value as
of the date of exercise times the number of shares of Common Stock transferred
to the Company. The Participant may not transfer to the Company in satisfaction
of the Purchase Price any fractional share of Common Stock. Any part of the
Purchase Price paid in cash upon the exercise of any Option shall be added to
the general funds of the Company and may be used for any proper corporate
purpose. Unless the Committee shall otherwise determine, any Common Stock transferred
to the Company as payment of all or part of the Purchase Price upon the
exercise of any Option shall be held as treasury shares.

 

6.05.  Change in Control.  Unless
otherwise provided by the Committee in the applicable Award Agreement, in the
event of a Change in Control, all Options outstanding on the date of such
Change in Control, and all Stock Appreciation Rights shall
become immediately and fully exercisable. The provisions of this
Section 6.05 shall not be applicable to any Options or Stock Appreciation
Rights granted to a Participant if any Change in Control results from such
Participant’s beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act) of Common Stock or Company Voting Securities.

 

ARTICLE VII

RESTRICTED SHARES

 

7.01.  Restricted Share Awards.  The
Committee may grant to any Participant an Award of Common Stock in such number
of shares, and on such terms, conditions and restrictions, whether based on
performance standards, periods of service, retention by the Participant of
ownership of purchased or designated shares of Common Stock or other criteria,
as the Committee shall establish. With respect to performance-based Awards of
Restricted Shares to “covered employees” (as defined in Section 162(m) of
the Code), performance targets will be limited to specified levels of one or
more of the Performance Goals. The terms of any Restricted Share Award granted
under this Plan shall be set forth in an Award Agreement which shall contain
provisions determined by the Committee and not inconsistent with this Plan.

 

(a) Issuance of Restricted Shares.  As
soon as practicable after the Date of Grant of a Restricted Share Award by the
Committee, the Company shall cause to be transferred on the books of the
Company, or its agent, Common Stock, registered on behalf of the Participant,
evidencing the Restricted Shares covered by the Award, but subject to
forfeiture to the Company as of the Date of Grant if an Award Agreement with
respect to the Restricted Shares covered by the Award is not duly executed by
the Participant and timely returned to the Company. All Common Stock covered by
Awards under this Article VII shall be subject to the restrictions, terms
and conditions contained in the Plan and the Award Agreement entered into by the
Participant. Until the lapse or release of all restrictions applicable to an
Award of Restricted Shares, the share certificates representing such Restricted
Shares may be held in custody by the Company, its designee, or, if the
certificates bear a restrictive legend, by the Participant. Upon the lapse or
release of all restrictions with respect to an Award as described in
Section 7.01(d), one or more share certificates, registered in the name of
the Participant, for an appropriate number of shares as provided in
Section 7.01(d), free of any restrictions set forth in the Plan and the
Award Agreement shall be delivered to the Participant.

 

(b) Shareholder Rights.  Beginning
on the Date of Grant of the Restricted Share Award and subject to execution of
the Award Agreement as provided in Section 7.01(a), the Participant shall
become a shareholder of the Company with respect to all shares subject to the
Award Agreement and shall have all of the rights of a shareholder, including,
but not limited to, the right to vote such shares and the right to receive
dividends; provided, however, that any Common Stock distributed as a dividend
or otherwise with respect to any Restricted Shares as to which the restrictions
have not yet lapsed, shall be subject to the same restrictions as such
Restricted Shares and held or restricted as provided in Section 7.01(a).

 

(c) Restriction on Transferability.  None
of the Restricted Shares may be assigned or transferred (other than by will or
the laws of descent and distribution, or to an inter vivos trust with respect
to which the Participant is treated as the owner under Sections 671
through 677 of the Code, except to the extent that Section 16 of the
Exchange Act

 

6

 

limits
a Participant’s right to make such transfers), pledged or sold prior to lapse
of the restrictions applicable thereto.

 

(d) Delivery of Shares Upon Vesting.   Upon
expiration or earlier termination of the forfeiture period without a forfeiture
and the satisfaction of or release from any other conditions prescribed by the
Committee, or at such earlier time as provided under the provisions of
Section 7.03, the restrictions applicable to the Restricted Shares shall
lapse. As promptly as administratively feasible thereafter, subject to the
requirements of Section 11.05, the Company shall deliver to the
Participant or, in case of the Participant’s death, to the Participant’s
Beneficiary, one or more share certificates for the appropriate number of
shares of Common Stock, free of all such restrictions, except for any
restrictions that may be imposed by law.

 

7.02.  Terms of Restricted Shares.

 

(a) Forfeiture of Restricted Shares.  Subject
to Sections 7.02(b) and 7.03, all Restricted Shares shall be
forfeited and returned to the Company and all rights of the Participant with
respect to such Restricted Shares shall terminate unless the Participant
continues in the service of the Company or a Subsidiary as an employee until
the expiration of the forfeiture period for such Restricted Shares and
satisfies any and all other conditions set forth in the Award Agreement. The
Committee shall determine the forfeiture period (which may, but need not, lapse
in installments) and any other terms and conditions applicable with respect to
any Restricted Share Award.

 

(b) Waiver of Forfeiture Period.  Notwithstanding
anything contained in this Article VII to the contrary, the Committee may,
in its sole discretion, waive the forfeiture period and any other conditions
set forth in any Award Agreement under appropriate circumstances (including the
death, disability or Retirement of the Participant or a material change in
circumstances arising after the date of an Award) and subject to such terms and
conditions (including forfeiture of a proportionate number of the Restricted
Shares) as the Committee shall deem appropriate.

 

7.03.  Change in Control.  Unless
otherwise provided by the Committee in the applicable Award Agreement, in the
event of a Change in Control, all restrictions applicable to the Restricted
Share Award shall terminate fully and the Participant shall immediately have
the right to the delivery of share certificate or certificates for such shares
in accordance with Section 7.01(d).

 

ARTICLE VIII

PERFORMANCE AWARDS

 

8.01.  Performance Awards.

 

(a) Award Periods and Calculations of Potential Incentive
Amounts.  The Committee may grant Performance Awards to
Participants. A Performance Award shall consist of the right to receive a
payment (measured by the Fair Market Value of a specified number of shares of
Common Stock, increases in such Fair Market Value during the Award Period
and/or a fixed cash amount) contingent upon the extent to which certain
predetermined performance targets have been met during an Award Period. The
Award Period shall be two or more fiscal or calendar years as determined by the
Committee. The Committee, in its discretion and under such terms as it deems
appropriate, may permit newly eligible Participants, such as those who are
promoted or newly hired, to receive Performance Awards after an Award Period
has commenced.

 

(b) Performance Targets.  The
performance targets may include such goals related to the performance of the
Company or, where relevant, any one or more of its Subsidiaries or divisions
and/or the performance of a Participant as may be established by the Committee
in its discretion. In the case of Performance Awards to “covered employees” (as
defined in Section 162(m) of the Code), the targets will be limited
to specified levels of one or more of the Performance Goals. The performance
targets established by the Committee may vary for different Award Periods and
need not be the same for each Participant receiving a Performance Award in an
Award Period. Except to the extent inconsistent with the performance-based compensation
exception under Section 162(m) of the Code, in the case of
Performance Awards granted to employees to whom such section is applicable, the
Committee, in its discretion, but only under extraordinary circumstances as
determined by the Committee, may change any prior determination of performance
targets for any Award Period at any time prior to the final determination of
the Award when events or transactions occur to cause the performance targets to
be an inappropriate measure of achievement.

 

(c) Earning Performance Awards.  The
Committee, at or as soon as practicable after the Date of Grant, shall
prescribe a formula to determine the percentage of the Performance Award to be
earned based upon the degree of attainment of the applicable performance targets.

 

(d) Payment of Earned Performance Awards.  Subject
to the requirements of Section 11.05, payments of earned Performance
Awards shall be made in cash or Common Stock, or a combination of cash and
Common Stock, in the discretion of the Committee. The Committee, in its sole
discretion, may define, and set forth in the applicable Award Agreement, such
terms and conditions with respect to the payment of earned Performance
Awards as it may deem desirable.

 

8.02.  Termination of Service.  In the
event of a Participant’s Termination of Service during an Award Period, the
Participant’s Performance Awards shall be forfeited except as may otherwise be
provided in the applicable Award Agreement.

 

8.03.  Change in Control.  Unless
otherwise provided by the Committee in the applicable Award Agreement, in the
event of a Change in Control, all Performance Awards for all Award Periods
shall immediately become fully vested and payable to all Participants and shall
be paid to Participants in accordance with Section 8.02(d), within
30 days after such Change in Control.

 

7

 

ARTICLE IX

OTHER STOCK-BASED AWARDS

 

9.01.  Grant of Other Stock-Based Awards.  Other
stock-based awards, consisting of stock purchase rights (with or without loans
to Participants by the Company containing such terms as the Committee shall
determine), Awards of Common Stock, or Awards valued in whole or in part by
reference to, or otherwise based on, Common Stock, may be granted either alone
or in addition to or in conjunction with other Awards under the Plan. Subject
to the provisions of the Plan, the Committee shall have sole and complete
authority to determine the persons to whom and the time or times at which such
Awards shall be made, the number of shares of Common Stock to be granted
pursuant to such Awards, and all other conditions of the Awards. Any such Award
shall be confirmed by an Award Agreement executed by the Committee and the
Participant, which Award Agreement shall contain such provisions as the
Committee determines to be necessary or appropriate to carry out the intent of
this Plan with respect to such Award.

 

9.02.  Terms of Other Stock-Based Awards.  In
addition to the terms and conditions specified in the Award Agreement, Awards
made pursuant to this Article IX shall be subject to the following:

 

(a) Any
Common Stock subject to Awards made under this Article IX may not be sold,
assigned, transferred, pledged or otherwise encumbered prior to the date on
which the shares are issued, or, if later, the date on which any applicable
restriction, performance or deferral period lapses; and

 

(b) If
specified by the Committee in the Award Agreement, the recipient of an Award
under this Article IX shall be entitled to receive, currently or on a
deferred basis, interest or dividends or dividend equivalents with respect to
the Common Stock or other securities covered by the Award; and

 

(c) The
Award Agreement with respect to any Award shall contain provisions dealing with
the disposition of such Award in the event of a Termination of Service prior to
the exercise, realization or payment of such Award, whether such termination
occurs because of Retirement, disability, death or other reason, with such
provisions to take account of the specific nature and purpose of the Award.

 

ARTICLE X

SHORT-TERM CASH INCENTIVE AWARDS

 

10.01.  Eligibility.  Executive officers
of the Company who are from time to time determined by the Committee to be “covered
employees” for purposes of Section 162(m) of the Code will be eligible
to receive short-term cash incentive awards under this Article X.

 

10.02.  Awards.

 

(a) Performance Targets.  For each
fiscal year of the Company after fiscal year 1999, the Committee shall
establish objective performance targets based on specified levels of one
or more of the Performance Goals. Such performance targets shall be
established by the Committee on a timely basis to ensure that
the targets are considered “preestablished” for purposes of
Section 162(m) of the Code.

 

(b) Amounts of Awards.  In
conjunction with the establishment of performance targets for a fiscal year,
the Committee shall adopt an objective formula (on the basis of percentages of
Participants’ salaries, shares in a bonus pool or otherwise) for computing the
respective amounts payable under the Plan to Participants if and to the extent
that the performance targets are attained. Such formula shall comply with the
requirements applicable to performance-based compensation plans under
Section 162(m) of the Code and, to the extent based on percentages of
a bonus pool, such percentages shall not exceed 100% in the aggregate.

 

(c) Payment of Awards.  Awards will
be payable to Participants in cash each year upon prior written certification
by the Committee of attainment of the specified performance targets for
the preceding fiscal year.

 

(d) Negative Discretion.  Notwithstanding
the attainment by the Company of the specified performance targets, the
Committee shall have the discretion, which need not be exercised uniformly
among the Participants, to reduce or eliminate the award that would be
otherwise paid.

 

(e) Guidelines.  The Committee shall
adopt from time to time written policies for its implementation of this
Article X. Such guidelines shall reflect the intention of the Company that
all payments hereunder qualify as performance-based compensation under
Section 162(m) of the Code.

 

(f) Non-Exclusive Arrangement.  The
adoption and operation of this Article X shall not preclude the Board or
the Committee from approving other short-term incentive compensation
arrangements for the benefit of individuals who are Participants hereunder as
the Board or Committee, as the case may be, deems appropriate and in the best
interest of the Company.

 

ARTICLE XI

TERMS APPLICABLE GENERALLY TO AWARDS GRANTED UNDER THE PLAN

 

11.01.  Plan Provisions Control Award Terms.  Except
as provided in Section 11.16, the terms of the Plan shall govern all
Awards granted under the Plan, and in no event shall the Committee have the
power to grant any Award under the Plan which is contrary to any of the
provisions of the Plan. In the event any provision of any Award granted under
the Plan shall conflict with any term in the Plan as constituted on the Date of
Grant of such Award, the term in the Plan as constituted on the Date of Grant
of such Award shall control. Except as provided in Section 11.03 and
Section 11.07, the terms of any Award granted under the Plan may not be
changed after the Date of Grant of such Award so as to materially decrease the
value of the Award without the express written approval of the holder.

 

11.02.  Award Agreement.  No person
shall have any rights under any Award granted under the Plan unless and until
the Company and

 

8

 

the
Participant to whom such Award shall have been granted shall have executed and
delivered an Award Agreement or received any other Award acknowledgment
authorized by the Committee expressly granting the Award to such person and
containing provisions setting forth the terms of the Award.

 

11.03.  Modification of Award After Grant.  No
Award granted under the Plan to a Participant may be modified (unless such
modification does not materially decrease the value of the Award) after the
Date of Grant except by express written agreement between the Company and the
Participant, provided that any such change (a) shall not be inconsistent
with the terms of the Plan, and (b) shall be approved by the Committee.

 

11.04.  Limitation on Transfer.  Except
as provided in Section 7.01(c) in the case of Restricted Shares, a
Participant’s rights and interest under the Plan may not be assigned or
transferred other than by will or the laws of descent and distribution, and
during the lifetime of a Participant, only the Participant personally (or the
Participant’s personal representative) may exercise rights under the Plan. The
Participant’s Beneficiary may exercise the Participant’s rights to the extent
they are exercisable under the Plan following the death of the Participant.
Notwithstanding the foregoing, (a) to the extent permitted under
Section 16(b) of the Exchange Act with respect to Participants
subject to such Section, the Committee may grant Non-Qualified Stock Options
that are transferable, without payment of consideration, to immediate family
members of the Participant or to trusts or partnerships for such family
members, and the Committee may also amend outstanding Non-Qualified Stock
Options to provide for such transferability and (b) in the case of
Participants subject to the laws in foreign jurisdictions that tax the Company
upon the grant of options to such Participants, the Committee may grant
Non-Qualified Stock Options in the form of freely transferable warrants
provided that, based on the advice of Company’s legal counsel, (i) any transfer
of the warrants to, and the issuance of shares upon exercise of the transferred
warrants by, a transferee (other than a transferee involving a transfer without
consideration to a transferee who is an immediate family member of the
Participant or which is a trust or partnership for such family members) would
be exempt under the registration provisions of the Securities Act, and
(ii) such transfer or issuance complies with the conditions necessary to
establish such exemption(s). In the event the Committee grants warrants in
accordance with clause (b) of this Section 11.04 and such
warrants are transferred (except to transferees for which an effective
Form S-8 is available), the number of shares reserved for issuance and
registered by the Company on Form S-8 shall be reduced by the number of
shares underlying the transferred warrants.

 

11.05.  Taxes.  The Company shall be
entitled, if the Committee deems it necessary or desirable, to withhold (or
secure payment from the Participant in lieu of withholding) the amount of any
withholding or other tax required by law to be withheld or paid by the Company
with respect to any amount payable and/or shares issuable under such
Participant’s Award, or with respect to any income recognized upon a
disqualifying disposition of shares received pursuant to the exercise of an
Incentive Stock Option, and the Company may defer payment or issuance of the
cash or shares upon exercise or vesting of an Award unless indemnified to its
satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Committee and shall be
payable by the Participant at such time as the Committee determines in
accordance with the following rules:

 

(a) The
Participant shall have the right to elect to meet his or her withholding
requirement (i) by having withheld from such Award at the appropriate time
that number of shares of Common Stock, rounded up to the next whole share,
whose Fair Market Value is equal to the amount of withholding taxes due,
(ii) by direct payment to the Company in cash of the amount of any taxes
required to be withheld with respect to such Award or (iii) by a
combination of shares and cash.

 

(b) The
Committee shall have the discretion as to any Award, to cause the Company to
pay to tax authorities for the benefit of any Participant, or to reimburse such
Participant for the individual taxes which are due on the grant, exercise or
vesting of any share Award, or the lapse of any restriction on any share Award
(whether by reason of a Participant’s filing of an election under
Section 83(b) of the Code or otherwise), including, but not limited
to, Federal income tax, state income tax, local income tax and excise tax under
Section 4999 of the Code, as well as for any such taxes as may be imposed
upon such tax payment or reimbursement.

 

(c) In
the case of Participants who are subject to Section 16 of the Exchange
Act, the Committee may impose such limitations and restrictions as it deems
necessary or appropriate with respect to the delivery or withholding of shares
of Common Stock to meet tax withholding obligations.

 

11.06.  Surrender of Awards.  Any Award
granted under the Plan may be surrendered to the Company for cancellation on
such terms as the Committee and the holder approve. With the consent of the
Participant, the Committee may substitute a new Award under this Plan in
connection with the surrender by the Participant of an equity compensation
award previously granted under this Plan or any other plan sponsored by the Company;
provided, however, that no such substitution shall be permitted without the
approval of the Company’s shareholders if such approval is required by the rules of
any applicable stock exchange.

 

11.07.  Adjustments to Reflect Capital Changes.

 

(a) Recapitalization.  The number
and kind of shares subject to outstanding Awards, the Purchase Price or
Exercise Price for such shares, the number and kind of shares available for
Awards subsequently granted under the Plan and the maximum number of shares in
respect of which Awards can be made to any Participant in any calendar year
shall be appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other change in
capitalization with a similar substantive effect upon the Plan or the Awards
granted under the Plan. The maximum number of shares in respect of which Awards
can be made to any Participant in any calendar year shall
be proportionately adjusted to reflect any other event that results

 

9

 

in an
increase in the number of issued and outstanding shares of Common Stock. The
Committee shall have the power and sole discretion to determine the amount of
the adjustment to be made in each case.

 

(b) Merger.  After any Merger in
which the Company is the surviving corporation, each Participant shall, at no
additional cost, be entitled upon any exercise of all Options or receipt of
other Award to receive (subject to any required action by shareholders), in lieu
of the number of shares of Common Stock receivable or exercisable pursuant to
such Award, the number and class of shares or other securities to which such
Participant would have been entitled pursuant to the terms of the Merger if, at
the time of the Merger, such Participant had been the holder of record of a
number of shares equal to the number of shares receivable or exercisable
pursuant to such Award. Comparable rights shall accrue to each Participant in
the event of successive Mergers of the character described above. In the event
of a Merger in which the Company is not the surviving corporation, the
surviving, continuing, successor, or purchasing corporation, as the case may be
(the “Acquiring Corporation”), shall either assume the Company’s rights and
obligations under outstanding Award Agreements or substitute awards in respect
of the Acquiring Corporation’s stock for such outstanding Awards. In the event
the Acquiring Corporation fails to assume or substitute for such outstanding
Awards, the Board shall provide that any unexercisable and/or unvested portion
of the outstanding Awards shall be immediately exercisable and vested as of a
date prior to such Merger, as the Board so determines. The exercise and/or
vesting of any Award that was permissible solely by reason of this
Section 11.07(b) shall be conditioned upon the consummation of the
Merger. Any Options which are neither assumed by the Acquiring Corporation nor
exercised as of the date of the Merger shall terminate effective as of the
effective date of the Merger.

 

(c) Options to Purchase Shares or Stock of Acquired
Companies.  After any Merger in which the Company or a
Subsidiary shall be a surviving corporation, the Committee may grant
substituted options under the provisions of the Plan, pursuant to
Section 424 of the Code, replacing old options granted under a plan of
another party to the Merger whose shares or stock subject to the old options
may no longer be issued following the Merger. The foregoing adjustments and
manner of application of the foregoing provisions shall be determined by the
Committee in its sole discretion. Any such adjustments may provide for the
elimination of any fractional shares which might otherwise become subject to
any Options.

 

11.08.  No Right to Continued Service.  No
person shall have any claim of right to be granted an Award under this Plan.
Neither the Plan nor any action taken hereunder shall be construed as giving
any Participant any right to be retained in the service of the Company or any
of its Subsidiaries.

 

11.09.  Awards Not Includable for Benefit Purposes.  Payments
received by a Participant pursuant to the provisions of the Plan shall not be
included in the determination of benefits under any pension, group insurance or
other benefit plan applicable to the Participant which is maintained by the
Company or any of its Subsidiaries, except as may be provided under the terms
of such plans or determined by the Board.

 

11.10.  Governing Law.  All
determinations made and actions taken pursuant to the Plan shall be governed by
the laws of State of Delaware and construed in accordance therewith.

 

11.11.  No Strict Construction.  No rule of
strict construction shall be implied against the Company, the Committee, or any
other person in the interpretation of any of the terms of the Plan, any Award
granted under the Plan or any rule or procedure established by the
Committee.

 

11.12.  Compliance with Rule 16b-3.  It
is intended that, unless the Committee determines otherwise, Awards under the
Plan be eligible for exemption under Rule 16b-3. The Board is authorized
to amend the Plan and to make any such modifications to Award Agreements to
comply with Rule 16b-3, as it may be amended from time to time, and to
make any other such amendments or modifications as it deems necessary or
appropriate to better accomplish the purposes of the Plan in light of any
amendments made to Rule 16b-3.

 

11.13.  Captions.  The captions (i.e.,
all Section headings) used in the Plan are for convenience only, do not
constitute a part of the Plan, and shall not be deemed to limit, characterize
or affect in any way any provisions of the Plan, and all provisions of the Plan
shall be construed as if no captions have been used in the Plan.

 

11.14.  Severability.  Whenever
possible, each provision in the Plan and every Award at any time granted under
the Plan shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Plan or any Award at any time
granted under the Plan shall be held to be prohibited by or invalid under
applicable law, then (a) such provision shall be deemed amended to
accomplish the objectives of the provision as originally written to the fullest
extent permitted by law and (b) all other provisions of the Plan and every
other Award at any time granted under the Plan shall remain in full force and
effect.

 

11.15.  Amendment and Termination.

 

(a) Amendment.  The Board shall have
complete power and authority to amend the Plan at any time; provided, however,
that the Board shall not, without the requisite affirmative approval of
shareholders of the Company, make any amendment which requires shareholder
approval under the Code or under any other applicable law or rule of any
stock exchange which lists Common Stock or Company Voting Securities. No
termination or amendment of the Plan may, without the consent of the
Participant to whom any Award shall theretofore have been granted under the
Plan, adversely affect the right of such individual under such Award.

 

(b) Termination.  The Board shall
have the right and the power to terminate the Plan at any time. No Award shall
be granted under the Plan after the termination of the Plan, but the
termination of the Plan shall not have any other effect and any Award
outstanding at the time of the termination of the Plan may be exercised after
termination of the Plan at any time prior to the expiration date of such Award
to the same extent such Award would have been exercisable had the Plan not
terminated.

 

11.16.  Foreign Qualified Awards.  Awards
under the Plan may be granted to such employees of the Company and its
Subsidiaries who are residing in foreign jurisdictions as the Committee in its
sole discretion may determine from time to time. The Committee may adopt such
supplements to the Plan as may be necessary or appropriate to comply with the
applicable laws of such foreign jurisdictions and to afford Participants
favorable treatment under such laws; provided, however, that no Award shall be
granted under any such supplement with terms or conditions inconsistent with
the provision set forth in the Plan.

 

10Exhibit
4.3

 

NOTICE OF GRANT OF NON-QUALIFIED
STOCK OPTION AWARD

 

MRV COMMUNICATIONS, INC.

2007 OMNIBUS INCENTIVE PLAN

 

FOR GOOD AND VALUABLE CONSIDERATION, MRV Communications, Inc. (the
“Company”) hereby grants, pursuant to the provisions of the Company’s 2007
Omnibus Incentive Plan (the “Plan”), to the Participant designated in this
Notice of Grant of Non-Qualified Stock Option Award (the “Notice”) an option to
purchase the number of shares of the common stock of the Company set forth in
the Notice (the “Shares”), subject to certain restrictions as outlined below in
this Notice and the additional provisions set forth in the attached Terms and
Conditions of Stock Option Award (collectively, the “Agreement”).  Also enclosed is a copy of the information
statement describing important provisions of the Plan.  Section references herein refer to the
attached Terms and Conditions of Stock Option Award.

 

	
  Optionee:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of
  Grant:

  	
   

  	
   

  	
  Type of Option: Non-Qualified Stock Option

  
	
   

  	
   

  	
   

  
	
  Exercise
  Price per Share:        $

  	
   

  	
  Expiration Date:

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Number of Shares Granted:

  	
   

  	
  Total Exercise Price:        $

  
						

 

Vesting
Schedule:    [1/4 vesting on each of the first, second, third and fourth anniversaries
of the date of the grant]

 

Vesting is accelerated in full upon a Change in
Control under Section 2(c).

 

Exercise After Termination of Service: Termination of Service as a director for any reason:
any non-vested portion of the Option expires immediately;

 

Termination of Service as a director due to death or
Disability: vested portion of the Option is exercisable by the
Optionee (or, in the event of the Optionee’s death, the Optionee’s Beneficiary)
for one (1) year after the Optionee’s Termination;

 

Termination of Service as a director for any reason
other than death or Disability: vested portion of the
Option is exercisable for a period of thirty (30) days following the Optionee’s
Termination.

 

This Option
shall not be exercised after the Expiration Date as provided above, unless
extended under Section 2(a). 

 

By signing below, the Optionee agrees that this Non-Qualified
Stock Option Award is granted under and governed by the terms and
conditions of the Company’s 2007 Omnibus Incentive Plan and the attached Terms
and Conditions.

 

	
  Participant

  	
   

  	
  MRV Communications, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  
					

 

1

 

TERMS
AND CONDITIONS OF NON-QUALIFIED STOCK OPTION AWARD

 

I.                                         AGREEMENT

 

1.             Grant of Option.  The Option granted to the Optionee and
described in the Notice of Grant is subject to the terms and conditions of the
Plan, which is incorporated by reference in its entirety into these Terms and
Conditions of Stock Option Award.

 

The Board of Directors of the Company has authorized and approved the
2007 Omnibus Incentive Plan (the “Plan”), which has been approved by the
Company’s stockholders.  The Committee
has approved an award to the Optionee of an option to purchase a number of
shares of the Company’s common stock, conditioned upon the Optionee’s
acceptance of the provisions set forth in the Notice and these Terms and
Conditions within 30 days after the Notice and these Terms and Conditions are
presented to the Optionee for review. 
For purposes of the Notice and these Terms and Conditions, any reference
to the Company shall include a reference to any Subsidiary.

 

The Company intends that this Option not be considered to provide for
the deferral of compensation under Section 409A of the Code and that this
Agreement shall be so administered and construed.  Further, the Company may modify the Plan and
this Award to the extent necessary to fulfill this intent.

 

2.             Exercise of Option.

 

(a)           Right to
Exercise.  This Option
shall be exercisable, in whole or in part, during its term in accordance with
the Vesting Schedule set out in the Notice of Grant and with the applicable
provisions of the Plan and this Option Agreement.  No Shares shall be issued pursuant to the
exercise of an Option unless the issuance and exercise comply with applicable
laws.  Assuming such compliance, for
income tax purposes the Shares shall be considered transferred to the Optionee
on the date on which the Option is exercised with respect to such Shares.  The Committee may, in its discretion, (i) accelerate
vesting of the Option or (ii) extend the applicable exercise period, to
the extent permitted under Section 6.03(c) of the Plan.

 

(b)           Method of
Exercise.  The
Optionee may exercise the Option by delivering a written exercise notice in a
form approved by the Company (or by such other method as the Company may establish
from time to time and so instruct the Optionee as to use) (the “Exercise Notice”)
which shall state the election to exercise the Option, the number of Shares
with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company.  The Exercise Notice shall be accompanied by
payment of the aggregate Exercise Price as to all Shares exercised consistent
with Section 3.  This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by the aggregate Exercise Price.

 

(c)           Acceleration of
Vesting on Change in Control.  Subject to the exception contained in Section 6.05
of the Plan, in the event of a Change in Control, all Options outstanding on
the date of the Change in Control that have not previously vested or terminated
under the terms of this Agreement shall be immediately and fully vested and
exercisable.

 

3.             Method of Payment.  If the Optionee elects to exercise the Option
by submitting an Exercise Notice under Section 2(b) of this
Agreement, the aggregate Exercise Price (as well as any applicable withholding
or other taxes) shall be paid by cash or check; provided, however, 

 

2

 

that the Committee may
consent, in its discretion, to payment in any of the following forms, or a
combination of them, when such payment is made consistent with Section 6.04
of the Plan:

 

(a)           cash or check;

 

(b)           consideration
received by the Company under a formal cashless exercise program adopted by the
Company in connection with the Plan;

 

(c)           surrender of
other Shares owned by the Optionee which have a Fair Market Value on the date
of surrender equal to the aggregate Exercise Price of the Exercised Shares and
any applicable withholding, provided, however, that
the Optionee may not transfer any fractional Share in satisfaction of the
Exercise Price; or

 

(d)           any other
consideration that the Committee deems appropriate and in compliance with
applicable law.

 

4.             Restrictions on Exercise.  This Option may not be exercised until such
time the issuance of the Shares upon exercise or the method of payment of
consideration for those Shares would not constitute a violation of any
applicable law or regulation, including until such time as the Shares reserved
for issuance under the Plan have been registered by the Company under the
Securities Act, unless the Optionee provides an opinion of counsel reasonably
satisfactory to the Company that registration under the Securities Act is not
required.

 

5.             Non-Transferability of
Option.  This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of the Optionee only by
the Optionee, and may be exercised by the Optionee’s Beneficiary to the extent
provided under the Plan following the death of the Optionee; The terms of the
Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

 

6.             Term of Option.  This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option Agreement.

 

7.             Withholding.

 

(a)           The Committee
shall determine the amount of any withholding or other tax required by law to
be withheld or paid by the Company with respect to any income recognized by the
Optionee with respect to the Option Award.

 

(b)           The Optionee
shall be required to meet any applicable tax withholding obligation in
accordance with the provisions of Section 11.05 of the Plan.

 

(c)           Subject to any rules prescribed
by the Committee, the Optionee shall have the right to elect to meet any
withholding requirement (i) by having withheld from this Award at the
appropriate time that number of whole shares of common stock whose fair market
value is equal to the amount of any taxes required to be withheld with respect
to such Award, (ii) by direct payment to the Company in cash of the amount
of any taxes required to be withheld with respect to such Award or (iii) by
a combination of shares and cash.

 

3

 

8.             Defined Terms.  Capitalized terms used but not defined in the
Notice and these Terms and Conditions shall have the meanings set forth in the
Plan.

 

9.             Optionee Representations.  The Optionee hereby represents to the Company
that the Optionee has read and fully understands the provisions of the Notice,
these Terms and Conditions and the Plan and the Optionee’s decision to
participate in the Plan is completely voluntary.  Further, the Optionee acknowledges that the
Optionee is relying solely on his or her own advisors with respect to the tax
consequences of this stock option award.

 

10.           Regulatory Limitations on
Exercises. 
Notwithstanding the other provisions of this Option Agreement, no option
exercise or issuance of Shares pursuant to this Option Agreement shall be
effective if (i) the shares of Common Stock reserved under the Plan are
not subject to an effective registration statement at the time of such exercise
or issuance, or otherwise eligible for an exemption from registration, or (ii) the
Company determines in good faith that such exercise or issuance would violate
any Company policy or applicable securities or other law or regulation.

 

11.           Miscellaneous.

 

(a)           Notices.  All notices, requests, deliveries, payments,
demands and other communications which are required or permitted to be given
under these Terms and Conditions shall be in writing and shall be either
delivered personally or sent by registered or certified mail, or by private
courier, return receipt requested, postage prepaid to the parties at their
respective addresses set forth herein, or to such other address as either shall
have specified by notice in writing to the other.  Notice shall be deemed duly given hereunder
when delivered or mailed as provided herein.

 

(b)           Waiver.  The waiver by any party hereto of a breach of
any provision of the Notice or these Terms and Conditions shall not operate or
be construed as a waiver of any other or subsequent breach.

 

(c)           Entire Agreement.  These Terms and Conditions, the Notice and
the Plan constitute the entire agreement between the parties with respect to
the subject matter hereof.

 

(d)           Binding Effect; Successors.  These Terms and Conditions shall inure to the
benefit of and be binding upon the parties hereto and to the extent not
prohibited herein, their respective heirs, successors, assigns and
representatives.  Nothing in these Terms
and Conditions, express or implied, is intended to confer on any person other
than the parties hereto and as provided above, their respective heirs,
successors, assigns and representatives any rights, remedies, obligations or
liabilities.

 

(e)           Governing Law.  The Notice and these Terms and Conditions
shall be governed by and construed in accordance with the laws of the State of
Delaware.

 

(f)            Headings.  The headings contained herein are for the
sole purpose of convenience of reference, and shall not in any way limit or
affect the meaning or interpretation of any of the terms or provisions of these
Terms and Conditions.

 

(g)           Conflicts; Amendment.  The provisions of the Plan are incorporated
in these Terms and Conditions in their entirety.  In the event of any conflict between the 

 

4

 

provisions of these Terms
and Conditions and the Plan, the provisions of the Plan shall control.  The Agreement may be amended at any time by
written agreement of the parties hereto.

 

(h)           No Right to Continued
Employment.  Nothing in
the Notice or these Terms and Conditions shall confer upon the Optionee any
right to continue in the employ or service of the Company or affect the right
of the Company to terminate the Optionee’s employment or service at any time.

 

(i)            Further Assurances.  The Optionee agrees, upon demand of the
Company or the Committee, to do all acts and execute, deliver and perform all
additional documents, instruments and agreements which may be reasonably
required by the Company or the Committee, as the case may be, to implement the
provisions and purposes of the Notice and these Terms and Conditions and the
Plan.

 

5

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