Document:

exv10w5

 

EXHIBIT 10.5

THE 2004 NON-EMPLOYEE DIRECTOR

EQUITY INCENTIVE PLAN

OF

ORBIMAGE INC.

 

 

Table of Contents

	 	 	 	 	 
	ARTICLE I. DEFINITIONS
	 	 	3	 
	ARTICLE II. SHARES SUBJECT TO PLAN
	 	 	8	 
	ARTICLE III. GRANTING OF AWARDS
	 	 	9	 
	ARTICLE IV. GRANTING OF OPTIONS TO EMPLOYEES AND CONSULTANTS
	 	 	10	 
	ARTICLE V. TERMS OF OPTIONS
	 	 	11	 
	ARTICLE VI. EXERCISE OF OPTIONS
	 	 	12	 
	ARTICLE VII. AWARD OF RESTRICTED STOCK
	 	 	15	 
	ARTICLE VIII. PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK, STOCK
PAYMENTS
	 	 	16	 
	ARTICLE IX. STOCK APPRECIATION RIGHTS
	 	 	19	 
	ARTICLE X. ADMINISTRATION
	 	 	20	 
	ARTICLE XI. MISCELLANEOUS PROVISIONS
	 	 	22	 

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          ORBIMAGE Inc., a Delaware corporation, has adopted the 2004 Non-Employee
Director Equity Incentive Plan of ORBIMAGE Inc., (the
“Plan”), effective July 1, 2004, for the benefit of its eligible directors.

          The purposes of the Plan are as follows:

          A. To provide an additional incentive for non-employee directors (as such
term is defined below) to further the growth, development and financial success
of the Company by personally benefiting through the ownership of Company stock
and/or rights which recognize such growth, development and financial success.

          B. To enable the Company to obtain and retain the services of non-employee
directors considered essential to the long range success of the Company by
offering them an opportunity to own stock in the Company and/or rights which
will reflect the growth, development and financial success of the Company.

ARTICLE I.

DEFINITIONS

          Wherever the following terms are used in the Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise. The
singular pronoun shall include the plural where the context so indicates.

          1.1 “Administrator” shall mean the entity that conducts the general
administration of the Plan as provided herein. With reference to the
administration of the Plan with respect to any Award, the term “Administrator”
shall refer to the Committee unless the Board has assumed the authority for
administration of the Plan generally as provided in Section 10.1.

          1.2 “Award” shall mean an Option, a Restricted Stock Award, a Performance
Award, a Dividend Equivalents Award, a Deferred Stock Award, a Stock Payment
Award or a Stock Appreciation Right which may be awarded or granted under the
Plan (collectively, “Awards”).

          1.3 “Award Agreement” shall mean a written agreement executed by an
authorized officer of the Company and the Holder which shall contain such terms
and conditions with respect to an Award as the Committee shall determine,
consistent with the Plan.

     1.4
“Award Limit” shall mean 70,000 shares of Common Stock; provided,
however, that solely with respect to Performance Awards granted pursuant to
Section 8.2(b) and Dividend Equivalents granted pursuant to Section 8.3, Award
Limit shall mean $1,000,000.

     1.5 “Board” shall mean the Board of Directors of the Company.

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     1.6 “Change in Control” shall mean the occurrence of any of the following
events:

          (i) the acquisition, directly or indirectly, by any “person” or
“group” (as those terms are defined in Sections 3(a)(9), 13(d), and
14(d) of the Exchange Act) and the rules thereunder) of “beneficial
ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act)
of securities entitled to vote generally in the election of directors
(“voting securities”) of the Company that represent 50% or more of the
combined voting power of the Company’s then outstanding voting
securities, other than

(A) an acquisition by a trustee or other fiduciary holding
securities under any employee benefit plan (or related trust)
sponsored or maintained by the Company or any person
controlled by the Company or by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
person controlled by the Company, or

(B) an acquisition of voting securities by the Company or 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,
or

(C) an acquisition of voting securities pursuant to a
transaction described in clause (iii) below that would not be
a Change in Control under clause (iii);

     Notwithstanding the foregoing, neither of the following events shall
constitute an “acquisition” by any person or group for purposes of this clause
(i): (x) a change in the voting power of the Company’s voting securities based
on the relative trading values of the Company’s then outstanding securities as
determined pursuant to the Company’s Certificate of Incorporation, if
applicable, or (y) an acquisition of the Company’s securities by the Company
which, either alone or in combination only with the other event, causes the
Company’s voting securities beneficially owned by a person or group to
represent 50% or more of the combined voting power of the Company’s then
outstanding voting securities; provided, however, that if a person or group
shall become the beneficial owner of 50% or more of the combined voting power
of the Company’s then outstanding voting securities by reason of share
acquisitions by the Company as described above and shall, after such share
acquisitions by the Company, become the beneficial owner of any additional
voting securities of the Company, then such acquisition shall constitute a
Change in Control;

          (ii) individuals who, as of the date hereof, constitute the Board
(the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board;

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          (iii) the consummation by the Company (whether directly involving
the Company or indirectly involving the Company through one or more
intermediaries) of (x) a merger, consolidation, reorganization, or
business combination or (y) a sale or other disposition of all or
substantially all of the Company’s assets or (z) the acquisition of
assets or stock of another entity, in each case, other than a
transaction

(A) which results in the Company’s voting securities
outstanding immediately before the transaction continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the Company or the person
that, as a result of the transaction, controls, directly or
indirectly, the Company or owns, directly or indirectly, all
or substantially all of the Company’s assets or otherwise
succeeds to the business of the Company (the Company or such
person, the “Successor Entity”)) directly or indirectly, at
least 50% of the combined voting power of the Successor
Entity’s outstanding voting securities immediately after the
transaction, and

(B) after which more than 50% of the members of the board of
directors of the Successor Entity were members of the
Incumbent Board at the time of the Board’s approval of the
agreement providing for the transaction or other action of
the Board approving the transaction, and

(C) after which no person or group beneficially owns voting
securities representing 50% or more of the combined voting
power of the Successor Entity; provided, however, that no
person or group shall be treated for purposes of this clause
(C) as beneficially owning 50% or more of combined voting
power of the Successor Entity solely as a result of the
voting power held in the Company and the other entity prior
to the consummation of the transaction; or

          (iv) a liquidation or dissolution of the Company.

     For purposes of clause (i) above, the calculation of voting power shall be
made as if the date of the acquisition were a record date for a vote of the
Company’s shareholders, and for purposes of clause (iii) above, the calculation
of voting power shall be made as if the date of the consummation of the
transaction were a record date for a vote of the Company’s shareholders.

          1.7 “Code” shall mean the Internal Revenue Code of 1986, as amended.

          1.8 “Committee” shall mean the Compensation Committee of the Board, or
another committee or subcommittee of the Board, appointed as provided in
Section 10.1.

          1.9 “Common Stock” shall mean the common stock of the Company, par value
$0.01 per share.

          1.10 “Company” shall mean ORBIMAGE Inc., a Delaware corporation.

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          1.11 “Deferred Stock” shall mean Common Stock awarded under Article VIII
of the Plan.

          1.12 “Director” shall mean a member of the Board.

          1.13 “Dividend Equivalent” shall mean a right to receive the equivalent
value (in cash or Common Stock) of dividends paid on Common Stock, awarded
under Article VIII of the Plan.

          1.14 “DRO” shall mean a domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder.

          1.15 “Employee” shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company, or of any
corporation which is a Subsidiary.

          1.16 “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.

          1.17 “Fair Market Value” of a share of Common Stock as of a given date
shall be (a) the closing price of a share of Common Stock on the principal
exchange on which shares of Common Stock are then trading, if any (or as
reported on any composite index which includes such principal exchange), on the
trading day previous to such date, or if shares were not traded on the trading
day previous to such date, then on the next preceding date on which a trade
occurred, or (b) if Common Stock is not traded on an exchange but is quoted on
NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation system,
or (c) if Common Stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the Fair Market Value of a share of
Common Stock as established by the Administrator acting in good faith.

          1.18 “Holder” shall mean a person who has been granted or awarded an
Award.

          1.19 “Incentive Stock Option” shall mean an option which conforms to the
applicable provisions of Section 422 of the Code or any successor provision,
and which is designated as an Incentive Stock Option by the Administrator.

          1.20 “Non-Employee Director” shall mean a member of the Board who is not
an Employee of the Company.

          1.21 “Non-Qualified Stock Option” shall mean an Option which is not
designated as an Incentive Stock Option by the Administrator.

          1.22 “Option” shall mean a stock option granted under Article IV of the
Plan. An Option granted under the Plan shall, as determined by the
Administrator and set forth in the applicable Award Agreement, be either a
Non-Qualified Stock Option or an Incentive Stock

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Option; provided, however, that Options granted to Consultants shall be
Non-Qualified Stock Options.

          1.23 “Performance Award” shall mean a cash bonus, stock bonus or other
performance or incentive award that is paid in cash, Common Stock or a
combination of both, awarded under Article VIII of the Plan.

          1.24 “Performance Criteria” shall mean the following business criteria
with respect to the Company, any Subsidiary or any division or operating unit
thereof: (a) net income, (b) pre-tax income, (c) operating income, (d) cash
flow, (e) earnings per share, (f) return on equity, (g) return on invested
capital or assets, (h) cost reductions or savings, (i) funds from operations,
(j) appreciation in the Fair Market Value of a share of Common Stock, (k)
operating profit, (l) working capital and (m) earnings before any one or more
of the following items: interest, taxes, depreciation or amortization;
provided that each of the business criteria described in subsections (a)
through (m) shall be determined in accordance with generally accepted
accounting principles (“GAAP”). For each fiscal year of the Company, the
Committee may provide for objectively determinable adjustments, as determined
in accordance with GAAP, to any of the business criteria described in
subsections (a) through (m) for one or more of the items of gain, loss, profit
or expense: (i) determined to be extraordinary or unusual in nature or
infrequent in occurrence, (ii) related to the disposal of a segment of a
business, (iii) related to a change in accounting principles under GAAP, (iv)
related to discontinued operations that do not qualify as a segment of a
business under GAAP, and (v) attributable to the business operations of any
entity acquired by the Company during the fiscal year.

          1.25 “Plan” shall mean the 2004 Non-Employee Director Equity Incentive
Plan of ORBIMAGE Inc.

          1.26 “Public Trading Date” shall mean the first date upon which Common
Stock of the Company is listed (or approved for listing) upon notice of
issuance on any securities exchange or designated (or approved for designation)
upon notice of issuance as a national market security on an interdealer
quotation system.

          1.27 “Restricted Stock” shall mean Common Stock awarded under Article VII
of the Plan as to which neither the substantial risk of forfeiture nor the
prohibition on transfers referred to in Article VII has expired.

          1.28 “Rule 16b-3” shall mean Rule 16b-3 promulgated under the Exchange Act
(or any successor rule to the same effect), as such Rule may be amended from
time to time.

          1.29 “Securities Act” shall mean the Securities Act of 1933, as amended.

          1.30 “Stock Appreciation Right” shall mean a stock appreciation right
granted under Article IX of the Plan.

          1.31 “Stock Payment” shall mean (a) a payment in the form of shares of
Common Stock, or (b) an option or other right to purchase shares of Common
Stock, as part of a deferred compensation arrangement, made in lieu of all or
any portion of the compensation,

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including without limitation, salary, bonuses and commissions, that would
otherwise become payable to a key Employee or Consultant in cash, awarded under
Article VIII of the Plan.

          1.32 “Subsidiary” shall mean any corporation, company or other entity (i)
more than fifty percent (50%) of whose outstanding shares or securities
(representing the right to vote for the election of directors or other managing
authority) are, or (ii) which does not have outstanding shares or securities
(as may be the case in a partnership, joint venture or unincorporated
association), but more than fifty percent (50%) of whose ownership interest
representing the right generally to make decisions for such other entity is,
now or hereafter, owned or controlled, directly or indirectly, but the Company
except that for purposes of determining whether any person may be a Participant
for purposes of any grant of Incentive Stock Options, “Subsidiary” means any
corporation in which, at the time, the Company owns or controls, directly or
indirectly, more than fifty percent (50%) of the total combined voting power
represented by all classes of stock issued by such corporation.

          1.33 “Substitute Award” shall mean an Award granted under this Plan upon
the assumption of, or in substitution for, outstanding equity awards previously
granted by a company or other entity in connection with a corporate
transaction, such as a merger, combination, consolidation or acquisition of
property or stock; provided, however, that in no event shall the term
“Substitute Award” be construed to refer to an award made in connection with
the cancellation and repricing of an Option.

ARTICLE II.

SHARES SUBJECT TO PLAN

          2.1 Shares Subject to Plan.

               (a) The aggregate number of shares which may be issued with
respect to Awards granted under the Plan shall not exceed 70,000
shares of Common Stock subject to adjustment as provided in
Section 11.3.

     The shares of Common Stock issuable with respect to Awards
granted under the Plan may be authorized but unissued, or
reacquired Common Stock. If an Award expires or becomes
unexercisable without having been exercised in full, the shares of
Common Stock which were subject thereto shall become available for
future grant or sale under the Plan (unless the Plan has
terminated). Furthermore, any shares subject to Awards which are
adjusted pursuant to Section 11.3 and become exercisable with
respect to shares of stock of another corporation shall be
considered cancelled and may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. Shares of
Common Stock which are delivered by the Holder or withheld by the
Company upon the exercise of an Award under the Plan, in payment
of the exercise price thereof or tax withholding thereon, may
again be optioned, granted or awarded hereunder, subject to the
limitations of this Section 2.1. If shares of Restricted Stock
are repurchased by the Company at their original purchase price,
such shares shall become available for future grant under the
Plan. In the event that Substitute Awards are granted under the
Plan, the aggregate number of shares of Common

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Stock available under the Plan for Substitute Awards other
than substitute Incentive Stock Options shall be increased by the
number of shares of Common Stock which may be granted or issued
with respect to such Substitute Awards. In no event shall the
maximum number of shares of Common Stock which may be issued under
this Plan with respect to Incentive Stock Options be increased
pursuant to the preceding sentence. Notwithstanding the
provisions of this Section 2.1, no shares of Common Stock may
again be optioned, granted or awarded if such action would cause
an Incentive Stock Option to fail to qualify as an Incentive Stock
Option under Code Section 422.

               (b) The maximum number of shares which may be subject to
Awards granted under the Plan to any individual in any calendar
year shall not exceed the Award Limit; provided, however, that the
foregoing limitation shall not apply prior to the Public Trading
Date and, following the Public Trading Date, the foregoing
limitation shall not apply until the earliest of: (i) the first
material modification of the Plan (within the meaning of Section
162(m) of the Code and the regulations issued thereunder); (ii)
the issuance of all of the shares of Common Stock reserved for
issuance under the Plan; (iii) the expiration of the Plan; (iv)
the first meeting of stockholders at which Directors are to be
elected that occurs after the close of the third calendar year
following the calendar year in which occurred the first
registration of an equity security of the Company under Section 12
of the Exchange Act; or (v) such other date required by Section
162(m) of the Code and the rules and regulations promulgated
thereunder. To the extent required by Section 162(m) of the Code, shares subject to Options which are canceled continue to be
counted against the Award Limit.

ARTICLE III.

GRANTING OF AWARDS

          3.1 Award Agreement. Each Award shall be evidenced by an Award Agreement.
Award Agreements evidencing Incentive Stock Options shall contain such terms
and conditions as may be necessary to meet the applicable provisions of Section
422 of the Code.

          3.2 Limitations Applicable to Section 16 Persons. Notwithstanding any
other provision of the Plan, the Plan, and any Award granted or awarded to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive
rule under Section 16 of the Exchange Act (including any amendment to Rule
16b-3 of the Exchange Act) that are requirements for the application of such
exemptive rule. To the extent permitted by applicable law, the Plan and Awards
granted or awarded hereunder shall be deemed amended to the extent necessary to
conform to such applicable exemptive rule.

          3.3 Consideration. In consideration of the granting of an Award under the
Plan, the Holder shall agree, in the Award Agreement, to serve as a
Non-Employee Director of the Company for a period of at least one year (or such
shorter period as may be fixed in the Award Agreement or by action of the
Administrator following grant of the Award) after the Award is granted.

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ARTICLE IV.

GRANTING OF OPTIONS

          4.1 Eligibility. Any Non-Employee Director selected by the Committee
pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option.

          4.2 Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under the Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any then
existing Subsidiary or parent corporation (within the meaning of Section 424(e)
of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.

          4.3 Qualification of Incentive Stock Options. No Incentive Stock Option
shall be granted to any person who is not an Employee.

          4.4 Granting of Options.

               (a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of the Plan:

               (i) Determine which Employees are key Employees and
select from among the key Employees or Consultants
(including Employees or Consultants who have previously
received Awards under the Plan) such of them as in its
opinion should be granted Options;

               (ii) Subject to the Award Limit, determine the number
of shares to be subject to such Options granted to the
selected key Employees or Consultants;

               (iii) Subject to Section 4.3, determine whether such
Options are to be Incentive Stock Options or Non-Qualified
Stock Options; and

               (iv) Determine the terms and conditions of such
Options, consistent with the Plan.

               (b) Upon the selection of a key Employee or Consultant to be
granted an Option, the Committee shall instruct the Secretary of
the Company to issue the Option and may impose such conditions on
the grant of the Option as it deems appropriate.

               (c) Any Incentive Stock Option granted under the Plan may be
modified by the Committee, with the consent of the Holder, to
disqualify such Option from treatment as an “incentive stock
option” under Section 422 of the Code.

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          4.5 Options in Lieu of Cash Compensation. Options may be granted under
the Plan in lieu of cash bonuses which would otherwise be payable to the Holder
pursuant to such policies which may be adopted by the Administrator from time
to time.

ARTICLE V.

TERMS OF OPTIONS

               (a) Option Price. The price per share of the shares subject
to each Option granted to Employees and Consultants shall be set
by the Committee; provided, however, such price shall be no less
than the Fair Market Value of a share of Common Stock on the date
of grant, and in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 424(e) of the
Code), such price shall not be less than 110% of the Fair Market
Value of a share of Common Stock on the date the Option is
granted.

          5.2 Option Term. The term of an Option granted to an Employee or
Consultant shall be set by the Committee in its discretion; provided, however,
that the term shall not be more than 10 years from the date the Award is
granted, or five years from the date the Incentive Stock Option is granted if
the Incentive Stock Option is granted to an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 424(e) of the Code). Except
as limited by requirements of Section 422 of the Code and regulations and
rulings thereunder applicable to Incentive Stock Options, the Committee may
extend the term, subject to the foregoing sentence of this Section 5.2, of any
outstanding Option in connection with any Termination of Employment or
Termination of Consultancy of the Holder, or amend any other term or condition
of such Option relating to such a termination.

          5.3 Option Vesting.

               (a) The period during which the right to exercise, in whole
or in part, an Option vests in the Holder shall be set by the
Committee and the Committee may determine that an Option may not
be exercised in whole or in part for a specified period after it
is granted; provided, however, that, unless the Committee
otherwise provides in the terms of the Award Agreement or
otherwise, no Option shall be exercisable by any Holder who is
then subject to Section 16 of the Exchange Act within the period
ending six months and one day after the date the Option is
granted. At any time after grant of an Option, the Committee may,
in its sole and absolute discretion and subject to whatever terms
and conditions it selects, accelerate the period during which an
Option granted to an Employee or Consultant vests.

               (b) No portion of an Option which is unexercisable at
Termination of Employment or Termination of Consultancy, as
applicable, shall

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thereafter become exercisable, except as may be
otherwise provided by the Committee either in the Award Agreement
or by action of the Committee following the grant of the Option.

               (c) To the extent that the aggregate Fair Market Value of
stock with respect to which “incentive stock options” (within the
meaning of Section 422 of the Code, but without regard to Section
422(d) of the Code) are exercisable for the first time by a Holder
during any calendar year (under the Plan and all other incentive
stock option plans of the Company and any parent or subsidiary
corporation, within the meaning of Section 422 of the Code) of the
Company, exceeds $100,000, such Options shall be treated as
Non-Qualified Stock Options to the extent required by Section 422
of the Code. The rule set forth in the preceding sentence shall be
applied by taking Options into account in the order in which they
were granted.

          5.4 Substitute Awards. Notwithstanding the foregoing provisions of this
Article V to the contrary, in the case of an Option that is a Substitute Award,
the price per share of the shares subject to such Option may be less than the
Fair Market Value per share on the date of grant, provided, that the excess of:

               (a) The aggregate Fair Market Value (as of the date such
Substitute Award is granted) of the shares subject to the
Substitute Award; over

               (b) The aggregate exercise price thereof;

does not exceed the excess of:

               (c) The aggregate fair market value (as of the time
immediately preceding the transaction giving rise to the
Substitute Award, such fair market value to be determined by the
Committee) of the shares of the predecessor entity that were
subject to the grant assumed or substituted for by the Company;
over

               (d) The aggregate exercise price of such shares.

ARTICLE VI.

EXERCISE OF OPTIONS

          6.1 Partial Exercise. An exercisable Option may be exercised in whole or
in part. However, an Option shall not be exercisable with respect to
fractional shares and the Administrator may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.

          6.2 Manner of Exercise. All or a portion of an exercisable Option shall
be deemed exercised upon delivery of all of the following to the Secretary of
the Company or his or her office:

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               (a) A written notice complying with the applicable rules
established by the Administrator stating that the Option, or a
portion thereof, is exercised. The notice shall be signed by the
Holder or other person then entitled to exercise the Option or
such portion of the Option;

               (b) Such representations and documents as the Administrator,
in its absolute discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Securities Act
and any other federal or state securities laws or regulations.
The Administrator may, in its absolute discretion, also take
whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and
registrars;

               (c) In the event that the Option shall be exercised pursuant
to Section 11.1 by any person or persons other than the Holder,
appropriate proof of the right of such person or persons to
exercise the Option; and

               (d) (1) Full cash payment to the Secretary of the Company for
the shares with respect to which the Option, or portion thereof,
is exercised; (2) payment, in whole or in part, through the
delivery of shares of Common Stock which have been owned by the
Holder for at least six months, duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to
the aggregate exercise price of the Option or exercised portion
thereof; (3) payment, in whole or in part, through the surrender
of shares of Common Stock then issuable upon exercise of the
Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised
portion thereof. However, the Administrator may, in its
discretion, (i) allow payment, in whole or in part, through the
delivery of property of any kind which constitutes good and
valuable consideration; (ii) allow payment, in whole or in part,
through the delivery of a full recourse promissory note bearing
interest (at no less than such rate as shall then preclude the
imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Administrator; (iii) allow payment, in
whole or in part, through the delivery of a notice that the Holder
has placed a market sell order with a broker with respect to shares of Common Stock then issuable upon exercise of the Option,
and that the broker has been directed to pay a sufficient portion
of the net proceeds of the sale to the Company in satisfaction of
the Option exercise price, provided that payment of such proceeds
is then made to the Company upon settlement of such sale; or (iv)
allow payment through any combination of the consideration
provided in the foregoing sentence or in subclauses (i), (ii) and
(iii) of this sentence. In the case of a promissory note, the
Administrator may also prescribe the form of such note and the
security to be given for such note. The Option may not be
exercised, however, by delivery of a promissory note or by a loan
from the Company when or where such loan or other extension of
credit is prohibited by law, and payment in the manner prescribed
by the preceding sentences shall not be permitted to the extent
that the Administrator determines that payment in such manner may
result in an extension or maintenance of credit, an arrangement
for the extension of

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credit, or a renewal of an extension of credit in the form of
a personal loan to or for any Director or executive officer of the
Company that is prohibited by Section 13(k) of the Exchange Act or
other applicable law.

          6.3 Conditions to Issuance of Stock Certificates. The Company shall not
be required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

               (a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;

               (b) The completion of any registration or other qualification
of such shares under any state or federal law, or under the
rulings or regulations of the Securities and Exchange Commission
or any other governmental regulatory body which the Administrator
shall, in its absolute discretion, deem necessary or advisable;

               (c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Administrator
shall, in its absolute discretion, determine to be necessary or
advisable;

               (d) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may establish from
time to time for reasons of administrative convenience; and

               (e) The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax, which
in the discretion of the Administrator may be in the form of
consideration used by the Holder to pay for such shares under
Section 6.2(d).

          6.4 Rights as Stockholders. Holders shall not be, nor have any of the
rights or privileges of, stockholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
Holders.

          6.5 Exercise, Ownership and Transfer Restrictions. The Administrator, in
its absolute discretion, may impose such restrictions on the exercise of an
Option and the ownership and transferability of the shares purchasable upon the
exercise of an Option as it deems appropriate. Any such restriction shall be
set forth in the respective Award Agreement and may be referred to on the
certificates evidencing such shares. The Holder shall give the Company prompt
notice of any disposition of shares of Common Stock acquired by exercise of an
Incentive Stock Option within (a) two years from the date of granting
(including the date the Option is modified, extended or renewed for purposes of
Section 424(h) of the Code) such Option to such Holder, or (b) one year after
the transfer of such shares to such Holder.

          6.6 Additional Limitations on Exercise of Options. Holders may be
required to comply with any timing or other restrictions with respect to the
settlement or exercise of an

14

 

Option, including a window-period limitation, as may be imposed in the
discretion of the Administrator.

ARTICLE VII.

AWARD OF RESTRICTED STOCK

          7.1 Eligibility. Subject to the Award Limit, Restricted Stock may be
awarded to any Employee or Consultant whom the Committee determines should
receive such an Award.

          7.2 Award of Restricted Stock.

               (a) The Committee may from time to time, in its absolute
discretion:

                    (i) Determine which Employees are key Employees and
select from among the key Employees or Consultants
(including Employees or Consultants who have previously
received other awards under the Plan) such of them as in its
opinion should be awarded Restricted Stock; and

                    (ii) Determine the purchase price, if any, and other
terms and conditions applicable to such Restricted Stock,
consistent with the Plan.

               (b) The Committee shall establish the purchase price, if any,
and form of payment for Restricted Stock; provided, however, that
such purchase price shall be no less than the par value of the
Common Stock to be purchased. In all cases, legal consideration
shall be required for each issuance of Restricted Stock.

               (c) Upon the selection of a key Employee or Consultant to be
awarded Restricted Stock, the Committee shall instruct the
Secretary of the Company to issue such Restricted Stock and may
impose such conditions on the issuance of such Restricted Stock as
it deems appropriate.

          7.3 Rights as Stockholders. Subject to Section 7.4, upon delivery of the
shares of Restricted Stock to the escrow holder pursuant to Section 7.6, the
Holder shall have, unless otherwise provided by the Committee, all the rights
of a stockholder with respect to said shares, subject to the restrictions in
his or her Award Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares; provided, however,
that in the discretion of the Committee, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in
Section 7.4.

          7.4 Restriction. All shares of Restricted Stock issued under the Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Committee shall provide, which restrictions
may include, without limitation, restrictions concerning voting rights

15

 

and transferability and restrictions based on duration of employment with
the Company, Company performance and individual performance; provided, however,
that, unless the Committee otherwise provides in the terms of the Award
Agreement or otherwise, no share of Restricted Stock granted to a person
subject to Section 16 of the Exchange Act shall be sold, assigned or otherwise
transferred until at least six months and one day have elapsed from the date on
which the Restricted Stock was issued, and provided, further, that, except with
respect to shares of Restricted Stock granted to Section 162(m) Participants,
by action taken after the Restricted Stock is issued, the Committee may, on
such terms and conditions as it may determine to be appropriate, remove any or
all of the restrictions imposed by the terms of the Award Agreement.
Restricted Stock may not be sold or encumbered until all restrictions are
terminated or expire. If no monetary consideration was paid by the Holder upon
issuance, a Holder’s rights in unvested Restricted Stock shall lapse, and such
Restricted Stock shall be surrendered to the Company without consideration,
upon Termination of Employment or Termination of Consultancy.

          7.5 Repurchase of Restricted Stock. The Committee shall provide in the
terms of each individual Award Agreement that the Company shall have the right
to repurchase from the Holder the Restricted Stock then subject to restrictions
under the Award Agreement immediately upon a Termination of Employment or
Termination of Consultancy, at a cash price per share equal to the price paid
by the Holder for such Restricted Stock.

          7.6 Escrow. The Secretary of the Company or such other escrow holder as
the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Award Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.

          7.7 Legend. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Committee shall cause a legend or legends to be
placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed thereby.

          7.8 Section 83(b) Election. If a Holder makes an election under Section
83(b) of the Code, or any successor section thereto, to be taxed with respect
to the Restricted Stock as of the date of transfer of the Restricted Stock
rather than as of the date or dates upon which the Holder would otherwise be
taxable under Section 83(a) of the Code, the Holder shall deliver a copy of
such election to the Company immediately after filing such election with the
Internal Revenue Service.

ARTICLE VIII.

PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK,

STOCK PAYMENTS

          8.1 Eligibility. Subject to the Award Limit, one or more Performance
Awards, Dividend Equivalents, awards of Deferred Stock and/or Stock Payments
may be granted to any Employee whom the Committee determines is a key Employee
or any Consultant whom the Committee determines should receive such an Award.

16

 

          8.2 Performance Awards.

               (a) Any key Employee or Consultant selected by the Committee
may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to any one or more of the
Performance Criteria or other specific performance criteria
determined appropriate by the Committee, in each case on a
specified date or dates or over any period or periods determined
by the Committee and set forth in the Award Agreement. In making
such determinations, the Committee shall consider (among such
other factors as it deems relevant in light of the specific type
of award) the contributions, responsibilities and other
compensation of the particular key Employee or Consultant.

               (b) Without limiting Section 8.2(a), the Committee may grant
Performance Awards to any 162(m) Participant in the form of a cash
bonus payable upon the attainment of objective performance goals
which are established by the Committee and relate to one or more
of the Performance Criteria, in each case on a specified date or
dates or over any period or periods determined by the Committee.
Any such bonuses paid to 162(m) Participants shall be based upon
objectively determinable bonus formulas established in accordance
with the provisions of Section 3.2. The maximum amount of any
Performance Award payable to a 162(m) Participant under this
Section 8.2(b) shall not exceed the Award Limit with respect to
any calendar year of the Company. Unless otherwise specified by
the Committee at the time of grant, the Performance Criteria with
respect to a Performance Award payable to a 162(m) Participant
shall be determined on the basis of generally accepted accounting
principles.

          8.3 Dividend Equivalents.

               (a) Any key Employee or Consultant selected by the Committee
may be granted Dividend Equivalents based on the dividends
declared on Common Stock, to be credited as of dividend payment
dates, during the period between the date a Stock Appreciation
Right, Deferred Stock or Performance Award is granted, and the

date such Stock Appreciation Right, Deferred Stock or Performance
Award is exercised, vests or expires, as determined by the
Committee. Such Dividend Equivalents shall be converted to cash
or additional shares of Common Stock by such formula and at such
time and subject to such limitations as may be determined by the
Committee.

               (b) Any Holder of an Option who is an Employee or Consultant
selected by the Committee may be granted Dividend Equivalents
based on the dividends declared on Common Stock, to be credited as
of dividend payment dates, during the period between the date an
Option is granted, and the date such Option is exercised, vests or
expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of
Common Stock by such formula and at such time and subject to such
limitations as may be determined by the Committee.

17

 

               (c) Dividend Equivalents granted with respect to Options
intended to be qualified performance-based compensation for
purposes of Section 162(m) of the Code shall be payable, with
respect to pre-exercise periods, regardless of whether such Option
is subsequently exercised.

          8.4 Stock Payments. Any key Employee or Consultant selected by the
Committee may receive Stock Payments in the manner determined from time to time
by the Committee. The number of shares shall be determined by the Committee
and may be based upon the Performance Criteria or other specific performance
criteria determined appropriate by the Committee, determined on the date such
Stock Payment is made or on any date thereafter.

          8.5 Deferred Stock. Any key Employee or Consultant selected by the
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock
shall be determined by the Committee and may be linked to the Performance
Criteria or other specific performance criteria determined to be appropriate by
the Committee, in each case on a specified date or dates or over any period or
periods determined by the Committee. Common Stock underlying a Deferred Stock
award will not be issued until the Deferred Stock award has vested, pursuant to
a vesting schedule or performance criteria set by the Committee. Unless
otherwise provided by the Committee, a Holder of Deferred Stock shall have no
rights as a Company stockholder with respect to such Deferred Stock until such
time as the Award has vested and the Common Stock underlying the Award has been
issued.

          8.6 Term. The term of a Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment shall be set by the Committee in its
discretion and set forth in the applicable Award Agreement.

          8.7 Exercise or Purchase Price. The Committee may establish the exercise
or purchase price of a Performance Award, shares of Deferred Stock or shares
received as a Stock Payment; provided, however, that such price shall not be
less than the Fair Market Value of a share of Common Stock.

          8.8 Exercise Upon Termination of Employment or Termination of Consultancy.
A Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock
Payment is exercisable or payable only while the Holder is an Employee or
Consultant, as applicable; provided, however, that the Administrator in its
sole and absolute discretion may provide that the Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment may be exercised or
paid subsequent to a Termination of Employment following a “change of control
or ownership” (within the meaning of Section 1.162-27(e)(2)(v) or any successor
regulation thereto) of the Company; provided, further, that except with respect
to Performance Awards granted to Section 162(m) Participants, the Administrator
in its sole and absolute discretion may provide that Performance Awards may be
exercised or paid following a Termination of Employment or Termination of
Consultancy without cause, or following a Change in Control of the Company, or
because of the Holder’s retirement, death or disability, or otherwise.

18

 

          8.9 Form of Payment. Payment of the amount determined under Section 8.2
or 8.3 above shall be in cash, in Common Stock or a combination of both, as
determined by the Committee. To the extent any payment under this Article VIII
is effected in Common Stock, it shall be made subject to satisfaction of all
provisions of Section 6.3.

ARTICLE IX.

STOCK APPRECIATION RIGHTS

          9.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be
granted to any key Employee or Consultant selected by the Committee. A Stock
Appreciation Right may be granted (a) in connection and simultaneously with the
grant of an Option, (b) with respect to a previously granted Option, or (c)
independent of an Option. Stock Appreciating Rights awarded in relation to
Incentive Stock Options must be granted concurrently with such Incentive Stock
Options. A Stock Appreciation Right shall be subject to such terms and
conditions not inconsistent with the Plan as the Committee shall impose and
shall be evidenced by an Award Agreement. Any grant of a Stock Appreciation
right may specify that the amount payable on exercise may not exceed a maximum
price set by the Committee on the date of grant.

          9.2 Coupled Stock Appreciation Rights.

               (a) A Coupled Stock Appreciation Right (“CSAR”) shall be
related to a particular Option and shall be exercisable only when
and to the extent the related Option is exercisable.

               (b) A CSAR may be granted to the Holder for no more than the
number of shares subject to the simultaneously or previously
granted Option to which it is coupled.

               (c) A CSAR shall entitle the Holder (or other person entitled
to exercise the Option pursuant to the Plan) to surrender to the
Company unexercised a portion of the Option to which the CSAR
relates (to the extent then exercisable pursuant to its terms) and
to receive from the Company in exchange therefor an amount
determined by multiplying the difference obtained by subtracting
the Option exercise price from the Fair Market Value of a share of
Common Stock on the date of exercise of the CSAR by the number of
            shares of Common Stock with respect to which the CSAR shall have
been exercised, subject to any limitations the Committee may
impose.

          9.3 Independent Stock Appreciation Rights.

               (a) An Independent Stock Appreciation Right (“ISAR”) shall be
unrelated to any Option and shall have a term set by the
Committee. An ISAR shall be exercisable in such installments
as the Committee may determine. An ISAR shall cover such number of shares of Common Stock as the Committee may determine; provided,
however, that unless the Committee otherwise provides in the terms
of the ISAR or otherwise, no ISAR granted to a person subject to
Section 16 of the Exchange Act shall be exercisable until at least
six months have elapsed from (but excluding) the date on which the
Option was granted. The

19

 

exercise price per share of Common Stock subject to each ISAR
shall be set by the Committee. An ISAR is exercisable only while
the Holder is an Employee or Consultant; provided, that the
Committee may determine that the ISAR may be exercised subsequent
to Termination of Employment or Termination of Consultancy without
cause, or following a Change in Control of the Company, or because
of the Holder’s retirement, death or disability, or otherwise.

               (b) An ISAR shall entitle the Holder (or other person
entitled to exercise the ISAR pursuant to the Plan) to exercise
all or a specified portion of the ISAR (to the extent then
exercisable pursuant to its terms) and to receive from the Company
an amount determined by multiplying the difference obtained by
subtracting the exercise price per share of the ISAR from the Fair
Market Value of a share of Common Stock on the date of exercise of
the ISAR by the number of shares of Common Stock with respect to
which the ISAR shall have been exercised, subject to any
limitations the Committee may impose.

          9.4 Payment and Limitations on Exercise.

               (a) Payment of the amounts determined under Section 9.2(c)
and 9.3(b) above shall be in cash, in Common Stock (based on its
Fair Market Value as of the date the Stock Appreciation Right is
exercised) or a combination of both, as determined by the
Committee. To the extent such payment is effected in Common Stock
it shall be made subject to satisfaction of all provisions of
Section 6.3 above pertaining to Options.

               (b) Holders of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the
settlement or exercise of a Stock Appreciation Right, including a
window-period limitation, as may be imposed in the discretion of
the Committee.

ARTICLE X.

ADMINISTRATION

          10.1 Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the
Committee under the Plan) shall consist solely of two or more Non-Employee
Directors appointed by and holding office at the pleasure of the Board, each of
whom is both a “non-employee director” as defined by Rule 16b-3 and an “outside
director” for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members
may resign at any time by delivering written notice to the Board. Vacancies in
the Committee may be filled by the Board.

          10.2 Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance with
its provisions. The Committee shall have the power to interpret the Plan and
the Award Agreements, and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith, to
interpret, amend or revoke any such rules. Interpretations and rules with
respect to Incentive

20

 

Stock Options shall be consistent with the provisions of Section 422 of
the Code. The Committee shall also have the power to amend any Award Agreement
provided that the rights or obligations of the Holder of the Award that is the
subject of any such Award Agreement are not affected adversely; provided,
however, that without the approval of the stockholders of the Company, neither
the Committee nor the Board shall authorize the amendment of any outstanding
Option or SAR to reduce its exercise price. Notwithstanding anything contained
herein, no Option or SAR shall be canceled and replaced with the grant of an
Option or SAR having a lower exercise price without the approval of the
stockholders of the Company. Grants or awards under the Plan need not be the
same with respect to each Holder. In its absolute discretion, the Board may at
any time and from time to time exercise any and all rights and duties of the
Committee under the Plan except with respect to matters which under Rule 16b-3
or Section 162(m) of the Code, or any regulations or rules issued thereunder,
are required to be determined in the sole discretion of the Committee.

          10.3 Majority Rule; Unanimous Written Consent. The Committee shall act by
a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.

          10.4 Compensation; Professional Assistance; Good Faith Actions. Members
of the Committee shall receive such compensation, if any, for their services as
members as may be determined by the Board; provided, however, that such
compensation may not disqualify such member as an outside director for purposes
of Section 162(m) or as a “non-employee director “ under Section 16b-3. All
expenses and liabilities which members of the Committee incur in connection
with the administration of the Plan shall be borne by the Company. The
Committee may, with the approval of the Board, employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the Company
and the Company’s officers and Directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Holders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or Awards, and all members of the Committee and the Board
shall be fully protected by the Company in respect of any such action,
determination or interpretation.

          10.5 Delegation of Authority to Grant Awards. The Committee may, but need
not, delegate from time to time some or all of its authority to grant Awards
under the Plan to a committee consisting of one or more members of the
Committee or of one or more officers of the Company; provided, however, that
the Committee may not delegate its authority to grant Awards to individuals (a)
who are subject on the date of the grant to the reporting rules under Section
16(a) of the Exchange Act, (b) who are Section 162(m) Participants, or (c) who
are officers of the Company who are delegated authority by the Committee
hereunder. Any delegation hereunder shall be subject to the restrictions and
limits that the Committee specifies at the time of such delegation of authority
and may be rescinded at any time by the Committee. At all times, any committee
appointed under this Section 10.5 shall serve in such capacity at the pleasure
of the Committee.

21

 

ARTICLE XI.

MISCELLANEOUS PROVISIONS

          11.1 Not Transferable.

               (a) No Award under the Plan may be sold, pledged, assigned or
transferred in any manner other than by will or the laws of
descent and distribution or, subject to the consent of the
Administrator, pursuant to a DRO, unless and until such Award has
been exercised, or the shares underlying such Award have been
issued, and all restrictions applicable to such shares have
lapsed. No Award or interest or right therein shall be liable for
the debts, contracts or engagements of the Holder or his or her
successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect, except to the
extent that such disposition is permitted by the preceding
sentence.

               (b) During the lifetime of the Holder, only he or she, or his
or her legal guardian or representative, may exercise an Option or
other Award (or any portion thereof) granted to him or her under
the Plan, unless it has been disposed of with the consent of the
Administrator pursuant to a DRO. After the death of the Holder,
any exercisable portion of an Option or other Award may, prior to
the time when such portion becomes unexercisable under the Plan or
the applicable Award Agreement, be exercised by his or her
personal representative or by any person empowered to do so under
the deceased Holder’s will or under the then applicable laws of
descent and distribution.

          11.2 Amendment, Suspension or Termination of the Plan. Except as
otherwise provided in this Section 11.2, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Administrator. However, without approval of the Company’s
stockholders before or after the action by the Administrator, no action of the
Administrator may, except as provided in Section 11.3, increase the limits
imposed in Section 2.1 on the maximum number of shares which may be issued
under the Plan upon the exercise of any Incentive Stock Option, and no action
of the Administrator may be taken that would otherwise require approval by the
Company’s stockholders as a matter of applicable law, regulation or rule,
including, but not limited to Section 162(m) and any applicable exchange rules.
No amendment, suspension or termination of the Plan shall, without the consent
of the Holder, alter or impair any rights or obligations under any Award
theretofore granted or awarded, unless the Award itself otherwise expressly so
provides. No Awards may be granted or awarded during any period of suspension
or after termination of the Plan, and in no event may any Incentive Stock
Option be granted under the Plan after the first to occur of the following
events:

               (a) The expiration of 10 years from the date the Plan is
adopted by the Board; or

22

 

               (b) The expiration of 10 years from the date the Plan is
approved by the Company’s stockholders under Section 11.4.

          11.3 Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.

               (a) Subject to Sections 11.3(a)(vii), 11.3(b) and 11.3(d), in
the event that the Administrator determines that any dividend or
other distribution (whether in the form of cash, Common Stock,
other securities or other property), recapitalization,
reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale,
transfer, exchange or other disposition of all or substantially
all of the assets of the Company, or exchange of Common Stock or
other securities of the Company, issuance of warrants or other
rights to purchase Common Stock or other securities of the
Company, other similar corporate transaction or event, or unusual
or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws,
regulations or accounting principles, the Administrator, in its
sole and absolute discretion, and on such terms and conditions as
it deems appropriate, either by the terms of the Award or by
action taken prior to the occurrence of such transaction or event
and either automatically or upon the Holder’s request, is hereby
authorized to take any one or more of the following actions
whenever the Administrator determines that such action is
appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under
the Plan or with respect to any Award under the Plan, to
facilitate such transactions or events or to give effect to such
changes in laws, regulations or principles:

               (i) To provide for either the purchase of any such
Award for an amount of cash equal to the amount that could
have been attained upon the exercise of such Award or
realization of the Holder’s rights had such Award been
currently exercisable or payable or fully vested, including
but not limited to conversion of the award to the right to
receive an amount equal to the excess, if any, of the
consideration (whether stock, cash, or other securities or
property) received in the transaction by holders of Common
Stock for each share held on the effective date of the
transaction over the exercise price of such Award (less an
amount equal to any required tax withholdings), or the
replacement of such Award with other rights or property
selected by the Administrator in its sole discretion;

               (ii) To provide that the Award cannot vest, be
exercised or become payable after such event;

               (iii) To provide that such Award shall be exercisable
as to all shares covered thereby, notwithstanding anything
to the contrary in Section 5.3 or 5.4 or the provisions of
such Award;

23

 

               (iv) To provide that such Award be assumed by the
successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options,
rights or awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and prices; and

               (v) To make adjustments in the number and type of shares of Common Stock (or other securities or property)
subject to outstanding Awards, and in the number and kind of
outstanding Restricted Stock or Deferred Stock and/or in the
terms and conditions of (including the grant or exercise
price), and the criteria included in, outstanding options,
rights and awards and options, rights and awards which may
be granted in the future.

               (vi) To provide that, for a specified period of time
prior to such event, the restrictions imposed under an Award
Agreement upon some or all shares of Restricted Stock or
Deferred Stock may be terminated, and, in the case of
Restricted Stock, some or all shares of such Restricted
Stock may cease to be subject to repurchase under Section
7.5 or forfeiture under Section 7.4 after such event.

               (b) Notwithstanding any other provision of the Plan, in the
event of a merger of the Company with or into another corporation,
or the sale of substantially all of the assets of the Company or a
Change in Control, each outstanding Option shall be assumed or an
equivalent option substituted by the successor corporation or a
parent or subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for
the Option, the optionee shall have the right to exercise the
Option as to all of the optioned stock, including shares as to
which it would not otherwise be exercisable. If an Option is
exercisable in lieu of assumption or substitution in the event of
a merger or sale of assets, the Administrator shall notify the
optionee that the Option shall be fully exercisable for a period
of 15 days from the date of such notice, and the Option shall
terminate upon the expiration of such period. For the purposes of
this Section 11.3(c), the Option shall be considered assumed if,
following the merger or sale of assets, the option confers the
right to purchase or receive, for each share of optioned stock
subject to the Option immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets
by holders of Common Stock for each share held on the effective
date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of
a majority of the outstanding shares); provided, however, that if
such consideration received in the merger or sale of assets was
not solely common stock of the successor corporation or its
parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the
exercise of the Option, for each share of optioned stock subject
to the
Option, to be solely common stock of the successor
corporation or its parent equal

24

 

in fair market value to the per
share consideration received by holders of Common Stock in the
merger or sale of assets.

               (c) Subject to Sections 3.2, 3.3 and 11.3(e), the
Administrator may, in its discretion, include such further
provisions and limitations in any Award, agreement or certificate,
as it may deem equitable and in the best interests of the Company.

               (d) With respect to Awards which are granted to Section
162(m) Participants and are intended to qualify as
performance-based compensation under Section 162(m)(4)(C), no
adjustment or action described in this Section 11.3 or in any
other provision of the Plan shall be authorized to the extent that
such adjustment or action would cause such Award to fail to so
qualify under Section 162(m)(4)(C), or any successor provisions
thereto. No adjustment or action described in this Section 11.3 or
in any other provision of the Plan shall be authorized to the
extent that such adjustment or action would cause the Plan to
violate Section 422(b) of the Code. Furthermore, no such
adjustment or action shall be authorized to the extent such
adjustment or action would result in short-swing profits liability
under Section 16 or violate the exemptive conditions of Rule 16b-3
unless the Administrator determines that the Award is not to
comply with such exemptive conditions. The number of shares of
Common Stock subject to any Award shall always be rounded to the
next whole number.

               (e) The existence of the Plan, the Award Agreement and the
Awards granted hereunder shall not affect or restrict in any way
the right or power of the Company or the shareholders of the
Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company’s capital structure
or its business, any merger or consolidation of the Company, any
issue of stock or of options, warrants or rights to purchase stock
or of bonds, debentures, preferred or prior preference stocks
whose rights are superior to or affect the Common Stock or the
rights thereof or which are convertible into or exchangeable for
Common Stock, or the dissolution or liquidation of the company, or
any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar
character or otherwise.

          11.4 Approval of Performance Criteria by Stockholders. If the Board
determines that Awards other than Options or Stock Appreciation Rights which
may be granted to Section 162(m) Participants should continue to be eligible to
qualify as performance-based compensation under Section 162(m)(4)(C) of the
Code, the Performance Criteria must be disclosed to and approved by the
Company’s stockholders no later than the first stockholder meeting that occurs
in the fifth year following the year in which the Company’s stockholders
previously approved the Performance Criteria.

          11.5 Tax Withholding. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Holder of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting, exercise or
payment of any Award. The Administrator may in its discretion and in
satisfaction of the

25

 

foregoing requirement allow such Holder to elect to have
the Company withhold shares of Common Stock otherwise issuable under such Award
(or allow the return of shares of Common Stock) having a Fair Market Value
equal to the sums required to be withheld, to the extent permitted by law.
Notwithstanding any other provision of the Plan, the number of shares of Common
Stock which may be withheld with respect to the issuance, vesting, exercise or
payment of any Award (or which may be repurchased from the Holder of such Award
within six months after such shares of Common Stock were acquired by the Holder
from the Company) in order to satisfy the Holder’s federal and state income and
payroll tax liabilities with respect to the issuance, vesting, exercise or
payment of the Award shall be limited to the number of shares which have a Fair
Market Value on the date of withholding or repurchase equal to the aggregate
amount of such liabilities based on the minimum statutory withholding rates for
federal and state tax income and payroll tax purposes that are applicable to
such supplemental taxable income.

          11.6 Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to Awards under the Plan, the
Administrator shall, to the extent permitted by applicable law, have the right
to provide, in the terms of Awards made under the Plan, or to require a Holder
to agree by separate written instrument, that (a)(i) any proceeds, gains or
other economic benefit actually or constructively received by the Holder upon
any receipt or exercise of the Award, or upon the receipt or resale of any
Common Stock underlying the Award, must be paid to the Company, and (ii) the
Award shall terminate and any unexercised portion of the Award (whether or not
vested) shall be forfeited, if (b)(i) a Termination of Employment or
Termination of Consultancy occurs prior to a specified date, or within a
specified time period following receipt or exercise of the Award, or (ii) the
Holder at any time, or during a specified time period, engages in any activity
in competition with the Company, or which is inimical, contrary or harmful to
the interests of the Company, as further defined by the Administrator or (iii)
the Holder incurs a Termination of Employment or Termination of Consultancy for
cause.

          11.7 Effect of Plan Upon Options and Compensation Plans. The adoption of
the Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in the Plan shall be construed to
limit the right of the Company (a) to establish any other forms of incentives
or compensation for Employees or Consultants of the Company or any Subsidiary,
or (b) to grant or assume options or other rights or awards otherwise than
under the Plan in connection with any proper corporate purpose including but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.

          11.8 Compliance with Laws. The Plan, the granting and vesting of Awards
under the Plan and the issuance and delivery of shares of Common Stock and the
payment of money under the Plan or under Awards granted or awarded hereunder
are subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law and
federal margin requirements) and to such approvals by any listing, regulatory
or governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
the Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the
Company, provide such assurances and representations to the Company as the
Company may

26

 

deem necessary or desirable to assure compliance with all
applicable legal requirements. To the extent permitted by applicable law, the
Plan and Awards granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.

          11.9 Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of the Plan.

          11.10 Governing Law. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.

27exv10w6

 

EXHIBIT 10.6

EMPLOYMENT-AT-WILL AND RETENTION AGREEMENT

between

ORBITAL IMAGING CORPORATION

and

MATTHEW M. O’CONNELL

Effective as of October 27, 2003

To Matthew M. O’Connell :

1. Employment By The Company.

     1.1 Subject to terms set forth herein, the Company agrees to continue to
employ you as an employee-at-will in the capacity of Chief Executive Officer.

2. Compensation.

	 	2.1	 	Salary. You will receive a base annual salary of $350,000,
which will be paid in accordance with standard Company policy.
	 
	 	2.2	 	Standard Company Benefits.

(a) You will be entitled to all rights and benefits for which you
are eligible under the terms and conditions of the standard Company
benefits and compensation practices which may be in effect from
time to time and provided by the Company to its employees in senior
executive positions (the “Company Benefits”).

(b) The Company will pay up to $2,000 in premiums annually toward
your company provided life insurance coverage. Such coverage will
be $1,000,000, subject to the continuing approval of the Company’s
life insurance carrier.

	 	2.3	 	Severance. You will be entitled to the severance benefits
(“Severance Benefits”) described in Section 6 below, subject to the
other terms and conditions of this Agreement.
	 
	 	2.4	 	Bonuses. (a) Regular Bonus. You will be eligible to receive
an annual bonus of 50% of your base salary at target, subject to
adjustment based upon the Company’s performance as shown on Appendix
A hereto. Your annual bonus will be payable 50% in cash and 50% in
common stock of the Company. For the purpose of calculating the
number of shares of common stock to be issued, the
value of such shares of common stock shall be the “Fair Market
Value” of such

 

 

	 	 	 	shares as defined in the Company’s 2003 Employee
Stock Incentive Plan.

(b) Refinancing Bonus. You will be eligible to receive special
bonuses based upon the Company’s refinancing prior to their
maturity of its Senior Notes due 2008 and/or its Senior
Subordinated Notes due 2008 (collectively, “Notes”). If any Notes
are redeemed with the proceeds from a new issuance of senior
secured debt of the Company, you will receive in cash an amount
equal to .5% of the amount of principal and accrued interest of the
Notes so redeemed. If any Notes are redeemed with the proceeds
from a new issuance of unsecured debt of the Company, you will
receive in cash an amount equal to 1.75% of the amount of principal
and accrued interest of the Notes so redeemed. If any Notes are
redeemed with the proceeds from a new issuance of equity securities
of the Company, you will receive in cash an amount equal to 2.5% of
the amount of principal and accrued interest of the Notes so
redeemed. For purposes of determining the amount of Notes redeemed
pursuant to any refinancing, the value of Notes redeemed will
exclude an amount equal to the amount invested in the Company in
such transaction by Crest Advisors LLC or its affiliates or the
holders of Notes as of the Effective Date (as defined in the
Company’s Plan of Reorganization in its Chapter 11 bankruptcy
proceeding). In order for you to receive a refinancing bonus under
this Section 2.4(b), if you are not employed by the Company at the
time of such refinancing, such refinancing must occur within 3
months of the date of your termination of employment with the
Company.

	 	2.5	 	Restricted Stock. On the effective date of the Company’s
Plan of Reorganization, the Board of Directors of the Company will
issue 275,454 shares of restricted common stock of the Company to
you pursuant to the Company’s 2003 Stock Incentive Plan, of which
(subject to changes set forth in a separate Restricted Stock
Agreement to be entered into between you and the Company): 91,818
shares will vest immediately; 91,818 shares will vest on the first
anniversary of such effective date; and 91,818 shares will vest on
the second anniversary of such effective date.
	 
	 	2.6	 	Stock Options. You will be eligible for award grants under
the Company’s 2003 Employee Stock Incentive Plan as determined by
the Compensation Committee of the Company’s Board of Directors.

3. Proprietary Information Obligations.

	 	3.1	 	Confidentiality. You agree that all Confidential Information
will be held in complete confidence and that you will not, during
your employment with the Company, except in the performance of your
duties to the Company, or at any time after the termination of your
employment with the Company, disclose to any person (other than the
Company or its affiliates), or use for your own account,
without the prior written consent of the Company, any Confidential
Information. For purposes of this Agreement, the term
“Confidential Information” shall mean

2

 

	 	 	 	information relating to the
business and affairs of the Company or any of its affiliates that
is of a confidential nature.

	 	3.2	 	Ownership of Trade Secrets, etc.

(a) All written materials, records and documents made by you or
coming into your possession during your employment with the Company
concerning the business or affairs of the Company or any of its
affiliates shall be the sole property of the Company and its
affiliates. Upon the termination of your employment with the
Company or upon the earlier request of the Company during your
employment with the Company, you shall promptly deliver the same to
the Company (or its designee).

(b) You agree that any trade secret, invention, improvement,
patent, patent application or writing, and any program, system or
novel technique (whether or not capable of being trademarked,
copyrighted or patented) conceived, developed or otherwise obtained
by you during your employment with the Company relating to the
business, property, methods, suppliers or customers of the Company
or any of its affiliates shall be the property of the Company and
its affiliates; and you agree to give the Company prompt written
notice of your conception, invention, authorship, development or
acquisition of any such trade secret, invention, improvement,
patent, patent application or writing, and any program, system or
novel technique and to execute such instruments of transfer,
assignment, conveyance or confirmation and such other documents and
to do all appropriate lawful acts as may be required by the Company
to transfer, assign, confirm and perfect in the Company all legally
protectible rights in any such trade secret, invention,
improvement, patent, patent application, writing, program, system
or novel technique.

(c) You represent and warrant that the execution and delivery by
you of this Agreement and the performance by you of your
obligations hereunder will not, with or without the giving of
notice or the passage of time, (i) to the best of your knowledge,
violate any judgment, writ, injunction or order of any court,
arbitrator or governmental agency applicable to you or (ii)
conflict with, result in the breach of any provisions of or the
termination of, or constitute default under, any agreement to which
you are a party or by which you are or may be bound, including, but
not limited to, any employment, confidentiality, non-competition or
non-solicitation agreement entered into between you and any
previous employer. You agree to indemnify and hold the Company
harmless from and against any and all claims for losses,
liabilities, damages, costs and expenses which may arise or result
from the violation of any such judgment, writ, injunction or order
or the breach of any such agreement referred to in the immediately
preceding sentence.
You have heretofore provided the Company with copies of any
agreement referred to in (ii) above to which you are bound.

3

 

	 	3.3	 	Remedies. Your duties under this Section 3 shall survive
termination of your employment with the Company. You acknowledge
that a remedy at law for any breach or threatened breach by you of
the provisions of this Section would be inadequate, and you agree
that the Company shall be entitled to injunctive relief in case of
any such breach or threatened breach.

4. Continuation Of Employment/Restrictive Covenant. During the term of your
employment and for a period of twelve (12) months immediately following your
termination, you shall not, without first obtaining the prior written approval
of the Company, directly or indirectly engage or prepare to engage, in any
activities in competition with the Company, or accept employment or establish a
business relationship with a business that directly competes with the Company
or solicit, induce or otherwise cause any customers of the Company to terminate
or reduce their relationship with the Company. Such approval shall not be
unreasonably withheld.

5. Nonsolicitation. While employed by the Company, and for twelve (12) months
immediately following your termination, you agree not to interfere with the
business of the Company by soliciting, attempting to solicit, inducing, or
otherwise causing any employees of the Company to terminate his or her
employment.

6. Termination Of Employment.

(a) Either you or the Company may terminate your employment relationship
at any time for any reason whatsoever, or for no reason, with or without
Cause or advance notice. This at-will employment relationship cannot be
changed except in a writing approved by the Board. If the Company
terminates your employment without Cause at any time, you will receive as
Severance Benefits: (i) regular bi-weekly payments equal to your usual
base salary, less payroll deductions and required withholdings, for
twelve months (the “Severance Period”), (ii) a payment of that portion of
the bonus, if any, you are entitled to for the calendar year based upon
performance for such year pro-rated based upon the number of full months
you were employed in such year, payable at the time such amount would
otherwise have been due ((i) and (ii) are sometimes collectively referred
to as the “Severance Payments”), and (iii) continuation of all group
health and life insurance benefits during the Severance Period , in
exchange for the execution of a release of all claims against the Company
in form satisfactory to the Company. If you resign voluntarily or if
your employment is terminated for Cause, all compensation and benefits
will cease immediately, and you will receive no Severance Benefits. Your
“qualifying event” for purposes of Section 4980B of the Internal Revenue
Code of 1986, as amended (or any successor provision thereto), shall be
your termination of employment.

For purposes of this Agreement, “Cause” shall mean misconduct, including:
(i) commission of any felony or any crime involving moral turpitude or
dishonesty; (ii) participation in a fraud or act of dishonesty against
the Company; (iii) willful breach or gross negligence of the Company’s
policies; (iv) intentional damage to the Company’s

4

 

property; (v) material
breach of this Agreement; (vi) your failure or refusal in a material
respect to follow the reasonable policies or directions of the Company as
specified by the Board of Directors after being provided with notice of
such failure and an opportunity to cure within seven (7) days of receipt
of such notice; (vii) any other act or omission which subjects the
Company to substantial public disrespect, scandal or ridicule or (viii)
your failure to carry out the duties of your position after being
provided with notice of such failure and a reasonable opportunity to
cure. Disability shall not constitute Cause. For purposes of this
Agreement, “Disability” shall mean a disability that prevents you from
substantially performing your duties under this Agreement for a period of
at least 45 consecutive days or 90 non-consecutive days within any
365-day period.

(b) In the event of death, the Company shall pay you any earned but
unpaid salary at the time of your death and, at the time such amount
would otherwise have been due, a pro rata portion of the bonuses, if any,
which may otherwise have been paid to you pursuant to Section 2.4 hereof
with respect to the annual period in which the death occurs.

7. General Provisions.

     7.1 Employment At-Will. Please understand that your employment with the
Company is “at will,” meaning that you may terminate your employment with the
Company at any time and for any reason whatsoever simply by notifying the
Company. Likewise, the Company may terminate your employment at any time and
for any reason, or for no reason, with or without Cause or advance notice.
This at-will relationship cannot be changed, nor may this Agreement be amended,
except in a writing approved by a majority of the Board of Directors of the
Company.

     7.2 Notices. Any notices provided hereunder must be in writing and shall
be deemed effective upon the earlier of personal delivery (including by
telecopy) or the third day after mailing by first class mail, to the Company at
its primary office location and to you at your address as listed on the
Company’s then current payroll records.

     7.3 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.

     7.4 Waiver. If either party should waive any breach of any provisions of
this Agreement, he, she or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.

     7.5 Complete Agreement. Please also understand that your acceptance of
this Agreement should not be based on any promises or representations other
than those contained in

5

 

this Agreement. Any promises contrary to the terms
specified in this Agreement are superceded by this Agreement. This Agreement
and any written option agreements between you and the Company constitute the
entire agreement between you and the Company and supercede any prior agreements
between you and the Company.

     7.6 Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by you and the Company, and each party’s
respective successors, assigns, heirs, executors and administrators, except
that you may not assign any of your duties hereunder and neither party may
assign any of its rights hereunder without the written consent of the other
party, which shall not be withheld unreasonably. The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business and/or
assets of the Company to execute an agreement pursuant to which the successor
expressly assumes all of the liabilities and obligations of the Company
hereunder and agrees to perform this Agreement in the same manner and to the
same extent the Company would be required to perform if no such succession had
taken place. If any successor declines to offer you employment, refuses to
assume this Agreement or fails to perform its obligations hereunder , you will
be deemed terminated without Cause and will be entitled to the Severance
Payments.

     7.7 Choice of Law. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the law of the
Commonwealth of Virginia.

     7.8 Survival. The following provisions of this Agreement shall survive
the termination of your employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee: Section 2; Section 3;
Section 4 and Section 5.

     7.9 Injunctive Relief. You acknowledge that the restrictions set forth in
Sections 3, 4 and 5 above are necessary to protect the Company’s confidential
proprietary information and other legitimate business interests and are
reasonable in all respects, including duration, territory and scope of activity
restricted. You further acknowledge that the provisions of Sections 3, 4 and 5
hereof are essential to the Company, that the Company would not enter into this
Agreement if it did not include these provisions and that damages sustained by
the Company as a result of a breach of these provisions cannot be adequately
remedied by damages, and You agree that the Company, in addition to any other
remedy it may have under this Agreement or at law, shall be entitled to
injunctive and other equitable relief to prevent or curtail any breach of
Sections 3, 4, and 5 of this Agreement. You agree that the existence of any
claim or cause of action by you against the Company or its affiliates, whether
predicated on this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of any of the provisions of Sections 3, 4, and 5
hereof.

6

 

     In Witness Whereof, the parties have executed this Agreement as of the day
and year first above written.

ORBITAL IMAGING CORPORATION

	 	 	 
	By:
	 	 
	

	 	

	

	 	Name: Armand D. Mancini
	

	 	Title: Executive Vice President and Chief Financial Officer

EMPLOYEE:

	 	 	 
	By:
	 	 
	

	 	

	

	 	Matthew M. O’Connell

7

 

APPENDIX A

ANNUAL BONUS PERFORMANCE TARGETS

For the year ended December 31, 2003, the annual bonus will be paid as set
forth on a pro rata sliding scale based where:

1. If the Company’s EBITDA is equal to the target set forth in the business
plan (the “Business Plan”) approved by the Board of Directors and included in
the Company’s Disclosure Statement approved by the Bankruptcy Court on
September 16, 2003, 100% of the bonus will be paid.

2. If the Company’s EBITDA is below 70% of the target set forth in the
Business Plan, 0% of the bonus will be paid.

3. If the Company’s EBITDA is equal to or greater than 125% of the target set
forth in the Business Plan, 137.5% of the bonus will be paid.

For subsequent years, the Performance Target shall be determined by the Board
of Directors.

8

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