Document:

exv4w1

 

Exhibit 4.1

CHINACAST EDUCATION CORPORATION

2007 OMNIBUS SECURITIES AND INCENTIVE PLAN

 

 

Table Of Contents

	 	 	 	 	 
	 	 	Page
	ARTICLE I PURPOSE
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	ARTICLE III EFFECTIVE DATE OF PLAN
	 	 	5	 
	 
	 	 	 	 
	ARTICLE IV ADMINISTRATION
	 	 	5	 
	Section 4.1 Composition of Committee
	 	 	5	 
	Section 4.2 Powers
	 	 	6	 
	Section 4.3 Additional Powers
	 	 	6	 
	Section 4.4 Committee Action
	 	 	6	 
	 
	 	 	 	 
	ARTICLE V STOCK SUBJECT TO PLAN AND LIMITATIONS THEREON
	 	 	6	 
	Section 5.1 Stock Grant and Award Limits
	 	 	6	 
	Section 5.2 Stock Offered
	 	 	7	 
	 
	 	 	 	 
	ARTICLE VI ELIGIBILITY FOR AWARDS; TERMINATION OF EMPLOYMENT, DIRECTOR STATUS OR CONSULTANT STATUS
	 	 	7	 
	Section 6.1 Eligibility
	 	 	7	 
	Section 6.2 Termination of Employment or Director Status
	 	 	7	 
	Section 6.3 Termination of Consultant Status
	 	 	8	 
	Section 6.4 Special Termination Rule
	 	 	9	 
	Section 6.5 Termination for Cause
	 	 	10	 
	 
	 	 	 	 
	ARTICLE VII OPTIONS
	 	 	10	 
	Section 7.1 Option Period
	 	 	10	 
	Section 7.2 Limitations on Exercise of Option
	 	 	10	 
	Section 7.3 Special Limitations on Incentive Stock Options
	 	 	10	 
	Section 7.4 Option Agreement
	 	 	10	 
	Section 7.5 Option Price and Payment
	 	 	11	 
	Section 7.6 Stockholder Rights and Privileges
	 	 	11	 
	Section 7.7 Options and Rights in Substitution for Stock Options Granted by Other Corporations
	 	 	11	 
	 
	 	 	 	 
	ARTICLE VIII RESTRICTED STOCK AWARDS
	 	 	12	 
	Section 8.1 Restriction Period to be Established by Committee
	 	 	12	 
	Section 8.2 Other Terms and Conditions
	 	 	12	 
	Section 8.3 Payment for Restricted Stock
	 	 	12	 
	Section 8.4 Restricted Stock Award Agreements
	 	 	13	 
	 
	 	 	 	 
	ARTICLE IX UNRESTRICTED STOCK AWARDS
	 	 	13	 
	 
	 	 	 	 
	ARTICLE X PERFORMANCE UNIT AWARDS
	 	 	13	 
	Section 10.1 Terms and Conditions
	 	 	13	 
	Section 10.2 Payments
	 	 	13	 

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Table Of Contents

	 	 	 	 	 
	 	 	Page
	ARTICLE XI PERFORMANCE SHARE AWARDS
	 	 	13	 
	Section 11.1 Terms and Conditions
	 	 	13	 
	Section 11.2 Stockholder Rights and Privileges
	 	 	13	 
	 
	 	 	 	 
	ARTICLE XII DISTRIBUTION EQUIVALENT RIGHTS
	 	 	14	 
	Section 12.1 Terms and Conditions
	 	 	14	 
	Section 12.2 Interest Equivalents
	 	 	14	 
	 
	 	 	 	 
	ARTICLE XIII STOCK APPRECIATION RIGHTS
	 	 	14	 
	Section 13.1 Terms and Conditions
	 	 	14	 
	Section 13.2 Tandem Stock Appreciation Rights
	 	 	14	 
	 
	 	 	 	 
	ARTICLE XIV RECAPITALIZATION OR REORGANIZATION
	 	 	15	 
	Section 14.1 Adjustments to Common Stock
	 	 	15	 
	Section 14.2 Recapitalization
	 	 	15	 
	Section 14.3 Other Events
	 	 	16	 
	Section 14.4 Powers Not Affected
	 	 	16	 
	Section 14.5 No Adjustment for Certain Awards
	 	 	16	 
	 
	 	 	 	 
	ARTICLE XV AMENDMENT AND TERMINATION OF PLAN
	 	 	16	 
	 
	 	 	 	 
	ARTICLE XVI MISCELLANEOUS
	 	 	17	 
	Section 16.1 No Right to Award
	 	 	17	 
	Section 16.2 No Rights Conferred
	 	 	17	 
	Section 16.3 No Fractional Shares; Withholding
	 	 	17	 
	Section 16.4 No Restriction on Corporate Action
	 	 	17	 
	Section 16.5 Restrictions on Transfer
	 	 	18	 
	Section 16.6 Beneficiary Designations
	 	 	18	 
	Section 16.7 Rule 16b-3
	 	 	18	 
	Section 16.8 Section 162(m)
	 	 	18	 
	Section 16.9 Section 409A
	 	 	18	 
	Section 16.10 Other Plans
	 	 	19	 
	Section 16.11 Limits of Liability
	 	 	19	 
	Section 16.12 Governing Law
	 	 	19	 
	Section 16.13 Severability of Provisions
	 	 	19	 
	Section 16.14 No Funding
	 	 	19	 
	Section 16.15 Headings
	 	 	19	 
	Section 16.16 Terms of Award Agreements
	 	 	19	 

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CHINACAST EDUCATION CORPORATION

2007 OMNIBUS SECURITIES AND INCENTIVE PLAN

ARTICLE I

PURPOSE

     The purpose of this ChinaCast Education Corporation 2007 Omnibus Securities and Incentive Plan
(the “Plan”) is to benefit the stockholders of ChinaCast Education Corporation, a Delaware
corporation (the “Company”), by assisting the Company to attract, retain and provide
incentives to key management employees and nonemployee directors of, and non-employee consultants
to, the Company and its Affiliates, and to align the interests of such employees, nonemployee
directors and nonemployee consultants with those of the Company’s stockholders. Accordingly, the
Plan provides for the granting of Distribution Equivalent Rights, Incentive Stock Options,
Non-Qualified Stock Options, Performance Share Awards, Restricted Stock Awards, Stock Appreciation
Rights, Tandem Stock Appreciation Rights, Unrestricted Stock Awards or any combination of the
foregoing, as may be best suited to the circumstances of the particular Employee, Director or
Consultant as provided herein.

ARTICLE II

DEFINITIONS

     The following definitions shall be applicable throughout the Plan unless the context otherwise
requires:

     “Affiliate” shall mean any person or entity which, at the time of reference, directly,
or indirectly through one or more intermediaries, controls, is controlled by, or is under common
control with, the Company.

     “Award” shall mean, individually or collectively, any Distribution Equivalent Right,
Option, Performance Share Award, Performance Unit Award, Restricted Stock Award, Stock Appreciation
Right or Unrestricted Stock Award.

     “Award Agreement” shall mean a written agreement between the Company and the Holder
with respect to an Award, each of which shall constitute a part of the Plan.

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

     “Cause” shall mean (i) if the Holder is a party to an employment or similar agreement
with the Company or an Affiliate which agreement defines “Cause” (or a similar term) therein,
“Cause” shall have the same meaning as provided for in such agreement, or (ii) for a Holder
who is not a party to such an agreement, “Cause” shall mean termination by the Company or
an Affiliate of the employment (or other service relationship) of the Holder by reason of the
Holder’s (A) intentional failure to perform reasonably assigned duties, (B) dishonesty or willful
misconduct in the performance of the Holder’s duties, (C) involvement in a transaction which is
materially adverse to the Company or an Affiliate, (D) breach of fiduciary duty involving personal
profit, (E)

 

 

willful violation of any law, rule, regulation or court order (other than misdemeanor traffic
violations and misdemeanors not involving misuse or misappropriation of money or property), (F)
commission of an act of fraud or intentional misappropriation or conversion of any asset or
opportunity of the Company or an Affiliate, or (G) material breach of any provision of the Plan or
the Holder’s Award Agreement or any other written agreement between the Holder and the Company or
an Affiliate, in each case as determined in good faith by the Board, the determination of which
shall be final, conclusive and binding on all parties.

     “Code” shall mean the Internal Revenue Code of 1986, as amended. Reference in the Plan
to any section of the Code shall be deemed to include any amendments or successor provisions to any
section and any regulation under such section.

     “Committee” shall mean a committee comprised of not less than three (3) members of the
Board who are selected by the Board as provided in Section 4.1.

     “Common Stock” shall mean the common stock, par value $0.0001 per share, of the
Company.

     “Company” shall mean ChinaCast Education Corporation, a Delaware corporation, and any
successor thereto.

     “Consultant” shall mean any non-Employee (individual or entity) advisor to the Company
or an Affiliate who or which has contracted directly with the Company or an Affiliate to render
bona fide consulting or advisory services thereto.

     “Director” shall mean a member of the Board or a member of the board of directors of
an Affiliate, in either case, who is not an Employee.

     “Distribution Equivalent Right” shall mean an Award granted under Article XII of the
Plan which entitles the Holder to receive bookkeeping credits, cash payments and/or Common Stock
distributions equal in amount to the distributions that would have been made to the Holder had the
Holder held a specified number of shares of Common Stock during the period the Holder held the
Distribution Equivalent Right.

     “Distribution Equivalent Right Award Agreement” shall mean a written agreement between
the Company and a Holder with respect to a Distribution Equivalent Right Award.

     “Effective
Date” shall mean May 31, 2007.

     “Employee” shall mean any employee, including officers, of the Company or an
Affiliate.

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

     “Fair Market Value” shall mean, as determined consistent with the applicable
requirements of Sections 409A and 422 of the Code, as of any specified date, the closing

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sales price of the Common Stock for such date (or, in the event that the Common Stock is not
traded on such date, on the immediately preceding trading date) on the Nasdaq Stock Market or a
domestic or foreign national securities exchange (including London’s Alternative Investment Market)
on which the Common Stock may be listed, as reported in The Wall Street Journal or The Financial
Times. If the Common Stock is not listed on the Nasdaq Stock Market or on a national securities
exchange, but is quoted on the OTC Bulletin Board or by the National Quotation Bureau, the Fair
Market Value of the Common Stock shall be the mean of the bid and asked prices per share of the
Common Stock for such date. If the Common Stock is not quoted or listed as set forth above, Fair
Market Value shall be determined by the Board in good faith by any fair and reasonable means (which
means, with respect to a particular Award grant, may be set forth with greater specificity in the
applicable Award Agreement). The Fair Market Value of property other than Common Stock shall be
determined by the Board in good faith by any fair and reasonable means, and consistent with the
applicable requirements of Sections 409A and 422 of the Code.

     “Family Member” shall mean any child, stepchild, grandchild, parent, 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 Holder’s
household (other than a tenant of the Holder), a trust in which such persons have more than fifty
percent (50%) of the beneficial interest, a foundation in which such persons (or the Holder)
control the management of assets, and any other entity in which such persons (or the Holder) own
more than fifty percent (50%) of the voting interests.

     “Holder” shall mean an Employee, Director or Consultant who has been granted an Award
or any such individual’s beneficiary, estate or representative, to the extent applicable.

     “Incentive Stock Option” shall mean an Option which is intended by the Committee to
constitute an “incentive stock option” under Section 422 of the Code.

     “Non-Qualified Stock Option” shall mean an Option which is not an Incentive Stock
Option.

     “Option” shall mean an Award granted under Article VII of the Plan of an option to
purchase shares of Common Stock and includes both Incentive Stock Options and Non-Qualified Stock
Options.

     “Option Agreement” shall mean a written agreement between the Company and a Holder
with respect to an Option.

     “Performance Share Award” shall mean an Award granted under Article XI of the Plan
under which, upon the satisfaction of predetermined individual and/or Company (and/or Affiliate)
performance goals and/or objectives, shares of Common Stock are paid to the Holder.

3

 

     “Performance Share Award Agreement” shall mean a written agreement between the Company
and a Holder with respect to a Performance Share Award.

     “Performance Unit” shall mean a Unit awarded to a Holder pursuant to a Performance
Unit Award.

     “Performance Unit Award” shall mean an Award granted under Article X of the Plan under
which, upon the satisfaction of predetermined individual and/or Company (and/or Affiliate)
performance goals and/or objectives, a cash payment shall be made to the Holder, based on the
number of Units awarded to the Holder.

     “Performance Unit Award Agreement” shall mean a written agreement between the Company
and a Holder with respect to a Performance Unit Award.

     “Plan” shall mean this ChinaCast Education Corporation 2007 Omnibus Securities and
Incentive Plan, as amended from time to time, together with each of the Award Agreements utilized
hereunder.

     “Restricted Stock Award” shall mean an Award granted under Article VIII of the Plan of
shares of Common Stock, the transferability of which by the Holder shall be subject to
Restrictions.

     “Restricted Stock Award Agreement” shall mean a written agreement between the Company
and a Holder with respect to a Restricted Stock Award.

     “Restriction Period” shall mean the period of time for which shares of Common Stock
subject to a Restricted Stock Award shall be subject to Restrictions, as set forth in the
applicable Restricted Stock Award Agreement.

     “Restrictions” shall mean forfeiture, transfer and/or other restrictions applicable to
shares of Common Stock awarded to an Employee, Director or Consultant under the Plan pursuant to a
Restricted Stock Award and set forth in a Restricted Stock Award Agreement.

     “Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Exchange Act, as such may be amended from time to time, and any successor
rule, regulation or statute fulfilling the same or a substantially similar function.

     “Stock Appreciation Right” shall mean an Award granted under Article XIII of the Plan
of a right, granted alone or in connection with a related Option, to receive a payment on the date
of exercise.

     “Stock Appreciation Right Award Agreement” shall mean a written agreement between the
Company and a Holder with respect to a Stock Appreciation Right.

     “Tandem Stock Appreciation Right” shall mean a Stock Appreciation Right granted in
connection with a related Option, the exercise of which shall result in

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termination of the otherwise entitlement to purchase some or all of the shares of Common Stock
under the related Option, all as set forth in Section 13.2.

     “Ten Percent Stockholder” shall mean an Employee who, at the time an Option is granted
to him or her, owns stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any parent corporation or subsidiary corporation
thereof (both as defined in Section 424 of the Code), within the meaning of Section 422(b)(6) of
the Code.

     “Total and Permanent Disability” shall mean the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a continuous period
of not less than twelve (12) months, all as described in Section 22(e)(3) of the Code.

     “Units” shall mean bookkeeping units, each of which represents such monetary amount as
shall be designated by the Committee in each Performance Unit Award Agreement.

     “Unrestricted Stock Award” shall mean an Award granted under Article IX of the Plan of
shares of Common Stock which are not subject to Restrictions.

     “Unrestricted Stock Award Agreement” shall mean a written agreement between the
Company and a Holder with respect to an Unrestricted Stock Award.

ARTICLE III

EFFECTIVE DATE OF PLAN

     The Plan shall be effective as of the Effective Date, provided that the Plan is approved by
the stockholders of the Company within twelve (12) months of such date.

ARTICLE IV

ADMINISTRATION

     Section 4.1 Composition of Committee. The Plan shall be administered by the
Committee, which shall be appointed by the Board. The Committee shall consist solely of two (2) or
more Directors who are each (i) “outside directors” within the meaning of Section 162(m) of the
Code (“Outside Directors”), and (ii) “non-employee directors” within the meaning of Rule
16b-3 (“Non-Employee Directors”); provided, however, that the Board or the
Committee may delegate to a committee of one or more members of the Board who are not (x) Outside
Directors, the authority to grant Awards to eligible persons who are not (A) then “covered
employees” within the meaning of Section 162(m) of the Code and are not expected to be “covered
employees” at the time of recognition of income resulting from such Award, or (B) persons with
respect to whom the Company wishes to comply with the requirements of Section 162(m) of the Code,
and/or (y) Non-Employee Directors, the authority to grant Awards to eligible persons who are not
then subject to
the requirements of Section 16 of the Exchange Act. If a member of the

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Committee shall be
eligible to receive an Award under the Plan, such Committee member shall have no authority
hereunder with respect to his or her own Award.

     Section 4.2 Powers. Subject to the provisions of the Plan, the Committee shall have
the sole authority, in its discretion, to make all determinations under the Plan, including but not
limited to determining which Employees, Directors or Consultants shall receive an Award, the time
or times when an Award shall be made, what type of Award shall be granted, the term of an Award,
the date or dates on which an Award vests (including acceleration of vesting), the form of any
payment to be made pursuant to an Award, the terms and conditions of an Award, the Restrictions
under a Restricted Stock Award and the number of shares of Common Stock which may be issued under
an Award, all as applicable. In making such determinations the Committee may take into account the
nature of the services rendered by the respective Employees, Directors and Consultants, their
present and potential contribution to the Company’s (or the Affiliate’s) success and such other
factors as the Committee in its discretion shall deem relevant.

     Section 4.3 Additional Powers. The Committee shall have such additional powers as are
delegated to it under the other provisions of the Plan. Subject to the express provisions of the
Plan, the Committee is authorized to construe the Plan and the respective Award Agreements executed
hereunder, to prescribe such rules and regulations relating to the Plan as it may deem advisable to
carry out the intent of the Plan, and to determine the terms, restrictions and provisions of each
Award, including such terms, restrictions and provisions as shall be requisite in the judgment of
the Committee to cause designated Options to qualify as Incentive Stock Options, and to make all
other determinations necessary or advisable for administering the Plan. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in any Award Agreement in the
manner and to the extent it shall deem expedient to carry it into effect. The determinations of the
Committee on the matters referred to in this Article IV shall be conclusive and binding on the
Company and all Holders.

     Section 4.4 Committee Action. In the absence of specific rules to the contrary,
action by the Committee shall require the consent of a majority of the members of the Committee,
expressed either orally at a meeting of the Committee or in writing in the absence of a meeting.
No member of the Committee shall have any liability for any good faith action, inaction or
determination in connection with the Plan.

ARTICLE V

STOCK SUBJECT TO PLAN AND LIMITATIONS THEREON

     Section 5.1 Stock Grant and Award Limits. The Committee may from time to time grant
Awards to
one or more Employees, Directors and/or Consultants determined by it to be eligible for
participation in the Plan in accordance with the provisions of Article VI. Subject to Article XIV,
the aggregate number of shares of Common Stock that may be issued under the Plan shall not exceed
Two Million Five Hundred Thousand (2,500,000) shares. Shares shall be deemed to have been issued
under the Plan solely to the extent actually issued and delivered pursuant to an Award. To the
extent that an Award lapses, expires, is canceled, is terminated unexercised or ceases to be
exercisable

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for any reason, or the rights of its Holder terminate, any shares of Common Stock
subject to such Award shall again be available for the grant of a new Award. Notwithstanding any
provision in the Plan to the contrary, the maximum number of shares of Common Stock that may be
subject to Awards of Options under Article VII and/or Stock Appreciation Rights under Article XIII,
in either or both cases granted to any one Employee during any
calendar year, shall be one million
(1,000,000) shares (subject to adjustment in the same manner as provided in
Article XIV with respect to shares of Common Stock subject to Awards then outstanding). The
limitation set forth in the preceding sentence shall be applied in a manner which shall permit
compensation generated in connection with the exercise of Options or Stock Appreciation Rights to
constitute “performance-based” compensation for purposes of Section 162(m) of the Code, including,
but not limited to, counting against such maximum number of shares, to the extent required under
Section 162(m) of the Code, any shares subject to Options or Stock Appreciation Rights that are
canceled or repriced.

     Section 5.2 Stock Offered. The stock to be offered pursuant to the grant of an Award
may be authorized but unissued Common Stock, Common Stock purchased on the open market or Common
Stock previously issued and outstanding and reacquired by the Company.

ARTICLE VI

ELIGIBILITY FOR AWARDS; TERMINATION OF

EMPLOYMENT, DIRECTOR STATUS OR CONSULTANT STATUS

     Section 6.1 Eligibility. Awards made under the Plan may be granted solely to persons
or entities who, at the time of grant, are Employees, Directors or Consultants. An Award may be
granted on more than one occasion to the same Employee, Director or Consultant, and, subject to the
limitations set forth in the Plan, such Award may include, a Non-Qualified Stock Option, a
Restricted Stock Award, an Unrestricted Stock Award, a Distribution Equivalent Right Award, any
combination thereof or, solely for Employees, an Incentive Stock Option.

     Section 6.2 Termination of Employment or Director Status. Except to the extent
inconsistent with the terms of the applicable Award Agreement and/or the provisions of Section 6.4,
the following terms and conditions shall apply with respect to the termination of a Holder’s
employment with, or status as a Director of, the Company or an
Affiliate, as applicable, for any reason, including, without limitation, Total and Permanent
Disability or death:

          (a) The Holder’s rights, if any, to exercise any then exercisable Non-Qualified Stock Options
shall terminate:

               (1) If such termination is for a reason other than the Holder’s Total and
Permanent Disability or death, not more than ninety (90) days after the date of
such termination of employment or after the date of such termination of Director
status;

7

 

               (2) If such termination is on account of the Holder’s Total and Permanent
Disability, one (1) year after the date of such termination of employment or
Director status; or

               (3) If such termination is on account of the Holder’s death, one (1) year
after the date of the Holder’s death.

Upon such applicable date the Holder (and such Holder’s estate, designated beneficiary or other
legal representative) shall forfeit any rights or interests in or with respect to any such
Non-Qualified Stock Options.

          (b) The Holder’s rights, if any, to exercise any then exercisable
Incentive Stock Option shall terminate:

                (1) If such termination is for a reason other than the Holder’s Total and
Permanent Disability or death, not more than three (3) months after the date of
such termination of employment;

                (2) If such termination is on account of the Holder’s Total and Permanent
Disability, one (1) year after the date of such termination of employment; or

                (3) If such termination is on account of the Holder’s death, one (1) year
after the date of the Holder’s death.

Upon such applicable date the Holder (and such Holder’s estate, designated beneficiary or other
legal representative) shall forfeit any rights or interests in or with respect to any such
Incentive Stock Options.

          (c) If a Holder’s employment with, or status as a Director of, the Company or an Affiliate, as
applicable, terminates for any reason prior to the actual or deemed satisfaction and/or lapse of
the restrictions, terms and conditions applicable to an Award of Restricted Stock and/or Deferred
Stock, such Restricted Stock and/or Deferred Stock shall immediately be canceled, and the Holder
(and such Holder’s estate, designated beneficiary or other legal representative) shall forfeit any
rights or interests in and with respect to any such Restricted Stock and/or Deferred Stock. The
immediately preceding sentence to the contrary notwithstanding, the Committee, in its sole
discretion,
may determine, prior to or within thirty (30) days after the date of such termination of
employment or Director status, that all or a portion of any such Holder’s Restricted Stock and/or
Deferred Stock shall not be so canceled and forfeited.

     Section 6.3 Termination of Consultant Status. Except to the extent inconsistent with
the terms of the applicable Award Agreement and/or the provisions of Section 6.4, the following
terms and conditions shall apply with respect to the termination of a Holder’s status as a
Consultant, for any reason:

          (a) The Holder’s rights, if any, to exercise any then exercisable Non-Qualified Stock Options
shall terminate:

8

 

                (1) If such termination is for a reason other than the Holder’s death, not
more than ninety (90) days after the date of such termination; or

                (2) If such termination is on account of the Holder’s death, one (1) year
after the date of the Holder’s death.

          (b) If the status of a Holder as a Consultant terminates for any reason prior to the actual or
deemed satisfaction and/or lapse of the restrictions, terms and conditions applicable to an Award
of Restricted Stock and/or Deferred Stock, such Restricted Stock and/or Deferred Stock shall
immediately be canceled, and the Holder (and such Holder’s estate, designated beneficiary or other
legal representative) shall forfeit any rights or interests in and with respect to any such
Restricted Stock and/or Deferred Stock. The immediately preceding sentence to the contrary
notwithstanding, the Committee, in its sole discretion, may determine, prior to or within thirty
(30) days after the date of such termination of such a Holder’s status as a Consultant, that all or
a portion of any such Holder’s Restricted Stock and/or Deferred Stock shall not be so canceled and
forfeited.

     Section 6.4 Special Termination Rule. Except to the extent inconsistent with the terms
of the applicable Award Agreement, and notwithstanding anything to the contrary contained in this
Article VI, if a Holder’s employment with, or status as a Director of, the Company or an Affiliate
shall terminate, if, within ninety (90) days of such termination, such Holder shall become a
Consultant, such Holder’s rights with respect to any Award or portion thereof granted thereto prior
to the date of such termination may be preserved, if and to the extent determined by the Committee
in its sole discretion, as if such Holder had been a Consultant for the entire period during which
such Award or portion thereof had been outstanding. Should the Committee effect such determination
with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated as if
his or her employment or Director status had terminated until such time as his or her Consultant
status shall terminate, in which case his or her Award, as it may have been reduced in connection
with the Holder’s becoming a Consultant, shall be treated pursuant to the provisions of Section
6.3; provided, however, that any such Award which is intended to
be an Incentive Stock Option shall, upon the Holder’s no longer being an Employee,
automatically convert to a Non-Qualified Stock Option. Should a Holder’s status as a Consultant
terminate, if, within ninety (90) days of such termination, such Holder shall become an Employee or
a Director, such Holder’s rights with respect to any Award or portion thereof granted thereto prior
to the date of such termination may be preserved, if and to the extent determined by the Committee
in its sole discretion, as if such Holder had been an Employee or a Director, as applicable, for
the entire period during which such Award or portion thereof had been outstanding, and, should the
Committee effect such determination with respect to such Holder, for all purposes of the Plan, such
Holder shall not be treated as if his or her Consultant status had terminated until such time as
his or her employment with the Company or an Affiliate, or his or her Director status, as
applicable, shall terminate, in which case his or her Award shall be treated pursuant to the
provisions of Section 6.2.

9

 

     Section 6.5 Termination for Cause. Notwithstanding anything in this Article VI or
elsewhere in the Plan to the contrary, and unless a Holder’s Award Agreement specifically provides
otherwise, should a Holder’s employment, Director status or engagement as a Consultant with or for
the Company or an Affiliate be terminated by the Company or Affiliate for Cause, all of such
Holder’s then outstanding Awards shall expire immediately and be forfeited in their entirety upon
such termination.

ARTICLE VII

OPTIONS

     Section 7.1 Option Period. The term of each Option shall be as specified in the
Option Agreement.

     Section 7.2 Limitations on Exercise of Option. An Option shall be exercisable in
whole or in such installments and at such times as specified in the Option Agreement.

     Section 7.3 Special Limitations on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined at the time the respective Incentive Stock Option is
granted) of Common Stock with respect to which Incentive Stock Options are exercisable for the
first time by an individual during any calendar year under all plans of the Company and any parent
corporation or subsidiary corporation thereof (both as defined in Section 424 of the Code) which
provide for the grant of Incentive Stock Options exceeds One Hundred Thousand Dollars ($100,000)
(or such other individual limit as may be in effect under the Code on the date of grant), such
Incentive Stock Options shall be treated as Non-Qualified Stock Options. The Committee shall
determine, in accordance with applicable provisions of the Code, Treasury Regulations and other
administrative pronouncements, which of a Holder’s Options, which were intended by the Committee to
be Incentive Stock Options when granted to the Holder, will not constitute Incentive Stock Options
because of such limitation, and shall notify the Holder of such determination as soon as
practicable after such determination. No Incentive Stock
Option shall be granted to an Employee if, at the time the Option is granted, such Employee is
a Ten Percent Stockholder, unless (i) at the time such Incentive Stock Option is granted the Option
price is at least one hundred ten percent (110 %) of the Fair Market Value of the Common Stock
subject to the Option, and (ii) such Incentive Stock Option by its terms is not exercisable after
the expiration of five (5) years from the date of grant. No Incentive Stock Option shall be
granted more than ten (10) years from the date on which the Plan is approved by the Company’s
stockholders. The designation by the Committee of an Option as an Incentive Stock Option shall not
guarantee the Holder that the Option will satisfy the applicable requirements for “incentive stock
option” status under Section 422 of the Code.

     Section 7.4 Option Agreement. Each Option shall be evidenced by an Option Agreement in
such form and containing such provisions not inconsistent with the provisions of the Plan as the
Committee from time to time shall approve, including, but not limited to, provisions intended to
qualify an Option as an Incentive Stock Option. An Option Agreement may provide for the payment of
the Option price, in whole or in part, by the delivery of a number of shares of Common Stock (plus
cash if necessary) having a

10

 

Fair Market Value equal to such Option price. Each Option Agreement
shall, solely to the extent inconsistent with the provisions of Sections 6.2, 6.3 and 6.4, as
applicable, specify the effect of termination of employment, Director status or Consultant status
on the exercisability of the Option. Moreover, an Option Agreement may provide for a “cashless
exercise” of the Option by establishing procedures whereby the Holder, by a properly-executed
written notice, directs (i) an immediate market sale or margin loan respecting all or a part of the
shares of Common Stock to which he is entitled upon exercise pursuant to an extension of credit by
the Company to the Holder of the Option price, (ii) the delivery of the shares of Common Stock from
the Company directly to a brokerage firm and (iii) the delivery of the Option price from sale or
margin loan proceeds from the brokerage firm directly to the Company. An Option Agreement may also
include provisions relating to (i) subject to the provisions hereof, accelerated vesting of
Options, (ii) tax matters (including provisions covering any applicable Employee wage withholding
requirements and requiring additional “gross-up” payments to Holders to meet any excise taxes or
other additional income tax liability imposed as a result of a payment upon a “change of control”
of the Company resulting from the operation of the Plan or of such Option Agreement) and (iii) any
other matters not inconsistent with the terms and provisions of the Plan that the Committee shall
in its sole discretion determine. The terms and conditions of the respective Option Agreements need
not be identical.

     Section 7.5 Option Price and Payment. The price at which a share of Common Stock may
be purchased upon exercise of an Option shall be determined by the Committee; provided,
however, that such Option price (i) shall not be less than the Fair Market Value of a share
of Common Stock on the date such Option is granted, and (ii) shall be subject to adjustment as
provided in Article XIV. The Option or portion thereof may be exercised by delivery of an
irrevocable notice of exercise to the Company. The Option price for the Option or portion thereof
shall be paid in full in the manner prescribed by the Committee as set forth in the applicable
Option Agreement. Separate stock certificates shall be issued by
the Company for those shares of Common Stock acquired pursuant to the exercise of an Incentive
Stock Option and for those shares of Common Stock acquired pursuant to the exercise of a
Non-Qualified Stock Option.

     Section 7.6 Stockholder Rights and Privileges. The Holder of an Option shall be
entitled to all the privileges and rights of a stockholder of the Company solely with respect to
such shares of Common Stock as have been purchased under the Option and for which certificates of
stock have been registered in the Holder’s name.

     Section 7.7 Options and Rights in Substitution for Stock Options Granted by Other
Corporations. Options may be granted under the Plan from time to time in substitution for
stock options held by individuals employed by entities who become Employees as a result of a merger
or consolidation of the employing entity with the Company or any Affiliate, or the acquisition by
the Company or an Affiliate of the assets of the employing entity, or the acquisition by the
Company or an Affiliate of stock of the employing entity with the result that such employing entity
becomes an Affiliate.

11

 

ARTICLE VIII

RESTRICTED STOCK AWARDS

     Section 8.1 Restriction Period to be Established by Committee. At the time a
Restricted Stock Award is made, the Committee shall establish the Restriction Period applicable to
such Award. Each Restricted Stock Award may have a different Restriction Period, in the discretion
of the Committee. The Restriction Period applicable to a particular Restricted Stock Award shall
not be changed except as permitted by Section 8.2.

     Section 8.2 Other Terms and Conditions. Common Stock awarded pursuant to a Restricted
Stock Award shall be represented by a stock certificate registered in the name of the Holder of
such Restricted Stock Award. If provided for under the Restricted Stock Award Agreement, the Holder
shall have the right to vote Common Stock subject thereto and to enjoy all other stockholder
rights, including the entitlement to receive dividends on the Common Stock during the Restriction
Period, except that (i) the Holder shall not be entitled to delivery of the stock certificate until
the Restriction Period shall have expired, (ii) the Company shall retain custody of the stock
certificate during the Restriction Period (with a stock power endorsed by the Holder in blank),
(iii) the Holder may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the
Common Stock during the Restriction Period and (iv) a breach of the terms and conditions
established by the Committee pursuant to the Restricted Stock Award Agreement shall cause a
forfeiture of the Restricted Stock Award. At the time of such Award, the Committee may, in its sole
discretion, prescribe additional terms and conditions or restrictions relating to Restricted
Stock Awards, including, but not limited to, rules pertaining to the effect of termination of
employment, Director status or Consultant status prior to expiration of the Restriction Period.
Such additional terms, conditions or restrictions shall, to the extent inconsistent with the
provisions of Sections 6.2, 6.3 and 6.4, as applicable, be set forth in a Restricted Stock Award
Agreement made in conjunction with the Award. Such Restricted Stock Award Agreement may also
include provisions relating to (i) subject to the provisions hereof, accelerated vesting of Awards,
including but not limited to accelerated vesting upon the occurrence of a “change of control” of
the Company, (ii) tax matters (including provisions covering any applicable Employee wage
withholding requirements and requiring additional “gross-up” payments to Holders to meet any excise
taxes or other additional income tax liability imposed as a result of a payment made in connection
with a “change of control” of the Company resulting from the operation of the Plan or of such
Restricted Stock Award Agreement) and (iii) any other matters not inconsistent with the terms and
provisions of the Plan that the Committee shall in its sole discretion determine. The terms and
conditions of the respective Restricted Stock Agreements need not be identical.

     Section 8.3 Payment for Restricted Stock. The Committee shall determine the amount
and form of any payment from a Holder for Common Stock received pursuant to a Restricted Stock
Award, if any, provided that in the absence of such a determination, a Holder shall not be required
to make any payment for Common Stock received pursuant to a Restricted Stock Award, except to the
extent otherwise required by law.

12

 

     Section 8.4 Restricted Stock Award Agreements. At the time any Award is made under
this Article VIII, the Company and the Holder shall enter into a Restricted Stock Award Agreement
setting forth each of the matters contemplated hereby and such other matters as the Committee may
determine to be appropriate.

ARTICLE IX

UNRESTRICTED STOCK AWARDS

     Pursuant to the terms of the applicable Unrestricted Stock Award Agreement, a Holder may be
awarded (or sold at a discount) shares of Common Stock which are not subject to Restrictions, in
consideration for past services rendered thereby to the Company or an Affiliate or for other valid
consideration.

ARTICLE X

PERFORMANCE UNIT AWARDS

     Section 10.1 Terms and Conditions. The Committee shall set forth in the applicable
Performance Unit Award Agreement the performance goals and objectives (and the period of time to
which such goals and objectives shall apply) which the Holder and/or the Company
would be required to satisfy before the Holder would become entitled to payment pursuant to
Section 10.2, the number of Units awarded to the Holder and the dollar value assigned to each such
Unit.

     Section 10.2 Payments. The Holder of a Performance Unit shall be entitled to receive
a cash payment equal to the dollar value assigned to such Unit under the applicable Performance
Unit Award Agreement if the Holder and/or the Company satisfy (or partially satisfy, if applicable
under the applicable Performance Unit Award Agreement) the performance goals and objectives set
forth in such Performance Unit Award Agreement.

ARTICLE XI

PERFORMANCE SHARE AWARDS

     Section 11.1 Terms and Conditions. The Committee shall set forth in the applicable
Performance Share Award Agreement the performance goals and objectives (and the period of time to
which such goals and objectives shall apply) which the Holder and/or the Company would be required
to satisfy before the Holder would become entitled to the receipt of shares of Common Stock
pursuant to such Holder’s Performance Share Award and the number of shares of Common Stock subject
to such Performance Share Award.

     Section 11.2 Stockholder Rights and Privileges. The Holder of a Performance Share
Award shall have no rights as a stockholder of the Company until such time, if any, as the Holder
actually receives shares of Common Stock pursuant to the Performance Share Award.

13

 

ARTICLE XII

DISTRIBUTION EQUIVALENT RIGHTS

     Section 12.1 Terms and Conditions. The Committee shall set forth in the applicable
Distribution Equivalent Rights Award Agreement the terms and conditions, if any, including whether
the Holder is to receive credits currently in cash, is to have such credits reinvested (at Fair
Market Value determined as of the date of reinvestment) in additional shares of Common Stock or is
to be entitled to choose among such alternatives. Distribution Equivalent Rights Awards may be
settled in cash or in shares of Common Stock, as set forth in the applicable Distribution
Equivalent Rights Award Agreement. A Distribution Equivalent Rights Award may, but need not be,
awarded in tandem with another Award, whereby, if so awarded, such Distribution Equivalent Rights
Award shall expire, terminate or be forfeited by the Holder, as applicable, under the same
conditions as under such other Award.

     Section 12.2 Interest Equivalents. The Distribution Equivalent Rights Award Agreement
for a Distribution Equivalent Rights Award may provide for the crediting of interest on a
Distribution Rights Award to be settled in cash at a future date, at a rate set forth in the
applicable Distribution Equivalent Rights Award Agreement, on the amount of cash payable
thereunder.

ARTICLE XIII

STOCK APPRECIATION RIGHTS

     Section 13.1 Terms and Conditions. The Committee shall set forth in the applicable
Stock Appreciation Right Award Agreement the terms and conditions of the Stock Appreciation Right,
including (i) the base value (the “Base Value”) for the Stock Appreciation Right, which for
purposes of a Stock Appreciation which is not a Tandem Stock Appreciation Right, shall be not less
than the Fair Market Value of a share of the Common Stock on the date of grant of the Stock
Appreciation Right, (ii) the number of shares of Common Stock subject to the Stock Appreciation
Right, (iii) the period during which the Stock Appreciation Right may be exercised, and (iv) any
other special rules and/or requirements which the Committee imposes upon the Stock Appreciation
Right. Upon the exercise of some or all of the portion of a Stock Appreciation Right, the Holder
shall receive a payment from the Company, in cash or in the form of shares of Common Stock having
an equivalent Fair Market Value or in a combination of both, as determined in the sole discretion
of the Committee, equal to the product of:

          (a) The excess of (i) the Fair Market Value of a share of the Common Stock on the date of
exercise, over (ii) the Base Value, multiplied by;

          (b) The number of shares of Common Stock with respect to which the Stock Appreciation Right is
exercised.

     Section 13.2 Tandem Stock Appreciation Rights. If the Committee grants a Stock
Appreciation Right which is intended to be a Tandem Stock Appreciation Right,

14

 

the Tandem Stock
Appreciation Right must be granted at the same time as the related Option, and the following
special rules shall apply:

          (a) The Base Value shall be equal to or greater than the exercise price under the related
Option;

          (b) The Tandem Stock Appreciation Right may be exercised for all or part of the shares of
Common Stock which are subject to the related Option, but solely upon the surrender by the Holder
of the Holder’s right to exercise the equivalent portion of the related Option (and when a share of
Common Stock is purchased under the related Option, an equivalent portion of the related Tandem
Stock Appreciation Right shall be cancelled);

          (c) The Tandem Stock Appreciation Right shall expire no later than the date of the expiration
of the related Option;

          (d) The value of the payment with respect to the Tandem Stock Appreciation Right may be no
more than one hundred percent (100%) of the difference between the exercise price under the related
Option and the Fair Market Value of the shares of Common Stock subject to the related Option at the
time the Tandem Stock Appreciation Right is exercised; and

          (e) The Tandem Stock Appreciation Right may be exercised solely when the Fair Market Value of
the shares of Common Stock subject to the related Option exceeds the exercise price under the
related Option.

ARTICLE XIV

RECAPITALIZATION OR REORGANIZATION

     Section 14.1 Adjustments to Common Stock. The shares with respect to which Awards may
be granted under the Plan are shares of Common Stock as presently constituted; provided,
however, that if, and whenever, prior to the expiration or distribution to the Holder of an
Award theretofore granted, the Company shall effect a subdivision or consolidation of shares of
Common Stock or the payment of a stock dividend on Common Stock without receipt of consideration by
the Company, the number of shares of Common Stock with respect to which such Award may thereafter
be exercised or satisfied, as applicable, (i) in the event of an increase in the number of
outstanding shares, shall be proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number of outstanding shares,
shall be proportionately reduced, and the purchase price per share shall be proportionately
increased. Notwithstanding the foregoing, any such adjustment made with respect to an Award which
is an Incentive Stock Option shall comply with the requirements of Section 424(a) of the Code, and
in no event shall any such adjustment be made which would render any Incentive Stock Option granted
under the Plan to be other than an “incentive stock option” for purposes of Section 422 of the
Code.

     Section 14.2 Recapitalization. If the Company recapitalizes or otherwise changes its
capital structure, thereafter upon any exercise or satisfaction, as applicable, of

15

 

a previously
granted Award, the Holder shall be entitled to receive (or entitled to purchase, if applicable)
under such Award, in lieu of the number of shares of Common Stock then covered by such Award, the
number and class of shares of stock and securities to which the Holder would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to such recapitalization, the
Holder had been the holder of record of the number of shares of Common Stock then covered by such
Award.

     Section 14.3 Other Events. In the event of changes to the outstanding Common Stock by
reason of recapitalization,
reorganization, mergers, consolidations, combinations, exchanges or other relevant changes in
capitalization occurring after the date of the grant of any Award and not otherwise provided for
under this Article XIV, any outstanding Awards and any Award Agreements evidencing such Awards
shall be adjusted by the Board in its discretion as to the number and price of shares of Common
Stock or other consideration subject to such Awards. In the event of any such change to the
outstanding Common Stock, the aggregate number of shares available under the Plan may be
appropriately adjusted by the Board, the determination of which shall be conclusive.

     Section 14.4 Powers Not Affected. The existence of the Plan and the Awards granted
hereunder shall not affect in any way the right or power of the Board or of the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or other change of
the Company’s capital structure or business, any merger or consolidation of the Company, any issue
of debt or equity securities ahead of or affecting Common Stock or the rights thereof, the
dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all
or any part of its assets or business or any other corporate act or proceeding.

     Section 14.5 No Adjustment for Certain Awards. Except as hereinabove expressly
provided, the issuance by the Company of shares of stock of any class or securities convertible
into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon
the exercise of rights or warrants to subscribe therefor or upon conversion of shares or
obligations of the Company convertible into such shares or other securities, and in any case
whether or not for fair value, shall not affect previously granted Awards, and no adjustment by
reason thereof shall be made with respect to the number of shares of Common Stock subject to Awards
theretofore granted or the purchase price per share, if applicable.

ARTICLE XV

AMENDMENT AND TERMINATION OF PLAN

     The Board in its discretion may terminate the Plan at any time with respect to any shares for
which Awards have not theretofore been granted; provided, however, that the Plan’s
termination shall not materially and adversely impair the rights of a Holder with respect to any
Award theretofore granted without the consent of the Holder. The Board shall have the right to
alter or amend the Plan or any part hereof from time to time; provided, however,
that no change in any Award theretofore granted may be made which would materially and adversely
impair the rights of a Holder with respect to such Award

16

 

without the consent of the Holder (unless
such change is required in order to cause the benefits under the Plan to qualify as
“performance-based” compensation within the meaning of Section 162(m) of the Code).

ARTICLE XVI

MISCELLANEOUS

     Section 16.1 No Right to Award. Neither the adoption of the Plan by the Company nor
any action of the Board or the Committee shall be deemed to give an Employee, Director or
Consultant any right to an Award except as may be evidenced by an Award Agreement duly executed on
behalf of the Company, and then solely to the extent and on the terms and conditions expressly set
forth therein.

     Section 16.2 No Rights Conferred. Nothing contained in the Plan shall (i) confer upon
any Employee any right with respect to continuation of employment with the Company or any
Affiliate, (ii) interfere in any way with any right of the Company or any Affiliate to terminate
the employment of an Employee at any time, (iii) confer upon any Director any right with respect to
continuation of such Director’s membership on the Board, (iv) interfere in any way with any right
of the Company or an Affiliate to terminate a Director’s membership on the Board at any time, (v)
confer upon any Consultant any right with respect to continuation of his or her consulting
engagement with the Company or any Affiliate, or (vi) interfere in any way with any right of the
Company or an Affiliate to terminate a Consultant’s consulting engagement with the Company or an
Affiliate at any time.

     Section 16.3 No Fractional Shares; Withholding. No fractional shares of Common Stock
shall be delivered, nor shall any cash in lieu of fractional shares be paid. The Company shall have
the right to deduct in cash (whether under this Plan or otherwise) in connection with all Awards
any taxes required by law to be withheld and to require any payments required to enable it to
satisfy its withholding obligations. In the case of any Award satisfied in the form of shares of
Common Stock, no shares shall be issued unless and until arrangements satisfactory to the Company
shall have been made to satisfy any tax withholding obligations applicable with respect to such
Award. Subject to such terms and conditions as the Committee may impose, the Company shall have the
right to retain, or the Committee may, subject to such terms and conditions as it may establish
from time to time, permit Holders to elect to tender, Common Stock (including Common Stock issuable
in respect of an Award) to satisfy, in whole or in part, the amount required to be withheld.

     Section 16.4 No Restriction on Corporate Action. Nothing contained in the Plan shall
be construed to prevent the Company or any Affiliate from taking any corporate action which is
deemed by the Company or such Affiliate to be appropriate or in its best interest, whether or not
such action would have an adverse effect on the Plan or any Award made under the Plan. No Employee,
Director, Consultant, beneficiary or other person shall have any claim against the Company or any
Affiliate as a result of any such action.

17

 

     Section 16.5 Restrictions on Transfer. No Award under the Plan or any Award Agreement
and no rights or interests herein or therein, shall or may be assigned, transferred, sold,
exchanged, encumbered, pledged or otherwise hypothecated or disposed of by a Holder except (i) by
will or by the laws of descent and distribution, or (ii) except for an Incentive Stock Option,
by gift to any Family Member of the Holder. An Award may be exercisable during the lifetime of the
Holder only by such Holder or by the Holder’s guardian or legal representative unless it has been
transferred by gift to a Family Member of the Holder, in which case it shall be exercisable solely
by such transferee. Notwithstanding any such transfer, the Holder shall continue to be subject to
the withholding requirements provided for under Section 16.3 hereof.

     Section 16.6 Beneficiary Designations. Each Holder may, from time to time, name a
beneficiary or beneficiaries (who may be contingent or successive beneficiaries) for purposes of
receiving any amount which is payable in connection with an Award under the Plan upon or subsequent
to the Holder’s death. Each such beneficiary designation shall serve to revoke all prior
beneficiary designations, be in a form prescribed by the Company and be effective solely when filed
by the Holder in writing with the Company during the Holder’s lifetime. In the absence of any such
written beneficiary designation, for purposes of the Plan, a Holder’s beneficiary shall be the
Holder’s estate.

     Section 16.7 Rule 16b-3. It is intended that the Plan and any Award made to a person
subject to Section 16 of the Exchange Act shall meet all of the requirements of Rule 16b-3. If any
provision of the Plan or of any such Award would disqualify the Plan or such Award under, or would
otherwise not comply with the requirements of, Rule 16b-3, such provision or Award shall be
construed or deemed to have been amended as necessary to conform to the requirements of Rule 16b-3.

     Section 16.8 Section 162(m). It is intended that the Plan shall comply fully with and
meet all the requirements of Section 162(m) of the Code so that Awards hereunder which are made to
Holders who are “covered employees” (as defined in Section 162(m) of the Code) shall constitute
“performance-based” compensation within the meaning of Section 162(m) of the Code. The performance
criteria to be utilized under the Plan for such purposes shall consist of objective tests based on
one or more of the following: earnings or earnings per share, cash flow, customer satisfaction,
revenues, financial return ratios (such as return on equity and/or return on assets), market
performance, stockholder return and/or value, operating profits, EBITDA, net profits, profit
returns and margins, stock price, credit quality, sales growth, market share, comparisons to peer
companies (on a company-wide or divisional basis), working capital and/or individual or aggregate
employee performance. If any provision of the Plan would disqualify the Plan or would not otherwise
permit the Plan to comply with Section 162(m) as so intended, such provision shall be construed or
deemed amended to conform to the requirements or provisions of Section 162(m).

     Section 16.9 Section 409A. Notwithstanding any other provision of the Plan, the
Committee shall have no authority to issue an Award under the Plan with terms and/or conditions
which would cause such Award to constitute non-qualified “deferred

18

 

compensation” under Section 409A
of the
Code. Accordingly, by way of example but not limitation, no Option shall be granted under the
Plan with a per share Option exercise price which is less than the Fair Market Value of a share of
Common Stock on the date of grant of the Option. Notwithstanding anything herein to the contrary,
no Award Agreement shall provide for any deferral feature with respect to an Award which
constitutes a deferral of compensation under Section 409A of the Code.

     Section 16.10 Other Plans. No Award, payment or amount received hereunder shall be
taken into account in computing an Employee’s salary or compensation for the purposes of
determining any benefits under any pension, retirement, life insurance or other benefit plan of the
Company or any Affiliate, unless such other plan specifically provides for the inclusion of such
Award, payment or amount received.

     Section 16.11 Limits of Liability. Any liability of the Company with respect to an
Award shall be based solely upon the contractual obligations created under the Plan and the Award
Agreement. None of the Company, any member of the Board nor any member of the Committee shall have
any liability to any party for any action taken or not taken, in good faith, in connection with or
under the Plan.

     Section 16.12 Governing Law. Except as otherwise provided herein, the Plan shall be
construed in accordance with the laws of the State of Delaware, without regard to principles of
conflicts of law.

     Section 16.13 Severability of Provisions. If any provision of the Plan is held
invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision
of the Plan, and the Plan shall be construed and enforced as if such invalid or unenforceable
provision had not been included in the Plan.

     Section 16.14 No Funding. The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other segregation of funds or
assets to ensure the payment of any Award.

     Section 16.15 Headings. Headings used throughout the Plan are for convenience only and
shall not be given legal significance.

     Section 16.16 Terms of Award Agreements. Each Award shall be evidenced by an Award
Agreement, which Award Agreement, if it provides for the issuance of Common Stock, shall require
the Holder to enter into and be bound by the terms of the Company’s Stockholders’ Agreement, if
any. The terms of the Award Agreements utilized under the Plan need not be the same.

19exv10w1

 

Exhibit 10.1

July 2, 2007

Mr. Umesh Padval

LSI Corporation

1873 Barber Lane

Milpitas, CA 95035

Dear Umesh,

The purpose of this letter is to detail the terms of a special retention bonus (the “Retention
Bonus”) developed for you in order to provide you with a financial incentive to remain an active
employee in good standing with the company and to achieve the performance goals set forth in this
letter.

As you know, LSI recently announced that it would explore strategic options for the Consumer
Products Group (CPG) with a goal of optimizing the value of the business for our customers,
employees and shareholders. Therefore, it is important to stay focused on delivering on our
commitments to our customers and to each other. Because your continued performance and
contributions are critical, the company is pleased to provide you with an opportunity to receive a
Retention Bonus as set forth below.

Retention Bonus

You will be eligible to receive a Retention Bonus equal to a maximum payout of $250,000 if (a) you
remain in your current position as an employee in good standing within the CPG organization through
August 31, 2007 (the “Retention Date”), and (b) you achieve the performance goals set forth
on Annex A (the “Performance Goals”).

The Retention Bonus, if earned, will be paid in a single lump sum payment within thirty (30) days
of the Retention Date. If you do not achieve the Performance Goals or if at any time prior to
Retention Date, (1) you voluntarily terminate your employment with the company, or (2) your
employment with the company is terminated for cause (as defined below), then your right to receive
the applicable retention payment shall lapse. If the company terminates your employment without
cause prior to the Retention Date (whether or not the Performance Goals are achieved), then the
Retention Bonus shall be deemed to be earned, and will be paid to you in a single lump sum within
thirty (30) days of any such termination.

Solely, for the purpose of this letter, termination “for cause” shall mean the termination of your
employment by the company following the occurrence of any of the following: (a) violation of the
company’s code of conduct; (b) conviction of (including a plea of guilty or nolo contendere) of a
felony or any crime of theft, dishonesty or moral turpitude; (c) an omission or dereliction of any
statutory or common law duty of loyalty to the company; or (d) you willfully neglect the duties of
your employment.

 

 

For the purpose of any benefit calculations (i.e., 401(k), ESPP, etc.), any payment made hereunder
is not included in benefit calculations.

Any payment shall be subject to any applicable taxes, and all applicable taxes shall be deducted
from any payment that is made to you.

Employment as a Technical Advisor

On September 1, 2007, you will resign your position as EVP CPG and officer and become a Technical
Consultant to the company until March 31, 2008 at a monthly payment of $15,000 per month, subject
to you executing the company’s standard form of Separation Agreement and General Release to include
non-solicit and non-compete covenants in the form attached as Annex B for a period
ending on 3/31/2008, the date of your termination. In addition, during your term as a Technical
Advisor to the company you would continue to be eligible for all company benefits other than
vacation accrual and a car allowance.

Employment At Will

Please be aware that this letter is not an employment contract and should not be construed or
interpreted as creating an implied or expressed guarantee of continued employment. The employment
relationship is by mutual consent. This means that you have the right to terminate your employment
at any time and for any reason. Likewise, the company reserves the right to terminate your
employment on the same basis.

Contingency of Offer

This terms and conditions set forth in this letter are contingent upon the approval of the
Compensation Committee of our Board of Directors.

Acceptance

Please acknowledge your written acceptance of this offer by signing and returning a copy to Jon
Gibson, Vice President — Human Resources.

*     *     *

We look forward to your continued contributions to the success of our company and CPG.

Sincerely,

/s/ Jon R Gibson

Jon R Gibson

Vice President, Human Resources

Acknowledged and Agreed:

/s/ Umesh Padval

Umesh Padval

July 6, 2007

 

 

Annex A

Performance Goals

1. Sale of the CPG Business

A bona fide buyer enters into a definitive purchase agreement for the purchase of all or
substantially all of the CPG business by July 15, 2007, and the closing of any such transaction
occurs on or before August 31, 2007. The decision of whether or note to enter into any Definitive
Agreement shall be in the sole and absolute discretion of the company and its Board of Directors.

2. Alternative Transaction

If the business is not sold or in the process of being sold as set forth above, then the CPG team
under your direction must meet any alternative goals and objectives for the business established by
the CEO in his sole discretion, and as approved by the Compensation Committee.

*     *     *

In order to receive the Retention Bonus either of the Performance Goals (1 or 2) above must be met
but not both. Notwithstanding anything to the contrary contained in this letter, no payment shall
be required to be made if neither of the Performance Goals is met for any reason. Determination of
whether a Performance Goal has been achieved shall be made by LSI’s President and Chief Executive
Officer, in his sole and absolute discretion, and approved by the Compensation Committee of the
Board of Directors.

 

 

Annex B

Form of Restrictive Covenants

Non-Solicitation

Until March 31, 2008, you shall not, without the prior written consent of the LSI’s Chief Executive
Officer, (i) directly or indirectly solicit (or encourage any company or business organization in
which you are an officer, employee, partner, director, consultant or member of a technical advisory
board to solicit or employ) or (ii) refer to any employee search firms, any person who was employed
by LSI as of the date hereof.

Non-Competition

Until March 31, 2008, you shall not, without the prior written consent of the LSI’s Chief Executive
Officer, at any time or for any reason, anywhere in the world, directly or indirectly (i) engage in
any business or activity, whether as an employee, consultant, partner, principal, agent,
representative, stockholder (except as a holder of less than 5% of the combined voting power of the
outstanding stock of a publicly held company) or in any other individual, corporate or
representative capacity, or render any services or provide any advice to any business, activity,
person or entity, if you know or reasonably should know that such business, activity, service,
person or entity, directly or indirectly, competes in any material manner with LSI’s business as
constituted on the date hereof, or (ii) meaningfully assist, help or otherwise support any person,
business, corporation, partnership or other entity or activity, whether as an employee, consultant,
partner, principal, agent, representative, stockholder (other than in the capacity as a stockholder
of less than 5% of the combined voting power of the outstanding shares of stock of a publicly held
company) or in any other individual, corporate or representative capacity, to create, commence or
otherwise initiate, or to develop, enhance or otherwise further, any business or activity if you
know or reasonably should know that such business, activity, service, person or entity, directly or
indirectly, competes in any material manner with LSI’s business as constituted on the date hereof.
For the purposes of this Agreement, LSI’s competitors shall be those companies listed in the
“Competition” section of LSI’s Form 10-K for the fiscal year ended December 31, 2006.

If at any time you violate the provisions above, any amounts remaining unpaid as set forth in this
Agreement as well as any benefits provided for in this Agreement (other than those from qualified
retirement or welfare plans) and any continuing vesting of stock options or restricted stock units,
if any, shall immediately be forfeited and terminated, and any amounts already paid to me in
accordance with this Agreement, except for the sum of One Thousand Dollars ($1,000) shall, at LSI’s
sole discretion, be required to be repaid by you to LSI within ten (10) business days of LSI’s
request in writing therefore. This provision shall not affect LSI’s right to otherwise specifically
enforce any provision relating to non-solicitation or non-competition that is in this Agreement or
in any other agreement, document or plan applicable to me.

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