Document:

Exhibit 4.3

 

AMENDED AND RESTATED

TRUE RELIGION APPAREL, INC. 

2009 EQUITY INCENTIVE PLAN

 

1                                         Purpose; Eligibility.

 

1.1          General
Purpose.  The
name of the Plan is the True Religion Apparel, Inc. 2009 Equity Incentive
Plan.  The purpose of the Plan is to enable
the Company and any Affiliate to obtain and retain the services of the types of
Employees, Consultants and Directors who will contribute to the Company’s long
range success and to provide incentives that are linked directly to increases
in share value which will inure to the benefit of all stockholders of the
Company.

 

1.2          Eligible
Award Recipients.  The persons eligible to receive Awards are
the Employees, Consultants and Directors of the Company and its Affiliates.

 

1.3          Available
Awards.  The
Plan provides a means by which eligible recipients of Awards may be given an
opportunity to benefit from increases in value of the Common Stock through the
granting of one or more of the following Awards:  (a) Incentive Stock Options, (b) Non-statutory
Stock Options, (c) Restricted Awards (Restricted Stock and Restricted
Stock Units), (d) Performance Awards and (e) Stock Appreciation
Rights.

 

2                                         Definitions.

 

2.1          “Administrator” means the
Board or the Committee appointed by the Board in accordance with Section 3.5.

 

2.2          “Affiliate” means any
parent corporation or subsidiary corporation of the Company, whether now or
hereafter existing, as those terms are defined in Code Sections 424(e) and
(f), respectively.

 

2.3          “Award” means any
right granted under the Plan, including an Incentive Stock Option, a
Non-statutory Stock Option, a Restricted Award (Restricted Stock and Restricted
Stock Units), a Performance Award, and a Stock Appreciation Right.

 

2.4          “Award Agreement” means a
written agreement between the Company and a holder of an Award evidencing the
terms and conditions of an individual Award grant.  Each Award Agreement will be subject to the
terms and conditions of the Plan and need not be identical.

 

2.5          “Beneficial Owner” has the
meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the
Exchange Act, except that in calculating the beneficial ownership of any
particular Person, such Person will be deemed to have beneficial ownership of
all securities that such Person has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only after the passage of time, the satisfaction of performance
goals, or both.  The terms “Beneficially
Owns” and “Beneficially Owned” have a corresponding meaning.

 

2.6          “Board” means the
Board of Directors of the Company.

 

 

2.7          “Cashless Exercise” has the
meaning set forth in Section 6.3.

 

2.8          “Change in Control” means (a) with
respect to any Participant who is a party to an employment or service agreement
with the Company or any Affiliate and such agreement provides for a definition
of change in control, solely for purposes of Award vesting or exercisability or
lapsing of restrictions on Awards, as defined therein; and (b) with
respect such Participants for all other purposes and to all other Participants
for all purposes, “Change in Control” means:

 

(i)            The direct or indirect sale, transfer, or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the assets of the
Company to any Person;

 

(ii)           The Incumbent Directors cease for any reason to constitute
a majority of the Board;

 

(iii)          The adoption of a plan relating to the liquidation or
dissolution of the Company; or

 

(iv)          The consummation of any transaction (including, without
limitation, any merger, consolidation or exchange) the result of which is that
any Person becomes the Beneficial Owner of more than 50% of the voting power of
the Company.

 

The foregoing
notwithstanding, a transaction will not constitute a Change in Control if (i) its
sole purpose is to change the state of the Company’s incorporation or to create
a holding company that will be owned in substantially the same proportions by
the Persons who held the Company’s securities immediately before such
transaction; (ii) it constitutes an initial public offering or a secondary
public offering that results in any security of the Company being listed (or
approved for listing) on any securities exchange or designated (or approved for
designation) as a security on an interdealer quotation system; or (iii) solely
because 50% or more of the total voting power of the Company’s then outstanding
securities is acquired by (A) a trustee or other fiduciary holding
securities under one or more employee benefit Plans of the Company or any
Affiliate, or (B) any company that, immediately before such acquisition,
is owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of stock in the Company
immediately before such acquisition.

 

2.9          “Code” means the
Internal Revenue Code of 1986, as amended.

 

2.10        “Committee” means a
committee of one or more members of the Board appointed by the Board to
administer the Plan in accordance with Section 3.5.

 

2.11        “Common Stock” means the
common stock of the Company.

 

2.12        “Company” means True
Religion Apparel, Inc., a Delaware corporation.

 

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2.13        “Consultant” means any
natural person who provides bona fide
consulting or advisory services to the Company or an Affiliate pursuant to a
written agreement, so long as such services are not in connection with the
offer or sale of securities in a capital raising transaction and do not
directly or indirectly promote or maintain a market for the Company’s
securities.

 

2.14        “Continuous Service” means that the
Participant’s service with the Company or an Affiliate, whether as an Employee,
Director or Consultant, is not interrupted or terminated.  The Participant’s Continuous Service will not
be deemed to have terminated merely because of a change in the capacity in
which the Participant renders service to the Company or an Affiliate as an
Employee, Consultant or Director or a change in the entity for which the
Participant renders such service, provided that there is no interruption or
termination of the Participant’s Continuous Service.  For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service.  The Administrator or its delegate, in its
sole discretion, may determine whether Continuous Service will be considered
interrupted in the case of any leave of absence approved by that party,
including sick leave, military leave or any other personal or family leave of
absence.

 

2.15        “Covered Employee” means an
Employee who is, or could be, a “covered employee” within the meaning of Code Section 162(m)(3) and
the regulations and interpretive guidance promulgated thereunder.

 

2.16        “Date of Grant” means, if the
key terms and conditions of the Award are communicated to the Participant
within a reasonable period following the Administrator’s action, the date on
which the Administrator adopts a resolution, or takes other appropriate action,
expressly granting an Award to a Participant that specifies the key terms and
conditions of the Award and from which the Participant begins to benefit from
or be adversely affected by subsequent changes in the Fair Market Value of the
Common Stock or, if a subsequent date is set forth in such resolution or
determined by the Administrator as the Date of Grant, then such date as is set
forth in such resolution.  In any
situation where the terms of the Award are subject to negotiation with the
Participant, the Date of Grant will not be earlier than the date the key terms
and conditions of the Award are communicated to the Participant.

 

2.17        “Detrimental Activity” means: (a) violation
of the terms of any agreement with the Company concerning non-disclosure,
confidentiality, intellectual property, privacy or exclusivity; (b) disclosure
of the Company’s confidential information to anyone outside the Company,
without prior written authorization from the Company, or in conflict with the
interests of the Company, whether the confidential information was acquired or
disclosed by the Participant during or after employment by the Company; (c) failure
or refusal to disclose promptly or assign to the Company all right, title and
interest in any invention, work product or idea, patentable or not, made or
conceived by the Participant during employment by the Company, relating in any
manner to the interests of the Company or, the failure or refusal to do
anything reasonably necessary to enable the Company to secure a patent where
appropriate in the United States and in other countries; (d) activity that
is discovered to be grounds for or results in termination of the Participant’s
employment for Misconduct; (e) any breach of a restrictive covenant contained
in any employment agreement, Award Agreement or other agreement 

 

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between the Participant and
the Company, during any period for which a restrictive covenant prohibiting
Detrimental Activity, or other similar conduct or act, is applicable to the
Participant during or after employment by the Company; (f) any attempt
directly or indirectly to induce any Employee of the Company to be employed or
perform services or acts in conflict with the interests of the Company; (g) any
attempt, in conflict with the interests of the Company, directly or indirectly,
to solicit the trade or business of any current or prospective customer,
client, supplier or partner of the Company; (h) the conviction of, or
guilty plea entered by, the Participant for any felony or a crime involving
moral turpitude whether or not connected with the Company; or
(i) the commission of any other act involving willful malfeasance
or material fiduciary breach with respect to the Company.

 

2.18        “Director” means a member
of the Board.

 

2.19        “Disability” means the
Participant’s inability to perform substantially his or her duties to the
Company or any Affiliate by reason of a medically determinable physical or
mental impairment that is expected to last for a period of six months or longer
or to result in death; provided, however, that for
purposes of determining the term of an Incentive Stock Option pursuant to Section 6.9
hereof, the term Disability has the meaning ascribed to it under Code Section 22(e)(3).  The Administrator shall determine whether an
individual has a Disability under procedures established by the
Administrator.  Except in situations
where the Administrator is determining Disability within the meaning of Code Section 22(e)(3) for
purposes of the term of an Incentive Stock Option pursuant to Section 6.9
hereof, the Administrator may rely on any determination that a Participant is
disabled for purposes of benefits under any long-term disability plan
maintained by the Company or any Affiliate in which a Participant participates.

 

2.20        “Effective Date”
has the meaning set forth in Section 15 of the Plan.

 

2.21        “Employee” means any
person employed by the Company or an Affiliate. 
Mere service as a Director or payment of a director’s fee by the Company
or an Affiliate is not sufficient to constitute “employment” by the Company or
an Affiliate.

 

2.22        “Established Securities Market”
means a national securities exchange that is registered under Section 6 of
the Exchange Act; a foreign national securities exchange that is officially
recognized, sanctioned, or supervised by governmental authority; and any
over-the-counter market that is reflected by the existence of an interdealer
quotation system.

 

2.23        “Exchange Act” means the
Securities Exchange Act of 1934, as amended.

 

2.24        “Exercise Price” has
the meaning set forth in Section 6.2 of the Plan.

 

2.25        “Fair Market Value” means, as of
any date, the value of the Common Stock determined using a method consistent
with the definition of fair market value found in Section 1.409A-1(b)(5)(iv) of
the Treasury Regulations, and will be determined using a method that is a
presumptively reasonable valuation method thereunder as determined below.

 

(a)           On any date on which shares of the
Company’s Common Stock are readily tradable on an Established Securities
Market, if the Common Stock is admitted to trading 

 

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on an exchange or market for
which closing prices are reported on any date, Fair Market Value may be determined
based on the last sale before or the first sale after the Date of Grant of an
Award; the closing price on the trading day before the Date of Grant of an
Award or on the Date of Grant; or may be based on an average selling price
during a specified period that is within 30 days before or 30 days after the
Date of Grant of the Award, provided that the commitment to grant an Award
based on such valuation method must be irrevocable before the beginning of the
specified period, and such valuation method must be used consistently for
grants of Awards under the same and substantially similar programs.

 

(b)           If the Common Stock is readily
tradable on an Established Securities Market but closing prices are not
reported, Fair Market Value may be determined based upon the average of the
highest bid and lowest asked prices of the Common Stock reported on the trading
day before the Date of Grant of an Award or on the Date of Grant; or may be
based upon an average of the highest bid and lowest asked prices during a
specified period that is within 30 days before or 30 days after the Date of
Grant of the Award, provided that the commitment to grant an Award based on
such valuation method must be irrevocable before the beginning of the specified
period, and such valuation method must be used consistently for grants of
Awards under the same and substantially similar programs.

 

(c)           If the Common Stock is not readily
tradable on an Established Securities Market, the Administrator shall determine
the Fair Market Value through the reasonable application of a reasonable
valuation method based on the facts and circumstances as of the valuation date,
including, at the election of the Administrator, by an independent appraisal
that meets the requirements of Code Section 401(a)(28)(C) and the
regulations promulgated thereunder as of a date that is no more than 12 months
before the relevant transaction to which the valuation is applied (for example,
an Option’s Date of Grant) and such determination will be conclusive and
binding on all persons.

 

2.26        “Free Standing SAR” has the
meaning set forth in Section 7.3(a).

 

2.27        “Incentive Stock Option” means an
Option intended to qualify as an incentive stock option within the meaning of Section 422
of the Code and the regulations promulgated thereunder.

 

2.28        “Incumbent Directors” means
individuals who, on the Effective Date, constitute the Board, provided that any
individual becoming a Director subsequent to the Effective Date whose election
or nomination for election to the Board was approved by a vote of at least
two-thirds of the Incumbent Directors then on the Board (either by a specific
vote or by approval of the proxy statement of the Company in which such person
is named as a nominee for Director without objection to such nomination) will
be an Incumbent Director.  No individual
initially elected or nominated as a Director of the Company as a result of an
actual or threatened election contest with respect to Directors or as a result
of any other actual or threatened solicitation of proxies by or on behalf of
any person other than the Board will be an Incumbent Director.

 

2.29        “Insider” means an
individual subject to Section 16 of the Exchange Act and includes an
Officer, a Director, or any other person who is directly or indirectly the
Beneficial 

 

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Owner of more than 10% of
any class of any equity security of the Company (other than an exempted
security) that is registered pursuant to Section 12 of the Exchange Act.

 

2.30        “Market Stand-Off” has the
meaning set forth in Section 14.

 

2.31        “Misconduct” means, (a) with
respect to any Participant who is a party to an employment or service agreement
or employment policy manual with the Company or any Affiliate and such
agreement or policy manual provides for a definition of misconduct, cause, or
other similar conduct or act, as defined therein; and (b) with respect to
all other Participants, (i) the commission of any act of fraud,
embezzlement, breach of fiduciary duty, or dishonesty; (ii) any unauthorized
use or disclosure of confidential information or trade secrets of the Company
(or any Affiliate); or (iii) any other intentional improper conduct
adversely affecting the business or affairs of the Company (or any Affiliate)
in a material manner.  The Administrator,
in its absolute discretion, shall determine the effect of all matters and
questions relating to whether a Participant has been discharged for Misconduct.

 

2.32        “Non-Employee Director” means a
Director who is a “non-employee director” within the meaning of Rule 16b-3.

 

2.33        “Non-statutory Stock Option” means an
Option not intended to qualify as an Incentive Stock Option.

 

2.34        “Officer” means (a) before
the first date upon which any security of the Company is registered under Section 12
of the Exchange Act, any person designated by the Company as an officer; and (b) on
and after the first date upon which any security of the Company is registered
under Section 12 of the Exchange Act, a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

 

2.35        “Option” means an
Incentive Stock Option or a Non-statutory Stock Option granted pursuant to the
Plan.

 

2.36        “Option Agreement” means a
written agreement between the Company and an Optionholder evidencing the terms
and conditions of an individual Option grant. 
Each Option Agreement will be subject to the terms and conditions of the
Plan and need not be identical.

 

2.37        “Optionholder”  means a person to whom an
Option is granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Option.

 

2.38        “Outside Director” means a
Director who is an “outside director” within the meaning of Section 162(m) of
the Code and Treasury Regulations Section 1.162-27(e)(3).

 

2.39        “Participant” means a person
to whom an Award is granted pursuant to the Plan or, if applicable, such other
person who holds an outstanding Award.

 

2.40        “Performance Award” means an Award
granted pursuant to Section 7.2.

 

6

 

2.41        “Permitted Transferee” means (a) any
spouse, parents, siblings (by blood, marriage or adoption) or lineal
descendants (by blood, marriage or adoption) of a Participant; (b) any
trust or other similar entity for the benefit of a Participant or the
Participant’s spouse, parents, siblings or lineal descendants; provided, however, that any transfer made
by a Participant to a Permitted Transferee may only be made if the Permitted
Transferee, prior to the time of transfer of stock, agrees in writing to be
bound by the terms of the Plan and provides written notice to the Company of
such transfer.

 

2.42        “Person” means an
individual, partnership, limited liability company, corporation, association,
joint stock company, trust, joint venture, labor organization, unincorporated
organization, governmental entity or political subdivision thereof, or any
other entity, and includes a syndicate or group as such terms are used in Section 13(d)(3) or
14(d)(2) of the Exchange Act.

 

2.43        “Plan” means this
True Religion Apparel, Inc. 2009 Equity Incentive Plan.

 

2.44        “Prior Plan” means the
Company’s 2005 Stock Incentive Plan.

 

2.45        “Prohibited Personal Loan”
means any direct or indirect extension of credit or arrangement of an extension
of credit to a Director or executive officer (or equivalent thereof) by the
Company or an Affiliate that is prohibited by Section 402(a) of the
Sarbanes-Oxley Act (codified as Section 13(k) of the Exchange Act).

 

2.46        “Restricted Award” means any Award
granted pursuant to Section 7.1, including
Restricted Stock and Restricted Stock Units.

 

2.47        “Restricted Period”  has the meaning set forth in
Section 7.1.

 

2.48        “Restricted Stock”  has the meaning set forth in
Section 7.1.

 

2.49        “Restricted Stock Unit”  means a hypothetical Common Stock
unit having a value equal to the Fair Market Value of an identical number of
shares of Common Stock as determined in Section 7.1.

 

2.50        “Right of Repurchase” means the
Company’s option to repurchase unvested Common Stock acquired under the Plan
upon the Participant’s termination of Continuous Service pursuant to Section 10.5.

 

2.51        “Rule 16b-3” means Rule 16b-3
promulgated under the Exchange Act or any successor to Rule 16b-3, as in
effect from time to time.

 

2.52        “Rule 701” means Rule 701
promulgated under the Securities Act.

 

2.53        “Securities Act” means the
Securities Act of 1933, as amended.

 

2.54        “Stock Appreciation Right” or “SAR” means the right
pursuant to an Award granted under Section 7.3
to receive an amount equal to the excess, if any, of (A) the Fair Market 

 

7

 

Value, as of the date such
Stock Appreciation Right or portion thereof is surrendered, of the shares of
Common Stock covered by such right or such portion thereof, over (B) the
aggregate Strike Price of such right or such portion thereof.

 

2.55        “Stock for Stock Exchange” has the
meaning set forth in Section 6.3.

 

2.56        “Strike Price” means
the threshold value per share of Common Stock, the excess over which will be
payable upon exercise of a Stock Appreciation Right, as determined by the
Administrator pursuant to Section 7.3(d) and set forth in the
Award Agreement for a Stock Appreciation Right.

 

2.57        “Surviving
Entity” means the Company if immediately following any
merger, consolidation or similar transaction, the holders of outstanding voting
securities of the Company immediately prior to the merger or consolidation own
equity securities possessing more than 50% of the voting power of the entity
existing following the merger, consolidation or similar transaction.  In all other cases, the other entity to the
transaction and not the Company will be the Surviving Entity.  In making the determination of ownership by
the stockholders of an entity immediately after the merger, consolidation or
similar transaction, equity securities that the stockholders owned immediately
before the merger, consolidation or similar transaction as stockholders of
another party to the transaction will be disregarded.  Further, outstanding voting securities of an
entity will be calculated by assuming the conversion of all equity securities
convertible (immediately or at some future time whether or not contingent on
the satisfaction of performance goals) into shares entitled to vote.

 

2.58        “Tandem SAR” has the
meaning set forth in Section 7.3(a).

 

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

 

3                                         Administration.

 

3.1          Administration
by Board.  The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in Section 3.5.

 

3.2          Powers
of Administrator.  The Administrator will have the power and
authority to select and grant to Participants, Awards pursuant to the terms of
the Plan.

 

3.3          Specific
Powers.  In
particular, the Administrator will have the authority (a) to construe and
interpret the Plan and apply its provisions; (b) to promulgate, amend, and
rescind rules and regulations relating to the administration of the Plan; (c) to
authorize any person to execute, on behalf of the Company, any instrument
required to carry out the purposes of the Plan; (d) to delegate its
authority to one or more Officers of the Company with respect to Awards that do
not involve Covered Employees or Insiders, provided such delegation is pursuant
to a resolution that specifies the total number of shares of Common Stock that
may be subject to Awards by such Officer and such Officer may not make an Award
to himself or herself; (e) to determine when Awards are to be granted
under the Plan; (f) from time to time to select, subject 

 

8

 

to the limitations set forth
in the Plan, those Participants to whom Awards will be granted; (g) to
determine the number of shares of Common Stock to be made subject to each
Award; (h) to determine whether each Option is to be an Incentive Stock
Option or a Non-statutory Stock Option; (i) to prescribe the terms and
conditions of each Award, including, without limitation, the Strike Price or
Exercise Price and medium of payment, vesting provisions and Right of
Repurchase provisions, and to specify the provisions of the Award Agreement
relating to such grant or sale; (j) subject to the restrictions applicable
under Section 12.5, to amend any outstanding Awards, including for
the purpose of modifying the time or manner of vesting, the purchase price,
Exercise Price or Strike Price, or the term of any outstanding Award; provided, however, that if any such
amendment impairs a Participant’s rights or increases a Participant’s
obligations under his or her Award, such amendment will also be subject to the
Participant’s consent (for the avoidance of doubt, a cancellation of an Award
where the Participant receives a payment equal in value to the Fair Market
Value of the vested Award or, in the case of vested Options, the difference
between the Fair Market Value of the Common Stock subject to an Option and the
Exercise Price, will not constitute an impairment of the Participant’s rights
that requires consent); (k) to determine the duration and purpose of
leaves of absences that may be granted to a Participant without constituting
termination of their Continuous Service for purposes of the Plan, which periods
will be no shorter than the periods generally applicable to Employees under the
Company’s employment policies or as required under applicable law; (l) to
make decisions with respect to outstanding Awards that may become necessary
upon a Change in Control or an event that triggers capital adjustments; and (m) to
exercise discretion to make any and all other determinations that it may
determine to be necessary or advisable for administration of the Plan.

 

3.4          Decisions
Final.  All
decisions made by the Administrator pursuant to the provisions of the Plan will
be final and binding on the Company and the Participants, unless such decisions
are determined by a court having jurisdiction to be arbitrary and capricious.

 

3.5          The
Committee.

 

(a)           General.  The Board may delegate administration of the
Plan to a Committee or Committees of one or more members of the Board, and the
term “Committee” will apply to
any person or persons to whom such authority has been delegated.  If administration is delegated to a
Committee, the Committee will have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee any of the administrative powers the Committee is
authorized to exercise (and references in the Plan to the Board or the
Administrator will thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board.  The Board may abolish the Committee at any
time and revest in the Board the administration of the Plan.  The members of the Committee will be
appointed by and serve at the pleasure of the Board.  From time to time, the Board may increase or
decrease the size of the Committee, add additional members to, remove members
(with or without cause) from, appoint new members in substitution therefor, and
fill vacancies, however caused, in the Committee.  The Committee shall act pursuant to a vote of
the majority of its members or, in the case of a Committee comprised of only
two members, the unanimous consent of its members, whether present or not, or
by the written consent of the majority of its members and shall keep minutes of
all of its meetings.  Subject to the
limitations 

 

9

 

prescribed by the Plan and
the Board, the Committee shall establish and follow such rules and regulations
for the conduct of its business as it may determine to be advisable.

 

(b)           Committee
Composition when Common Stock is Registered.  At such time as the Common Stock is required
to be registered under Section 12 of the Exchange Act, in the discretion
of the Board, a Committee may consist solely of two or more Non-Employee
Directors who are also Outside Directors. 
The Board will have discretion to determine whether or not it intends to
comply with the exemption requirements of Rule 16b-3, Code Section 162(m),
or both.  If, however, the Board intends
to satisfy such exemption requirements, with respect to Awards to any Covered
Employee and with respect to any Insider, the Committee shall at all times
consists solely of two or more Non-Employee Directors who are also Outside
Directors.  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 Award or (B) not persons with
respect to whom the Company wishes to comply with Code Section 162(m) 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 Insiders.  Nothing
herein is intended to create an inference that an Award is not validly granted
under the Plan in the event Awards are granted under the Plan by a committee of
the Board that does not at all times consist solely of two or more Non-Employee
Directors who are also Outside Directors.

 

3.6          Indemnification.  In addition to such other rights of indemnification
as they may have as Directors or members of the Committee, and to the extent
allowed by applicable law, the Company shall indemnify the Administrator
against the reasonable expenses, including attorney’s fees, actually incurred
in connection with any action, suit or proceeding or in connection with any
appeal therein, to which the Administrator may be party by reason of any action
taken or failure to act under or in connection with the Plan or any Award
granted under the Plan, and against all amounts paid by the Administrator in
settlement thereof (provided, however, that the settlement has been
approved by the Company, which approval shall not be unreasonably withheld) or
paid by the Administrator in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it is adjudged in
such action, suit or proceeding that such Administrator did not act in good
faith and in a manner that such person reasonably believed to be in the best
interests of the Company, and in the case of a criminal proceeding, had no
reason to believe that the conduct complained of was lawful; provided, however, that within
60 days after institution of any such action, suit or proceeding, such
Administrator or Committee member shall, in writing, offer the Company the
opportunity at its own expense to handle and defend such action, suit or
proceeding.

 

4                                         Shares Subject to the Plan.

 

4.1          Share Reserve.  Subject to the provisions of Section 11.1
relating to adjustments upon changes in Common Stock, the shares that may be
issued pursuant to Awards will consist of the Company’s authorized but unissued
Common Stock, and the maximum aggregate amount of such Common Stock that may be
issued upon exercise of all Awards under the Plan will not 

 

10

 

exceed 2,963,000 shares of
Common Stock, all of which may be used for Incentive Stock Options or any other
Awards. 
Such limitation consists of the sum of (a) 613,716  shares
of Common Stock available for issuance under the Prior Plan as of the date of
the stockholders’ approval of the Plan; (b) up to 1,349,284 shares of
Common Stock that are issuable upon exercise of awards pursuant to the Prior
Plan or that were otherwise awarded under the Prior Plan, that on or after the
date of the stockholders’ approval of the Plan are forfeited, cancelled,
expired, unexercised, or settled in cash; and (c) an additional 1,000,000
shares of Common Stock to be approved by the Company’s stockholders.  Upon the date of the stockholders’ approval of the Plan, no awards may be
granted under the Prior Plan.

 

4.2          Reversion
of Shares to the Share Reserve.  If any Award for any reason expires or
otherwise terminates, in whole or in part, the shares of Common Stock not
acquired under such Award will revert to and again become available for
issuance under the Plan.  If the Company
reacquires shares of Common Stock issued under the Plan pursuant to the terms
of any forfeiture provision, including the Right of Repurchase of unvested
Common Stock under Section 10.5, such shares
will again be available for purposes of the Plan.  Each share of Common Stock subject to any
Award granted hereunder will be counted against the share reserve set forth in Section 4.1
on the basis of one share for every share subject thereto.  Notwithstanding anything herein to the
contrary, shares of Common Stock used to pay the required Exercise Price or tax
obligations, or shares not issued in connection with settlement of an Option or
SAR or that are used or withheld to satisfy tax obligations of the Participant
will not be available again for other Awards under the Plan.  Awards or portions thereof that are settled
in cash and not in shares of Common Stock will not be counted against the
foregoing maximum share limitations.  On and after the date of the stockholders’ approval of the Plan,
any shares of Common Stock that are forfeited or cancelled, expire unexercised,
or settled in cash under the Prior Plan will be available, subject to the
limitations set forth in this Section 4.2, for issuance under the
Plan.

 

4.3          Source
of Shares.  The shares of Common Stock subject to the
Plan may be authorized but unissued Common Stock or reacquired Common Stock
bought on the market, pursuant to any forfeiture provision or Right of
Repurchase, or otherwise.

 

5                                         Eligibility.

 

5.1          Eligibility
for Specific Awards.  Incentive Stock Options may be granted only
to Employees.  Awards other than
Incentive Stock Options may be granted to Employees, Directors and Consultants.

 

5.2          Ten
Percent Stockholders.  A Ten Percent Stockholder shall not be
granted an Incentive Stock Option unless the Exercise Price of such Option is
at least 110% of the Fair Market Value of the Common Stock at the Date of Grant
and the Option is not exercisable after the expiration of five years from the
Date of Grant.

 

5.3          Section 162(m) Limitation.  Subject to the provisions of Section 11.1
relating to adjustments upon changes in the shares of Common Stock, no Employee
will be eligible to be granted Awards covering more than 500,000 shares in the
aggregate during any calendar year.

 

11

 

5.4          Directors.  Each Director of the Company will be eligible
to receive discretionary grants of Awards under the Plan.  If the Board or the Compensation Committee of
the Board separately has adopted or in the future adopts a compensation policy
covering some or all Directors that provides for a predetermined formula grant
that specifies the type of Award, the timing of the Date of Grant and the
number of shares to be awarded under the terms of the Plan, such formula grant
will be incorporated by reference and will be administered as if such terms
were provided under the terms of the Plan without any requirement that the
Administrator separately take action to determine the terms of such Awards.

 

6                                         Option Provisions.

 

Each Option will be in such
form and will contain such terms and conditions as the Administrator deems
appropriate.  All Options will be
separately designated Incentive Stock Options or Non-statutory Stock Options at
the time of grant, and, if certificates are issued, a separate certificate or
certificates will be issued for shares of Common Stock purchased on exercise of
each type of Option.  Notwithstanding the
foregoing, the Company will have no liability to any Participant or any other
person if an Option designated as an Incentive Stock Option fails to qualify as
such at any time.  The provisions of
separate Options need not be identical, but each Option will include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

 

6.1          Term.  Subject to the provisions of Section 5.2
regarding Ten Percent Stockholders, no Option will be exercisable after the
expiration of 10 years from the Date of Grant.

 

6.2          Exercise
Price.  The
exercise price per share of Common Stock for each Option (the “Exercise Price”) will
not be less than 100% of the Fair Market Value of such share on the Date of
Grant; provided, however, that in the case of an Incentive
Stock Option granted to a Ten Percent Stockholder, the Exercise Price will be
no less than 110% of the Fair Market Value per share on the Date of Grant.  Notwithstanding the foregoing, an Option
granted pursuant to an assumption or substitution for another stock option in a
manner satisfying the provisions of Section 424(a) of the Code, as if
the Option was a statutory stock option, may be granted with an Exercise Price
lower than the Fair Market Value per share on the Date of Grant.

 

6.3          Consideration.  The Optionholder shall pay the Exercise Price
of Common Stock acquired pursuant to an Option, to the extent permitted by
applicable statutes and regulations, either (a) in cash or by certified or
bank check at the time the Option is exercised, or (b) in the Administrator’s
discretion and upon such terms as the Administrator approves:  (i) by delivery to the Company of other
Common Stock, duly endorsed for transfer to the Company, with a Fair Market
Value on the date of delivery equal to the Exercise Price (or portion thereof)
due for the number of shares being acquired, or by means of attestation whereby
the Participant identifies for delivery specific shares of Common Stock held by
the Participant that have a Fair Market Value on the date of attestation equal
to the Exercise Price (or portion thereof) and receives a number of shares of
Common Stock equal to the difference between the number of shares thereby
purchased and the number of identified attestation shares of Common Stock (a “Stock for Stock Exchange”); (ii) during
any period for which the Common Stock is readily tradable on

 

12

 

an Established Securities
Market by a copy of instructions to a broker directing such broker to sell the
Common Stock for which such Option is exercised, and to remit to the Company
the aggregate Exercise Price of such Options (a “Cashless
Exercise”); (iii) in any other form of legal
consideration that may be acceptable to the Administrator, including without
limitation with a full-recourse promissory note; provided,
however, if applicable law requires, the Optionholder shall pay the par value
(if any) of Common Stock, if newly issued, in cash or cash equivalents.  The interest rate payable under the terms of
the promissory note may not be less than the minimum rate (if any) required to
avoid the imputation of additional interest under the Code.  Subject to the foregoing, the Administrator
(in its sole discretion) shall specify the term, interest rate, amortization
requirements (if any) and other provisions of such note.  Unless the Administrator determines
otherwise, the holder shall pledge to the Company shares of Common Stock having
a Fair Market Value at least equal to the principal amount of any such loan as
security for payment of the unpaid balance of the loan and such pledge must be
evidenced by a pledge agreement, the terms of which the Administrator shall
determine, in its discretion; provided, however, that each
loan must comply with all applicable laws, regulations and rules of the
Board of Governors of the Federal Reserve System and any other governmental
agency having jurisdiction.  Unless the
Administrator determines otherwise, the purchase price of Common Stock acquired
pursuant to an Option that is paid by delivery (or attestation) to the Company
of other shares of Common Stock acquired, directly or indirectly from the
Company, will be paid only by shares of Common Stock that have been held for
more than six months (or such longer or shorter period as may be required to
avoid a charge to earnings for financial accounting purposes).  Notwithstanding the foregoing, during any
period for which the Company has any class of its securities listed on a
national securities exchange in the United States, has securities registered
under Section 12 of the Exchange Act, is required to file reports under Section 13(a) or
15(d) of the Exchange Act, or has a registration statement pending under
the Securities Act, an exercise with a promissory note or other transaction by
an Optionholder that involves or may involve a Prohibited Personal Loan is
prohibited with respect to any Option under the Plan.  Unless otherwise provided in the terms of an
Option Agreement, payment of the Exercise Price by a Participant who is an
Officer, Director, or other Insider in the form of a Stock for Stock Exchange
is subject to pre-approval by the Administrator, in its sole discretion.  The Administrator shall document any such
pre-approval in a manner that complies with the specificity requirements of Rule 16b-3,
including the name of the Participant involved in the transaction, the nature
of the transaction, the number of shares to be acquired or disposed of by the
Participant and the material terms of the Options involved in the transaction.

 

6.4          Transferability
of an Incentive Stock Option.  An Incentive Stock Option will not be
transferable except by will or by the laws of descent and distribution and will
be exercisable during the lifetime of the Optionholder only by the
Optionholder.  Notwithstanding the foregoing,
the Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, will thereafter be entitled to exercise the Option.

 

6.5          Transferability
of a Non-statutory Stock Option.  A Non-statutory Stock Option may, in the sole
discretion of the Administrator, be transferable to a Permitted Transferee upon
written approval by the Administrator to the extent provided in the Option
Agreement.  A Permitted Transferee
includes: (a) a transfer by gift or domestic relations order to a member
of

 

13

 

the Optionholder’s immediate
family (child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships), any person sharing the Optionholder’s household (other than a
tenant or employee), a trust in which these persons (or the Optionholder) have
more than 50% of the beneficial interest, a foundation in which these persons
(or the Optionholder) control the management of assets, and any other entity in
which these persons (or the Optionholder) own more than 50% of the voting
interests; (b) third parties designated by the Administrator in connection
with a program established and approved by the Administrator pursuant to which
Participants may receive a cash payment or other consideration in consideration
for the transfer of such Non-statutory Stock Option; and (c) such other
transferees as may be permitted by the Administrator in its sole
discretion.  If the Non-statutory Stock
Option does not provide for transferability, then the Non-statutory Stock
Option will not be transferable except by will or by the laws of descent and
distribution and will be exercisable during the lifetime of the Optionholder
only by the Optionholder. 
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionholder, will
thereafter be entitled to exercise the Option.

 

6.6          Vesting
Generally.  The Option may, but need not, vest and therefore
become exercisable in periodic installments that may, but need not, be
equal.  The Option may be subject to such
other terms and conditions on the time or times when it may be exercised (which
may be based on performance or other criteria) as the Administrator may deem
appropriate.  The vesting provisions of
individual Options may vary.  The
Administrator may, but will not be required to, provide that no Option may be
exercised for a fraction of a share of Common Stock.  The Administrator may, but will not be
required to, provide for an acceleration of vesting and exercisability in the
terms of any Option Agreement upon the occurrence of a specified event.  Unless otherwise specified in the terms of
any Option Agreement, each Option granted pursuant to the terms of the Plan
will become exercisable at a rate of 25% per year over the four-year period
commencing on the Date of Grant of the Option.

 

6.7          Termination
of Continuous Service.  Unless otherwise provided in an Option
Agreement or in an employment agreement the terms of which have been approved
by the Administrator, in the event an Optionholder’s Continuous Service
terminates (other than upon the Optionholder’s death or Disability or
termination by the Company for Misconduct), the Optionholder may exercise his
or her Option (to the extent that the Optionholder was entitled to exercise
such Option as of the date of termination) but only within such period ending
on the earlier of (a) the date three months following the termination of
the Optionholder’s Continuous Service, or (b) the expiration of the term
of the Option as set forth in the Option Agreement.  If, after termination, the Optionholder does
not exercise his or her Option within the time specified in the Option
Agreement, the Option will terminate. 
Unless otherwise provided in an Option Agreement or in an employment
agreement the terms of which have been approved by the Administrator, or as
otherwise provided in Sections 6.8,
6.9, and 6.10 of the Plan, outstanding Options that are not exercisable
at the time an Optionholder’s Continuous Service terminates for any reason
other than for Misconduct (including an Optionholder’s death or Disability)
will be forfeited and expire at the close of business on the date of such
termination.  If the Optionholder’s
Continuous Service terminates for Misconduct, all outstanding Options (whether

 

14

 

or not vested) will be
forfeited and expire as of the beginning of business on the date of such
termination for Misconduct.

 

6.8          Extension
of Termination Date.  An Option Agreement may also provide that if
the exercise of the Option following the termination of the Optionholder’s
Continuous Service for any reason (other than upon the Optionholder’s death or
Disability or termination by the Company for Misconduct) would violate any
applicable federal, state or local law, the Option will terminate on the
earlier of (a) the expiration of the term of the Option in accordance with
Section 6.1, or (b) the date that is thirty days after the
exercise of the Option would no longer violate any applicable federal, state or
local law.

 

6.9          Disability
of Optionholder.  Unless otherwise provided in an Option
Agreement or in an employment or service agreement the terms of which have been
approved by the Administrator, in the event that an Optionholder’s Continuous
Service terminates as a result of the Optionholder’s Disability, the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of
termination), but only within such period ending on the earlier of (a) the
date 12 months following such termination or (b) the expiration of the
term of the Option as set forth in the Option Agreement.  If, after termination, the Optionholder does
not exercise his or her Option within the time specified herein, the Option
will terminate.

 

6.10        Death
of Optionholder.  Unless otherwise provided in an Option
Agreement or in an employment or service agreement the terms of which have been
approved by the Administrator, in the event an Optionholder’s Continuous
Service terminates as a result of the Optionholder’s death, then the Option may
be exercised (to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder’s estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the Option upon the Optionholder’s death, but
only within the period ending on the earlier of (a) the date 12 months
following the date of death or (b) the expiration of the term of such
Option as set forth in the Option Agreement. 
If, after death, the Option is not exercised within the time specified
herein, the Option will terminate.

 

6.11        Incentive
Stock Option $100,000 Limitation.  To the extent that the aggregate Fair Market
Value of Common Stock on the Date of Grant with respect to which Incentive
Stock Options are exercisable for the first time by any Optionholder during any
calendar year (under all plans of the Company and its Affiliates) exceeds
$100,000, the Options or portions thereof which exceed such limit (according to
the order in which they were granted) will be treated as Non-statutory Stock
Options.

 

6.12        Early
Exercise.  The Option may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder’s Continuous Service terminates to exercise the Option as to any
part or all of the shares of Common Stock subject to the Option prior to the
full vesting of the Option.  In such
case, the shares of Common Stock acquired on exercise will be subject to the
vesting schedule that otherwise would apply to determine the exercisability of
the Option.  Any unvested shares of
Common Stock so purchased may be subject to any other restriction the
Administrator determines to be appropriate.

 

15

 

6.13        Transfer,
Approved Leave of Absence.  For purposes of Incentive Stock Options, no
termination of employment by an Employee will be deemed to result from either (a) a
transfer to the employment of the Company from an Affiliate or from the Company
to an Affiliate, or from one Affiliate to another; or (b) an approved
leave of absence for military service or sickness, or for any other purpose
approved by the Company, if the period of such leave does not exceed three
months or, if longer, the Employee’s right to re-employment is guaranteed
either by a statute or by contract.

 

6.14        Disqualifying
Dispositions.  Any Participant who makes a “disposition” (as
defined in Section 424 of the Code) of all or any portion of shares of
Common Stock acquired upon exercise of an Incentive Stock Option within two
years from the Date of Grant of such Incentive Stock Option or within one year
after the issuance of the shares of Common Stock acquired upon exercise of such
Incentive Stock Option will be required to immediately advise the Company in
writing as to the occurrence of the sale and the price realized upon the sale
of such shares of Common Stock.

 

7                                         Provisions of Awards Other Than Options.

 

7.1          Restricted
Awards.  A
Restricted Award is an Award of actual shares of Common Stock (“Restricted Stock”) or
hypothetical Common Stock units (“Restricted Stock Units”) having a value equal
to the Fair Market Value of an identical number of shares of Common Stock,
which may, but need not, provide that such Restricted Award may not be sold,
assigned, transferred or otherwise disposed of, pledged or hypothecated as
collateral for a loan or as security for the performance of any obligation or
for any other purpose for such period (the “Restricted Period”) as the Administrator
shall determine.  Each Restricted Award
will be in such form and will contain such terms, conditions and Restricted
Periods as the Administrator deems appropriate, including the treatment of
dividends or dividend equivalents, as the case may be.  The terms and conditions of the Restricted
Award may change from time to time, and the terms and conditions of separate
Restricted Awards need not be identical, but each Restricted Award will include
(through incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

 

(a)           Purchase
Price.  The purchase
price of Restricted Awards, if any, will be determined by the Administrator,
and may be stated as cash, property, or prior or future services.

 

(b)           Consideration.  The Participant shall pay the consideration
for Common Stock acquired pursuant to the Restricted Award either:  (i) in cash at the time of purchase; or (ii) in
any other form of legal consideration that may be acceptable to the
Administrator in its discretion including, without limitation, a recourse
promissory note, property or a Stock for Stock Exchange, or prior or future
services that the Administrator determines have a value at least equal to the
Fair Market Value of such Common Stock. 
Notwithstanding the foregoing, during any period for which the Company
has any class of its securities listed on a national securities exchange in the
United States, has securities registered under Section 12 of the Exchange
Act, is required to file reports under Section 13(a) or 15(d) of
the Exchange Act, or has a registration statement pending under the Securities
Act, payment with a promissory note or

 

16

 

other transaction by a
Participant that involves or may involve a Prohibited Personal Loan is
prohibited with respect to any Restricted Award under the Plan.

 

(c)           Vesting.  The Restricted Award, and any shares of
Common Stock acquired under the Restricted Award, may, but need not, be subject
to a Restricted Period that specifies a Right of Repurchase in favor of the
Company, or forfeiture where the consideration was in the form of services, in
accordance with a vesting schedule to be determined by the Administrator.  The Administrator in its discretion may
provide for an acceleration of vesting in the terms of any Restricted Award, at
any time, including in the event a Change in Control occurs.  The Administrator in its discretion may grant
a Restricted Award that is, in whole or in part, vested upon grant and not
subject to a Restricted Period.  Unless
otherwise specified in the terms of any Award Agreement, each Restricted Award
granted pursuant to the terms of the Plan will become exercisable at a rate of
25% per year over the four-year period commencing on the Date of Grant of the
Restricted Award.

 

(d)           Termination
of Participant’s Continuous Service.  Unless otherwise provided in a Restricted
Award or in an employment agreement the terms of which have been approved by
the Administrator, in the event a Participant’s Continuous Service terminates
for any reason, the Company may exercise its Right of Repurchase or otherwise reacquire,
or the Participant shall forfeit the unvested portion of a Restricted Award
acquired in consideration of services, and any or all of the shares of Common
Stock held by the Participant that have not vested as of the date of
termination under the terms of the Restricted Award will be forfeited and the
Participant will have no rights with respect to the Award.

 

(e)           Transferability.  Rights to acquire shares of Common Stock
under the Restricted Award will be transferable by the Participant only upon such
terms and conditions as are set forth in the Award Agreement, as the
Administrator shall determine in its discretion, so long as Common Stock
awarded under the Restricted Award remains subject to the terms of the Award
Agreement.

 

(f)            Concurrent
Tax Payment.  The
Administrator, in its sole discretion, may (but will not be required to)
provide for payment of a concurrent cash award in an amount equal, in whole or
in part, to the estimated after-tax amount required to satisfy applicable
federal, state or local tax withholding obligations arising from the receipt
and deemed vesting of Restricted Stock for which an election under Code Section 83(b) may
be required.

 

(g)           Lapse
of Restrictions.  Upon
the expiration or termination of the Restricted Period and the satisfaction of
any other conditions prescribed by the Administrator (including, without
limitation, the Participant’s satisfaction of applicable tax withholding
obligations attributable to the Award), the restrictions applicable to the
Restricted Award will lapse and a stock certificate for the number of shares of
Common Stock with respect to which the restrictions have lapsed will be
delivered, free of any restrictions except those that may be imposed by law,
the terms of the Plan or the terms of a Restricted Award, to the Participant or
the Participant’s beneficiary or estate, as the case may be, unless such
Restricted Award is subject to a deferral condition that complies with Section 409A
of the Code and the regulations thereunder as may be allowed or required by the
Administrator in its sole discretion. 
The Company will not

 

17

 

be required to deliver any
fractional share of Common Stock but shall pay, in lieu thereof, the Fair
Market Value of such fractional share in cash to the Participant or the
Participant’s beneficiary or estate, as the case may be.  With respect only to Restricted Stock Units,
unless otherwise subject to a deferral condition that complies with Section 409A
of the Code, the Common Stock certificate will be issued and delivered and the
Participant will be entitled to the beneficial ownership rights of such Common
Stock not later than (i) the later of (A) the date that is 21⁄2 months
after the end of the Participant’s taxable year for which the Restricted Period
ends and the Restricted Stock Unit is no longer subject to a substantial risk
of forfeiture, or (B) the date that is 21⁄2 months after the end of the
Company’s taxable year for which the Restricted Period ends and the Restricted
Stock Unit is no longer subject to a substantial risk of forfeiture; or (ii) such
earlier date as may be necessary to avoid application of Section 409A of
the Code to such Award.

 

7.2          Performance
Awards.

 

(a)           Nature
of Performance Awards. 
A Performance Award is an Award entitling the recipient to vest in or
acquire shares of Common Stock or hypothetical Common Stock units having a
value equal to the Fair Market Value of an identical number of shares of Common
Stock that will be settled in the form of shares of Common Stock upon the
attainment of specified performance goals. 
The Administrator may make Performance Awards independent of or in
connection with the granting of any other Award under the Plan.  Performance Awards may be granted under the
Plan to any Participant, including those who qualify for awards under other
performance plans of the Company.  The
Administrator in its sole discretion shall determine whether and to whom
Performance Awards will be made, the performance goals applicable under each Award,
the periods during which performance is to be measured, and all other
limitations and conditions applicable to the awarded shares; provided, however,
that the Administrator may rely on the performance goals and other standards
applicable to other performance plans of the Company in setting the standards
for Performance Awards under the Plan.

 

(b)           Performance
Goals.  Performance goals will
be based on a pre-established objective formula or standard that specifies the
manner of determining the number of shares of Common Stock under the
Performance Award that will be granted or will vest if the performance goal is
attained.  The Administrator shall
determine the performance goals before the time that 25% of the service period
has elapsed, but not later than 90 days after the commencement of the service
period to which the performance goal relates. 
Performance goals may be based on one or more business criteria that
apply to a Participant, a business unit or the Company and its Affiliates.  Such business criteria include the
following:  revenue; sales; earnings
before all or any of interest expense, taxes, depreciation and/or amortization
(“EBIT,” “EBITA,” or “EBITDA”); operating income; operating income per share;
pre-tax or after-tax income; net cash provided by operating activities; cash
available for distribution; cash available for distribution per share; working
capital and components thereof; sales (net or gross) measured by product line,
territory, customer or customers, or other category; return on equity or
average stockholders’ equity; return on assets; return on capital; enterprise
value or economic value added; share price performance; improvements in the
Company’s attainment of expense levels; implementing or completion of critical
projects; improvement in cash-flow (before or after tax) ;

 

18

 

net earnings; earnings per
share; earnings from continuing operations; net worth; credit rating; levels of
expense, cost or liability by category, operating unit or any other
delineation; or any increase or decrease of one or more of the foregoing over a
specified period; or the occurrence of a Change in Control.  A performance goal may be measured over a
performance period on a periodic, annual, cumulative or average basis and may
be established on a corporate-wide basis or established with respect to one or
more operating units, divisions, subsidiaries, acquired businesses, minority
investments, partnerships or joint ventures. 
More than one performance goal may be incorporated in a performance
objective, in which case achievement with respect to each performance goal may
be assessed individually or in combination with each other.  The Administrator may, in connection with the
establishment of performance goals for a performance period, establish a matrix
setting forth the relationship between performance on two or more performance
goals and the amount of the Performance Award payable for that performance
period.  The level or levels of
performance specified with respect to a performance goal may be established in
absolute terms, as objectives relative to performance in prior periods, as an
objective compared to the performance of one or more comparable companies or an
index covering multiple companies, or otherwise as the Administrator may
determine.  Performance goals will be
objective and, if the Company is required to be registered under Section 12
of the Exchange Act, will otherwise meet the requirements of Section 162(m) of
the Code.  Performance goals may differ
for Performance Awards granted to any one Participant or to different
Participants.  A Performance Award to a
Participant who is a Covered Employee will (unless the Administrator determines
otherwise) provide that in the event of the Participant’s termination of
Continuous Service prior to the end of the performance period for any reason,
such Award will be payable only (i) if the applicable performance
objectives are achieved and (ii) to the extent, if any, the Administrator
shall determine.  Such objective
performance goals are not required to be based on increases in a specific
business criterion, but may be based on maintaining the status quo or limiting
economic losses.  With respect to
Participants who are not Covered Employees, performance goals may also include
such objective or subjective performance goals as the Administrator may, from
time to time, establish.

 

(c)           Restrictions
on Transfer. 
Performance Awards and all rights with respect to such Performance
Awards may not be sold, assigned, transferred, pledged or otherwise encumbered.

 

(d)           Satisfaction
of Performance Goals. 
A Participant will be entitled to receive a stock certificate evidencing
the acquisition of shares of Common Stock under a Performance Award only upon
satisfaction of all conditions specified in the written instrument evidencing
the Performance Award (or in a performance plan adopted by the Administrator),
including, without limitation, the Participant’s satisfaction of applicable tax
withholding obligations attributable to the Award.  With respect only to a Performance Award that
is denominated in hypothetical Common Stock units, the Common Stock certificate
will be issued and delivered and the Participant will be entitled to the beneficial
ownership rights of such Common Stock not later than (i) the later of (A) the
date that is 21⁄2 months after the end of the Participant’s taxable year for
which the Administrator certifies that the Performance Award conditions have
been satisfied and the Performance Award is no longer subject to a substantial
risk of forfeiture, or (B) the date that is 21⁄2 months after the end of the
Company’s taxable year for which the Administrator certifies that the
Performance Award conditions have been satisfied

 

19

 

and the Performance Award is
no longer subject to a substantial risk of forfeiture; or (ii) such other
date as may be necessary to avoid application of Section 409A of the Code
to such Award.

 

(e)           Termination.  Except as may otherwise be provided by the
Administrator at any time, a Participant’s rights in all Performance Awards
will automatically terminate upon the Participant’s termination of employment
(or business relationship) with the Company and its Affiliates for any reason.

 

(f)            Acceleration,
Waiver, Etc.  Before
the first date on which any class of the Company’s common equity securities is
required to be registered under Section 12 of the Exchange Act or after
such date with respect to Participants who are not Covered Employees, at any time
before the Participant’s termination of Continuous Service by the Company and
its Affiliates, the Administrator may in its sole discretion accelerate, waive
or, subject to Section 12
hereof, amend any or all of the goals, restrictions or
conditions imposed under any Performance Award. 
The Administrator in its discretion may provide for an acceleration of
vesting in the terms of any Performance Award at any time, including in the
event a Change in Control occurs. 
Notwithstanding the foregoing, with respect to a Covered Employee, after
the first date on which any class of the Company’s common equity securities is
required to be registered under Section 12 of the Exchange Act, no
amendment or waiver of the performance goal will be permitted, and no acceleration
of payment (other than in the form of Common Stock) will be permitted unless
the performance goal has been attained and the Award is discounted to
reasonably reflect the time value of money attributable to such acceleration.

 

(g)           Certification.  Following the completion of each performance
period, the Administrator shall certify in writing, in accordance with the
requirements of Section 162(m) of the Code, whether the performance
objectives and other material terms of a Performance Award have been achieved
or met.  Unless the Administrator
determines otherwise, Performance Awards will not be settled until the
Administrator has made the certification specified under this Section 7.2(g).

 

7.3          Stock
Appreciation Rights.

 

(a)           General.  Stock Appreciation Rights may be granted
either alone (“Free Standing SARs”) or, provided
the requirements of Section 7.3(b) are
satisfied, in tandem with all or part of any Option granted under the Plan (“Tandem
SARs”).  In the
case of a Non-statutory Stock Option, Tandem SARs may be granted either at or
after the time of the grant of such Option. 
In the case of an Incentive Stock Option, Tandem SARs may be granted
only at the time of the grant of the Incentive Stock Option.

 

(b)           Grant
Requirements.  A Stock
Appreciation Right may only be granted if it does not provide for the deferral
of compensation within the meaning of Section 409A of the Code.  A Stock Appreciation Right does not provide
for a deferral of compensation if: (i) the Strike Price may never be less than the Fair
Market Value per share of Common Stock on the Date of Grant, (ii) the
compensation payable under the Stock Appreciation Right can never be greater
than the difference between the Strike Price and the Fair Market Value per
share of Common Stock on the date the Stock Appreciation Right is exercised, (iii) the
number of shares

 

20

 

of
Common Stock subject to the Stock Appreciation Right is fixed on the Date of
Grant of the Stock Appreciation Right, and (iv) the Stock Appreciation
Right does not include any feature for the deferral of compensation other than
the deferral of recognition of income until the exercise of the right.

 

(c)                                  Exercise and Payment.  Upon delivery to the Administrator of a
written request to exercise a Stock Appreciation Right, the holder of such
Stock Appreciation Right will be entitled to receive from the Company, an
amount equal to the product of (i) the excess of the Fair Market Value, on
the date of exercise, of one share of Common Stock over the Strike Price per
share specified in such Stock Appreciation Right or its related Option;
multiplied by (ii) the number of shares for which such Stock Appreciation
Right is exercised.  Payment with respect
to the exercise of a Stock Appreciation Right will be paid on the date of
exercise and made in shares of Common Stock valued at Fair Market Value on the
date of exercise.  Payment may be made in
the form of shares of Common Stock (with or without restrictions as to
substantial risk of forfeiture and transferability, as determined by the
Administrator in its sole discretion), cash, or a combination thereof, as
determined by the Administrator in its sole discretion.

 

(d)                                 Strike Price.  The Administrator shall determine the Strike
Price of a Free Standing SAR, which may not be less than 100% of the Fair
Market Value per share of Common Stock on the Date of Grant of such Stock
Appreciation Right.  The Strike Price of
a Tandem SAR granted simultaneously with or subsequent to the grant of an
Option and in conjunction therewith or in the alternative thereto will be the
Exercise Price of the related Option.  A
Tandem SAR will be transferable only upon the same terms and conditions as the
related Option, and will be exercisable only to the same extent as the related
Option; provided, however, that a Tandem SAR, by its terms,
will be exercisable only when the Fair Market Value per share of Common Stock
subject to the Tandem SAR and related Option exceeds the Strike Price per share
thereof.

 

(e)                                  Reduction in the Underlying Option Shares.  Upon any exercise of a Stock Appreciation
Right, the number of shares of Common Stock for which any related Option will
be exercisable will be reduced by the number of shares for which the Stock
Appreciation Right has been exercised. 
The number of shares of Common Stock for which a Tandem SAR is
exercisable will be reduced upon any exercise of any related Option by the
number of shares of Common Stock for which such Option has been exercised.

 

(f)                                    Written Request.  Unless otherwise determined by the
Administrator in its sole discretion, Stock Appreciation Rights will be settled
in the form of Common Stock.  If
permitted in the Award Agreement, a Participant may request that any exercise
of a Stock Appreciation Right be settled for cash, but a Participant will not
have any right to demand a cash settlement. 
A request for a cash settlement may be made only by a written request
filed with the Corporate Secretary of the Company during the period beginning
on the third business day following the date of release for publication by the
Company of quarterly or annual summary statements of earnings and ending on the
twelfth business day following such date. 
Within 30 days of the receipt by the Company of a written request to
receive cash in full or partial settlement of a Stock Appreciation Right or to
exercise such Stock Appreciation Right for cash, the Administrator shall, in
its sole discretion, either consent to or disapprove, in whole or in part, such
written request.  A written request to
receive cash in full or partial settlement of a Stock 

 

21

 

Appreciation
Right or to exercise a Stock Appreciation Right for cash may provide that, in
the event the Administrator disapproves such written request, such written
request will be deemed to be an exercise of such Stock Appreciation Right for
shares of Common Stock.

 

(g)                                 Disapproval by Administrator.  If the Administrator disapproves in whole or
in part any request by a Participant to receive cash in full or partial
settlement of a Stock Appreciation Right or to exercise such Stock Appreciation
Right for cash, such disapproval will not affect such Participant’s right to
exercise such Stock Appreciation Right at a later date, to the extent that such
Stock Appreciation Right will be otherwise exercisable, or to request a cash
form of payment at a later date, provided that a request to receive cash upon
such later exercise will be subject to the approval of the Administrator.  Additionally, such disapproval will not
affect such Participant’s right to exercise any related Option.

 

(h)                                 Restrictions on Transfer.  Stock Appreciation Rights and all rights with
respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.

 

8                                         Covenants of the Company.

 

8.1                               Availability of Shares.  During the terms of the Awards, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such Awards.

 

8.2                               Securities Law Compliance.  Each Award Agreement will provide that no
shares of Common Stock may be purchased or sold thereunder unless and until any
then applicable requirements of state, federal or applicable foreign laws and
regulatory agencies have been fully complied with to the satisfaction of the
Company and its counsel.  The Company
shall use reasonable efforts to seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required
to grant Awards and to issue and sell shares of Common Stock upon exercise of
the Awards; provided, however, that this undertaking will
not require the Company to register under the Securities Act the Plan, any
Award or any Common Stock issued or issuable pursuant to any such Award.  If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
that counsel for the Company deems necessary for the lawful issuance and sale
of Common Stock under the Plan, the Company will be relieved from any liability
for failure to issue and sell Common Stock upon exercise of such Awards unless
and until such authority is obtained.

 

9                                         Use of Proceeds from Stock.

 

Proceeds
from the sale of Common Stock pursuant to Awards will constitute general funds
of the Company.

 

10                                  Miscellaneous.

 

10.1                        Stockholder Rights.  Except as provided in Section 11.1
hereof or as otherwise provided in an Award Agreement, no Participant will be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to an Award unless and until the
Participant has satisfied all requirements for exercise, payment, or delivery
of the Award, as applicable, pursuant to its terms, and no adjustment will be
made for dividends 

 

22

 

(ordinary
or extraordinary, whether in cash, securities, or other property) or
distributions of other rights for which the record date is prior to the date of
issue of a Common Stock certificate.

 

10.2                        No Employment or Other Service Rights.  Nothing in the Plan or any instrument
executed or Award granted pursuant thereto will confer upon any Participant any
right to continue to serve the Company or an Affiliate in the capacity in
effect at the time the Award was granted or will affect the right of the
Company or an Affiliate to terminate (a) the employment of an Employee
with or without notice and for or without Misconduct, (b) the service of a
Consultant pursuant to the terms of such Consultant’s agreement with the
Company or an Affiliate, or (c) the service of a Director pursuant to the
Bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.

 

10.3                        Investment Assurances.  The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Award, (a) to
give written assurances satisfactory to the Company as to the Participant’s
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Award; and (b) to
give written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Award for the
Participant’s own account and not with any present intention of selling or
otherwise distributing the Common Stock. 
The foregoing requirements, and any assurances given pursuant to such
requirements, will be inoperative if (i) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Award
has been registered under a then currently effective registration statement
under the Securities Act, or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to
the Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the
transfer of the Common Stock.

 

10.4                        Withholding Obligations.  To the extent provided by the terms of an
Award Agreement and subject to the discretion of the Administrator, the
Participant may satisfy any federal, state or local tax withholding obligation
relating to the exercise or acquisition of Common Stock under an Award by any
of the following means (in addition to the Company’s right to withhold from any
compensation paid to the Participant by the Company) or by a combination of
such means:  (a) tendering a cash
payment; (b) authorizing the Company to withhold shares of Common Stock
from the shares of Common Stock otherwise issuable to the Participant as a
result of the exercise or acquisition of Common Stock under the Award, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount
of tax required to be withheld by law; (c) delivering to the Company
previously owned and unencumbered shares of Common Stock or (d) by
execution of a recourse promissory note by a Participant.  Notwithstanding the foregoing, during any
period for which the Company has any class of its securities listed on a
national securities exchange in the United States, has securities registered
under Section 12 of the Exchange Act, is required to file reports 

 

23

 

under
Section 13(a) or 15(d) of the Exchange Act, or has a
registration statement pending under the Securities Act, payment of the tax
withholding with a promissory note or other transaction by a Participant that
involves or may involve a Prohibited Personal Loan is prohibited with respect
to any Award.  Unless otherwise provided
in the terms of an Option Agreement, payment of the tax withholding by a
Participant who is an Officer, Director, or other Insider by delivering
previously owned and unencumbered shares of Common Stock or in the form of
share withholding is subject to pre-approval by the Administrator, in its sole
discretion.  The Administrator shall
document any such pre-approval in a manner that complies with the specificity
requirements of Rule 16b-3, including the name of the Participant involved
in the transaction, the nature of the transaction, the number of shares to be
acquired or disposed of by the Participant and the material terms of the Award
involved in the transaction.

 

10.5                        Right of Repurchase.  Each Award Agreement may provide that,
following a termination of the Participant’s Continuous Service, the Company
may repurchase the Participant’s unvested Common Stock acquired under the Plan
as provided in this Section (the
“Right of Repurchase”).  The Right of Repurchase for unvested Common
Stock will be exercisable at a price equal to the lesser of the purchase price
at which such Common Stock was acquired under the Plan or the Fair Market Value
of such Common Stock (if an Award is granted solely in consideration of past
services without payment of any additional consideration, the unvested Common
Stock will be forfeited without any repurchase).  The Award Agreement may specify the period
following a termination of the Participant’s Continuous Service during which
the Right of Repurchase may be exercised.

 

10.6                        Acceleration of Exercisability and Vesting.  The Administrator has the power to accelerate
the time at which an Award may first be exercised or the time during which an
Award or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Award stating the time at which it may
first be exercised or the time during which it will vest.

 

11                                  Adjustments upon Changes in Stock.

 

11.1                        Capitalization Adjustments.  If any change is made in the Common Stock
subject to the Plan, or subject to any Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), then the Administrator shall
proportionately adjust (a) the aggregate number of shares of Common Stock
or class of shares that may be purchased pursuant to Awards granted hereunder;
(b) the aggregate number of shares of Common Stock or class of shares that
may be purchased pursuant to Incentive Stock Options granted hereunder;
(c) the number and/or class of shares of Common Stock covered by
outstanding Options and Awards; (d) the maximum number of shares of Common
Stock with respect to which Options may be granted to any single Optionholder
during any calendar year; and (e) the Exercise Price of any Option in
effect prior to such change to reflect any increase or decrease in the number
of issued shares of Common Stock or change in the Fair Market Value of such
Common Stock resulting from such transaction; provided, however, that any
fractional shares resulting from the adjustment may be eliminated by a cash
payment.  The Administrator shall make
such 

 

24

 

adjustments
in a manner that will provide an appropriate adjustment that neither increases
nor decreases the value of such Award as in effect immediately prior to such
corporate change, and its determination will be final, binding and conclusive.  The conversion of any securities of the
Company that are by their terms convertible will not be treated as a
transaction “without receipt of consideration” by the Company.

 

11.2                        Dissolution or Liquidation.  In the event of a dissolution or liquidation
of the Company, then, subject to Section 11.3,
all outstanding Awards will terminate immediately prior to such event.

 

11.3                        Change in Control – Asset Sale, Merger,
Consolidation or Reverse Merger.  In the event of a Change in Control, a
dissolution or liquidation of the Company, an exchange of shares, or any
corporate separation or division, including, but not limited to, a split-up, a
split-off or a spin-off, or a sale, in one or a series of related transactions,
of all or substantially all of the assets of the Company; a merger or consolidation
in which the Company is not the Surviving Entity; or a reverse merger in which
the Company is the Surviving Entity, but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then the
Company, to the extent permitted by applicable law, but otherwise in the sole
discretion of the Administrator may provide for: (a) the continuation of
outstanding Awards by the Company (if the Company is the Surviving Entity);
(b) the assumption of the Plan and such outstanding Awards by the
Surviving Entity or its parent; (c) the substitution by the Surviving
Entity or its parent of Awards with substantially the same terms (including an
award to acquire the same consideration paid to the stockholders in the
transaction described in this Section)
for such outstanding Awards and, if appropriate, subject to the equitable
adjustment provisions of Section 11.1
hereof; (d) the cancellation of such outstanding Awards in consideration
for a payment (in the form of stock or cash) equal in value to the Fair Market
Value of vested Awards, or in the case of an Option, the difference between the
Fair Market Value and the Exercise Price for all shares of Common Stock subject
to exercise (i.e., to the extent
vested) under any outstanding Option; or (e) the cancellation of such
outstanding Awards without payment of any consideration.  If such Awards would be canceled without
consideration for vested Awards, the Participant will have the right,
exercisable during the later of the 10-day period ending on the fifth day prior
to such merger or consolidation or 10 days after the Administrator provides the
Award holder a notice of cancellation, to exercise such Awards in whole or in
part without regard to any installment exercise provisions in the Option
Agreement.

 

12                                  Amendment of the Plan and Awards.

 

12.1                        Amendment of Plan.  The Board at any time, and from time to time,
may amend or terminate the Plan. 
However, except as provided in Section 11.1
relating to adjustments upon changes in Common Stock, no amendment will be
effective unless approved by the stockholders of the Company to the extent
stockholder approval is necessary to satisfy any applicable law or any securities
exchange listing requirements.  At the
time of such amendment, the Board shall determine, upon advice from counsel,
whether such amendment will be contingent on stockholder approval.

 

25

 

12.2                        Stockholder Approval.  The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding
the exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

 

12.3                        Contemplated Amendments.  It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options or to the nonqualified deferred
compensation provisions of Section 409A of the Code and to bring the Plan
and Awards granted hereunder into compliance therewith.  Notwithstanding the foregoing, neither the
Board nor the Company nor any Affiliate will have any liability to any
Participant or any other Person as to (a) any tax consequences expected,
but not realized, by a Participant or any other person due to the receipt,
exercise, or settlement of any Award granted hereunder; or (b) the failure
of any Award to comply with Section 409A of the Code.

 

12.4                        No Impairment of Rights.  No amendment of the Plan may impair rights
under any Award granted before such amendment unless (a) the Company
requests the consent of the Participant and (b) the Participant consents
in writing.  For the avoidance of doubt,
a cancellation of an Award where the Participant receives a payment equal in
value to the Fair Market Value of the vested Award or, in the case of vested
Options, the difference between the Fair Market Value and the Exercise Price,
is not an impairment of the Participant’s rights that requires consent of the
Participant.

 

12.5                        Amendment of Awards.  The Administrator at any time, and from time
to time, may amend the terms of any one or more Awards; provided, however, that the
Administrator may not effect any amendment that would otherwise constitute an
impairment of the rights under any Award unless (a) the Company requests
the consent of the Participant and (b) the Participant consents in
writing.  For the avoidance of doubt, the
cancellation of a vested Award where the Participant receives a payment equal
in value to the Fair Market Value of the vested Award or, in the case of vested
Options, the difference between the Fair Market Value of the Common Stock
underlying the Option and the aggregate Exercise Price, will not be an
impairment of the Participant’s rights that requires consent of the
Participant; provided further,
that without stockholder approval, except as otherwise permitted under Section 11
of the Plan, (i) no amendment or modification may reduce the Exercise
Price of any Option or the Strike Price of any SAR; (ii) the Committee may
not cancel any outstanding Option or SAR and replace it with a new Option or
SAR, another Award or cash; and (iii) the Committee may not take any other
action that is considered a “repricing” for purposes of the stockholder
approval rules of the applicable securities exchange or inter-dealer
quotation system on which the Common Stock is listed or quoted.

 

13                                  General Provisions.

 

13.1                        Other Compensation Arrangements.  Nothing contained in the Plan will prevent
the Board from adopting other or additional compensation arrangements, subject
to 

 

26

 

stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.

 

13.2                        Recapitalizations.  Each Award Agreement will contain provisions
required to reflect the provisions of Section 11.1.

 

13.3                        Delivery.  Upon exercise of a right granted pursuant to
an Award under the Plan, the Company shall issue Common Stock or pay any
amounts due within a reasonable period thereafter.  Subject to any statutory or regulatory
obligations the Company may otherwise have, for purposes of the Plan, 30 days
will be considered a reasonable period.

 

13.4                        Other Provisions.  The Award Agreements authorized under the
Plan may contain such other provisions not inconsistent with the Plan,
including, without limitation, restrictions upon the exercise of the Awards, as
the Administrator may deem advisable.

 

13.5                        Cancellation and Rescission of Awards for
Detrimental Activity.

 

(a)                                  Upon exercise,
payment, or delivery pursuant to an Award, the Administrator may require a
Participant to certify in a manner acceptable to the Company that the
Participant has not engaged in any Detrimental Activity.

 

(b)                                 Unless the
Award Agreement specifies otherwise, the Administrator may cancel, rescind,
suspend, withhold or otherwise limit or restrict any unexpired, unpaid or
deferred Awards at any time if the Participant engages in any Detrimental
Activity.

 

(c)                                  In the event a
Participant engages in Detrimental Activity after any exercise, payment or
delivery pursuant to an Award, during any period for which any restrictive
covenant prohibiting such activity is applicable to the Participant, such
exercise, payment or delivery may be rescinded within one year thereafter.  In the event of any such rescission, the
Participant shall pay to the Company the amount of any gain realized or payment
received as a result of the exercise, payment or delivery, in such manner and
on such terms and conditions as may be required by the Company.  The Company will be entitled to set-off
against the amount of any such gain any amount owed to the Participant by the
Company.

 

14                                  Market Stand-Off.

 

Each
Option Agreement and Award Agreement will provide that, in connection with any
underwritten public offering by the Company of its equity securities, the
Participant shall agree not to sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the repurchase of, transfer the economic
consequences of ownership or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to
any Common Stock without the prior written consent of the Company or its
underwriters, for such period from and after the effective date of such
registration statement as may be requested by the Company or such underwriters
(the “Market Stand-Off”).  In order to enforce the Market Stand-Off, the
Company may impose stop-transfer instructions with respect to the shares of
Common Stock acquired under the Plan until the end of the applicable stand-off
period.  If there is any change in the
number of outstanding shares of Common Stock by reason of a stock split,
reverse stock 

 

27

 

split, stock dividend, recapitalization, combination, reclassification,
dissolution or liquidation of the Company, any corporate separation or division
(including, but not limited to, a split-up, a split-off or a spin-off), a
merger or consolidation; a reverse merger or similar transaction, then any new,
substituted or additional securities that are by reason of such transaction distributed
with respect to any shares of Common Stock subject to the Market Stand-Off, or
into which such shares of Common Stock thereby become convertible, will
immediately be subject to the Market Stand-Off.

 

15                                  Effective Date of Plan.

 

The
Plan is effective as of April 7, 2009, the date on which the Board adopted
the Plan (the “Effective Date”).  No Award granted on or after the Effective
Date may be exercised (or, in the case of a stock Award, may be granted) unless
and until the Plan has been approved by the stockholders of the Company, which
approval must be within 12 months before or after the date the Plan is adopted
by the Board.

 

16                                  Termination or Suspension of the Plan.

 

The
Plan will terminate automatically on the day before the 10th anniversary of the
Effective Date.  No Award may be granted
pursuant to the Plan after such date, but Awards theretofore granted may extend
beyond that date.  The Board may suspend
or terminate the Plan at any earlier date pursuant to Section 12.1
hereof.  No Awards may be granted under
the Plan while the Plan is suspended or after it is terminated.

 

17                                  Choice of Law.

 

The
law of the State of Delaware will govern all questions concerning the
construction, validity and interpretation of the Plan, without regard to such state’s
conflict of law rules.

 

18                                  Limitation on Liability.

 

The
Company and any Affiliate that is in existence or that hereinafter comes into
existence will have no liability to any Participant or any other person as to
(a) the non-issuance or sale of shares of Common Stock as to which the
Company has been unable to obtain from any regulatory body having jurisdiction
the authority deemed by counsel to the Company necessary to the lawful issuance
and sale of any shares hereunder; (b) any tax consequences expected, but
not realized, by a Participant or any other person due to the receipt,
exercise, or settlement of any Award granted hereunder; (c) the failure of
any Award that is determined to constitute “nonqualified deferred compensation”
to comply with Section 409A of the Code and the regulations thereunder.

 

19                                  Execution.

 

To
record the adoption of the Plan by the Board, the Company has caused its
authorized officer to execute the Plan as of the date specified below.

 

Signature
page follows

 

28

 

IN WITNESS WHEREOF, upon authorization of the
Board, the undersigned has executed the Amended and Restated True Religion
Apparel, Inc. 2009 Equity Incentive Plan, effective as of the Effective
Date, on the date opposite his or her signature.

 

	
   

  	
  TRUE
  RELIGION APPAREL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:  May 18, 2009

  	
  By:

  	
  /s/ Peter F. Collins 

  
	
   

  	
  Name:

  	
  Peter F. Collins 

  
	
   

  	
  Its:

  	
  Chief Financial Officer

  

 

Signature Page to Amended and Restated True
Religion Apparel, Inc. 2009 Equity Incentive PlanExhibit 4.4

 

Restricted Stock Award (#)     

 

TRUE RELIGION APPAREL, INC.

2009 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD CERTIFICATE

 

THIS IS TO CERTIFY that True
Religion Apparel, Inc., a Delaware corporation (the “Company”), has granted you (“Participant”) the right to receive Common Stock of the Company
under its 2009 Equity Incentive Plan (the “Plan”), as follows:

 

	
  Name
  of Participant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address
  of Participant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number
  of Shares:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date
  of Grant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Acceptance
  Expiration Date:

  	
   

  	
  15
  days after Participant’s receipt of this Certificate and the attached
  Restricted Stock Award Agreement.

  
	
   

  	
   

  	
   

  
	
  Vesting
  Commencement Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Vesting
  Schedule:

  	
   

  	
   

  

 

	
   

  	
   

  	
  Anniversary of Vesting

  	
   

  	
  Percentage of

  	
   

  
	
   

  	
   

  	
  Commencement Date

  	
   

  	
  Shares Vested

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  %

  

 

By your signature and the
signature of the Company’s representative below, you and the Company agree to
be bound by all of the terms and conditions of the attached Restricted Stock
Award Agreement and the Plan (both incorporated herein by this reference as if
set forth in full in this document).  By
executing this Certificate, you hereby irrevocably elect to accept the
Restricted Stock Award rights granted pursuant to this Certificate and the
related Restricted Stock Award Agreement and to receive the shares of
Restricted Stock of True Religion Apparel, Inc. designated above subject
to the terms of the Plan, this Certificate and the Award Agreement.

 

	
  Participant:

  	
   

  	
  True
  Religion Apparel, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  Dated:

  	
   

  
					

 

True
Religion Apparel, Inc. Executive Restricted Stock Award Certificate

 

 

TRUE RELIGION APPAREL, INC.

2009 EQUITY INCENTIVE PLAN

 

RESTRICTED STOCK AWARD AGREEMENT

 

This Restricted Stock Award
Agreement (this “Agreement”), is made and
entered into on the execution date of the Restricted Stock Award Certificate to
which it is attached (the “Certificate”), by and between True Religion Apparel, Inc., a
Delaware corporation (the “Company”), and the Participant named in the Certificate.

 

Pursuant to the True
Religion Apparel, Inc. 2009 Equity Incentive Plan (the “Plan”), the Administrator has authorized the grant to
Participant of the right to receive shares of the Company’s Common Stock (the “Award”), upon the terms and subject
to the conditions set forth in this Agreement and in the Plan.  Capitalized terms not otherwise defined
herein have the meanings ascribed to them in the Plan.

 

NOW, THEREFORE, in consideration of the premises and the benefits
to be derived from the mutual observance of the covenants and promises
contained herein and other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:

 

1.             Basis for Award.  This
Award is made pursuant to the Plan for valid consideration provided to the
Company by Participant.  By your
execution of the Certificate, you agree to accept the Restricted Stock Award
rights granted pursuant to the Certificate and this Agreement and to receive
the shares of Restricted Stock of the Company designated in the Certificate
subject to the terms of the Plan, the Certificate and this Agreement.

 

2.             Restricted Stock Award.  The Company hereby awards and grants to
Participant, for valid consideration with a value in excess of the aggregate
par value of the Common Stock awarded to Participant, the number of shares of
Common Stock set forth in the Certificate, which are subject to the
restrictions and conditions set forth in the Plan, the Certificate and in this
Agreement (the “Restricted
Stock”).  One or more
stock certificates representing the number of shares of Common Stock specified
in the Certificate will hereby be registered in Participant’s name (the “Stock Certificate”), but will
be deposited and held in the custody of the Company for Participant’s account
as provided in Section 4 hereof until such Restricted Stock becomes
vested.  Participant acknowledges and
agrees that those shares of Common Stock may be issued as a book entry with the
Company’s transfer agent and that no physical certificates need be issued for
as long as such shares remain subject to forfeiture and restrictions on
transfer.

 

3.             Vesting.  Except as otherwise provided in an employment
agreement or service agreement, the terms of which have been approved by the
Administrator, the Restricted Stock will vest and restrictions on transfer will
lapse pursuant to the Vesting Schedule set forth in the Certificate, on
condition that Participant is still then in Continuous Service.  Except as otherwise provided in an employment
agreement or service agreement, the terms of which have been approved by the
Administrator, if Participant ceases Continuous Service for any reason
Participant will immediately forfeit the shares of Restricted Stock standing in
the name of Participant on the books of the Company that have not vested and as
to which restrictions have 

 

True
Religion Apparel, Inc. Executive Restricted Stock Award Agreement

 

 

not
lapsed (“Unvested Shares”) and such Unvested Shares will be cancelled as outstanding
shares of Common Stock.  To the extent
that an employment agreement or service agreement, the terms of which have been
approved by the Administrator, provides for acceleration of vesting of any or
all Unvested Shares upon termination of Continuous Service, such provisions are
incorporated by reference herein.

 

(a)           Forfeiture
of Unvested Shares.  Unless
otherwise provided in an employment agreement or service agreement, the terms
of which have been approved by the Administrator, if Unvested Shares do not
become vested on or before the expiration of the period during which the
applicable vesting conditions must occur, such Unvested Shares will be
automatically forfeited and cancelled as outstanding shares of Common Stock
immediately upon the occurrence of the event or period after which such
Unvested Shares may no longer become vested.

 

(b)           Restriction
on Transfer of Unvested Shares.  Participant is not permitted to transfer,
assign, grant a lien or security interest in, pledge, hypothecate, encumber, or
otherwise dispose of any of the Unvested Shares, except as permitted by this
Agreement.

 

4.             Deposit of the Unvested Shares.  Participant shall deposit all of the Unvested
Shares with the Company to hold in its custody until they become vested, at
which time such vested shares of Restricted Stock will no longer constitute
Unvested Shares.  If requested by the
Company, Participant shall execute and deliver to the Company, concurrently
with the execution of this Agreement (and/or, if requested by the Company, from
time to time thereafter during the Restricted Period) blank stock powers for
use in connection with the transfer to the Company or its designee of Unvested
Shares that do not become vested.  The
Company will deliver to Participant the Stock Certificate for the shares of
Common Stock that become vested upon the lapse of the forfeiture and
non-transferability restrictions thereon.

 

5.             Rights as a Stockholder, Dividends.  Subject to the
terms of this Agreement, Participant will have all the rights of a stockholder
with respect to the Restricted Stock, including the right to vote the
Restricted Stock and to receive any dividends thereon; provided that any
dividends paid with respect to Unvested Shares will not be paid to Participant
until the Unvested Shares pursuant to which the dividends were paid become
vested and are no longer subject to forfeiture and restrictions on
transfer.  Any such dividends will be
deposited with a third party escrow agent or a third party trustee selected by
the Administrator in its discretion, until such time as the Unvested Shares
relating to such dividends become vested and deliverable to Participant, at
which time such dividends will be released from escrow and paid to
Participant.  If the Unvested Shares
relating to dividends held in escrow are subsequently forfeited, such dividends
will be automatically forfeited and released from escrow and returned to the
Company.

 

6.             Compliance with Laws and Regulations.  The issuance and
transfer of Common Stock is subject to the Company’s and Participant’s full compliance,
to the satisfaction of the Company and its counsel, with all applicable
requirements of federal, state and foreign securities laws and with all
applicable requirements of any securities exchange on which the Common Stock
may be listed at the time of such issuance or transfer.  Participant understands that the Company is
under no obligation to register or qualify the shares of Common Stock with the 

 

2

 

Securities
Exchange Commission, any state securities commission, foreign securities
regulatory authority, or any securities exchange to effect such compliance.

 

7.             Tax Withholding.

 

(a)           As a condition to the
release of shares of Common Stock from escrow and lapse of restrictions on
transfer, no later than the first to occur of (i) the date as of which the
all or any of the shares of Restricted Stock vest and the restrictions on their
transfer lapse, or (ii) the date required by Section 7(b),
Participant shall pay to the Company any federal, state, or local taxes
required by law to be withheld with respect to the shares of Restricted Stock
that vest and for which the restrictions lapse. 
Participant shall pay such amount to the Company in cash, or by
tendering Common Stock held by Participant, including shares of Restricted
Stock held in escrow that become vested, with a Fair Market Value on the date
the Restricted Stock vests equal to the amount of Participant’s minimum
statutory tax withholding liability, or a combination thereof.  If Participant fails to make such payments,
the Company will, to the extent permitted by law, have the right to deduct from
any payment of any kind otherwise due to Participant any federal, state, or
local taxes required by law to be withheld with respect to such shares of Common
Stock.

 

(b)           Participant may elect,
within 30 days of the Date of Grant, to include in gross income for federal
income tax purposes pursuant to Section 83(b) of the Code, an amount
equal to the aggregate Fair Market Value on the Date of Grant of the Restricted
Stock granted hereunder.  In connection
with any such election, Participant shall promptly provide the Company with a
copy of such election as filed with the Internal Revenue Service, and pay to
the Company, or make such other arrangements satisfactory to the Administrator
to pay to the Company based on the Fair Market Value of the Restricted Stock on
the Date of Grant, any federal, state, or local taxes required by law to be
withheld with respect to such shares of Restricted Stock at the time of such
election.  If Participant fails to make
such payments, the Company will, to the extent permitted by law, have the right
to deduct from any payment of any kind otherwise due to Participant any
federal, state, or local taxes required by law to be withheld with respect to
such shares of Common Stock.

 

8.             No Right to Continued Service.  Nothing in this Agreement or in the Plan
imposes or may be deemed to impose, by implication or otherwise, any limitation
on any right of the Company or any Affiliate to terminate Participant’s
Continuous Service at any time.

 

9.             Representations and Warranties of Participant.  Participant
represents and warrants to the Company as follows:

 

(a)           Agrees to
Terms of the Plan.  Participant
acknowledges that a copy of the Plan has been made available to Participant,
and Participant has read and understands the terms of the Plan, the Certificate
and this Agreement and agrees to be bound by their terms and conditions.  Participant acknowledges that there may be
adverse tax consequences upon the vesting of Restricted Stock or disposition of
the shares of Common Stock once vested, and that Participant should consult a
tax advisor before such time.

 

3

 

(b)           Stock
Ownership.  Participant
is the record and beneficial owner of the shares of Restricted Stock with full
right and power to transfer the Unvested Shares to the Company free and clear
of any liens, claims, or encumbrances and Participant understands that the
Stock Certificates evidencing the Restricted Stock will bear a legend
referencing this Agreement.

 

(c)           Rule 144.  Participant understands that Rule 144
promulgated under the Securities Act may indefinitely restrict transfer of the
Common Stock if Participant is an “affiliate” of the Company (as defined in Rule 144),
or for up to one year if “current public information” about the Company (as
defined in Rule 144) is not publicly available regardless of whether
Participant is an affiliate of the Company.

 

10.           Compliance with Securities Laws.  Participant
understands and acknowledges that, notwithstanding any other provision of the
Agreement to the contrary, the vesting and holding of the Restricted Stock is
expressly conditioned upon compliance with the Securities Act and all
applicable federal, state, and foreign securities laws.  Participant agrees to cooperate with the
Company to ensure compliance with such laws.

 

11.           Adjustments.  If, as a result of any adjustment pursuant to
Section 11.1 of the Plan, Participant becomes entitled to receive any
additional shares of Common Stock or other securities (“Additional Securities”) in respect of the Unvested
Shares, the total number of Unvested Shares will be equal to the sum of (i) the
initial Unvested Shares, and (ii) the  number of
Additional Securities issued or issuable in respect of the initial Unvested
Shares and any Additional Securities previously issued to Participant.

 

12.           Change in Control.  To the extent that an employment agreement or
service agreement in effect immediately before the consummation of a Change in
Control, the terms of which have been approved by the Administrator, provides
for accelerated vesting of any or all Unvested Shares upon the occurrence of a
Change in Control, such provisions of such employment agreement or service
agreement are incorporated by reference herein.

 

13.           Restrictive Legends and Stop-Transfer Orders.

 

(a)           Legends.  To the extent that a Stock Certificate or
Certificates representing Unvested Shares is issued in physical form rather
than through book entry with the Company’s transfer agent, Participant
understands and agrees that the Company will place the legends set forth below
or similar legends on any Stock Certificate evidencing the Common Stock,
together with any other legends that may be required by federal, state, or
foreign securities laws, the Company’s articles of incorporation or bylaws, any
other agreement between Participant and the Company, or any agreement between
Participant and any third party:

 

THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON PUBLIC
RESALE AND TRANSFER, AS SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES.  SUCH PUBLIC RESALE AND TRANSFER RESTRICTIONS
ARE BINDING ON TRANSFEREES OF THESE SHARES.

 

4

 

The Company will remove the
above legend at such time as the shares of Common Stock in question are no
longer subject to restrictions on public resale and transfer pursuant to this
Agreement.  Any legends required by
applicable federal, state, or foreign securities laws will be removed at such
time as such legends are no longer required.

 

(b)           Stop-Transfer
Instructions.  To ensure
compliance with the restrictions imposed by this Agreement, the Company may
issue appropriate “stop-transfer” instructions to its transfer agent, if any,
and if the Company transfers its own Common Stock, it may make appropriate
notations to the same effect in its own records.

 

(c)           Refusal to
Transfer.  The Company
will not be required (i) to transfer on its books any shares of Common
Stock that have been sold or otherwise transferred in violation of any of the
provisions of this Agreement; or (ii) to treat as owner of such shares, or
to accord the right to vote or pay dividends to any purchaser or other
transferee to whom such shares have been so transferred.

 

14.           Modification.  The Agreement may be modified only in writing
signed by both parties.

 

15.           Interpretation.  Any
dispute regarding the interpretation of this Agreement must be submitted by
Participant or the Company to the Administrator for review.  The resolution of such a dispute by the
Administrator will be final and binding on the Company and Participant.

 

16.           Entire Agreement.  The Plan and the Certificate are incorporated
herein by reference, and Participant hereby acknowledges that a copy of the
Plan has been made available to Participant. 
This Agreement, the Certificate and the Plan constitute the entire
agreement of the parties and supersede all prior undertakings and agreements
with respect to the subject matter hereof. 
In the event of a conflict or inconsistency between the terms and
conditions of this Agreement, the Certificate, and the Plan, the Plan will govern.

 

17.           Notices.  Any notice required under this Agreement to
be delivered to the Company must be in writing and addressed to the Corporate
Secretary of the Company at its principal corporate offices.  Any notice required to be given or delivered
to Participant must be in writing and addressed to Participant at the address
indicated on the Certificate or to such other address as Participant designates
in writing to the Company.  All notices
will be deemed to have been delivered:  (a) upon
personal delivery, (b) five days after deposit in the United States mails
by certified or registered mail (return receipt requested), (c) two
business days after deposit with any return receipt express courier (prepaid),
or (d) one business day after transmission by facsimile.

 

18.           Successors and Assigns.  The Company may assign any of its rights
under this Agreement.  This Agreement
will be binding upon and inure to the benefit of the successors and assigns of
the Company.  Subject to the restrictions
on transfer set forth herein, this Agreement is binding upon Participant and
Participant’s heirs, executors, administrators, legal representatives,
successors and assigns.

 

19.           Governing Law.  This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to its conflict of law 

 

5

 

principles.  If any provision of this Agreement is
determined by a court of law to be illegal or unenforceable, then such
provision will be enforced to the maximum extent possible and the other
provisions will remain fully effective and enforceable.

 

6

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