Document:

EXHIBIT
4.1

DG
FASTCHANNEL, INC.

2006 LONG-TERM STOCK INCENTIVE PLAN

1.             ESTABLISHMENT OF PLAN.  DG FastChannel, Inc. establishes the “DG
FastChannel, Inc. 2006 Long-Term Stock Incentive Plan,” effective as of the Effective
Date.  Options granted under the Plan shall
be subject to the terms and conditions of the Plan as set forth herein, as it
may be amended from time to time.

2.             PURPOSE.  The purposes of the Plan
are (i) to offer selected Employees, including Officers, Directors and
Consultants of the Company and its Affiliates an equity ownership interest and
opportunity to participate in the growth and financial success of the Company,
(ii) to provide the Company an opportunity to attract and retain the best
available personnel for positions of substantial responsibility, (iii) to
create long-term value and to provide incentives to such Employees, Directors
and Consultants by means of market-driven and performance-related stock-based
awards to achieve long-term performance goals, and (iv) to promote the
growth and success of the Company’s business by aligning the financial
interests of Employees, Directors and Consultants with that of the other
stockholders of the Company.  Toward
these objectives, the Plan provides for the grant of Options, Stock
Appreciation Rights and Restricted Stock Awards, some of which may be
Performance Awards.

3.             DEFINITIONS.  As used herein, unless the context requires
otherwise, the following terms shall have the meanings indicated below:

(a)           “Affiliate”
means (i) any corporation, partnership or other entity which owns,
directly or indirectly, a majority of the voting equity securities of the
Company, (ii) any corporation, partnership or other entity of which a
majority of the voting equity securities or equity interest is owned, directly
or indirectly, by the Company, and (iii) with respect to an Option that is
intended to be an Incentive Stock Option, (A) any “parent corporation” of
the Company, as defined in Section 424(e) of the Code or (B) any “subsidiary
corporation” of the Company as defined in Section 424(f) of the Code, any other
entity that is taxed as a corporation under Section 7701(a)(3) of the Code and
is a member of the “affiliated group” as defined in Section 1504(a) of the Code
of which the Company is the common parent, and any other entity as may be
permitted from time to time by the Code or by the Internal Revenue Service to
be an employer of Employees to whom Incentive Stock Options may be granted;
provided, however, that in each case the Affiliate must be consolidated in the
Company’s financial statements.

(b)           “Award” means
any right granted under the Plan, including an Option, a Stock Appreciation
Right, a Restricted Stock Award and a Performance Award, and whether granted
singly or in combination, to a Grantee pursuant to the terms, conditions and
limitations that the Committee may establish in order to fulfill the objectives
of the Plan.

(c)           “Award Agreement”
means a written agreement with a Grantee with respect to any Award, including
any amendments thereto, and includes an Option Agreement, a Stock Appreciation
Rights Agreement and a Restricted Stock Agreement.

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

 

 

(e)           “Cause” means
the meaning set forth in a then-effective written employment agreement between
the Grantee and the Company or an Affiliate or, in the absence of such a
definition in a then-effective written employment agreement (in the
determination of the Committee), shall mean (i) the habitual neglect of
the Grantee’s duties or failure by the Grantee to perform or observe any
substantial lawful obligation of the Grantee’s duties to the Company or any
Affiliate that is not remedied within thirty (30) days after written notice
thereof from the Company or the Board, (ii) an intentional violation or
failure by the Grantee to satisfy any policy or written agreement with the
Company or an Affiliate, (iii) the involvement by the Grantee in a transaction
or act in connection with the performance of duties to the Company or any
Affiliate which transaction or act is adverse to the interests of the Company
or any Affiliate, (iv) the intentional engagement by the Grantee in unfair
competition with the Company or any Affiliate, (v) the use of alcohol or drugs
by the Grantee in a manner that affects the Grantee’s job performance or could
reasonably be expected to adversely affect the reputation of the Company or any
Affiliate, or (vi) the conviction of, or plea of nolo contendere by the Grantee to, a
felony or misdemeanor involving fraud, embezzlement, theft or dishonesty or
other criminal conduct against the Company or any Affiliate.

(f)            “Change in Control”
of the Company means the occurrence of any of the following events:  (i) any “person” (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50 percent or more of the
combined voting power of the Company’s then outstanding securities; (ii) as
a result of, or in connection with, any tender offer or exchange offer, merger,
or other business combination (a “Transaction”), the persons who were directors
of the Company immediately before the Transaction shall cease to constitute a
majority of the Board of the Company or any successor to the Company; (iii) the
Company is merged or consolidated with another corporation and as a result of
the merger or consolidation less than 50 percent of the outstanding voting
securities of the surviving or resulting corporation shall then be owned in the
aggregate by the former stockholders of the Company; (iv) a tender offer
or exchange offer is made and consummated for the ownership of securities of
the Company representing 50 percent or more of the combined voting power of the
Company’s then outstanding voting securities; or (v) the Company transfers
substantially all of its assets to another corporation which is not controlled
by the Company.

(g)           “Chief Executive
Officer” means the individual serving at any relevant time as the chief
executive officer of the Company.

(h)           “Code” means the
Internal Revenue Code of 1986, as amended, and any successor statute.  Reference in the Plan to any section of the
Code shall be deemed to include any amendments or successor provisions to such
section and any Treasury regulations promulgated under such section.

(i)            “Committee”
means the committee (or committees), as constituted from time to time, of the
Board that is appointed by the Board to administer the Plan, or if no such
committee is appointed (or no such committee shall be in existence at any
relevant time), the term “Committee” for purposes of the Plan shall mean the
Board; provided, however, that while the Common Stock is publicly traded, the
Committee shall be a committee of the Board consisting

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solely of two or more Outside Directors, in accordance with Section
162(m) of the Code, and/or solely of two or more Non-Employee Directors, in
accordance with Rule 16b-3, as necessary and deemed desirable by the Board from
time to time in each case to satisfy such requirements with respect to Awards granted
under the Plan.  While the Common Stock
is listed for trading on any national securities exchange or quoted on the
Nasdaq Stock Market, the Committee’s members shall also satisfy the “independence”
criteria or be “independent directors” to the extent required under the rules
and regulations of the exchange or the Nasdaq Stock Market, as applicable.  While the Common Stock is not listed for
trading on any national securities exchange or quoted on the Nasdaq Stock
Market, within the scope of such authority, the Board or the Committee may (i) delegate
to a committee of one or more members of the Board who are not Outside
Directors the authority to grant Awards to eligible persons who are either
(A) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Awards or
(B) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code and/or (ii) delegate to a committee of one or
more members of the Board who are not Non-Employee Directors the authority to
grant Awards to eligible persons who are not then subject to Section 16 of the
Exchange Act.  The Board may assume any
or all of the powers and responsibilities prescribed for the Committee, and to
the extent it does so, the term “Committee” as used herein shall also be
applicable to the Board.

(j)            “Common Stock”
means the Common Stock, $0.001 par value per share, of the Company or the
common stock that the Company may in the future be authorized to issue (as long
as the common stock varies from that currently authorized, if at all, only in
amount of par value) in replacement or substitution thereof.

(k)           “Company” means DG
FastChannel, Inc., a Delaware corporation.

(l)            “Consultant”
means any person (other than an Employee or a Director, solely with respect to
rendering services in such person’s capacity as a Director) who is engaged by
the Company or any Affiliate to render consulting or advisory services to the
Company or such Affiliate and who is a “consultant or advisor” within the
meaning of Rule 701 promulgated under the Securities Act or Form S-8
promulgated under the Securities Act, including any foreign national who, but
for the laws of his country, would be an employee of the Company or an
Affiliate.

(m)          “Continuous Service”
means that the provision of services to the Company or an Affiliate in any
capacity of Employee, Director or Consultant is not interrupted or
terminated.  Except as otherwise provided
in a particular Award Agreement, service shall not be considered interrupted or
terminated for this purpose in the case of (i) any approved leave of
absence, (ii) transfers among the Company, any Affiliate, or any
successor, in any capacity of Employee, Director or Consultant, or (iii) any
change in status as long as the individual remains in the service of the
Company or an Affiliate in any capacity of Employee, Director or
Consultant.  An approved leave of absence
shall include sick leave, military leave, or any other authorized personal
leave.  For purposes of each Incentive
Stock Option, if such leave exceeds ninety (90) days, and re-employment upon
expiration of such leave is not guaranteed by statute or contract, then the
Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the
day that is three (3) months and one (1) day following the expiration of such
ninety (90)-day period.

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(n)           “Covered
Employee” means the Chief Executive Officer and the four other most highly
compensated officers of the Company for whom total compensation is required to
be reported to stockholders under Regulation S-K, as determined for
purposes of Section 162(m) of the Code.

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

(p)           “Disability”
means the “disability” of a person (i) as defined in a then-effective
written employment agreement with the Company or an Affiliate that covers such
person, (ii) if such person is not covered by a then-effective written
employment agreement with the Company or an Affiliate, as defined in a
then-effective long-term disability plan maintained by the Company that covers
such person, or (iii) if neither a then-effective employment agreement or
a long-term disability plan exists at any relevant time covering such person, “Disability”
means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code.  For
purposes of determining the time during which an Incentive Stock Option may be
exercised under the terms of an Option Agreement, “Disability” means the
permanent and total disability of a person within the meaning of Section
22(e)(3) of the Code.  Section 22(e)(3)
of the Code provides that an individual is totally and permanently disabled if
he or she is unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months.

(q)           “Effective
Date” means the date the Plan was approved by the stockholders at the
Company’s 2006 annual meeting.

(r)            “Employee”
means any person, including an Officer or Director, who is employed, within the
meaning of Section 3401 of the Code, by the Company or an Affiliate.  The provision of compensation by the Company
or an Affiliate to a Director solely with respect to such individual rendering
services in the capacity of a Director, however, shall not be sufficient to
constitute “employment” by the Company or that Affiliate.

(s)           “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and any
successor statute.  Reference in the Plan
to any section of the Exchange Act shall be deemed to include any amendments or
successor provisions to such section and any rules and regulations relating to
such section.

(t)            “Fair
Market Value” means, as of any date, the value of the Common Stock
determined as follows:

(i)            If
the Common Stock has an established market by virtue of being listed on any
established stock exchange, traded on the Nasdaq National Market or the Nasdaq
SmallCap Market or reported on the Over-the-Counter Bulletin Board published by
the National Quotation Bureau, Inc., the Fair Market Value of a share of Common
Stock shall be the closing sales price for such a share of Common Stock (or the
closing bid, if no sales were reported) as quoted on such exchange or market (or
if the Common Stock is listed or traded on more than one exchange or market,
the exchange or market with the greatest volume of trading in the Common Stock)
or reported on the Over-the-Counter

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Bulletin Board for the last market trading day prior to the day of
determination, as reported in The Wall Street Journal
or such other source as the Committee deems reliable.  If the relevant date does not fall on a day
on which the Common Stock has traded on such securities exchange or market
system, the date on which the Fair Market Value shall be established shall be
the last day on which the Common Stock was so traded prior to the relevant
date, or such other appropriate day as shall be determined by the Board, in its
sole discretion consistent with Section 409A of the Code.

(ii)           In
the absence of any such established market for the Common Stock, the Fair
Market Value shall be determined in good faith by the reasonable application by
the Committee of a reasonable valuation method in accordance with Section 409A
of the Code.

(u)           “Grantee”
means an Employee, Director or Consultant to whom an Award has been granted
under the Plan.

(v)           “Incentive
Stock Option” means an Option granted to an Employee under the Plan that
meets the requirements of Section 422 of the Code.

(w)          “Non-Employee
Director” means a Director who either (i) is not an  Employee or Officer, does not receive
compensation (directly or indirectly) from the Company or an Affiliate in any
capacity other than as a Director (except for an amount as to which disclosure
would not be required under Item 404(a) of Regulation S-K), does not
possess an interest in any other transaction as to which disclosure would be
required under Item 404(a) of Regulation S-K and is not engaged in a
business relationship as to which disclosure would be required under Item
404(b) of Regulation S-K or (ii) is otherwise considered a “non-employee
director” for purposes of Rule 16b-3.

(x)            “Non-Qualified
Stock Option” means an Option granted under the Plan that is not intended
to be an Incentive Stock Option.

(y)           “Officer”
means a person who is an “officer” of the Company or any Affiliate within the
meaning of Section 16 of the Exchange Act (whether or not the Company is
subject to the requirements of the Exchange Act).

(z)            “Option”
means an Award in the form of a stock option granted pursuant to Section 8
of the Plan to purchase a specified number of shares of Common Stock during the
Option period for a specified exercise price, whether granted as an Incentive
Stock Option or as a Non-Qualified Stock Option.

(aa)         “Option
Agreement” means the written agreement evidencing the grant of an Option
executed by the Company and the Optionee, including any amendments thereto.  Each Option Agreement shall be subject to the
terms and conditions of the Plan.

(bb)         “Optionee”
means an individual to whom an Option has been granted under the Plan.

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(cc)         “Outside
Director” means a Director who either (i) is not a current employee of
the Company or an “affiliated corporation” (within the meaning of the Treasury
regulations promulgated under Section 162(m) of the Code), is not a former
employee of the Company or an “affiliated corporation” receiving compensation
for prior services (other than benefits under a tax qualified pension plan),
has not been an officer of the Company or an “affiliated corporation” at any
time and is not currently receiving (within the meaning of the Treasury
regulations promulgated under Section 162(m) of the Code) direct or indirect
remuneration from the Company or an “affiliated corporation” for services in
any capacity other than as a Director, or (ii) is otherwise considered an “outside
director” for purposes of Section 162(m) of the Code.

(dd)         “Performance
Award” means a Restricted Stock Award granted under Section 11 of the
Plan to a Grantee who is an Employee that becomes vested and earned solely on
account of the attainment of a specified performance target in relation to one
or more Performance Goals.

(ee)         “Performance
Goals” mean, with respect to any Performance Award, the business criteria
(and related factors) selected by the Committee at the time of grant to measure
the level of performance of the Company during the Performance Period, in each
case, prepared on the same basis as the financial statements published for financial
reporting purposes, except as adjusted pursuant to Section 11(f).  The Committee may select as the Performance
Goals for a Performance Period any one or combination of the following business
criteria that apply to the Grantee of the Performance Award, one or more
business units, divisions or Affiliates or the applicable sector of the
Company, or the Company as a whole, and if so desired by the Committee, by
comparison with a peer group of companies, as interpreted and defined, in each
case, by the Committee, which business criteria (to the extent applicable) will
be determined in accordance with generally accepted accounting principles:

(i)            Net
income as a percentage of revenue;

(ii)           Earnings
per share of Common Stock;

(iii)          Earnings
before interest, taxes, depreciation and amortization;

(iv)          Return
on net assets employed before interest and taxes;

(v)           Operating
margin as a percentage of revenue;

(vi)          Safety
performance relative to industry standards and the Company annual target;

(vii)         Strategic
team goals;

(viii)        Net
operating profit after taxes;

(ix)           Net
operating profit after taxes per share of Common Stock;

(x)            Return
on invested capital;

(xi)           Return
on assets or net assets;

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(xii)          Total
stockholder return;

(xiii)         Relative
total stockholder return (as compared with a peer group of the Company);

(xiv)        Earnings
before income taxes;

(xv)         Net
income;

(xvi)        Free
cash flow;

(xvii)       Free
cash flow per share of Common Stock;

(xviii)      Revenue
(or any component thereof);

(xix)         Revenue
growth; or

(xx)          Any
other performance objective approved by the stockholders of the Company in
accordance with Section 162(m) of the Code.

(ff)           “Performance
Period” means that period established by the Committee at the time any
Performance Award is granted or, except in the case of any grant to a Covered
Employee, at any time thereafter, during which any Performance Goals specified
by the Committee with respect to such Award are to be measured.

(gg)         “Plan”
means this DG FastChannel, Inc. 2006 Long-Term Stock Incentive Plan as set
forth herein and as it may be amended from time to time.

(hh)         “Qualifying
Shares” means shares of Common Stock which either (i) have been owned
by the Grantee for more than six (6) months and have been “paid for” within the
meaning of Rule 144 promulgated under the Securities Act, or (ii) were
obtained by the Grantee in the public market.

(ii)           “Regulation
S-K” means Regulation S-K promulgated under the Securities Act,
as it may be amended from time to time, and any successor to Regulation S-K.  Reference in the Plan to any item of
Regulation S-K shall be deemed to include any amendments or successor
provisions to such item.

(jj)           “Restriction
Period” means the period during which the Common Stock under a Restricted
Stock Award is nontransferable and subject to “Forfeiture Restrictions” as
defined in Section 10(b) of the Plan and set forth in the related Restricted
Stock Agreement.

(kk)         “Restricted
Stock Agreement” means the written agreement evidencing the grant of a
Restricted Stock Award executed by the Company and the Grantee, including any
amendments thereto.  Each Restricted
Stock Agreement shall be subject to the terms and conditions of the Plan.

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(ll)           “Restricted
Stock Award” means an Award granted under Section 10 of the Plan to a
Grantee of shares of Common Stock issued to the Grantee for such consideration,
if any, and subject to such restrictions on transfer, forfeiture provisions and
other terms and conditions as are established by the Committee.

(mm)       “Rule
16b-3” means Rule 16b-3 promulgated under the Exchange Act, as it may be
amended from time to time, and any successor to Rule 16b-3.

(nn)         “Section”
means a section of the Plan unless otherwise stated or the context otherwise
requires.

(oo)         “Securities
Act” means the Securities Act of 1933, as amended, and any successor
statute.  Reference in the Plan to any
section of the Securities Act shall be deemed to include any amendments or
successor provisions to such section and any rules and regulations relating to
such section.

(pp)         “Stock
Appreciation Right” means an Award granted under Section 9 of the Plan
to receive all or some portion of the increase in the value of the shares of
Common Stock to which such right relates as provided in Section 9 hereof.

(qq)         “Stock
Appreciation Right Agreement” means a written agreement with a Grantee with
respect to an Award of Stock Appreciation Rights, including any amendments
thereto.  Each Stock Appreciation Right
Agreement shall be subject to the terms and conditions of the Plan.

(rr)           “Ten
Percent Stockholder” means a person who owns (or is deemed to own pursuant
to Section 424(d) of the Code) at the time an Option is granted stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or of any of its Affiliates.

4.             TYPES OF INCENTIVE AWARDS AVAILABLE UNDER THE PLAN.  Awards granted under the Plan may be (i) Incentive
Stock Options, (ii) Non-Qualified Stock Options, (iii) Stock
Appreciation Rights, (iv) Restricted Stock Awards, and (v) Performance
Awards.  An Option may be granted in
tandem with a Stock Appreciation Right.

5.             SHARES SUBJECT TO PLAN.

(a)           Maximum
Shares Subject to Plan.  Subject to
adjustment pursuant to Section 13(a) hereof, the total amount of Common Stock
with respect to which Awards may be granted under the Plan shall not exceed 1,100,000
shares.  At all times during the term of
the Plan, the Company shall reserve and keep available such number of shares of
Common Stock as will be required to satisfy the requirements of outstanding Awards
under the Plan.  The number of shares
reserved for issuance under the Plan shall be reduced only to the extent that
shares of Common Stock are actually issued in connection with the exercise or
settlement of an Award.  Any shares of
Common Stock covered by an Award (or a portion of an Award) that is forfeited
or canceled or that expires without being exercised or settled shall be deemed
not to have been issued for purposes of determining the maximum aggregate
number of shares of Common Stock which

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may be issued under the Plan and shall again
be available to be subject to Awards under the Plan.  If an Option is issued in tandem with a Stock
Appreciation Right and all or a portion of the Option is cancelled as provided
for in Section 9(b)(iii) in connection with the exercise of the related Stock
Appreciation Right, the shares of Common Stock that were subject to the portion
of the Option so cancelled will not again be available for grant under the
Plan.  In addition, shares of Common Stock
withheld pursuant to the Plan to pay taxes and shares of Common stock used in
the exercise of an Option as described in Section 8(d) in a “same day” or “margin”
arrangement shall reduce the number of shares available for Awards under the
Plan.  Nothing in this Section 5
shall impair the right of the Company to reduce the number of outstanding
shares of Common Stock pursuant to repurchases, redemptions, or otherwise;
provided, however, that no reduction in the number of outstanding shares of
Common Stock shall (i) impair the validity of any outstanding Award,
whether or not that Award is fully vested or exercisable, or (ii) impair
the status of any shares of Common Stock previously issued pursuant to an Award
as duly authorized, validly issued, fully paid and nonassessable.  The shares to be delivered under the Plan shall
be made available from (i) authorized but unissued shares of Common Stock,
or (ii) Common Stock held in the treasury of the Company, in each
situation as the Committee may determine from time to time in its sole
discretion.

(b)           Registration
and Listing of Shares.  From time to
time, the Board and appropriate Officers shall be and are authorized to take
whatever actions are necessary to file required documents with governmental
authorities, stock exchanges and other appropriate persons to register, list
and otherwise make shares of Common Stock available for issuance pursuant to
Awards.

6.             ELIGIBILITY.  Awards other than Incentive Stock Options may
be granted to Employees, Officers, Directors, and Consultants.  Incentive Stock Options may be granted only
to Employees (including Officers and Directors who are also Employees), as
limited by clause (iii) of Section 3(a).  The Committee, in its sole discretion, shall
select the recipients of Awards.  A
Grantee may be granted more than one Award under the Plan, and Awards may be
granted at any time or times during the term of the Plan.  The grant of an Award to an Employee,
Officer, Director or Consultant shall not be deemed either to entitle that
individual to, or to disqualify that individual from, participation in any
other grant of Awards under the Plan.

7.             LIMITATION ON INDIVIDUAL AWARDS.  No person shall be granted Awards during any
fiscal year of the Company covering more than 100,000 shares of Common
Stock.  Notwithstanding the preceding
sentence, in connection with the commencement of a person’s Continuous Service,
a person may be granted Awards covering up to an additional 50,000 shares of
Common Stock that shall not count against the limit in the preceding sentence.  The limitations set forth in the preceding
sentences shall be applied in a manner which will permit compensation generated
under the Plan, where appropriate, to constitute “performance-based”
compensation for purposes of Section 162(m) of the Code, including counting
against such maximum number of shares, to the extent required under Section
162(m) of the Code and applicable interpretive authority thereunder, any shares
of Common Stock subject to Options or other Awards that are canceled or
repriced.

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8.             OPTIONS.

(a)           Grant
of Options.  The Committee shall
determine (i) whether each Option shall be granted as an Incentive Stock
Option or as a Non-Qualified Stock Option and (ii) the provisions, terms,
and conditions of each Option including, but not limited to, the vesting
schedule, the number of shares of Common Stock subject to the Option, the
exercise price of the Option, the period during which the Option may be
exercised, forfeiture provisions, methods of payment,  and all other terms and conditions of the Option.

(b)           Limitations
on Incentive Stock Options.  The
aggregate Fair Market Value (determined as of the date of grant of an Option)
of Common Stock which any Employee is first eligible to purchase during any
calendar year by exercise of Incentive Stock Options granted under the Plan and
by exercise of incentive stock options (within the meaning of Section 422 of
the Code) granted under any other incentive stock option plan of the Company or
an Affiliate shall not exceed $100,000. 
If the Fair Market Value of stock with respect to which all incentive
stock options described in the preceding sentence held by any one Optionee are
exercisable for the first time by such Optionee during any calendar year
exceeds $100,000, the Options (that are intended to be Incentive Stock Options
on the date of grant thereof) for the first $100,000 worth of shares of Common
Stock to become exercisable in such year shall be deemed to constitute
incentive stock options within the meaning of Section 422 of the Code and the
Options (that are intended to be Incentive Stock Options on the date of grant
thereof) for the shares of Common Stock in the amount in excess of $100,000
that become exercisable in that calendar year shall be treated as Non-Qualified
Stock Options.  If the Code is amended
after the effective date of the Plan to provide for a different limit than the
one described in this Section 8(b), such different limit shall be incorporated
herein and shall apply to any Options granted after the effective date of such
amendment.

(c)           Acquisitions
and Other Transactions.  Notwithstanding
the provisions of Section 12(g), in the case of an Option issued or assumed
pursuant to Section 12(g), the exercise price and number of shares for the
Option shall be determined in accordance with the principles of Sections 409A
and 424(a) of the Code.  The Committee
also may grant Options under the Plan in settlement of or substitution for,
outstanding options or obligations to grant future options in connection with
the Company or an Affiliate acquiring another entity, an interest in another
entity or an additional interest in an Affiliate whether by merger, stock
purchase, asset purchase or other form of transaction.

(d)           Payment
or Exercise.  Payment for the shares
of Common Stock to be purchased upon exercise of an Option may be made in cash
(by check) or, if elected by the Optionee and approved by the Committee, in one
or more of the following methods which must be stated in the Option Agreement
(at the date of grant with respect to any Option granted as an Incentive Stock
Option) and where permitted by law:  (i) if
the Common Stock has an established market as described in clause (i) of
Section 3(t), through a “same day sale” arrangement between the Optionee and a
broker-dealer that is a member of the National Association of Securities
Dealers, Inc. (an “NASD Dealer”) whereby the Optionee irrevocably elects to
exercise the Option and to sell a portion of the shares of Common Stock so
purchased to pay for the exercise price and whereby the NASD Dealer irrevocably
commits upon receipt of such shares of Common Stock to forward the exercise
price directly to the Company; (ii) if the Common Stock has an

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established market as described in clause (i)
of Section 3(t), through a “margin” commitment from the Optionee and an NASD
Dealer whereby the Optionee irrevocably elects to exercise the Option and to
pledge the shares of Common Stock so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
exercise price, and whereby the NASD Dealer irrevocably commits upon receipt of
such shares of Common Stock to forward the exercise price directly to the Company;
or (iii) by surrender for cancellation of Qualifying Shares at the Fair
Market Value per share at the time of exercise (provided that such surrender
does not result in an accounting charge for the Company).  No shares of Common Stock may be issued until
full payment of the purchase price therefor has been made.

(e)           Modification,
Extension and Renewal of Options. 
The Committee shall have the power to modify, cancel, extend or renew
outstanding Options and to authorize the grant of new Options and/or Restricted
Stock Awards in substitution therefor (regardless of whether any such action
would be treated as a repricing for financial accounting or other purposes),
provided that (except as permitted by Section 13(a) of the Plan) any such
action may not, without the written consent of any Optionee, (i) impair
any rights under any Option previously granted to such Optionee,
(ii) cause the Option or the Plan to become subject to Section 409A of the
Code, or (iii) cause any Option to lose its status as “performance-based”
compensation under Section 162(m) of the Code. 
Any outstanding Incentive Stock Option that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code.

(f)            Privileges
of Stock Ownership.  No Optionee will
have any of the rights of a stockholder with respect to any shares of Common
Stock subject to an Option until such Option is properly exercised and the
purchased shares are issued and delivered to the Optionee, as evidenced by an
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company.  No adjustment
shall be made for dividends or distributions or other rights for which the
record date is prior to such date of such issuance and delivery, except as provided
in the Plan.

9.             STOCK APPRECIATION RIGHTS.

(a)           Stock
Appreciation Rights.  A Stock
Appreciation Right is a right to receive, upon exercise of the right, shares of
Common Stock or their cash equivalent in an amount equal to the increase in
Fair Market Value of the Common Stock between the grant and exercise
dates.  The Committee, from time to time,
subject to the terms and provisions of the Plan, may grant to an eligible
Employee, Director or Consultant Stock Appreciation Rights if (i) the
exercise price of the Stock Appreciation Right is not less than the Fair Market
Value of the Common Stock on the grant date of the Award, (ii) the Stock
Appreciation Right will be settled only in shares of Common Stock (unless
settlement in the form of cash would not cause a Stock Appreciation Right or
the Plan to become subject to Section 409A of the Code), and (iii) the
Stock Appreciation Right does not include any feature for the deferral of
compensation other than the time between the Stock Appreciation Right grant and
exercise or any other feature that would cause the Stock Appreciation Right or
the Plan to become subject to Section 409A of the Code.  In addition, a Stock Appreciation Right may
be related to an Option, or issued “in tandem” with an Option, only if such an
arrangement would not cause the Stock Appreciation Right, the Option or the
Plan to become subject to Section 409A of the Code.  The terms and conditions of a Stock
Appreciation Right shall be set forth in a Stock Appreciation Right Agreement
or may be

 11
 

included in an Option Agreement (which need
not be the same for each Grantee) in such form as the Committee approves, but
which is not inconsistent with the Plan. 
With respect to Stock Appreciation Rights that are subject to Section 16
of the Exchange Act, the Committee shall retain sole discretion (i) to
determine the form in which payment of the Stock Appreciation Right will be
made (i.e., cash, securities or
any combination thereof), or (ii) to approve an election by a Grantee to
receive cash in full or partial settlement of Stock Appreciation Rights.  The number of shares reserved for issuance
under the Plan shall be reduced only to the extent that shares of Common Stock
are actually issued in connection with the exercise or settlement of an Award and
as provided in Section 9(b)(iii).

(b)           Stock
Appreciation Right Related to an Option. 
If permitted pursuant to the conditions and limitations contained in
Section 9(a), a Stock Appreciation Right granted in connection with an Option
shall cover the same shares of Common Stock covered by the Option (or such
lesser number of shares of Common Stock as the Committee may determine) and
shall, except as provided in this Section 9(b), be subject to the same terms
and conditions as the related Option and the following:

(i)            Exercise.  A Stock Appreciation Right granted in
connection with an Option shall be exercisable at such time or times and only
to the extent that the related Option is exercisable, and will not be
transferable except to the extent the related Option may be transferable.

(ii)           Amount
Payable.  Upon the exercise of a
Stock Appreciation Right related to an Option, the Grantee shall be entitled to
receive an amount payable in whole shares of Common Stock determined by
multiplying (A) the excess of the Fair Market Value of a share of Common
Stock on the date of exercise of such Stock Appreciation Right over the Option
exercise price of the Stock Appreciation Right, by (B) the number of
shares of Common Stock as to which such Stock Appreciation Right is being
exercised. Notwithstanding the foregoing, the Committee may limit in any manner
the amount payable with respect to any Stock Appreciation Right by including
such a limit in the applicable Stock Appreciation Right Agreement.

(iii)          Treatment
of Related Options and Stock Appreciation Rights Upon Exercise.  Upon the exercise of a Stock Appreciation
Right granted in connection with an Option, the Option shall be canceled to the
extent of the number of shares of Common Stock as to which the Stock Appreciation
Right is exercised, and upon the exercise of an Option granted in connection
with a Stock Appreciation Right, the Stock Appreciation Right shall be canceled
to the extent of the number of shares of Common Stock as to which the Option is
exercised or surrendered.  The shares
reserved for issuance under the Plan shall be reduced by the number of shares
of Common Stock that were covered by the Option cancelled in connection with
the exercise of the Stock Appreciation Right.

(c)           Stock
Appreciation Right Unrelated to an Option. 
A Stock Appreciation Right unrelated to an Option shall cover such
number of shares of Common Stock as the Committee shall determine.

 12
 

(i)            Terms;
Duration.  A Stock Appreciation Right
unrelated to an Option shall contain such terms and conditions as to
exercisability, vesting and duration as the Committee shall determine, but in
no event shall any such right have a term of greater than ten (10) years.
However, each Stock Appreciation Right shall be exercisable only during such
portion of its term as the Committee shall determine and, unless provided
otherwise by the specific provisions of the Stock Appreciation Right Agreement,
only if the Grantee’s Continuous Service has not terminated at the time of such
exercise.

(ii)           Amount
Payable.  Upon exercise of a Stock
Appreciation Right unrelated to an Option, the Grantee shall be entitled to
receive an amount payable in whole shares of Common Stock determined by
multiplying (A) the excess of the Fair Market Value of a share of Common
Stock on the date of exercise of such Stock Appreciation Right over the Fair
Market Value of a share of Common Stock on the date the Stock Appreciation
Right was granted, by (B) the number of shares of Common Stock as to which
the Stock Appreciation Right is being exercised. Notwithstanding the foregoing,
the Committee may limit in any manner the amount payable with respect to any
Stock Appreciation Right by including such a limit in the applicable Stock
Appreciation Right Agreement.

(iii)          Non-Transferability.  No Stock Appreciation Right unrelated to an
Option shall be transferable by the Grantee otherwise than by will or the laws
of descent and distribution, and such Stock Appreciation Right shall be
exercisable during the lifetime of such Grantee only by the Grantee or his
guardian or legal representative.

10.           RESTRICTED STOCK AWARDS.

(a)           Restricted
Stock Awards.  A Restricted Stock
Award is a grant of shares of Common Stock for such consideration, if any, and
subject to such restrictions on transfer, forfeiture provisions and other terms
and conditions as are established by the Committee.  Each Restricted Stock Agreement shall be in
such form and shall contain such terms and conditions as the Committee shall
deem appropriate.  The terms and
conditions of such Restricted Stock Agreements may change from time to time,
and the terms and conditions of separate Restricted Stock Agreements need not
be identical, but each such Restricted Stock Agreement shall be subject to the
terms and conditions of this Section 10.

(b)           Forfeiture
Restrictions.  Shares of Common Stock
that are the subject of a Restricted Stock Award shall be subject to
restrictions on disposition by the Grantee and to an obligation of the Grantee
to forfeit and surrender the shares to the Company under certain circumstances
(the “Forfeiture Restrictions”).  The
Forfeiture Restrictions shall be determined by the Committee in its sole
discretion, and the Committee may provide that the Forfeiture Restrictions
shall lapse on the passage of time, the attainment of one or more performance
targets established by the Committee, or the occurrence of such other event or
events determined to be appropriate by the Committee.  The Forfeiture Restrictions, if any,
applicable to a particular Restricted Stock Award (which may differ from any
other such Restricted Stock Award) shall be stated in the Restricted Stock
Agreement.

(c)           Rights
as Stockholder.  At the time any
Restricted Stock Award is granted under the Plan, the Company and the Grantee
shall enter into a Restricted Stock Agreement setting

 13
 

forth each of the matters addressed in this
Section 10 and such other matters as the Committee may determine to be
appropriate.  Shares of Common Stock
awarded pursuant to a Restricted Stock Award shall be represented by a stock
certificate registered in the name of the Grantee of such Restricted Stock
Award or by a book entry account with the Company’s transfer agent.  The Grantee shall have the right to receive
dividends with respect to the shares of Common Stock subject to a Restricted
Stock Award, to vote the shares of Common Stock subject thereto and to enjoy
all other stockholder rights with respect to the shares of Common Stock subject
thereto, except that, unless provided otherwise in the Plan or in the Restricted
Stock Agreement, (i) the Grantee shall not be entitled to delivery of the share
certificate evidencing the shares of Common Stock until the Forfeiture
Restrictions have expired, (ii) the Company or an escrow agent shall
retain custody of the share certificate evidencing the shares of Common Stock (or
such shares shall be held in a book entry account with the Company’s transfer
agent) until the Forfeiture Restrictions expire, (iii) the Grantee may not
sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the
shares of Common Stock until the Forfeiture Restrictions have expired, and
(iv) a breach of the terms and conditions established by the Committee
pursuant to the Restricted Stock Agreement shall cause a forfeiture of the
Restricted Stock Award.  At the time of
such Award, the Committee may, in its sole discretion, prescribe additional
terms, conditions or restrictions relating to Restricted Stock Award, including
rules pertaining to the termination of the Grantee’s Continuous Service (by
retirement, Disability, death or otherwise) prior to expiration of the
Forfeiture Restrictions.  Such additional
terms, conditions or restrictions shall also be set forth in a Restricted Stock
Agreement made in connection with the Restricted Stock Award.

(d)           Stock
Certificate Delivery and Rights and Obligations of the Grantee.  One or more stock certificates representing
shares of Common Stock, free of Forfeiture Restrictions, shall be delivered to
the Grantee promptly after, and only after, the Forfeiture Restrictions have
expired and the Grantee has satisfied all applicable Federal, state and local
income and employment tax withholding requirements.  Each Restricted Stock Agreement shall require
that (i) the Grantee, by his or her acceptance of the Restricted Stock Award,
shall irrevocably grant to the Company a power of attorney to transfer any
shares so forfeited to the Company, agrees to execute any documents requested
by the Company in connection with such forfeiture and transfer, and (ii) such
provisions regarding transfers of forfeited shares shall be specifically
performable by the Company in a court of equity or law.

(e)           Restriction
Period.  The Restriction Period for a
Restricted Stock Award shall commence on the date of grant of the Restricted
Stock Award and, unless otherwise established by the Committee and stated in
the Restricted Stock Award Agreement, shall expire upon satisfaction of the
conditions set forth in the Restricted Stock Agreement pursuant to which the
Forfeiture Restrictions will lapse.

(f)            Securities
Restrictions.  The Committee may
impose other conditions on any shares of Common Stock subject to a Restricted
Stock Award as it may deem advisable, including (i) restrictions under
applicable state or federal securities laws, and (ii) the requirements of
any stock exchange or national market system upon which shares of Common Stock
are then listed or quoted.

 14
 

(g)           Payment
for Restricted Stock.  The Committee
shall determine the amount and form of any payment for shares of Common Stock
received pursuant to a Restricted Stock Award. 
In the absence of such a determination, the Grantee shall not be
required to make any payment for shares of Common Stock received pursuant to a Restricted
Stock Award, except to the extent otherwise required by law.

(h)           Forfeiture
of Restricted Stock.  Subject to the
provisions of the particular Restricted Stock Agreement, upon termination of
the Grantee’s Continuous Service during the Restriction Period, the shares of
Common Stock subject to the Restricted Stock Award shall be forfeited by the
Grantee.  Upon any forfeiture, all rights
of the Grantee with respect to the forfeited shares of the Common Stock subject
to the Restricted Stock Award shall cease and terminate, without any further
obligation on the part of the Company, except that if so provided in the
Restricted Stock Agreement applicable to the Restricted Stock Award, the
Company shall repurchase each of the shares of Common Stock forfeited for the
purchase price per share, if any, paid by the Grantee.  The Committee will have discretion to
determine whether the Continuous Service of a Grantee has terminated and the
date on which such Continuous Service terminates and whether the Grantee’s
Continuous Service terminated as a result of the Disability of the Grantee.

(i)            Lapse
of Forfeiture Restrictions in Certain Events; Committee’s Discretion.  Notwithstanding the provisions of Section
10(h) or any other provision in the Plan to the contrary, the Committee may, in
its discretion and as of a date determined by the Committee, fully vest any or
all Common Stock awarded to the Grantee pursuant to a Restricted Stock Award,
and upon such vesting, all Forfeiture Restrictions applicable to such
Restricted Stock Award shall lapse or terminate.  Any action by the Committee pursuant to this
Section 10(i) may vary among individual Grantees and may vary among the
Restricted Stock Awards held by any individual Grantee.  Notwithstanding the preceding provisions of
this Section 10(i), the Committee may not take any action described in this
Section 10(i) with respect to a Restricted Stock Award that has been granted to
a Covered Employee if such Award has been designed to meet the exception for
performance-based compensation under Section 162(m) of the Code.

(j)            Notice
of Election Under 83(b).  Each
Grantee making an election under Section 83(b) of the Code shall provide a copy
thereof to the Company within thirty (30) days of the filing of such election
with the Internal Revenue Service.

11.           PERFORMANCE AWARDS.

(a)           Designation
as a Performance Award.  The
Committee shall have the right to designate any Restricted Stock Award as a
Performance Award.  Performance Awards
may be granted only to Employees.

(b)           Performance
Awards.  In the case of any
Restricted Stock Award to any person who is or may become a Covered Employee
during the Performance Period or before payment of the Award, the Committee may
grant such Award as a Performance Award that is intended to comply with the
requirements of Section 162(m) of the Code, as determined by the Committee, in
the amount and pursuant to the terms and conditions that the Committee may
determine and set forth in the Restricted Stock Agreement, subject to the
provisions of this Section 11.

 15
 

(c)           Performance
Period.  Performance Awards will be
awarded in connection with a Performance Period, as determined by the Committee
in its discretion; provided, however, that a Performance Period may be no
shorter than twelve (12) months for any Performance Awards granted to a Covered
Employee.

(d)           Eligible
Grantees.  Prior to the commencement
of a Performance Period, the Committee shall determine the Employees who will
be eligible to receive a Performance Award with respect to that Performance
Period; provided that the Committee may determine the eligibility of any
Employee, other than a Covered Employee, after the commencement of the
Performance Period.  The Committee shall
provide a Restricted Stock Agreement, as applicable, to each Grantee who
receives a grant of a Performance Award under the Plan as soon as administratively
feasible after such Grantee receives such Award.  A Restricted Stock Agreement for a
Performance Award shall specify the applicable Performance Period, and the
Performance Goals, specific performance factors and targets related to the
Performance Goals, award criteria and the targeted amount of his or her
Performance Award, as well as any other applicable terms of the Performance
Award for which the Grantee is eligible.

(e)           Performance
Goals; Specific Performance Targets; Award Criteria.  Prior to the commencement of each Performance
Period, the Committee shall fix and establish in writing (i) the
Performance Goals that will apply to that Performance Period with respect to
each Performance Award; (ii) with respect to Performance Goals, the specific
performance factors and targets related to each Grantee and, if achieved, the
targeted amount of the Grantee’s Performance Award; and (iii) subject to
Section 11(f) below, the criteria for computing the amount that will be paid
with respect to each level of attained performance.  The Committee shall also set forth the
minimum level of performance, based on objective factors and criteria, that
must be attained during the Performance Period before any Performance Goal is
deemed to be attained and any Performance Award will be earned and become
payable, and the percentage of the Performance Award that will become earned
and payable upon attainment of various levels of performance that equal or
exceed the minimum required level.

(f)            Adjustments.

(i)            In
order to assure the incentive features of the Plan and to avoid distortion in
the operation of the Plan, the Committee may make adjustments in the
Performance Goals, specific performance factors and targets related to those
Performance Goals and award criteria established by it for any Performance
Period under this Section 11(f) whether before or after the end of the
Performance Period to the extent it deems appropriate in its sole discretion,
which shall be conclusive and binding upon all parties concerned, to compensate
for or reflect any changes which may have occurred during the Performance
Period which significantly affect factors that formed part of the basis upon
which such Performance Goals, specific performance targets related to those
Performance Goals and award criteria were determined.  Such changes may include, without limitation,
changes in accounting practices, tax, regulatory or other laws or regulations
or economic changes not in the ordinary course of business cycles.  The Committee also reserves the right to
adjust Performance Awards to insulate them from the effects of unanticipated,
extraordinary, major business developments, such as a special asset writedown,
sale of a division and other unusual events. 
The determination

 16
 

of financial performance achieved for any Performance Period may, but
need not be, adjusted by the Committee to reflect such extraordinary, major
business developments.  Any such
determination shall not be affected by subsequent adjustments or restatements.

(ii)           In
the event of any change in outstanding shares of the Company by reason of any
stock dividend or split, recapitalization, merger, consolidation, combination
or exchange of shares or other similar corporate change, the Committee shall
make such adjustments, if any, that it deems appropriate in the Performance
Goals, specific performance factors and targets related to those Performance
Goals and award criteria established by it under this Section 11(f) for any
Performance Period not then completed. 
Any and all such adjustments shall be conclusive and binding upon all
parties concerned.

(iii)          Notwithstanding
the foregoing provisions of this Section 11(f), the Committee shall have no
discretion to modify or waive the Performance Goals or conditions to the grant
or vesting of a Performance Award or to increase the amount payable to any
Grantee that would otherwise be due upon attainment of the Performance Goals,
unless such Award is not intended to qualify as qualified performance-based
compensation under Section 162(m) of the Code and the relevant Restricted Stock
Agreement provides for such discretion.

(g)           Section
162(m) of the Code.  If the Committee
intends for a Performance Award to be granted and administered in a manner
designed to preserve the deductibility of the compensation resulting from such
Award in accordance with Section 162(m) of the Code, it is the intent of the
Company and the Committee that this Section 11 be interpreted in a manner
that satisfies the applicable requirements of Section 162(m)(4)(C) of the Code,
and that the Plan be operated so that the Company may take a full tax deduction
for such Performance Awards.  If any
provision of the Plan or any Performance Award would otherwise frustrate or
conflict with this intent, that provision shall be interpreted and deemed
amended so as to avoid this conflict and such terms or provisions shall be
deemed inoperative to the extent necessary to avoid the conflict with the
requirements of Section 162(m) of the Code without invalidating the remaining
provisions hereof.  Without limiting the
generality of the preceding provisions of this Section 11(g), the Committee may
apply any restrictions it deems appropriate to the payment of dividends
declared with respect to shares of Common Stock covered by a Performance Award,
such that the dividends and/or the shares of Common Stock maintain eligibility
for the “performance-compensation exception” under Section 162(m) of the
Code.  In the event that any dividend
constitutes a derivative security or an equity security pursuant to the rules
under Section 16 of the Exchange Act, if applicable, such dividend shall
be subject to a vesting period equal to the remaining vesting period of the
shares of Common Stock subject to the Performance Award with respect to which
the dividend is paid.

12.           GENERAL PROVISIONS REGARDING AWARDS.

(a)           Form
of Award Agreement.  Each Award
granted under the Plan shall be evidenced by a written Award Agreement in such
form (which need not be the same for each Grantee) as the Committee from time
to time approves, but which is not inconsistent with the Plan, including any
provisions that may be necessary to assure that any Option that is intended to
be an Incentive Stock Option will comply with Section 422 of the Code.

 17
 

(b)           Awards
Criteria.  In determining the amount
and value of Awards to be granted, the Committee may take into account the
responsibility level, performance, potential, other Awards and such other
considerations with respect to a Grantee as it deems appropriate.  The terms of an Award Agreement may provide
that the amount payable as an Award may be adjusted for dividends or dividend
equivalent.

(c)           Date
of Grant.  The date of grant of an
Award will be the date specified by the Committee as the effective date of the
grant of an Award or, if the Committee does not so specify, will be the date on
which the Committee makes the determination to grant such Award.  The Award Agreement evidencing the Award will
be delivered to the Grantee with a copy of the Plan and other relevant Award
documents within a reasonable time after the date of grant.

(d)           Stock
Price.  The exercise price or other
measurement of stock value relative to any Award shall be the price determined
by the Committee (but, if required by applicable law, shall be not less than
the par value of the shares of Common Stock on the date of grant of the
Award).  The exercise price of any Option
shall not be less than 100% of the Fair Market Value of the shares of Common
Stock for the date of grant of the Option; provided, however, the exercise
price of any Option granted to a Ten Percent Stockholder shall not be less than
110% of the Fair Market Value of the shares of Common Stock for the date of
grant of the Option.

(e)           Period
of Award.  Awards shall be
exercisable or payable within the time or times or upon the event or events
determined by the Committee and set forth in the Award Agreement.  Unless otherwise provided in an Award
Agreement, Awards other than Restricted Stock Awards shall terminate on (and no
longer be exercisable or payable after) the earlier of:  (i) ten (10) years from the date of
grant of the Award; (ii) for an Incentive Stock Option granted to a Ten
Percent Stockholder, five (5) years from the date of grant of the Option; (iii) three
(3) months after the Grantee is no longer serving in any capacity as an
Employee, Consultant or Director of the Company for a reason other than the death
or Disability of the Grantee; (iv) six (6) months after death of the
Grantee; or (v) six (6) months after Disability of the Grantee.

(f)            Transferability
of Awards.  Awards granted under the
Plan, and any interest therein, shall not be transferable or assignable by the
Grantee, and may not be made subject to execution, attachment or similar
process, otherwise than by will or by the laws of descent and distribution, and
shall be exercisable or payable during the lifetime of the Grantee only by the
Grantee; provided, that the Grantee may, however, designate persons who or
which may exercise or receive his or her Awards following the Grantee’s death.  Notwithstanding the preceding sentence, Non-Qualified
Stock Options may be transferred to such family members, family member trusts,
family limited partnerships and other family member entities as the Committee,
in its sole discretion, may approve prior to any such transfer.  No such transfer will be approved by the
Committee if the Common Stock issuable under such transferred Award would not
be eligible to be registered on Form S-8 promulgated under the Securities Act.

(g)           Acquisitions
and Other Transactions.  The
Committee may, from time to time, cause the Company to assume outstanding
awards granted by another entity, whether in connection with an acquisition of
such other entity or otherwise, by either (i) granting an Award under the
Plan in replacement of or in substitution for the awards assumed by the
Company, or (ii) treating the assumed award as if it had been granted
under the Plan if the terms of such

 18
 

assumed award could be applied to an Award
granted under the Plan.  Such assumption
shall be permissible if the holder of the assumed award would have been
eligible to be granted an Award hereunder if the other entity had applied the
rules of this Plan to such grant.

(h)           Payment.  Payment of an Award (i) may be made in
cash, Common Stock or a combination thereof, as determined by the Committee in
its sole discretion, (ii) shall be made in a lump sum or in installments
as prescribed by the Committee in its sole discretion, and (iii) to the
extent applicable, shall be based on the Fair Market Value of the Common Stock
for the payment or exercise date. 
Payment of the amount determined under Section 9(b) or 9(c) shall be
made solely in whole shares of Common Stock in a number determined by their
Fair Market Value on the date of exercise of the Stock Appreciation Right.  If the amount payable results in a fractional
share of Common Stock, the amount payable for the fractional share will be
withheld pursuant to Section 12(j) hereof by the Company in connection with satisfying
its tax withholding obligations with respect to the exercise of the Stock
Appreciation Right.  Notwithstanding the
foregoing provisions of this Section 12(h), payment of the amount determined
under Section 9(b) or 9(c) in connection with the exercise of a Stock
Appreciation Right may be paid in cash, if such form of payment would not cause
the Stock Appreciation Right or the Plan to be subject to Section 409A of the
Code.

(i)            Notice.  If an Award involves an exercise, it may be
exercised only by delivery to the Company of a written exercise agreement approved
by the Committee (which need not be the same for each Grantee), stating the
number of shares of Common Stock being purchased or with respect to which an
Award is being exercised, the method of payment, and such other matters as may
be deemed appropriate by the Company in connection with the issuance of shares
upon exercise of the Award, together with payment in full of any exercise price
for any shares of Common Stock being purchased. 
Such exercise agreement may be part of a Grantee’s Award Agreement.

(j)            Withholding
Taxes.  The Committee may establish
such rules and procedures as it considers desirable in order to satisfy any
obligation of the Company to withhold the statutory prescribed minimum amount
of Federal, state or local income taxes or other taxes with respect to the
grant, exercise or payment of any Award under the Plan, including procedures
for a Grantee to have shares of Common Stock withheld from the total number of
shares of Common Stock to be issued or purchased upon grant or exercise of an
Award.  The shares of Common Stock
reserved for issuance under the Plan shall be reduced by the number of shares
of Common Stock withheld for the payment of taxes pursuant to this Section
12(j).  Prior to issuance of any shares
of Common Stock or, if applicable, payment of cash, upon exercise of an Award,
the Grantee shall pay or make adequate provision acceptable to the Committee
for the satisfaction of the statutory minimum prescribed amount of any Federal,
state or local income or other tax withholding obligations of the Company, if
applicable.

(k)           Exercise
of Award Following Termination of Continuous Service.

(i)            An
Award may not be exercised after the expiration date of such Award set forth in
the Award Agreement and may be exercised following the termination of a Grantee’s
Continuous Service only to the extent provided in the Award Agreement.

 19
 

(ii)           Where
the Award Agreement permits a Grantee to exercise an Award following the
termination of the Grantee’s Continuous Service for a specified period, the Award
shall terminate to the extent not exercised on the last day of the specified
period or the last day of the original term of the Award, whichever occurs
first.

(iii)          Any
Option designated as an Incentive Stock Option, to the extent not exercised
within the time permitted by law for the exercise of Incentive Stock Options
following the termination of an Optionee’s Continuous Service, shall convert
automatically to a Non-Qualified Stock Option and thereafter shall be
exercisable as such to the extent exercisable by its terms for the period
specified in the Option Agreement.

(iv)          The
Committee shall have discretion to determine whether the Continuous Service of a
Grantee has terminated and the effective date on which such Continuous Service
terminates and whether the Grantee’s Continuous Service terminated as a result
of the Disability of the Grantee.

(l)            Limitations
on Exercise.

(i)            The
Committee may specify a reasonable minimum number of shares of Common Stock or
a percentage of the shares subject to an Award that may be purchased on any
exercise of an Award; provided, that such minimum number will not prevent a
Grantee from exercising the full number of shares of Common Stock as to which
the Award is then exercisable.

(ii)           The
obligation of the Company to issue any shares of Common Stock pursuant to the
exercise of any Award or otherwise make payments hereunder shall be subject to
the condition that such exercise and the issuance and delivery of such shares and
other actions pursuant thereto comply with Section 409A of the Code, the
Securities Act, all applicable state securities and other laws and the
requirements of any stock exchange or national market system upon which the
shares of Common Stock may then be listed or quoted, as in effect on the date
of exercise.  The Company shall be under
no obligation to register the shares of Common Stock with the Securities and
Exchange Commission or to effect compliance with the registration, qualification
or listing requirements of any state securities laws or stock exchange or
national market system, and the Company shall have no liability for any
inability or failure to do so.

(iii)          As
a condition to the exercise of an Award, the Company may require the person
exercising such Award to represent and warrant at the time of any such exercise
that the shares of Common Stock are being purchased only for investment and
without any present intention to sell or distribute such shares of Common Stock
if, in the opinion of counsel for the Company, such a representation is
required by any securities or other applicable laws.

(m)          Privileges
of Stock Ownership.  Except as
provided in the Plan with respect to Restricted Stock Awards, no Grantee will
have any of the rights of a stockholder with respect to any shares of Common
Stock subject to an Award until such Award is properly exercised and the
purchased or awarded shares of Common Stock are issued and delivered to the
Grantee, as

 20

evidenced by an appropriate entry on the
books of the Company or of a duly authorized transfer agent of the
Company.  No adjustment shall be made for
dividends or distributions or other rights for which the record date is prior
to such date of issuance and delivery of shares of Common Stock, except as
provided in the Plan.

(n)           Breach; Additional Terms.  A breach of the terms and conditions of this
Plan or established by the Committee pursuant to the Award Agreement shall
cause a forfeiture of the Award.  At the
time of such Award, the Committee may, in its sole discretion, prescribe
additional terms, conditions or restrictions relating to the Award, including
provisions pertaining to the termination of the Grantee’s employment (by
retirement, Disability, death or otherwise) prior to expiration of the
Forfeiture Restrictions or other vesting provisions.  Such additional terms, conditions or
restrictions shall also be set forth in an Award Agreement made in connection
with the Award.

13.           ADJUSTMENT UPON CHANGES IN CAPITALIZATION AND
CORPORATE EVENTS.

(a)           Capital Adjustments.  The number of shares of Common Stock (i) covered
by each outstanding Award granted under the Plan, the exercise, target or
purchase price of each outstanding Award, and any other terms of the Award that
the Committee determines requires adjustment, and (ii) available for
issuance under Sections 5 and 7 shall be adjusted to reflect, as deemed
appropriate by the Committee, any increase or decrease in the number of shares
of Common Stock resulting from a stock dividend, stock split, reverse stock
split, combination, reclassification or similar change in the capital structure
of the Company without receipt of consideration, subject to any required action
by the Board or the stockholders of the Company and compliance with applicable
securities laws; provided, however, that the exercise, target or purchase price
may not be decreased to below the par value, if any, for the shares of Common
Stock as adjusted pursuant to this Section 13(a).  Except as the Committee determines, no
issuance by the Company of shares of capital stock of any class, or securities
convertible into shares of capital stock of any class, shall affect, and no
adjustment by reason hereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Award. 
Notwithstanding the foregoing provisions of this Section 13(a), no
adjustment may be made by the Committee with respect to an outstanding Award
that would cause such Award and/or the Plan to become subject to Section 409A
of the Code.

(b)           Dissolution or Liquidation.  The Committee shall notify the Grantee at
least twenty (20) days prior to any proposed dissolution or liquidation of the
Company.  Unless specifically provided
otherwise in an individual Award or Award Agreement or in a then-effective
written employment agreement between the Grantee and the Company or an
Affiliate, to the extent that an Award has not been previously exercised, or
the Forfeiture Restrictions have not lapsed, any such Award that is an Option
or Stock Appreciation Right shall expire, and any such Award that is a
Restricted Stock Award shall be forfeited, and the shares of Common Stock
subject to such Award shall be returned to the Company, in each case, immediately
prior to consummation of such dissolution or liquidation, and such Award shall
terminate immediately prior to consummation of such dissolution or liquidation.

 21
 

(c)           Change in Control.  Unless specifically provided otherwise with
respect to Change in Control events in an individual Award or Award Agreement
or in a then-effective written employment agreement between the Grantee and the
Company or an Affiliate, if, during the term of the Plan, a Change in Control
occurs, the surviving entity or purchaser described in Section 3(f), the “Purchaser,”
shall either assume the obligations of the Company under the outstanding Awards
or convert the outstanding Awards into awards of at least equal value as to
capital stock of the Purchaser.  In the
event such Purchaser refuses to assume or substitute Awards pursuant to a
Change in Control, each Award which is at the time outstanding under the Plan
shall (i) except as provided otherwise in an individual Award or Award Agreement,
automatically become, subject to all other terms of the Award or Award Agreement,
fully vested and exercisable or payable, as appropriate, and be released from
any repurchase or forfeiture provisions, immediately prior to the specified
effective date of such Change in Control, for all of the shares of Common Stock
at the time represented by such Award, (ii) the Forfeiture Restrictions
applicable to all outstanding Restricted Stock Awards shall lapse and shares of
Common Stock subject to such Restricted Stock Awards shall be released from
escrow (or transferred from book entry with the Company’s transfer agent, if
applicable), and delivered (subject to Grantee’s satisfaction of the
requirements of Section 12(j)) to the Grantees of the Awards free of any
Forfeiture Restriction, (iii) all other Awards shall become fully vested
and payment thereof shall be accelerated using, if applicable, the then-current
Fair Market Value to measure any payment that is based on the value of the
Common Stock or using such higher amount as the Committee may determine to be
more reflective of the actual value of such stock, and (iv) notwithstanding
any contrary terms in the Award or Award Agreement, expire on a date at least
twenty (20) days after the Committee gives written notice to Grantees specifying
the terms and conditions of the acceleration of vesting of their Awards and, if
applicable, the remaining period to exercise their Options.

To the extent that a Grantee
exercises an Award before or on the effective date of the Change in Control, (i) the
Company shall issue all Common Stock purchased or issuable by exercise of that Award
(subject to the Grantee’s satisfaction of the requirements of Section 12(j)),
and those shares of Common Stock shall be treated as issued and outstanding for
purposes of the Change in Control, and (ii) with respect to a Stock
Appreciation Right that is to be settled in the form of a cash payment, the
Company shall make such payment to the Grantee (subject to Grantee’s
satisfaction of the requirements of Section 12(j)).  Upon a Change in Control, if the outstanding Awards
are not assumed or substituted by the Purchaser, the Plan shall terminate and
any unexercised Awards outstanding under the Plan at that date shall terminate
as of the expiration of the period specified in the notice to be provided in
the immediately preceding paragraph.

14.           STOCKHOLDER APPROVAL.  The Company shall obtain the approval of the
Plan by the Company’s stockholders to the extent required to satisfy Sections
162(m) or 422 of the Code or to satisfy or comply with any applicable laws or
the rules of any stock exchange or national market system on which the Common
Stock may be listed or quoted.   No Award
that is granted as a result of any increase in the number of shares of Common
Stock authorized to be issued under the Plan may be exercised or forfeiture
restrictions lapse prior to the time such increase has been approved by the stockholders
of the Company.  No Award shall be made
hereunder unless and until such stockholder approval of the Plan is obtained.

 22
 

15.           ADMINISTRATION.  The Plan shall be administered by the
Committee.  The Committee shall interpret
the Plan and any Awards granted pursuant to the Plan and shall prescribe such
rules and regulations in connection with the operation of the Plan as it
determines to be advisable for the administration of the Plan.  The Committee may rescind and amend its rules
and regulations from time to time.  The
interpretation by the Committee of any of the provisions of the Plan or any Award
granted under the Plan shall be final and binding upon the Company and all
persons having an interest in any Award or any shares of Common Stock purchased
or other payments received pursuant to an Award.  Notwithstanding the authority hereby
delegated to the Committee to grant Awards to Employees, Directors and Consultants
under the Plan, the Board shall have full authority, subject to the express
provisions of the Plan, to grant Awards to Employees, Directors and Consultants
under the Plan, to interpret the Plan, to provide, modify and rescind rules and
regulations relating to the Plan, to determine the terms and provision of Awards
granted to Employees, Consultants and Directors under the Plan and to make all
other determinations and perform such actions as the Board deems necessary or
advisable to administer the Plan.  No
member of the Committee or the Board shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Award granted
hereunder.

16.           EFFECT OF PLAN.  Neither the adoption of the Plan nor any
action of the Board or the Committee shall be deemed to give any Employee,
Director or Consultant any right to be granted an Award or any other rights
except as may be evidenced by the Award Agreement, or any amendment thereto,
duly authorized by the Committee and executed on behalf of the Company, and
then only to the extent and on the terms and conditions expressly set forth
therein.  The existence of the Plan and
the Awards granted hereunder shall not affect in any way the right of the
Board, the Committee or the stockholders 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 or other
transaction involving the Company, any issue of bonds, debentures, or shares of
preferred stock ranking prior to or affecting the Common Stock or the rights
thereof, the dissolution or liquidation of the Company or any sale or transfer
of all or any part of the Company’s assets or business, or any other corporate
act or proceeding by or for the Company. 
Nothing contained in the Plan or in any Award Agreement or in other
related documents shall confer upon any Employee, Director or Consultant any
right with respect to such person’s Continuous Service or interfere or affect
in any way with the right of the Company or an Affiliate to terminate such
person’s Continuous Service at any time, with or without cause.

17.           NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS.  Except as specifically provided in a
retirement or other benefit plan of the Company or an Affiliate, Awards shall
not be deemed compensation for purposes of computing benefits or contributions
under any retirement plan of the Company or an Affiliate, and shall not affect
any benefits under any other benefit plan of any kind or any benefit plan
subsequently instituted under which the availability or amount of benefits is
related to level of compensation.  The
Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement
Income Security Act of 1974, as amended.

 23
 

18.           AMENDMENT OR TERMINATION OF PLAN.  The Board in its discretion may, at any time
or from time to time after the date of adoption of the Plan, terminate or amend
the Plan in any respect, including 
amendment of any form of Award Agreement, exercise agreement, or
instrument to be executed pursuant to the Plan; provided, however, to the
extent necessary to comply with the Code, including Sections 162(m) and 422 of
the Code, other applicable laws, or the applicable requirements of any stock
exchange or national market system, the Company shall obtain stockholder
approval of any Plan amendment in such manner and to such a degree as
required.  No Award may be granted after
termination of the Plan.  Any amendment
or termination of the Plan shall not affect Awards previously granted, and such
Awards shall otherwise remain in full force and effect as if the Plan had not
been amended or terminated, unless mutually agreed otherwise in a writing
(including an Award Agreement) signed by the Grantee and the Company.

19.           EFFECTIVE DATE AND TERM OF PLAN.  The Plan shall become effective as of the
Effective Date, which is the date the Plan was approved by the Company’s
stockholders.  The Plan shall continue in
effect for a term of ten (10) years from the Effective Date, and shall terminate
on the day before the tenth anniversary of the Effective Date, unless sooner
terminated by action of the Board.

20.           SEVERABILITY AND REFORMATION.  The Company intends all provisions of the
Plan to be enforced to the fullest extent permitted by law.  Accordingly, should a court of competent
jurisdiction determine that the scope of any provision of the Plan is too broad
to be enforced as written, the court should reform the provision to such
narrower scope as it determines to be enforceable.  If, however, any provision of the Plan is
held to be wholly illegal, invalid, or unenforceable under present or future
law, such provision shall be fully severable and severed, and the Plan shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
were never a part hereof, and the remaining provisions of the Plan shall remain
in full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance.

21.           GOVERNING LAW.  The Plan and all issues or matters relating
to the Plan shall be governed by, determined and enforced under, and construed
and interpreted in accordance with the laws of the State of Texas.

22.           INTERPRETIVE MATTERS.  Whenever required by the context, pronouns
and any variation thereof shall be deemed to refer to the masculine, feminine,
or neuter, and the singular shall include the plural, and visa versa.  The term “include” or “including” does not
denote or imply any limitation.  The term
“business day” means any Monday through Friday other than such a day on which
banks are authorized to be closed in the State of Texas.  The captions and headings used in the Plan
are inserted for convenience and shall not be deemed a part of the Plan for
construction or interpretation.

 24EXHIBIT 4.2

 

DG FASTCHANNEL, INC.

2006 EMPLOYEE STOCK PURCHASE PLAN

1.                                      ESTABLISHMENT,
PURPOSE AND TERM OF PLAN.

1.1          Establishment.  The DG FastChannel, Inc. 2006 Employee Stock
Purchase Plan (the “Plan”) is hereby established effective as of October
1, 2006 (the “Effective Date”).

1.2          Purpose.
 The purpose of
the Plan is to align the interests of the Company with its stockholders by
providing an incentive to attract, retain and reward Eligible Employees of the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group. The Plan provides
such Eligible Employees with an opportunity to acquire a proprietary interest in
the Company through the purchase of Stock. 
The Company intends that the Plan qualify as an “employee stock purchase
plan” under Section 423 of the Code (including any amendments or replacements
of such section), and the Plan shall be so construed.

1.3          Term
of Plan.  The
Plan shall continue in effect until the earlier of (a) its termination by
the Board, (b) the date on which all of the shares of Stock available for
issuance under the Plan have been issued, or (c) the tenth anniversary of
the Effective Date.

2.                                      DEFINITIONS
AND CONSTRUCTION.

2.1          Definitions.  Any term not expressly defined in the Plan
but defined for purposes of Section 423 of the Code shall have the same
definition herein.  Whenever used herein,
the following terms shall have their respective meanings set forth below.

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

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

(c)           “Committee” means a committee
of the Board duly appointed to administer the Plan and having such powers as
shall be specified by the Board.  Unless
the powers of the Committee have been specifically limited, the Committee shall
have all of the powers and authority of the Board granted herein, including
specifically the powers and authority described in Section 3, but not the power
to amend or terminate the Plan.  If the
Board does not appoint a Committee, or if a Committee otherwise fails to exist
at any time during the term hereof, the Board shall perform the functions of
the Committee.

(d)           “Company” means DG
FastChannel, Inc., a Delaware corporation, or any successor corporation
thereto.

(e)           “Compensation” means, with
respect to any Offering Period, regular base wages or salary, overtime,
bonuses, commissions, profit sharing distributions and

 

other incentive-type payments paid during
such Offering Period before deduction for any contributions to any plan
maintained by a Participating Company and described in Section 401(k) or
Section 125 of the Code.  However,
Compensation shall not include any contributions (other than contributions
under Section 401(k) or 125 of the Code) made on the Employee’s behalf by the
Company or any Participating Company to any deferred compensation or welfare
benefit program now or hereafter established.

(f)            “Eligible Employee” means an
Employee who meets the requirements set forth in Section 5 for eligibility to
participate in the Plan.

(g)           “Employee” means a person
treated as an employee of a Participating Company for purposes of Section 423
of the Code.  A Participant shall be
deemed to have ceased to be an Employee either upon an actual termination of
employment or upon the corporation employing the Participant ceasing to be a
Participating Company.  For purposes of
the Plan, an individual shall not be deemed to have ceased to be an Employee
while such individual is on any military leave, sick leave, or other bona fide
leave of absence approved by the Company of 90 days or less.  In the event an individual’s leave of absence
exceeds 90 days, the individual shall be deemed to have ceased to be an
Employee on the 91st day of such leave unless the individual’s right to
reemployment with the Participating Company Group is guaranteed either by
statute or by contract.  The Company
shall determine in good faith and in the exercise of its discretion whether an
individual has become or has ceased to be an Employee and the effective date of
such individual’s employment or termination of employment, as the case may
be.  For purposes of an individual’s
participation in or other rights, if any, under the Plan as of the time of the
Company’s determination, all such determinations by the Company shall be final,
binding and conclusive, notwithstanding that the Company or any governmental
agency subsequently makes a contrary determination.

(h)           “Fair Market Value” means, as
of any date, the closing price of a share of Stock on the New York Stock
Exchange or such other principal national securities exchange on which the
Stock is then listed or admitted to trading, if the stock is then listed or
admitted to trading on any national securities exchange.  The closing price shall be the last reported
sale price, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, as reported by said exchange.  If the Stock is not then so listed on a
national securities exchange, the Fair Market Value shall be deemed to be the
closing price of a share of Stock (or the mean of the closing bid and asked
price if the Stock is so quoted instead) as quoted on the Nasdaq National
Market, the Nasdaq Small-Cap Market or such other market system or regional
securities exchange constituting the primary market for the Stock as reported
in The Wall Street Journal or such other
source as the Company deems reliable.  If
the relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded to
the relevant date, or such other appropriate day as shall be determined by the
Board, in its sole discretion.  If there
is no public market for the Stock, the Fair Market Value on any relevant date
shall be as determined by the Board.

(i)            “Offering” means an Offering
of Stock as provided in Section 6.

 2
 

 

(j)            “Offering Date” means, for
any Offering, the first day of the Offering Period with respect to such
Offering.

(k)           “Offering Period” means a
period established in accordance with Section 6.1.

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

(m)          “Participant” means an Eligible
Employee who has become a participant in an Offering Period in accordance with
Section 7 and remains a participant in accordance with the Plan.

(n)           “Participating Company” means
the Company and each Parent Corporation or Subsidiary Corporation unless any
such entity is designated by the Board as not eligible to participate in the
Plan.  The Board shall have the sole and
absolute discretion to determine from time to time which Parent Corporations or
Subsidiary Corporations, if any, shall not be eligible to become Participating
Companies.

(o)           “Participating Company Group”
means, at any point in time, the Company and all other corporations
collectively which are then Participating Companies.

(p)           “Purchase Date” means for any
Offering Period (or Purchase Period, if so determined by the Board in
accordance with Section 6.2) the last day of such period.

(q)           “Purchase Period” means a
period, if any, established in accordance with Section 6.2.

(r)            “Purchase Price” means the
price at which a share of Stock may be purchased under the Plan, as determined
in accordance with Section 9.

(s)           “Purchase Right” means an
option granted to a Participant pursuant to the Plan to purchase such shares of
Stock as provided in Section 8, which the Participant may or may not
exercise during the Offering Period in which such option is outstanding.  Such option arises from the right of a
Participant to withdraw any accumulated payroll deductions of the Participant
not previously applied to the purchase of Stock under the Plan and to terminate
participation in the Plan at any time during an Offering Period.

(t)            “Stock” means the Common
Stock, $0.001 par value per share, of the Company, as adjusted from time to
time in accordance with Section 4.2.

(u)           “Subscription Agreement” means
a written agreement in such form as specified by the Company, stating an
Employee’s election to participate in the Plan, authorizing payroll deductions
under the Plan from the Employee’s Compensation, designating a beneficiary to
receive the Participant’s benefits under the Plan, if any, payable as a result
of the

 3
 

 

Participant’s death and requiring the
Participant to notify the Company of the details of a “Disqualifying
Disposition” as described in Section 19 of any shares of Stock.

(v)           “Subscription Date” means the
last business day prior to the Offering Date of an Offering Period or such
earlier date as the Company shall establish.

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

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

3.                                      ADMINISTRATION.

3.1          Administration by the Board.  The Plan shall be administered by the
Board.  All questions of interpretation
of the Plan, of any form of agreement or other document employed by the Company
in the administration of the Plan, or of any Purchase Right shall be determined
by the Board and shall be final and binding upon all persons having an interest
in the Plan or the Purchase Right. Subject to the provisions of the Plan, the
Board shall determine all of the relevant terms and conditions of Purchase
Rights granted pursuant to the Plan; provided, however, that all Participants
granted Purchase Rights pursuant to the Plan shall have the same rights and
privileges within the meaning of Section 423(b)(5) of the Code.  All expenses incurred in connection with the
administration of the Plan shall be paid by the Company.

3.2          Authority of Officers.  Any officer of the Company shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election that is the responsibility of or that is
allocated to the Company herein, provided that the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.

3.3          Policies and Procedures Established by
the Board.  The
Board may, from time to time, consistent with the Plan and the requirements of
Section 423 of the Code, establish, change or terminate such rules, guidelines,
policies, procedures, limitations, or adjustments as deemed advisable by the
Board, in its sole discretion, for the proper administration of the Plan,
including, without limitation, (a) a minimum payroll deduction amount
required for participation in an Offering, (b) a limitation on the
frequency or number of changes permitted in the rate of payroll deduction
during an Offering, (c) a payroll deduction greater than or less than the
amount designated by a Participant in order to adjust for the Company’s delay
or mistake in processing a Subscription Agreement or in otherwise effecting a
Participant election under the Plan or as advisable to comply with the
requirements of Section 423 of the Code, (d) determination of the date and
manner by which the Fair Market Value of a share of Stock is determined for
purposes of administration of the Plan, and (e) increasing or decreasing
the holding period as set forth in Section 11.3.

 4
 

 

4.                                      SHARES
SUBJECT TO PLAN.

4.1          Maximum Number of Shares Issuable.  Subject to adjustment as provided in Section
4.2, the maximum aggregate number of shares of Stock that may be issued under
the Plan shall be 100,000 and shall consist of authorized but unissued or
reacquired shares of Stock, or any combination thereof.  If an outstanding Purchase Right for any
reason expires or is terminated or canceled, the shares of Stock allocable to
the unexercised portion of such Purchase Right shall again be available for
issuance under the Plan.

4.2          Adjustments for Changes in Capital
Structure.  In
the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification or similar changes in the
capital structure of the Company, or in the event of any merger, sale of assets
or other reorganization in which the Company is a party, appropriate
adjustments shall be made in the number and class of shares subject to the Plan
and each Purchase Right and in the Purchase Price.  If a majority of the shares which are of the
same class as the shares that are subject to outstanding Purchase Rights are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change Event (as defined in Section 14)) shares of another
corporation (the “New Shares”), the Board may unilaterally amend the
outstanding Purchase Rights to provide that such Purchase Rights are
exercisable for New Shares.  In the event
of any such amendment the number of shares subject to, and the Purchase Price
of, the outstanding Purchase Rights shall be adjusted in a fair and equitable
manner, as determined by the Board, in its sole discretion.  Notwithstanding the foregoing, any fractional
share resulting from an adjustment pursuant to this Section 4.2 shall be
rounded down to the nearest whole number, and in no event may the Purchase
Price be decreased in amount less than the par value, if any, of the stock
subject to the Purchase Right.  The
adjustments determined by the Board pursuant to this Section 4.2 shall be
final, binding and conclusive.

5.                                      ELIGIBILITY.

5.1          Employees Eligible to Participate.  Each Employee of a Participating Company is
eligible to participate in the Plan and shall be deemed an Eligible Employee
except the  following:

(a)           any Employee who is customarily
employed by the Participating Company Group for 20 hours or less per week; and

(b)           any Employee who is customarily
employed by the Participating Company Group for not more than five months in
any calendar year.  For this purpose, the
Board may, on a consistent and uniform basis, credit an Employee’s period of
service with an entity acquired by the Company or a Participating Company or
with an entity whose assets are acquired by the Company or a Participating
Company as service with the Participating Company Group.

5.2          Exclusion of Certain Stockholders.  Notwithstanding any provision of the Plan to
the contrary, no Employee shall be granted a Purchase Right under the Plan if,
immediately after such grant, such Employee would own or hold options to
purchase stock of the Company or of any Parent Corporation or Subsidiary Corporation
possessing five percent (5%)

 5
 

 

or more of the total combined voting power or
value of all classes of stock of such corporation, as determined in accordance
with Section 423(b)(3) of the Code.  For
purposes of this Section 5.2, the attribution rules of Section 424(d) of the
Code shall apply in determining the stock ownership of such Employee.

6.                                      OFFERINGS.

6.1          Offering Periods.  Except as otherwise set forth below, the Plan
shall be implemented by sequential Offerings of approximately six months duration,
each of which shall constitute an Offering Period for purposes of the
Plan.  The first Offering Period shall
commence on the Effective Date and end on December 31, 2006.  Subsequent Offerings shall commence on the
first day of January and July of each year and end on the last day of the
following June and December, respectively, occurring thereafter.  Notwithstanding the foregoing, the Board may
establish a different duration for one or more future Offering Periods or
different commencing or ending dates for such Offering Periods; provided,
however, that no Offering Period may have a duration exceeding twenty-four (24)
months.  If the first or last day of an
Offering Period is not a day on which the national or regional securities
exchange or market system constituting the primary market for the Stock is open
for trading, the Company shall specify the trading day that will be deemed the
first or last day, as the case may be, of the Offering Period.

6.2          Purchase Periods.  If the Board so determines, in its
discretion, each Offering Period may consist of two or more consecutive
Purchase Periods having such duration as the Board shall specify, and the last
day of each Purchase Period shall be a Purchase Date.  If the first or last day of a Purchase Period
is not a day on which the national or regional securities exchange or market
system for the Stock, as the case may be, is open for trading, the Company
shall specify the trading day that will be deemed the first or last day, as the
case may be, of the Purchase Period.

7.                                      PARTICIPATION
IN THIS PLAN.

7.1          Initial Participation.  Except as otherwise provided in this Section
7.1, an Eligible Employee may become a Participant in an Offering Period by
delivering a properly completed Subscription Agreement to the office designated
by the Company not later than the close of business for such office on the
Subscription Date established by the Company for such Offering Period, which
shall be before the first day of the relevant Offering Period.  An Eligible Employee who does not deliver a
properly completed Subscription Agreement on or before the Subscription Date
for an Offering Period shall not participate in the Plan for that Offering
Period or for any subsequent Offering Period unless such Eligible Employee
subsequently delivers a properly completed Subscription Agreement to the
appropriate office of the Company on or before the Subscription Date for such
subsequent Offering Period. An Employee who becomes an Eligible Employee after
the Offering Date of an Offering Period shall be eligible to participate in
such Offering Period if the Eligible Employee delivers a properly completed
Subscription Agreement to the office designated by the Company not later than
the close of business for such office on the earlier of (i) thirty days before
the Purchase Date for such Offering Period or (ii) the tenth business day
following the date the Employee became an Eligible Employee.

 6
 

 

7.2          Continued Participation.  A Participant shall automatically participate
in the next Offering Period commencing immediately after the Purchase Date of
each Offering Period in which the Participant participates provided that such
Participant remains an Eligible Employee on the Offering Date of the new
Offering Period and has not (a) withdrawn from the Plan pursuant to
Section 12.1, (b) elected to stop deductions during the immediately preceding
Offering Period as provided in Section 10.3, or (c) terminated employment
as provided in Section 13.  A
Participant who may automatically participate in a subsequent Offering Period,
as provided in this Section, is not required to deliver any additional
Subscription Agreement for the subsequent Offering Period in order to continue
participation in the Plan.  However, a
Participant may deliver a new Subscription Agreement for a subsequent Offering
Period in accordance with the procedures set forth in Section 7.1 if the
Participant desires to change any of the elections contained in the Participant’s
then effective Subscription Agreement.

8.                                      RIGHT
TO PURCHASE SHARES.

8.1          Grant of Purchase Right.  Except as set forth below, on the Offering
Date of each Offering Period, each Participant in such Offering Period shall be
granted automatically a Purchase Right consisting of an option to purchase that
number of shares equal to the quotient of (i) the aggregate payroll
deductions withheld on behalf of such Participant during the Offering Period,
divided by (ii) the Purchase Price for that Offering Period.  No Purchase Right shall be granted on an
Offering Date to any person who is not, on such Offering Date, an Eligible
Employee.

8.2          Offering Period Purchase Limitation.  Notwithstanding any provision of the Plan to
the contrary, the maximum number of shares of Stock that may be purchased under
the Plan by a Participant during any Offering Period is 250 shares.

8.3          Calendar Year Purchase Limitation.  Notwithstanding any provision of the Plan to
the contrary, no Participant shall be granted a Purchase Right which permits
his or her right to purchase shares of Stock under the Plan to accrue at a rate
which, when aggregated with such Participant’s rights to purchase shares under
all other employee stock purchase plans of a Participating Company intended to
meet the requirements of Section 423 of the Code, exceeds $25,000 in Fair
Market Value (or such other limit, if any, as may be imposed by the Code) for
each calendar year in which such Purchase Right is outstanding at any
time.  For purposes of the preceding
sentence, the Fair Market Value of shares purchased during a given Offering Period
shall be determined as of the Offering Date for such Offering Period.  The limitation described in this Section 8.3
shall be applied in conformance with applicable regulations under Section
423(b)(8) of the Code.

9.                                      PURCHASE
PRICE.

The Purchase
Price at which each share of Stock may be acquired in an Offering Period upon
the exercise of all or any portion of a Purchase Right shall be established by
the Board; provided, however, that the Purchase Right shall not be less than
ninety-five percent (95%) of the Fair Market Value of a share of Stock on the
Purchase Date.  Unless otherwise provided
by the Board prior to the commencement of an Offering Period, the Purchase
Price for

 7
 

 

that Offering Period shall be ninety-five
percent (95%) of the Fair Market Value of a share of Stock on the Purchase
Date.

10.                               ACCUMULATION
OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION.

Shares of
Stock acquired pursuant to the exercise of all or any portion of a Purchase
Right may be paid for only by means of payroll deductions from the Participant’s
Compensation accumulated during the Offering Period for which such Purchase
Right was granted, subject to the following:

10.1        Amount of Payroll Deductions.  Except as otherwise provided herein, the
amount to be deducted under the Plan from a Participant’s Compensation on each
payday during an Offering Period shall be determined by the Participant
Subscription Agreement. The Subscription Agreement shall set forth the
percentage of the Participant’s Compensation to be deducted on each payday
during an Offering Period in whole percentages of not less than one percent
(1%) (except as a result of a election pursuant to Section 10.3 to stop
deductions made effective following the first payday during an Offering) or
more than ten percent (10%).  Notwithstanding
the foregoing, the Board may change the limits on payroll deductions effective
as of any future Offering Date.

10.2        Commencement of Payroll Deductions.  Payroll deductions shall commence on the
first payday following the Offering Date and shall continue to the end of the
Offering Period unless sooner altered or terminated as provided herein.

10.3        Election to Change or Stop Payroll
Deductions.  A
Participant may not elect to increase or decrease the rate of deduction from
his or her Compensation during an Offering Period.  However, at any time prior to the two-week
period ending on the last day of an Offering Period, a Participant may elect to
stop deductions from his or her Compensation for such Offering Period by
delivering to the Company’s designated office an amended Subscription Agreement
authorizing such cessation of deductions on or before the “Change Notice Date.”  The “Change Notice Date” shall be a date
prior to the beginning of the first payday period for which such election is to
be effective as established by the Company from time to time and announced to
the Participants. Unless otherwise established by the Company, the Change
Notice Date shall be the seventh day prior to the beginning of the first pay
period for which such election is to be effective.  A Participant who elects to cease his or her
payroll deductions shall nevertheless remain a Participant in the current
Offering Period with respect to deductions made before the effective date of
such change unless such Participant withdraws from the Plan as provided in
Section 12.1.

10.4        Administrative Suspension of Payroll
Deductions.  The
Company may, in its sole discretion, suspend a Participant’s payroll deductions
under the Plan as the Company deems advisable to avoid accumulating payroll
deductions in excess of the amount that could reasonably be anticipated to
purchase the maximum number of shares of Stock permitted during a calendar year
under the limit set forth in Section 8.3. 
Payroll deductions shall be resumed at

 8
 

 

the rate specified in the Participant’s then
effective Subscription Agreement at the beginning of the next Offering Period
the Purchase Date of which falls in the following calendar year.

10.5        Participant Accounts.  Individual bookkeeping accounts shall be
maintained for each Participant.  All
payroll deductions from a Participant’s Compensation shall be credited to such
Participant’s Plan account and shall be deposited with the general funds of the
Company.  All payroll deductions received
or held by the Company may be used by the Company for any corporate purpose.

10.6        No Interest Paid.  Interest shall not be paid on sums deducted
from a Participant’s Compensation pursuant to the Plan.

10.7        Voluntary Withdrawal from Plan Account.  A Participant may, during an Offering Period,
withdraw all but not less than all of the payroll deductions credited to his or
her Plan account and not previously applied toward the purchase of Stock by
delivering to the Company’s designated office a written notice on a form
provided by the Company for such purpose at any time prior to the two-week
period ending on the last day of the Offering Period.  A Participant who withdraws the entire
remaining balance credited to his or her Plan account shall be deemed to have
withdrawn from the Plan in accordance with Section 12.1.  Amounts withdrawn shall be returned to the
Participant as soon as practicable after the Participant’s notice of withdrawal
and the Company may from time to time establish or change limitations on the frequency of withdrawals
permitted under this Section 10.7,
establish a minimum dollar amount that must be retained in the Participant’s
Plan account, or terminate the withdrawal right provided by this
Section.

11.                               PURCHASE
OF SHARES.

11.1        Exercise of Purchase Right.  On each Purchase Date of a Offering Period,
each Participant who has not withdrawn from the Plan and whose participation in
the Offering has not terminated before such Purchase Date shall automatically
acquire pursuant to the exercise of the Participant’s Purchase Right the number
of whole shares of Stock determined by dividing (a) the total amount of
the Participant’s payroll deductions accumulated in the Participant’s Plan
account during the Offering Period and not previously applied toward the
purchase of Stock by (b) the Purchase Price. However, in no event shall
the number of shares purchased by the Participant during an Offering Period
exceed the number of shares subject to the Participant’s Purchase Right.  No shares of Stock shall be purchased on a
Purchase Date on behalf of a Participant whose participation in the Offering or
the Plan has terminated before the Purchase Date.

11.2        Pro Rata Allocation of Shares.  In the event that the number of shares of
Stock which might be purchased by all Participants in the Plan on a Purchase
Date exceeds the number of shares of Stock available in the Plan as provided in
Section 4.1, the Company shall make a pro rata allocation of the remaining
shares in as uniform a manner as shall be practicable and as the Company shall
determine to be equitable.  Any
fractional share resulting from such pro rata allocation to any Participant
shall be disregarded and the amount associated with such fractional share shall
be returned to the Participant as soon as administratively practicable.

 9
 

 

11.3        Issuance of Certificates and Required
Holding Period. 
As soon as practicable after each Purchase Date, the Company shall
arrange the issuance on behalf of each Participant, as appropriate, of a
certificate representing the shares acquired by the Participant on such
Purchase Date and the delivery of such certificate to or on behalf of the
Participant.  As provided in Section 19
and in a Participant’s Subscription Agreement, a Participant may be required to
notify the Company if any shares of Stock are sold prior to the expiration of
the dates described in Section 423(a)(1) of the Code.  Shares issued under the Plan shall be
registered in the name of the Participant, or if requested by the Participant
in the name of the Participant and his or her spouse, or, if applicable, in the
names of the heirs of the Participant.

11.4        Return of Cash Balance.  Any cash balance remaining in a Participant’s
Plan account following any Purchase Date shall be refunded to the Participant
as soon as practicable after such Purchase Date. However, if the cash to be
returned to a Participant pursuant to the preceding sentence is an amount less
than the amount that would have been necessary to purchase an additional whole
share of Stock on such Purchase Date, the Company may retain such amount in the
Participant’s Plan account to be applied toward the purchase of shares of Stock
in the subsequent Purchase Period or Offering Period, as the case may be.

11.5        Tax Withholding.  At the time a Participant’s Purchase right is
exercised, in whole or in part, or at the time a Participant disposes of some
or all of the shares of Stock he or she acquires under the Plan, the
Participant shall make adequate provisions for the federal, state and local tax
withholding obligations of the Participating Company Group, if any, which arise
upon exercise of the Purchase Right or upon such disposition of shares,
respectively.  The Participating Company
Group may, but shall not be obligated to, withhold from the Participant’s
compensation the amount necessary to meet such withholding obligations.

11.6        Expiration of Purchase Right.  Any portion of a Participant’s Purchase Right
remaining unexercised after the end of the Offering Period to which the
Purchase Right relates shall expire immediately upon the end of the Offering
Period.

11.7        Reports to Participants.  Each Participant who has exercised all of his
or her Purchase Right shall receive, as soon as practicable after the Purchase
Date, a report of such Participant’s Plan account setting forth the total
payroll deductions accumulated prior to such exercise, the number of shares of
Stock purchased, the Purchase Price for such shares, the date of purchase and
the cash balance, if any, remaining immediately after such purchase that is to
be refunded or retained in the Participant’s Plan account pursuant to Section
11.4.  The report required by this
Section 11.7 may be delivered in such form and by such means, including by
electronic transmissions, as the Company may determine.

12.                               WITHDRAWAL
FROM THE PLAN.

12.1        Voluntary
Withdrawal from the Plan.  A Participant may withdraw from the Plan by
signing and delivering to the Company’s designated office a written notice of
withdrawal on a form provided by the Company for such purpose. Such withdrawal
may be elected at any time prior to the two-week period ending on the last day
of an Offering Period.  A Participant who
voluntarily withdraws from the Plan is prohibited from resuming participation
in

 10

the Plan in the same Offering from which he
or she withdrew, but may participate in any subsequent Offering by again
satisfying the requirements of Sections 5 and 7.1.  The Company may impose from time to time, a
requirement that the notice of withdrawal from the Plan be on file with the
Company’s designated office for a reasonable period prior to the effectiveness
of the Participant’s withdrawal.

12.2        Return of Payroll Deductions.  Upon a Participant’s voluntary withdrawal
from the Plan pursuant to Section 12.1, the Participant’s accumulated payroll
deductions which have not been applied toward the purchase of shares of Stock
shall be refunded to the Participant as soon as practicable after the
withdrawal, without the payment of any interest, and the Participant’s interest
in the Plan shall terminate.  Such
accumulated payroll deductions to be refunded in accordance with this Section
12.2 may not be applied to any other Offering under the Plan.

13.                               TERMINATION
OF EMPLOYMENT OR ELIGIBILITY.

Upon a Participant’s
ceasing, prior to a Purchase Date, to be an Employee of the Participating
Company Group for any reason, including retirement, disability or death, or the
failure of a Participant to remain an Eligible Employee, the Participant’s
participation in the Plan shall terminate immediately.  In such event, the payroll deductions
credited to the Participant’s Plan account since the last Purchase Date shall,
as soon as practicable, be returned to the Participant or in the case of the
Participant’s death, to the Participant’s designated beneficiary, or if none,
to the Participant’s legal representative, and all of the Participant’s rights
under the Plan shall terminate.  Interest
shall not be paid on sums returned pursuant to this Section 13.  A Participant whose participation has been so
terminated may again become eligible to participate in the Plan by satisfying
the requirement of Sections 5 and 7.1.

14.                               CHANGE
IN CONTROL.

14.1        Definitions.

(a)           An “Ownership
Change Event” shall be deemed to have occurred if any of the following
occurs with respect to the Company: (i) the direct or indirect sale or
exchange in a single or series of related transactions by the stockholders of
the Company of more than fifty percent (50%) of the voting stock of the
Company; (ii) a merger or consolidation of the Company with or into
another entity; or (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company.

(b)           A
“Change in Control” shall mean an Ownership Change Event or a series of related
Ownership Change Events (collectively, the “Transaction”) wherein the
stockholders of the Company immediately before the Transaction do not retain
immediately after the Transaction, in substantially the same proportions as
their ownership of shares of the Company’s voting stock immediately before the
Transaction, direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding voting stock of the
Company or the corporation or corporations to which the assets of the Company
were transferred (the “Transferee Corporation(s)”), as the case may
be.  For purposes of the preceding
sentence, indirect beneficial ownership shall include, without

 11
 

limitation, an interest resulting from ownership of the voting stock of
one or more corporations which, as a result of the Transaction, own the Company
or the Transferee Corporation(s), as the case may be, either directly or
through one or more subsidiary corporations. 
The Board shall have the right to determine whether multiple sales or
exchanges of the voting stock of the Company or multiple Ownership Change
Events are related, and its determination shall be final, binding and
conclusive.

14.2        Effect of Change in Control on Purchase
Rights.  In the
event of a Change in Control, the surviving, continuing, successor, or
purchasing corporation, or parent corporation thereof, as the case may be (the “Acquiring
Corporation”), may assume the Company’s rights and obligations under the
Plan.  If the Acquiring Corporation
elects not to assume the Company’s rights and obligations under outstanding
Purchase Rights, the Purchase Date of the then current Offering Period (or
Purchase Price) shall be accelerated to a date before the date of the Change in
Control specified by the Board, but the number of shares of Stock subject to
outstanding Purchase Rights shall not be adjusted.  All Purchase Rights which are neither assumed
by the Acquiring Corporation in connection with the Change in Control nor exercised
as of the date of the Change in Control shall terminate and cease to be
outstanding effective as of the date of the Change in Control.

14.3        Dissolution of Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Offering Periods shall terminate immediately
prior to the consummation of the proposed action, unless otherwise provided by
the Board, and the payroll deductions credited to the Participants’ Plan
accounts shall, as soon as practicable, be returned to the Participants.  

15.                               NONTRANSFERABILITY
OF PURCHASE RIGHTS.

A
Purchase Right may not be transferred in any manner otherwise than by will or
the laws of descent and distribution and shall be exercisable during the
lifetime of the Participant only by the Participant.

16.                               COMPLIANCE
WITH SECURITIES LAW.

The issuance of shares
under the Plan shall be subject to compliance with all applicable requirements
of federal and state law with respect to such securities.  A Purchase Right may not be exercised if the
issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations or the
requirements of any securities exchange or market system upon which the Stock
may then be listed.  In addition, no
Purchase Right may be exercised unless (a) a registration statement under
the Securities Act of 1933, as amended, shall at the time of exercise of the
Purchase Right be in effect with respect to the shares issuable upon exercise
of the Purchase Right, or (b) in the opinion of legal counsel to the
Company, the shares issuable upon exercise of the Purchase Right may be issued
in accordance with the terms of an applicable exemption from the registration
requirements of said Act.  The inability
of the Company to obtain from any regulatory body having jurisdiction the
authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance and sale of any shares under the Plan shall relieve the Company
of any liability in respect of the failure to issue or sell such shares as to
which such requisite authority shall not have been

 12
 

obtained. As a
condition to the exercise of a Purchase Right, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate
to evidence compliance with any applicable law or regulation, and to make any
representation or warranty with respect thereto as may be requested by the
Company.

17.                               RIGHTS
AS A STOCKHOLDER AND EMPLOYEE.

A Participant shall have
no rights as a stockholder by virtue of the Participant’s participation in the
Plan until the date of the issuance of a certificate for the shares purchased
pursuant to the exercise of the Participant’s Purchase Right (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company).  No adjustment
shall be made for dividends, distributions or other rights for which the record
date is prior to the date such certificate is issued, except as provided in
Section 4.2.  Nothing herein shall confer
upon a Participant any right to continue in the employ of the Participating
Company Group or interfere in any way with any right of the Participating
Company Group to terminate the Participant’s employment at any time and for any
reason.

18.                               LEGENDS.

The Company may at any
time place legends or other identifying symbols referencing any applicable
federal or state securities law restrictions or any provision convenient in the
administration of the Plan on some or all of the certificates representing
shares of Stock issued under the Plan. 
The Participant shall, at the request of the Company, promptly present
to the Company any and all certificates representing shares acquired pursuant
to a Purchase Right in the possession of the Participant in order to carry out
the provisions of this Section.

19.                               NOTIFICATION
OF SALE OF SHARES.

The Company may require
the Participant to give the Company prompt notice of any disposition of shares
acquired by exercise of a Purchase Right within two years from the date of
granting such Purchase Right or one year from the date of exercise of such
Purchase Right (a “Disqualifying Disposition”), whichever is later.  Any such notice requirement regarding a
Disqualifying Disposition will be contained in the Participant’s Subscription
Agreement.  The Company may require that
until such time as a Participant disposes of shares acquired upon exercise of a
Purchase Right, the Participant shall hold all such shares in the Participant’s
name (or, if elected by the Participant, in the name of the Participant and his
or her spouse but not in the name of any nominee) until the lapse of the
Disqualifying Disposition time periods with respect to such Purchase
Right.  The Company may direct that the
certificates evidencing shares acquired by exercise of a Purchase Right refer
to such requirement to give prompt notice of disposition.

20.                               NOTICES.

All notices or other
communications by a Participant to the Company under or in connection with the
Plan shall be deemed to have been duly given when received in the form
specified by the Company at the location, or by the person, designated by the
Company for the receipt thereof.

 13
 

21.                               INDEMNIFICATION.

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

22.                               AMENDMENT
OR TERMINATION OF THE PLAN.

The Board may at any time amend or terminate the Plan,
except that (a) such termination shall not affect Purchase Rights
previously granted under the Plan, other than as permitted under the Plan, and
(b) no amendment may adversely affect a Purchase Right previously granted
under the Plan (except to the extent permitted by the Plan or as may be
necessary to qualify the Plan as an employee stock purchase plan pursuant to
Section 423 of the Code or to obtain qualification or registration of the
shares of Stock under applicable federal or state securities laws).  In addition, an amendment to the Plan must be
approved by the stockholders of the Company within 12 months of the adoption of
such amendment if such amendment would authorize the sale of more shares than
are authorized for issuance under the Plan, would change the definition of the
corporations that may be designated by the Board as Participating Companies or
would be required under the Code, applicable securities laws or the rules of
any securities exchange or market system upon which the Stock may then be
listed.  In the event that the Board
approves an amendment to increase the number of shares authorized for issuance
under the Plan (the “Additional Shares”), the Board, in its sole
discretion, may specify that such Additional Shares may only be issued pursuant
to Purchase Rights granted after the date on which the stockholders of the
Company approve such amendment, and such designation by the Board shall not be
deemed to have adversely affected any Purchase Right granted prior to the date
on which the stockholders approve the amendment.

 14

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